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. Part 1 examined metrics relating to membership base and new business. Here, we continue to look at member-related ratios.
As cooperatives, credit unions are not able to measure their market performance via daily changes in stock price. Without this type of market benchmark, credit union performance can be more difficult to gauge; therefore, identifying appropriate measurement standards is a significant aspect of credit union management.
Member loyalty is a significant benchmark for credit unions, and quantifying the member relationship is a great way to gauge loyalty. Metrics about member relationship help marketing departments track how well they are succeeding at communicating the value of credit union membership and participation.
5. Average Member Relationship
The average member relationship reflects how much the retail member is using the credit union’s share and loan products. This calculation should remove outstanding business loans to focus on the consumer relationship. The credit union’s pricing strategy, underwriting policies, product mix, service levels, and sales culture contribute to this performance measure, as does the makeup of the field of membership (FOM) and the economic environment. Offering products at competitive rates, having a more affluent membership, and offering a variety of loan and deposit products all contribute to higher share and loan balances. The credit union’s ability to market and sell loan and deposit products also has a measurable impact on the average member relationship.
How to calculate: (total shares + total loans – outstanding member business loans)/number of members = average member relationship.
6. Year-Over-Year Change In Average Member Relationship
Several factors that affect share and loan growth — such as the credit union’s pricing strategies, new product offerings, the level of risk the credit union is willing to manage, the membership's demographic and socioeconomic composition, and the state of the economy — can also change average member relationship. Credit unions with memberships composed of growing industries or communities typically post higher rates of growth than their peers. Demographic factors that influence loan growth include: the average age of members, the wealth distribution of the membership, and cultural attitudes toward debt and borrowing. A credit union’s marketing, product development, delivery channels, technology, and sales culture also influences its ability to grow loans and deposits. If a credit union cleans its membership rosters or purges single-service accounts, this ratio might spike.
How to calculate: (average member relationship new year) - (average member relationship original year)/ (average member relationship original year) = year-over-year change in average member relationship.
7. Number Of Accounts Per Member
The number of accounts per member — loans and deposits — is driven primarily by the credit union’s business plan but also by its FOM. A credit union that offers a full array of financial services as well as the resources required to deliver those services should have a higher account-to-member ratio.
Credit unions can use a four-step business plan to grow number of accounts per member.
First, a credit union must develop products and services — such as checking accounts, investment-type deposit products, credit cards, and real estate loans — that meet member needs.
Second, a credit union must develop the delivery channels that fit the FOM. A credit union must have the appropriate number of branches, but it also might consider a call center that processes loans and an online system that provides both transaction and deposit and loan account processing.
Third, the credit union must offer competitive pricing.
Fourth, the credit union's sales culture must be able to promote both deposit and loan products.
Credit unions that want to provide niche or limited services need to continually monitor the membership to validate such a strategy and be aware of competitive forces that could copy the strategy. Credit unions that do not have a strategy to routinely purge dormant or single-service, inactive accounts will likely also have a low account to member ratio.
How to calculate: (number of loan accounts + number of share accounts) / total members = number of accounts per member.
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)