10 Key Elements for an Effective Onboarding Strategy. Onboarding White Paper Harland Clarke Corp.

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1 10 Key Elements for an Effective Onboarding Strategy Onboarding White Paper Harland Clarke Corp.

2 When it comes to engaging, growing and retaining members, an effective onboarding strategy is crucial to gain an edge over the competition and win both the minds and hearts of new members. From the first few minutes of an account opening through the entire first year, credit unions are faced with a make-it-or-break-it window of opportunity. Research shows that new members are the most likely to purchase additional products and services. Paradoxically, they are also the most likely to leave. Maintaining a positive member experience is key to member retention. Successful onboarding is an ongoing process that stimulates growth, transitioning new account holders into satisfied, profitable and loyal members. Attrition during the first year ranges from approximately 35% to 45% that s two times higher than the rate of attrition among established account holders. Source: American Banker, June 2006 Effective onboarding counters this problem by establishing an early and meaningful dialogue with new members enhancing and strengthening relationships from the very start to pave the way to a long-lasting, mutually beneficial relationship. A guaranteed way to impress new account holders is to repeatedly demonstrate how the credit union helps improve their lives, financially and otherwise. No single aspect of an onboarding program is all-important, but the most successful strategies integrate the following components: Element No. 1: A good account holder is good to find. Integral to an effective onboarding strategy is a good member acquisition process. Targeted programs result in attrition rates of approximately 25% or less during the first year of the relationship, as found by two Harland Clarke clients. A successful acquisition program allows credit unions to quickly identify account holder needs (as well as address issues before they escalate into larger problems), thereby engaging them with appropriate products sooner which means fewer lost accounts and immediate profitability for the institution. This is why the entire first year honeymoon period is so important. During this time, account holders fully expect to be contacted by their new credit union, so they are extremely receptive to the cross-selling of products and services. BAI Research illustrates why the first 90 days plays such an important role in engaging new account holders: 1 24% of total cross-sales occur during an account-opening event 28% of total cross-sales occur within the first 30 days 75% of cross-sales occur in the first 90 days Conversely, the consequences of not retaining first-year members can be severe as shown in Figures 1 and Harland Clarke Corp. 2

3 Figure 1 Impact of First- Attrition For Every 20,000 New Account Holders 6,000 $1,500,000 $84,000,000 $2,940,000 $1,200,000 $4,140,000 Account Holders In Marketing Expenditures In Balances In Interest Income In Fee Income In Total Income Assumptions: 30% attrition, $250 marketing cost per account acquisition, $14,000 average balances, 3.5% average interest income, $200 annual fee income Source: Harland Clarke Marketing Services Figure 2 Net Interest and Fee Income Lost Over Time For Every 20,000 New Account Holders 20,000 New Accountholders Fee Income and Interest Income Total $4,140,000 $4,203,900 $3,741,471 $3,329,909 $2,963,619 $2,637,621 $2,347,483 $23,364,003 $4,140,000 $4,203,900 $3,741,471 $3,329,909 $2,963,619 $2,637,621 $21,016,520 $4,140,000 $4,203,900 $3,741,471 $3,329,909 $2,963,619 $18,378,899 $4,140,000 $4,203,900 $3,741,471 $3,329,909 $15,415,280 $4,140,000 $4,203,900 $3,741,471 $12,085,371 $4,140,000 $4,203,900 $8,343,900 $4,140,000 $4,140,000 $102,743,974 Source: Harland Clarke Marketing Services Even a small decrease in new account holder attrition can make a big difference over time, as shown in Figures 3 and Harland Clarke Corp. 3

4 Figure 3 Savings Achieved With Decreased Attrition For Every 20,000 New Account Holders Attrition Rate Income Lost Savings 30% 28% 26% 24% $102,743,974 $95,894,376 $89,044,778 $82,195,179 $6,849,598 $13,699,197 $20,548,795 Source: Harland Clarke Marketing Services According to BAI, the average household has 3.4 products with their primary credit union (PFI) and only 1.8 with their secondary financial partner. 2 Figure 4 Retention Rate by Length of Relationship Attrition & Products per Household Over Time 35% % 30% % 19% 20% % % 1 10% Attrition Rate 5% 0.5 0% Services Per Household Services Household Per Attrition Rate Avg. Number of Products/Household Source: Harland Clarke Marketing Services Industry Database, Independent Research Studies 2008 Harland Clarke Corp. 4

