The quality of your marketing messages is crucial, but the quality of your targeting has a far greater impact on your return rates, says John Zells, executive vice president of IBM Southeast Employees Federal Credit Union ($856.1M, Boca Raton, FL).
“If you segment, you find your costs are considerably reduced,” Zells says. “The member feels like they’re receiving communication that’s relevant to them. And the response rates are dramatically higher. … The success is undeniable.”
IMB Southeast Employees, with 72,981 members, began member segmenting in-house about 12 years ago but then turned to a third-party – Harland Financial Solutions – for more sophisticated predictive modeling in a strategy called “informational dominance.” Since, then the credit union’s response rates to its email blasts have climbed significantly higher than the industry standards and unsubscribe rates remain lower.
The matrix email blasts are tailored to groups as small as 500 or 1,000 members targeting those most likely to buy at a certain point in time. The segments are based members’ age, income, location, and recent purchase behavior. Some members receive marketing for car loan, others a home equity line, others a checking account.
“One of the most important variables is sequence,” Zells says. “If someone opens a money market account, they may be geared towards CDs or the other way around. If someone gets a mortgage, maybe the next thing they’ll do is acquire home equity line. Car loans have certain time intervals. These are all components of predictive modeling.”
While IBM Southeast Employees relies on a third party for segmenting, some credit unions do internal segmentation, assigning a staff member in marketing or IT to create a Marketing Customer Information File (MCIF). Creating segments is fairly easy, Zells says, but the real challenge is coordinating the data in a way that all channels are integrated so a credit union is not just conducting a marketing campaign.
IBM Southeast Employees’ marketing program includes a follow-up process in which employees are aware of which mailing went out to particular households. Frontline employees understand which products they should reinforce. When a member calls into the credit union or an employee makes an outbound call, that same message will be repeated.
Credit unions should similarly create a cohesive system that integrates all of their customer contact channels to carry the same message by household.
“Segmentation strategy is a very effective way to communicate with members,” Zells says. “If we have better information than our competition, then we win. Even a Smart Bomb requires a target.”
Zells says member segmenting helps avoid high unsubscribe rates. If consumers are getting mail that is not connected with their needs, they’re likely to delete it, and credit unions then lose that connection. Segmenting to households with the highest propensity to respond creates the opposite effect, Zells says.
“You’re creating better readership habits because they’re interested in what you’re sending them,” Zells says. “They’re likely to look at the next few things even more intensely.”