The Rising Need to Understand, Measure and Deploy Relationship Profitability

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By Mark Weber, CEO & Chairman - Strum

While many credit union leaders have tried to build organizational profit models, few have succeeded in building a sightline on the real profitability of their member relationships.

Some have generalized, peer-level profitability, or average household profitability based on industry “standards.” Certainly few, if any, know what the “lifetime profitability” of their members truly is. And in fact, some leaders (and boards) have simply determined that it is wrong to identify or even discuss which members are profitable or unprofitable, lest they be treated unfairly.

That lack of relationship profitability insight threatens to hinder leaders during an especially vulnerable time: as margins are squeezed; capital ratios decline and lending is challenged amidst the pandemic and recession. If successful growth in the past decade has been covering this blind spot, we are now in a moment where data gaps like this can no longer be ignored.

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