5 The surest way to engage new account holders and prevent attrition is through the implementation of wellexecuted, multi-touch, multi-channel onboarding programs. Programs that effectively engage new members from the very start and add value to their experience through improved service pave the way for continued growth and long-term profitability. Element No. 2: Relevant Communication, Early and Often. You don t get a second chance to make a good first impression which is why relevant communication must begin in the first week, with value-added messaging being delivered at least three times during the first 90 days. Delayed or no communications negatively impact retention as well as up-sell and cross-sell opportunities. The key to effective communication is that the messaging is relevant. Members expect their credit union to know them well enough to be able to anticipate their needs. If the messaging is irrelevant, the member will see their credit union s communications as a nuisance (or the dreaded junk mail) which, not surprisingly, negatively impacts retention as well as up-sell and cross-sell opportunities. Element No. 3: Right Message, Right Channel, Right Time. The member experience is based upon a culmination of experiences the account holder has with their credit union. Whenever a breakdown occurs in any area you run the risk of offsetting any positive experiences that may have already taken place. This is why the coordination and consistent integration of channels is another key component to delivering an exceptional member experience. Using multiple channels (e.g., the phone, direct mail, , customized statement messaging) appeals to different demographic groups, increasing the number of touchpoints while significantly improving results. Industry research indicates a lift by as much as 30% when using dual channels, and an even larger increase if telephone or additional channels are utilized. Source: Javelin Strategy & Research New Account Onboarding Communication (2007) Studies show that targeted checkbook messages can increase response rates by 100% generating twice the accounts and balances. 3 For an effective onboarding experience, collected member insights must be combined with demographic and product usage information. This helps credit unions understand and anticipate their account holders future needs allowing for more effective messaging through the most effective channel at the most appropriate time. The following processes are used to further enhance messaging: Segmentation: Grouping account holders into mutually exclusive segments based on a common set of characteristics Predictive intelligence: Predicting which products and/or services an account holder has the greatest propensity to purchase 2008 Harland Clarke Corp. 5

6 Targeting: Positioning content to members in a way that influences certain behavior ( active targeting reaches members or prospects in a personalized way that is meaningful to them) Studies show that follow-up to a direct mail campaign can enhance results by as much as 30%. Figure 5 illustrates the multiple channels that can be employed. Figure 5 Right Channel Direct Mail Foundation for all communications Statements Personalized statements with targeted messaging Reinforcement to members who have provided address Checkbox Targeted messaging with the delivery of checks Telephone Follow-up from branch or central contact center Online Banking Site Message reinforcement via online banking site Source: Harland Clarke Marketing Services Integrated communications can improve results 30% or more In terms of timing, communicating with new account holders during the first week after the account is opened is critical. Credit Unions should send a welcome letter and a switch kit within that first week and then follow-up with a phone call and/or an Harland Clarke Corp. 6

7 Following this initial contact, the next phase carries through the first year of the relationship, as illustrated in Figure 6. Figure 6 Member Touchpoint Roadmap Right Message Right Channel Right Time engage grow retain Account Opening New Account File Processing Welcome Direct Mail #1 with Check Order with In Box Message Welcome Outbound Phone Call NMLP Cross- Sell #1 NMLP Cross- Sell #2 NMLP Cross- Sell #3 High Value Contact High Value Contact Surprise & Delight Message Day 1 Day 1-2 Week 1 Day 7+ Day 14 Day 30 Day 60 Day 90 Day 180 Day 270 Day 360 Through personalized communications and predictive modeling based upon relevant information (i.e., why the member opened the account, their financial goals, preferred channels of communication, etc.) collected during the account opening process, credit unions are able to enhance the account holder experience, increase cross-selling and build the foundation for a long and lucrative relationship Harland Clarke Corp. 7

8 Element No. 4: Know thy member. Learning everything there is to know about a member in terms of preferences, goals and expectations is critical to starting a relationship off on the right foot. Much of this can be learned at the new account desk, but surveys also provide valuable feedback on new account opening processes, products, services, personnel, and programs as well. The following key information is used to further enhance messaging: Why the member opened the account The new member s primary financial goals Who the primary decision maker is on the account Their preferred channel of communication What type of accounts the member holds elsewhere (setting the stage for future communication and product offers) Again, it is essential that creidt unions use this information to make relevant offers to their members, otherwise it could actually have an adverse effect because the member may feel they weren t listened to especially if that member is offered an irrelevant product sell, it could make matters even worse. A well-crafted member experience survey can elicit response rates as high as 15% to 20%. Source: Scantron Corporation, Harland Clarke Clients Short surveys can also help identify service issues, evaluate offerings, capture measurable diagnostics for improvements, and generate goodwill simply by letting members know their credit union cares about their opinions. Element No. 5: Making the most of engagement products and services. An essential characteristic of a successful onboarding strategy is its ability to encourage members to utilize engagement products and services when account holders are most willing to buy. Offerings might include DDA-related products and services such as direct deposit, online banking, bill pay, and debit cards. Engaging new members with these products and services makes it more difficult for them to defect. For example, according to Harland Clarke s Financial Industry database, members with online banking (a sticky service) are twice as likely to stay with a credit union. The sale of direct deposit or ACH debits can enhance account-level profitability by 200% to 300%. Source: : Dove Consulting (2004) 2008 Harland Clarke Corp. 8

