“Know thyself,” wrote William Shakespeare half a millennium ago. Shakespeare recognized that we all have elusive wants, feelings, and frustrations that set each of us apart from everyone else. So when Dallas Teachers Credit Union wanted to grow its assets two years ago, it adapted a lesson from the Bard. Rather than manage its database with “neither rhyme nor reason,” the DTCU invested in customer segmentation software to really know its customers — all 150,000 of them.
By creating 150,000 distinct customer profiles, the DTCU was able to determine customers’ individual banking needs. Each customer was profiled, based on more than 100 different data points — things like age, level of schooling, annual income, type of home, and location. All customers also were “householded” to reveal who else in the nest might need one of the bank’s services, such as a checking account, an IRA, a credit card, or a mortgage. Only then was targeted marketing material delivered to individual customers. The upshot: the DTCU increased its assets by more than $500 million in the last 18 months — to $1.45 billion — making it the fastest-growing credit union in the nation.
After rolling together its own internal customer data with an array of external demographic information provided by Acxiom, the DTCU ran it through sophisticated modeling algorithms created by IBM Global Services. This rigorous process enabled the credit union to “rank order” each of its myriad services by customer — that is, to identity which individuals had the greatest inclination to use each service. “The customer segmentation strategy took the guesswork out of cross-selling,” says Patricia Korioth, senior vice president and CFO.
“Instead of sending marketing material to all our [150,000] members and getting a single-digit response rate, we’ll now send out 15,000 pieces of mail and get a 10 percent response rate,” adds Korioth. “The strategy gave us the confidence to re-charter as a community bank.” Now called the Credit Union of Texas, the bank has expanded its potential customer base — it’s no longer just for teachers only.
“We’ve even used the data to determine where our new branches should be located,” says Jerry Thompson, the bank’s chief information officer. “Internal surveys indicated our customers like to bank at a facility within a 10-minute drive. The internal data pinpointed where our most profitable customers resided, and the demographics indicated others of similar banking needs. Up went the branch.”
Customer segmentation strategies using CRM software are almost a matter of course in the financial services industry, which retains an enormous amount of internal transactional and personal data on customers and customer behavior, enabling relatively easy segmentation for purposes of marketing and customer service. In recent years retailers have been discerning their customers’ buying preferences by scanning their credit cards or frequent-shopper cards, and even by using radio frequency identification (RFID) technology to pick them out through their cell phones and other devices as they enter a store.
(Thereby hangs a tale: It’s been reported that at least one retailer has explored the possibility of embedding RFID chips in its clothing, so salespeople could easily identify repeat visitors on arrival and give priority service to these more loyal — and hence more valuable — customers. Though it’s not nearly as intrusive as the iris-scanning shopping-mall come-ons of Minority Report, privacy concerns seem to have put such initiatives on hold.)