Best Targets For Loans Differ From Loan Type to Loan Type

By Jon Haller
Director of Market Research,
Credit Union National Association

Although remote-banking services get a great deal of the attention these days--not only from the trade media, but also, quite possibly, at your own credit union--the fact remains that the biggest impact to your credit union’s bottom line will, for the foreseeable future, come from your loan offerings.

Of course, this fact has not been lost on the competition in your local area, nor on the country’s online-only and click-and-mortar banks. But more and more non-traditional entities are entering the chase for your members’ loan business, with big-time players, such as Target Corporation, Nordstrom, General Motors and the AAA auto club just to name a few, looking to leverage their multiple-million-dollar marketing budgets and strong brand recognition and loyalty to take a sizeable bite from the consumer (and your member) financial services pie.

Given the bottom-line impact of loans and rising competition, it comes as no surprise that more of credit unions’ marketing funds (37%) get dedicated to loans than to any other single product line or objective (e.g., attracting new members), according to CUNA’s 2002 National Member Survey Report.

And while younger to middle-aged members with moderate- to high household incomes tend to be the strongest target markets for most loan types, there are some exceptions to this pattern, as noted in the target-marketing matrix, below. For example, nationally, the lifecycle segment comprised of members 55 and older (most likely those 55 to 64) with household incomes of $50,000 to $100,000, along with high-income members (regardless of their age), would be the best promotional targets for home equity/2nd mortgage/HELOC offerings.

The underlying premise for the target-marketing matrix is this: The most efficient way to identify potential users of a particular service is to identify the characteristics of those members who are currently using that service somewhere, then finding others in your membership who are "just like them."

Then, by using your MCIF (Marketing Customer Information File) or your membership database, you can assemble your mailing list using only the "highest-potential" lifecycle segments for your particular direct-mail promotion.

Use this matrix to help guide your target-marketing strategies. When conducting your next member survey, seek out vendors capable of developing a target-marketing matrix based on your own members’ financial behaviors, as your individual credit union’s target- marketing index scores could differ--somewhat or even more so--from the nationally-based scores provided in this article.

In addition, use your survey to measure your credit union’s loan market shares and examine members’ reasons for taking their loan business elsewhere. And monitor their satisfaction with your loan rates, approval time, and loan-staff courtesy, knowledge of loan policies/procedures, etc. Then make adjustments in any areas that are deemed in need of shoring up and/or that have experienced drops since your previous survey.

Next month’s topic: Call center volume and annual operating costs.

Other Issues of Research Review

Previous Issue:
EBP Transaction Volume and Costs