January 25, 2010

The subject of a national campaign for credit unions has been widely debated over the years. Some argue about whether it should be a brand campaign or an awareness campaign. Others dispute what such a campaign should say. And a few even question the very need for this sort of campaign.

Regardless of who supports- or opposes the idea, one question bothers everyone: How would such a campaign be funded?

Here’s the easiest funding formula. Every credit union could contribute a proportionate amount relative to their asset size — a proposed multiple of 0.005% of assets. That’s 1/200th of a percent.

Where does this 0.005% number come from? Simple. As a rule of thumb, the marketing budget for a financial institution should be around 0.1% of its assets (it can be a little more for smaller financial institutions, and a little less for bigger ones). For example, a $500 million credit union should spend around $500,000 per year on marketing. That means if credit unions contributed 0.005% of their asset size to fund a national campaign, it would work out to around a 5% slice of their annual marketing budgets.

Key Question: If you’re a $100 million dollar credit union, could you afford to contribute $5,000 from your marketing budget to a campaign that benefits all credit unions? If you’re a $1 billion credit union, can you make a $950,000 marketing budget work while contributing $50,000 to a national effort?

Reality Check: Some credit unions are still spending almost 0.005% of their assets on advertising in the Yellow Pages.

If credit unions would contribute only 5% of their annual marketing budgets to some sort of nationally-organized effort, they could collectively build a $50 million annual war chest. Keep in mind that this isn’t additional marketing dollars; this would be a reallocation of money that’s already being spent. It’s simply about achieving economies of scale… and “credit unions helping credit unions,” as the expression goes.

What could credit unions do with this $50 million budget? Certainly they could run ads in print and on TV, as some credit union experts have suggested. But what if $50 million was spent all online (ads, SEO, etc.), pointing towards a website like JoinACreditUnion.com? How many Gen-Y members would credit unions draw? Or what if credit unions used the $50 million all for a coordinated public relations effort? How much more good press could credit unions pick up in the mainstream media? And what would happen if credit unions sustained this for five years?

Reality Check: This isn’t likely to happen — especially now. Beyond the massive pressure on everyone’s capital, CFO’s everywhere are wondering if- and when another “special assessment” might be coming. The notion of a national campaign probably just sounds like one more hit to the bottom line. The last thing most credit unions feel like talking about is another way to spend money. Don’t expect to see a flood of credit unions volunteering anytime soon.

Bottom Line: The majority of consumers have no clue about what credit unions really are, and/or don’t include credit unions in their list of primary financial options. Credit unions could afford a national campaign that addresses this reality…that is, if they really wanted one.

Key Questions: Can credit unions afford to not run a national campaign? What are the opportunity costs? What would have happened if credit unions had been running this sort of campaign throughout the financial crisis?

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Previous related stories from The Financial Brand:

• Credit union marketing budgets — too much, too little
• Four points about a national CU campaign
• Death panel for America’s smallest credit unions?
• Canadian CU pays $1.62 million to name arena

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