12 Ratios Every Marketing Manager Should Know (part 1)

Key metrics to evaluate credit union marketing spend and bridge the gap between macro trends and micro performance.

 
 

In 2011, creditunions.com published a popular series of articles on key ratios for board members. In this series, we explore key ratios specifically for marketing managers.

Benchmarking performance relative to other credit unions and community banks helps educate personnel about their credit union’s business model and helps managers advance projects. Credit unions can track the metrics featured in this series for all credit unions nationwide using 5300 data. Comparing credit unions with similar business models, membership demographics, or geographic range lends credence to new marketing programs and helps measure success. Of course, well-rounded marketing plans also consider ratios outside of the metrics featured in this series and link marketing plans to the institution’s strategic objectives.

In Part 1 we examine membership base and new business. Later, we will evaluate existing member relationships and measure income and expenses derived from marketing efforts.

1. Member Growth

The credit union's new member acquisition strategy stems from the board’s philosophy on service levels, delivery channels, product pricing, and breadth of services. Consumers join a credit union primarily because it fulfills a need. The variety of products and services the credit union offers as well as the size of the potential market directly correlates with the number of members joining the credit union. After that, member service affects retention and word-of-mouth marketing.

2. Member Per Potential Members

The population of the United States is approximately 310 million. Credit unions' potential membership base is more than 1.5 billion, which means each consumer is eligible to join nearly five credit unions. Members per potential members measures the credit union's penetration relative to the total potential membership base. The credit union’s field of membership (FOM) is the predominant driver of this ratio and acts as a proxy for market share.

Credit unions should consider whether the membership base is growing at or above the levels of the community it serves. Credit unions with low ratios that want to grow might concentrate on bringing in new members and their accounts held at other area institutions. Credit unions with high ratios, on the other hand, might prefer to grow organically by deepening wallet share with existing members.

3. Net New Members Per Branch

This ratio matters more for credit unions that have a significant brick-and-mortar investment. Credit union branches, through placement and service, are billboards for the institution. Combined with marketing campaigns and word-of-mouth, credit unions should be measuring how many members, on average, each branch location brings in. Elevated levels can result from word-of-mouth referrals, high traffic, promotions, events, or an influential business development program. Negative values indicate a net loss of members for the previous 12 months at the credit union.

4. Annualized Loan Originations Per Member

The amount of loans granted year-to-date demonstrates the credit union’s success at executing its lending strategy. The dollar amount of loans granted is a function of the demographic make-up of the field of membership, the breadth of the credit union’s lending operations and the effectiveness of the credit union’s marketing and sales culture. Average member age, a FOM's socioeconomic makeup, a FOM's cultural makeup, and home ownership percentages all impact the balances of granted loans. The types of products a credit union offers is a key determinant of the number of loans it will grant. Additionally, real estate and new auto loans generally have higher balances than used car and signature loans, which will drive this ratio higher. Measuring the change in loans originated in a given quarter over the previous year helps demonstrate marketing successes; however, take note of economic climate, consumer attitudes toward credit, and the management of the credit union’s balance sheet as these will influence increases or decreases.

Read The Entire Series

12 Ratios Every Marketing Manager Should Know (part 1)
12 Ratios Every Marketing Manager Should Know (part 2)
12 Ratios Every Marketing Manager Should Know (part 3)
12 Ratios Every Marketing Manager Should Know (part 4)

 

 

 

June 25, 2012


Comments

 
 
 
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  • Great article, thanks for posting.
    CUBling
     
     
     
  • great tools to evaluate your growth
    Karen Wood
     
     
     
  • Domenic, these ratios are all in Peer-to-Peer but some will need to be created in the program as they aren't pre-built. Please let me know if you'd like the formulas I use in daily analysis. Most (probably 75%) are also available in our web-based financial analysis tool, CU Analyzer.

    Lydia Cole, Author
     
     
     
  • Can I assume Peer Ratios of these 12 key metrics are found in your Peer to Peer program?

    Thank you for this and upcoming articles.
    Domenic DiPillo