9 Switch kits also help facilitate the use of sticky products and services. These kits make it easy to sign up for a range of services through the use of pre-populated account holder information and helps guarantee a smooth transition. Sending personalized switch kits to new members has resulted in a 30% increase in cross-sales and a 42% decrease in single-service households. 4 Element No. 6: Build a Frequency of Communications. Onboarding is not a one-time communication, but a stream of messages geared to the member throughout the first year. Modeling, based on member insights and predictive intelligence, enables credit unions to offer products and services consumers will potentially want, instead of what the union wants to sell enhancing both the member experience as well as the credit union's revenue potential. Information systems supporting onboarding programs should capture account holder insight and usage data that, when analyzed, can: Predict each household s next-most-likely-to-purchase product propensity Identify members at risk of attrition Protect and nurture high-value segments and grow revenue Data-driven modeling for relationship potential can enhance balances by 300% or more. Source: Harland Clarke Client Element No. 7: Divide and Conquer. This is where the member insight gathered at the account opening comes into play, giving important insights as to what members want and the best way to reach them. Based on this information, new members should receive strong, personalized offers that stimulate account usage, response and build deeper relationships. From the member s perspective, each inbound and outbound communication should have a relevant purpose for the experience to be positive. The goal is to simultaneously service the member s needs while not losing sight of the onboarding strategy based on the account holder s profile. Element No. 8: Practice makes Perfect; the Art of Onboarding. Onboarding is not a program that can be started and left alone. It is an ongoing marketing process where offers should be tested, timing of communications reviewed, new formats introduced, and performance analyzed. Element No. 9: The Proof is in the Pudding. Quantitative metrics measure the success of an onboarding program, enabling credit unions to understand their impact and make necessary adjustments. The first step is to determine relevant benchmarks that will illustrate the difference between pre- and post-onboarding programs Harland Clarke Corp. 9

10 These measurements include cross-sell metrics as well as information pertaining to the level of satisfaction a member has experienced with their credit union. Ultimately, the measure of true onboarding success is reflected in the improvement in return on marketing investment, increases in fee and interest income, and the overall member experience. Element No. 10: Provide a Single Point of Responsibility. Ultimately, the success of an onboarding strategy is based on the ability to communicate the right product at the right time, to the right member not a messaging sequence that is pre-set by the credit union. This takes a single point of reference outside product silos, with specific, measurable goals for achievement. Additionally, credit unions should ensure their marketing communication partners have the experience to thoroughly understand the financial services industry, as well as the complexities associated with marketing to and servicing account holders. Every onboarding component should be in complete compliance with and strictly adhere to all security, confidentiality, legal, and other requirements that impact credit unions. Marketing Communications partners should also have a robust, state-of-the-art security program in place to protect all client and member data, since the transfer of information must occur on a daily basis for timely communication. The Opportunity Successful onboarding keeps them coming back for more. A robust onboarding process enables credit unions to proactively take control of the member experience during the critical first year. By offering the products and services members actually need, credit unions not only satisfy account holders desires but reduce attrition while improving sales and marketing campaign effectiveness. About Harland Clarke Harland Clarke Corp. is a leading provider of integrated payment solutions, marketing services and technology solutions. It serves approximately 15,000 financial institutions, as well as major investment firms, business-tobusiness clients, small businesses, and individual consumers. With its corporate headquarters in San Antonio, Texas and a regional headquarters in Decatur, Georgia, Harland Clarke employs approximately 5,800 people and has manufacturing facilities nationwide. Harland Clarke Corp. is a wholly-owned subsidiary of Harland Clarke Holdings Corp., which is also the parent company of Harland Financial Solutions Inc. and Scantron Corporation. Harland Clarke Holdings Corp. is wholly owned by M & F Worldwide Corp. (NYSE:MFW) Harland Clarke Corp. 10

11 References 1 BAI Research, Ninety Days that Make or Break the Deposit Relationship (2003) 2 BAI Research, Front Line Performance Gap (2004) 3 Harland Clarke Marketing Services Industry Database, Independent Research Studies (2005) 4 Harland Clarke Marketing Services Industry Database, Independent Research Studies (2004) 2008 Harland Clarke Corp. 11