Here’s to you for working on the 5th of July and reading this.
To reward your tenacity (or maybe pulling the short straw on who had to show up this week), here’s a three-step exercise you can pull off this week and look like a boss at for the rest of the quarter.
- Do a little “back of the envelope” or spreadsheet math to figure out the unit economics of your customers. How much does it cost to acquire them? How much interest and noninterest income do they individually generate? If you’ve never done this before, we created a ready-made tool to do this for you
- Pick 100 or so of your customers at random. Do this same math for them individually. What was their actual interest, noninterest, and if you have that granular attribution data, what did they cost to acquire? Sort that list from highest to lowest.
- You’re going to see a pattern called a power curve. A few accounts or customers at the top of the list will be many times larger than the rest. The top 20 or so will likely account for 80% of the total income or lifetime value. What do those customers have in common? If it only appears to be account balances, what about them could you identify and use to better find similar customers to acquire and retain?
- Bonus 4th step -> What percentage of your marketing efforts are spent on those top 20%? I’d be shocked, shocked I tell you, if it were much more than 20%. This is to say, you’re likely spending as much, if not more, to acquire and retain customers and members that are only 1/4 as valuable to your bottom line.
This short exercise should give you enough insight to ask the right questions. Start with the organization or agencies doing the heavy lifting of your marketing and advertising. Even small shifts in improving overall lifetime value or customer equity can have outsized impacts on your bottom line.
“But we’re a credit union! As a non-profit, we serve our members no matter how much they contribute to the bottom line!”
This is true, and I’m not suggesting giving anyone less service or care than they deserve. However, as this exercise shows, there are great efficiencies to be found by putting your marketing under the ROI microscope and looking for ways to improve. Even if incrementally.
In the end, the better you can segment and personalize your messaging and services to your customers and members, the better you can serve them.