Two years ago, Hudson Valley Federal Credit Union ($2.8B, Poughkeepsie, NY) launched a strategy it referred to as “Lights Out Marketing.” The credit union made direct mail the central instrument of its marketing strategy, which blends refined member relationship management technology and traditional marketing. The credit union leverages member information collected through its marketing customer information files. In addition to onboarding and retention, the files support member acquisition and recapture strategies.
After researching the behavior and choices of its members, Hudson Valley discovered most of its accounts were opened by members within 120 to 180 days after opening their first account.
“Members are still experiencing their honeymoon with the credit union,” explains chief marketing officer, Steve Nikitas. Hudson Valley uses this opportunity to cement a long-term relationship with the member.
The honeymoon period is a volatile time, not just at Hudson Valley but across the financial services industry. According to San Antonio-based Harte-Hanks, up to 73% of cross-selling occurs within the first 90 days. However, approximately one fourth of new credit union members will also leave within their first 12-15 months, says marketing solutions company Marquis Software Solutions. According to this dynamic, the first few months will likely determine the member relationship
The strength of Hudson Valley’s onboarding program lies in its detail and flexibility. Once a member opens their first account, they are put on a six-month marketing campaign customized to the demographics of the individual. For example, if a middle-aged man with a house and a family opens a share account but nothing else, then in the first month he will receive a direct mail item focusing on the advantages of Hudson Valley’s checking account. The next month he will receive an offer to refinance his mortgage, currently held by another vendor. Next is a notice about electronic bill bay. The focus is on getting the new member to sign up for sticky products that lead to longer-term relationships, Nikitas explains. During the remaining three months, the member will receive offers for a home equity loan, auto loan, and share certificates.
Making the List
A Hudson Valley MCIF specialist meets with Harland Financial Services (its MRM provider) to ensure the quality of the credit union’s member information. Harland also coordinates with Equifax to prequalify new members for loan offers and to see what other preexisting relationships these members have with competing financial institutions.
From there, the MCIF specialist is able to determine which members pre-qualify for what products and which products each member already has with the credit union. The specialist combines that information with other demographic information to prepare segmented lists. These lists detail by order of importance the products on which marketing should focus for each individual member. The marketing department then prepares and distributes the direct marketing pieces.
According to the Direct Marketing Association’s Response Rates Trends Report, directing marketing typically yields a response rate [sales divided by number of direct marketing pieces] from 1% to 2% across most industries, sometimes up to 5% for nonprofits. By comparison, Hudson Valley’s overall response rate for its direct mail marketing in 2009 was 12%. In other words, 12% of its 25,000 mail pieces resulted in a new relationship, either a deposit account or loan. This remarkable response spells real results for the credit union. In 2009, its direct marketing efforts contributed to a 4.7% growth in membership, 11.1% growth in shares, and an incredible 51.0% growth in loan originations, according to Callahan’s Peer-to-Peer Software. By focusing on relevance and timing, Hudson Valley has been able to leverage its MRM capabilities to solidify solid, lasting relationships with its members.