Trailblazer Awards: Graham Links Pieces to Solve Member Profitability Puzzle
Cathy Graham, vice president of marketing at Desert Schools Federal Credit Union in Phoenix, is a data nerd.
That drive to dig deeper into the analytics to discover a new approach and perspective on member profitability is why she is CU Times’ 2015 Marketing Executive of the Year.
Given the people helping people philosophy, the idea of generating profits from members can be polarizing.
“Who in the credit union industry hasn't heard if we start making decisions based on member profitability aren't we essentially turning into a bank,” she said. “At the same time, as a business dealing with the financial challenges of today's world, how can we not make business decisions based on profitability?”
Undaunted, Graham partnered with the $3.8 billion credit union's finance department, analyzing profitability from every angle to gain a better understanding.
The data revealed that member profitability wasn't driven by age, income or length of membership, but rather by the relationship.
“It was like a light bulb went off. Members who used more products and services were not only more profitable, but also received more direct value from Desert Schools in the form of savings on rates and fees,” Graham said. “That doesn't sound like a bank thing. That sounds very much like a credit union thing, and I think that's why the board and senior team's reaction was so overwhelmingly positive about putting the data to good use.”
It also helped the credit union look at fees in a different way.
As a financial cooperative, members with just one service were being subsidized and not contributing their share to the bottom line. A small, limited membership fee was implemented for those with only a savings account with less than $300 in average monthly balance, according to Graham.
Members were given options on how to avoid the nominal fee by opening other accounts with Desert Schools. Some chose to close their accounts, but Graham said it was an even split between those who were content to pay the fee and those who deepened their relationship with the credit union.
The realignment of strategies to drive deeper relationships led to a 46% decrease in single service households, a 54% increase in households with more than three services, a 71% increase in average household profitability and a 22% increase in percentage of profitable households, Graham said.
“I think it is important not to make assumptions in analyzing the data and not to run with the first piece of data,” she noted. “You’ve got to really take the time to do the analysis and need to have a good understanding of the business. For us, sharing data has been a way to partner with different units leading to greater collaboration across departments.”
For example, in a bid to ebb the spikes and valleys associated with lending, Graham recognized the need for some understanding around what type of offers consumers would value in the local marketplace.
She worked with a research company to conduct an online focus group to find out what members and nonmembers thought.
Initially, she found they liked getting cash back. However, a little more research revealed a cash back offer alone was not enough to entice consumers to refinance with Desert Schools.
“Even the consumers who said they liked the cash back offer immediately asked, ‘Okay, but what's the rate?’ Consumers assumed that the rate was high in order to cover the cost of the cash back,” Graham said. “That critical understanding led to Desert Schools promoting a 1% cash back and our low rates, so consumers didn't have to choose one or the other.”
The results were $237 million in funded loans, $2.3 million in cash back to members, a 100% lift over pre-promotional volumes and sustained results for the past 31 months since the campaign was first launched, according to Graham.
“Marketing is not fluff. Every ad or promotional campaign is the end product of so much research,” she explained. “Most people just think, ‘oh, your department does all the fun stuff.’ It drives me crazy because what I try to bring to the table is data and analysis and the why behind it all. It's fun but also hard work and there is so much strategy that goes into everything we, as marketers, do.”
One of the initiatives close to Graham's heart that epitomized the benefits of filtering messages through the member profitability lens was Shine On, Desert Schools’ celebration of its 75th anniversary.
The year-long celebration focused on creating opportunities to express sincere appreciation to members and the communities the credit union served. (Pictured to the left, Graham and Aaron Parrott of Mentor Kids USA spend some time in the neighborhood garden his agency created with funds from one of Desert School FCU's Shine On grants.)
Built around community giving, member appreciation and employee engagement, the celebration revolved around providing grants to six local organizations to help them make a difference in the community. The organizations were then featured on www.ShineOnAZ.org and members, employees and the community at-large were invited to vote throughout the year on their favorite organization.
At the end of the year, the organization with the most votes would receive an additional $30,000 grant.
Desert Schools also hosted pop-up parties, in which groups of staffers went out into the community and surprised members with gift cards or free lunches on Food Truck Fridays.
The credit union also pledged to give back at least $1 million directly to the community throughout 2014 via fundraising, donations, grants, scholarships and volunteer hours.
“We asked ourselves, ‘why should anyone care we’re turning 75?’ Giving back has always been in our DNA, and we have a great story to tell. Rather than pat ourselves on the back, we wanted to do something that would inspire others in the community to join with us to help make a difference,” she said. “It just exploded and everyone wanted to be involved in how can we make it even better. It's been the most fulfilling wonderful experience.”
Graham said the community groups have more momentum when it comes to getting out their missions and messages.
“These organizations are filled with people who have huge hearts but often they don't always know how to market, so in this process of getting votes, they had to learn how to promote themselves,” she said. “Those skills and lessons learned over the course of the year are even more lasting than money. It's been a win-win for everyone involved.”