5 minutes
Ten years ago, most branch location analysis was based on finding markets with the highest potential for selling products and services.
This branch location analysis was “commodity-based,” and effective in recognizing markets with potential for car loans, mortgages, wealth management and business services. This approach was built on the idea that the credit union would have the best rates in the branch market area.
Today credit unions are asking themselves if the commodity- and rate-based approach alone is the best choice for developing the most productive relationships with members. Can something be done to help members in target households and small business members better bond with the credit union’s brand? If the credit union could get more brand bonding, would higher member engagement and greater share of wallet follow?
As a result of this thinking, we are seeing market analysis methods evolving. Credit unions now are using modest to robust databases to make million dollar decisions that impact branch locations, composition, product and service offerings, staffing, investments and delivery channel priorities. The cost of mistakes can be very high which demands a heightened level if analysis. Making the right strategic choices can be a game changer.
Credit unions must elevate their member and market analysis by using both psychographic and demographic data, and linking that information to use of financial services today and in five years. They can use this data to look at markets in a variety of ways.
Qualitatively, a credit union can “heat map” psychographic characteristics to recognize hot and cold spots in terms of markets that match desired member lifestyles. Quantitatively, individual or grouped household and product and service potential characteristics can be mapped down to the block level. And, you can add weighting to the characteristics to customize the analysis to your specific target markets and goals for growth.
The data drill down can be very specific. For example, you may want to increase share of wallet in terms of investments or wealth management. The data will tell you the location of households with high savings and CDs, income, and home values. Based on quantitative and qualitative analysis, you may want to include an investment advisor in the branch full time, set up a regular schedule for a visiting advisor, provide a hoteling office, or rely on video conferencing for introductions. This drill down is effective for mortgage, insurance and small business as well.
Psychographic drill down can also be used to help determine the type of cash delivery for the branch. For example, one of our clients has branches in both an agricultural and a large urban high-tech market, each with different psychographic characteristics. The decline in branch transactions in suburban and rural markets is averaging 5 percent a year compared to 20 percent a year in the urban market. This suggests that branches in rural markets should deliver cash using universal associates, while branches in the urban market may be able to successfully deliver cash using video tellers.
Market analysis company ESRI, Redlands, Calif., offers 64 combinations of characteristics that look at lifestyles and interests to form a market “tapestry.” Four to six of these lifestyle segments can be selected to match brand attributes and then mapped to pinpoint target market locations. This mapping information is then overlaid with traffic patterns, shopping, work, geographic locations and cultural boundaries to understand how to provide the highest level of convenience at the lowest cost through branch network optimization.
Jessica Bonds with ESRI graciously allowed me to share one of their lifestyle descriptors as follows.
#28 Aspiring Young Families
Demographic
Most of the residents in these neighborhoods are young, startup families, married couples with or without children, and single parents. The average family size of 3.1 people matches the U.S. average. Approximately two-thirds of the households are families, 27 percent are single person and 9 percent are shared. Annual population growth is 1.13 percent, higher than the U.S. figure. The median age is 31.1 years; nearly 20 percent of the residents are in their 20s. Typical of younger populations, aspiring young families are more ethnically diverse than the total U.S. population.
Socioeconomic
The median household income is $46,275; wages provide the primary source of income. Approximately 60 percent of employed residents work in professional, management, sales, or office/administrative support positions. Overall, 87 percent of residents aged 25 years and older have graduated from high school, 58 percent have attended college, and 24 percent hold a bachelor’s or graduate degree.
Residential
The highest concentrations of growing southern and western metropolitan neighborhoods are found in California, Florida, and Texas. Twenty percent are located in the Midwest. Tenure is nearly even; 51 percent of the households rent; 47 percent own their homes. Residents live in moderately priced apartments, single-family houses, and startup townhouses. Most of the housing was built after 1969. The average gross rent is comparable to the U.S. average.
Preferences
Focused on family and home, residents of aspiring young family’s communities spend most of their discretionary income for baby and children’s products, toys, home furnishings, cameras and video game systems. They go online to look for jobs, play games and buy personal preference items such as music and computer equipment.
These residents would probably go to a theme park while on vacation. They play video games, watch TV, eat out and go to the movies. They also play basketball, and go bowling and biking. They listen to urban stations and professional basketball games on the radio and watch sports, news, entertainment and courtroom shows on TV. They eat out at family restaurants such as Chili’s or IHOP and go to Jack in the Box or Sonic for fast food.
The alignment of brand attributes with household lifestyle characteristics is true brand mapping. Like a geologist looking for gold, marketers can use brand mapping to mine markets for specific locations. This mapping can be combined with product and service opportunity mapping to determine the correct level of market investment and the appropriate product and service configuration in each branch.
The high cost of branching and the increase in competition demands rigorous market analysis to perfect each branch location and entire branch networks. Do not skimp on market analysis, as it will return a hundred fold in efficiency, productivity and target market growth.
Paul Seibert, CMC, is principal/financial and retail design, for CUES Supplier member EHS, a NELSON Company, Seattle.
