At the prompting of EverythingCU member Mike Anderson, I decided to do a little slicing and dicing of the EverythingCU Marketing Budget Report to find out what the actual national average is for total marketing budget spent compared to total net new members walking in the door.
I have good news and bad news.
The bad news: Membership growth has been very flat. Credit unions are spending decent amounts of money on marketing. Thus, we’re spending a LOT of money to get relatively small results. If your net new members number is at all positive, you are doing well, congratulations!
The good news: This means that you can go to your CEO and legitimately say “it takes a LOT of marketing money to bring in a new member to the CU movement, you’d better give me a bigger budget if you want new members.”
So to all the VPs of Marketing and Marketing Managers in CU-land, you are welcome. To all the CEOs and CFOs, I’m sorry, but it is what it is.
Here are the numbers:
These numbers are based on year-end 2007, the latest year for which we have complete, full-year data.
Of the largest 4213 CUs in the nation:
Average net member growth was: 1.15%
Average number of members 12/31/07: 19,767
Average number of members 12/31/06: 19,270
Therefore, average gain in membership was: 497
Average marketing budget, 2007 for those same CUs: $236,337
Therefore, across the CU movement as looked at here, the average cost to gain a new member was…. wait for it…..
$475 EACH.
Please bear in mind that this does NOT take into account TOTAL new members, only NET new members. You may also ask, “why 4213?” I set our marketing budget report to show 5,000 CUs, and apparently 787 CUs out of the top 5000 have been merged out of existence, that we weren’t aware of, since we created our database of CUs in the year 2000. Also, you might say that 2008 is different than 2007, and you’d be correct, but I’m guessing that the national average won’t come out very differently. I’ll run it again in a couple of months when the NCUA releases their year-end 2008 data.
Personally, I would not recommend taking this $475 number to your CEO unless you want to induce a heart attack. On the other hand, if you are bringing in new members at a lower cost, perhaps you can wrangle yourself a raise out of it.
If you want to slice and dice the numbers yourself and get something more meaningful, i.e. a smaller sampling of YOUR CU peers, feel free to check out the EverythingCU Online Marketing Budget Report.
Tags: acquisition, budget, cost, expense, marketing, marketing budget, member, Mike Anderson
EverythingCU.com World 2.0 Adventure 
January 6, 2009 at 1:05 am |
Boy, $475 seems like a lot of money to pay for every new member.
But doesn’t your math assume that every single dollar of all credit unions’ marketing budgets are being allocated to new member acquisition? What about additional product and service sales (share of wallet) and member retention?
I may be wrong. I’m a designer, not an accountant.
January 6, 2009 at 1:27 am |
@tim, you are absolutely right, that crunching the numbers, especially looking at such broad averages, doesn’t tell the whole story, and only goes so far. Correct, we can’t subdivide different aspects of marketing budgets. We can’t even take into account all new members gained, because current members lost (or deceased) aren’t accounted for. These numbers also don’t take into account members gained through activities not related to marketing. So it definitely needs to be taken with a grain of salt.
Also, the average ROA per member is in the neighborhood of $90-$100 per year, if I remember my stats correctly. We don’t want to be spending $475 to make $100, losing us $375 per new member in the first year. And we don’t have the time frame to wait five years for the investment to become worthwhile.
January 6, 2009 at 9:30 am |
The math leading to the $475 figure is a little misleading. It assumes that every dollar in the marketing budget was spent on acquiring new members.
January 6, 2009 at 10:53 am |
@ Jeffry – Right, that’s what Tim said. 😉
Here’s the thing- you can’t break marketing down into what marketing dollar is spent for what result, in terms of new members vs. sales of product. As example, say you run a used auto loan campaign that features a fantastic rate. The CU sees a spike in used auto loan applications, as well as a spike in new auto loan applications, in addition to a small uptick in new members.
What happened here? From the CU’s point of view, no attribution of new auto loans or new members should be made since the campaign was strictly for used auto loans. In addition, the used auto loan portfolio saw no net gain since the underwriting criteria was very strict.
But what happened from the member point of view? Members saw and responded to the used auto loan campaign, came in and applied. Other members who were not in the market for a used auto were reminded what a great deal the credit union is, and came in for a new auto loan. At the same time, loyal members referred their family, friends, and co-workers who they knew were looking to get a used car. These referrals had to become members in order to apply for the loan, thus a spike in new members, but without any products and services beyond the minimum share account. When they were denied for a loan, most of them closed their account to get their investment back, thus creating a slight gain in single-service (non-active) members.
Now how should we apportion marketing budget to net new member results versus increase in loan portfolios again?