Sometimes it can feel darn near impossible to figure out how much it costs to acquire a new credit union members.
But should it be so hard?
We spoke with Bryan Adler, CEO of Vetter. Adler has a lot of experience in attracting and onboarding new members at credit unions and community banks.
What Adler revealed is that the cost of new credit union member acquisition is actually very low—and easy to calculate!
Which Formula Does Your Credit Union Use?
One of the main reasons why credit unions can’t seem to agree about how much it costs to acquire new members is that there’s no standard formula.
How are there so many different methods?
Adler has a few ideas about that:
“One credit union might consider the cost of advertisements, banner ads, newspapers, and so on. Another credit union might include the cost of people’s time, so that the salaries for marketing specialists also count toward the cost of new member acquisition.”
Already it’s clear that the cost of acquiring a new credit union member is going to be murky.
The Average Cost of New Member Acquisitions
Adler suggests including the entire cost of new member acquisitions.
That means no cheating on your numbers!
If you have a marketing department—and if their job is to attract new members—then at least a portion their salaries and budget should be included in the calculation.
Adler provides a number range:
“Depending on methodology and account type, we see the average cost of acquiring a new member to sit somewhere between $400 and $700.”
Overall, that doesn’t seem too high. At least, it’s not too high so long as they’re profitable, long-term members…
Is It Worth It to Attract Just Anybody?
Where Adler’s average member acquisition cost numbers get exciting is when he speaks about which members are worth pursuing.
On the one hand, some credit unions offer competitive services, such as checking accounts that pay interest.
Marketers don’t need to spend much time advertising services like that. Prospective members already know what a great deal it is!
However, members who only set up checking accounts and don’t do much with them don’t actually make any money for the credit union. In fact, they may end up costing the credit union even more money over time!
Addressing that issue is Adler’s bread and butter:
“On the other hand, prospective members looking for a less competitive service (such as a car loan or a mortgage) might take a little more effort to bring in. As a result, it may cost more money to woo these prospects. If your goal is credit union loan growth, you should prepare to see higher member acquisition costs.”
His blog post goes into further detail. You can read the whole text here.
We’ve seen some credit unions and larger banks calculate their costs to be under $400 before.
Frankly, Adler’s numbers seem far more realistic. His company, Vetter, focuses almost exclusively on community bank and credit union member growth strategies, retention, and marketing costs.
If you’d like to see more of what Adler and Vetter have been up to, check out their posts about digital marketing for credit unions and how to keep track of your credit union’s attrition rate.