Lifetime Member Value: Considerations for Lifecycle Marketing

Guest post written by Sundeep Kapur, Digital Strategist, Allied Solutions. Sundeep will lead an integrated marketing workshop at NAFCU’s Strategic Growth Conference in Venice Beach, California in March 2014. Register here.

Allied Solutions is the NAFCU Services Preferred Partner for Insurance—Bond, Creditor Placed (CPI), Guaranteed Auto Protection (GAP), and Mechanical Breakdown (MBP); iSolutions; and rateGenius.

What Would You Pay for a Member Referral?

A prospective client is a young lady who is just turning 21. She is two years away from an advanced degree and a well-paying job. One day she will start a family. Her future purchases include a used car, two new cars, and a home. She will need credit cards and a home equity line of credit.

Would you like to get this young lady to become a member of your credit union?

Your answer is hopefully yes as you could benefit from a long-term relationship with this individual. If you acquire her as a member, you will have an opportunity to connect, to engage, and to nurture her towards mutual profitability. From a practical prospective you need to be considerate of three things:

  1. How much money would you be willing to spend to acquire this member?
  2. What is your average lifetime member value?
  3. What formula do you use to compute lifetime member value?

Key Considerations for Lifetime Member Value

  1. Member Age: Some financially institutions want members who are fiscally responsible and more mature as they feel that they can earn more with such a relationship; however, in an ideal situation you will also have the opportunity to engage with younger members and nurture them towards fiscal responsibility.
  2. Products with Your Credit Union: A simple savings account versus a “fully loaded” car loan is certainly one way to look at your ability to earn. Part of your opportunity lies in segmenting members into different groups in order to drive efficiencies.
  3. Income Level and Credit Score: This tells you the potential value of the member so you can effectively plan your communication opportunities.
  4. Personal Situation: What prompted the new membership—was it a new job, a move, fees that their former bank charged? All of these reasons are important as you consider nurturing programs to engage with your members.
  5. Other Relationships: Think about opportunities to get referrals from both new and existing members.

What Do Credit Union Members Want?

Credit union members seek five social values: (1) the opportunity to communicate with experts, (2) convenience, (3) recognition (so they are not just an account number), (4) financial knowledge, and (5) superb service. As financial institutions, you need to keep looking for ways to provide your members with these values and to also make goodwill deposits, such as being courteous and providing speed of service and sending reminders and confirmations. Also, it is important to keep reminding your members about your investment in their financial well-being and in the community.

Lifetime value is not just about acquisition and it is certainly not just a one-time measure, rather a whole lifecycle of marketing is important. We are in the “repeat” business—think about things that can be done to drive repeat behavior. Your ROI is a measure of the difference between your product revenue and total cost (where your cost is comprised of lifecycle costs and not just acquisition costs).

More educational resources and contact information are available at www.nafcu.org/allied.

Also available: Allied Growth and Innovation: Driving Member Engagement Series (Webinar Series) »

Also available: Five Big Trends Driving Member Engagement (Blog Post) »