Cracking the code to a successful deposit campaign
Having a solid base of core deposits is the cornerstone for most credit unions’ operations.
But gathering this funding is usually easier said than done. That’s especially true in a competitive environment that has many institutions focusing on attracting new members and trying to get more business from existing ones.
To boost funding to support lending, a number of credit unions this year tried out-of-the-box solutions. Three of those institutions – Western Vista Credit Union, Technology Credit Union and Patelco Credit Union – are being recognized with one of Credit Union Journal’s annual Best Practices Awards for deposit strategies. More winners in other categories can be seen here. The common theme among all winners is programs yielded tangible results that exceeded the institutions’ initial expectations.
In the deposits category, these institutions can attribute their success to using data and other tools to launch targeted campaigns with clearly defined goals. That’s an important takeaway other credit unions can learn from.
“It’s very difficult to do a one-size-fits all campaign,” said Vincent Hui, who specializes in strategic planning and leads risk management and M&A for the consulting firm Cornerstone Advisors. “We see that constantly. You might get some returns on a board-based campaign, but that’s often pretty low.”
The grind for deposits
Gathering additional deposits has been a top priority for many institutions this year, experts said. Lending has continued to grow with total loans outstanding increasing by more than 6% during the second quarter compared to a year earlier, according to data from the National Credit Union Administration.
That has contributed to the industry’s loan-to-share ratio ticking up to 83.3% at June 30 from 83% for the same period in 2018 and 79.7% two years ago, NCUA data shows.
“A lot of institutions were running close to 100% for their loan-to-share ratio,” said Steven Reider, president of the consulting firm Bancography. “Deposits are critical. Credit unions can’t grow unless they have deposits.”
Western Vista in Cheyenne, Wyo., is one of those institutions that needed to bring in new funding to help support its lending. With loans and leases totaling roughly $139 million at the end of Q3 – a 23% increase from one year earlier – the $166 million-asset shop decided to forego more modern forms of marketing, such as email blasts, and instead use a traditional route largely considered passé, a direct mail campaign.
Lorrell Walter, SVP of marketing and member experience, decided to go with a direct mail campaign because the credit union specifically was interested in reaching an older demographic that would have the larger deposits it was looking to secure. Additionally, digital campaigns have their own challenges – consumers often delete emails without opening them – and using billboards didn’t give the institution enough space to convey its offer.
“Our market is a bit different than some others and they tend to be more traditional in their behavior, so we thought direct mail would be the best bet,” Walter said.
While direct mail is often seen as outdated, experts say it can still be effective if done right.
Western Vista carefully targeted who it sent mailings to, initially reaching out to more than 18,000 households. The list was developed by selecting neighborhoods with a median income of at least $75,000. That was followed up with another mailing that broadened the pool to include current members who were already in the institution’s top 500 accounts for deposits. A third mailing was then completed that included the top 1,000 accounts for deposits.
Walter also spoke with branch personnel in a market she was less familiar with to ensure that the credit union wasn’t missing any neighborhoods that should be included in the ad campaign.
As a result, Western Vista saw its deposits jump by 16.5% from Jan. 31 to Oct. 31. Walter attributed the campaign’s success to targeting certain households rather than everyone in the communities it serves.
“Know your market,” Walter said. “To do a blanket mailing would have been an incredible waste of money.”
Data is your friend
The $7.2 billion-asset Patelco took a different route in using data than Western Vista. The credit union initially launched in the fall of 2018 a certificate with a 3% rate, a good deal at the time, but the product gained little traction with its members, said Kipp Riesland, retail portfolio manager.
Given the lackluster performance of that push, the Pleasanton, Calif.-based institution decided it needed to do something to stand out from its competitors and not simply compete on rates. To find out what members valued in a deposit product, Patelco surveyed 83,000 members and received back more than 3,000 responses. It was the first time the institution had solicited feedback for this type of product, though it had used focus groups for other initiatives before, Riesland said.
The respondents were given four different choices, but participants overwhelmingly favored a three-year option that started at 3% and allowed members the flexibility of taking out their money each year with no penalty or renewing annually for an increased return.
More than 5,100 members opted for the product, generating $368 million in new deposits in about six weeks. Half of that growth came from new members, compared with the typical 20%. Patelco said that was unprecedented for the institution.
“We have at least some certainty of having that money for a year,” Riesland said. “For members, it is an uncertain environment, but you have that piece of mind and that’s huge. You are almost taking that desire for a shorter duration but giving them a much higher rate than you could otherwise.”
Western Vista’s success along with that of Patelco shows the importance of using data in designing and promoting consumer products, Hui said.
“No one has been able to crack the code because people have to figure out the use cases for data,” Hui added. “A best practice with those institutions is figuring out how to use data to be productive in promotions in an authentic way.”
Recognizing members have personal lives
Patelco’s campaign along with that of Tech Credit Union also show the importance of understanding what drives members. The $3 billion-asset shop launched a pilot promotional campaign to offer members who put at least $2,000 into a CD a specially created wine bundle (valued at $100) from Revel Wine, a wine exchange that delivers customers’ selections to their front door. The pilot email campaign was focused on members with a money market account of at least $5,000.
Tech CU is based in San Jose, Calif., near the famed wineries of Napa Valley. Because of that proximity, there was an assumption that some of the credit union’s members might be interested in a promotion where wine was offered as an incentive.
“It was a lifestyle campaign,” said Guy Hadnot, senior vice president of marketing at Tech CU. “We were looking at the membership more holistically and their lifestyles and the things members like to do outside of going to the bank. It is something we want to recognize and really reward.”
The pilot ran from Feb. 14 to March 31, bringing in more than $610,000 in certificate deposits with an average certificate amount over $15,000. At the same time, it cost Tech CU $3,550 in expenses, representing just 0.5% of what was brought in.
“You have to think about how your members are complex individuals,” Hadnot said. “There are a number of things that matter to them beyond their finances. They want great rates and great technology from their credit union, but people have other interests. How do you engage with the whole person?”
This type of campaign is a variation on offering a member a reward, such as a free $100 if they keep a certain amount in an account over a period of time, Hui said. But cash rewards can be easily forgotten. Providing something more personal, such as a promotion that clearly connects to a popular local interest, is one way to make the gesture more memorable and build deeper relationships.
“It’s taking those incentives in a very positive way,” Hui added. “They have figured out their market and what types of things resonate. Again it's targeted marketing and knowing their customers.”