Source: Callahan & Associates “Peer 2.0 Software” – June 30, 2008

Key Insights:

• The country’s largest credit unions spend, on average, the least per member, but they may also be gaining media efficiencies with their marketing budgets.
• A marketing budget of $350,000 is not enough to support and sustain a billion-dollar credit union. That represents only .035% of total assets.
• Similarly, a $150,000 marketing budget is inadequate for a $500 million credit union. That’s only .03% of total assets.
• A $40,000 marketing budget is dismally low for a $250 million credit union. That’s about .015% of assets.
• A marketing budget of $2.8 million seems excessive for a $500 million credit union, as does $1.2 million for a credit union with $250 million in assets. That’s around .05% of assets.

Key Questions:

• How can any credit union at any size have a marketing budget of $0?
• What is the average cost of marketing per new member?
• What is the average growth in assets per marketing dollar spent?

Bottom Line:

• The average marketing budget for most financial institutions (bank or credit union) at any asset size should be at least 0.1% of total assets. (Case in point: BofA, whose $2.0 billion marketing budget is almost exactly 0.1% of its $1.9 trillion in deposits.) Many factors affect this guideline — up or down — including, but not limited to, growth goals and media costs in specific markets.
• Now is not the time to cut your marketing budget (as tempting as that may sound to some among your senior management team). First of all, as market conditions get tougher, you need to ramp up your spending — just to stay where you’re at. Second, it’s easier to “cut through the clutter” when there’s less clutter.

Here’s the FBI’s latest data on robberies of financial institutions for the first three months of 2008.

Alarm Systems

Alarm systems were installed and maintained in 96.2% of all institutions robbed. Of those, they were activated 92.7% of the time, meaning that in 61 robberies the alarm wasn’t activated. Thirteen times an alarm was activated but it didn’t work.

Key Question: In this day and age, how can any bank or credit union not have an alarm system (that works)?

Surveillance Cameras

Cameras were installed in all but 23 institutions that were robbed. In 44 instances, cameras were installed but not activated. Seven times cameras were installed but failed to capture the crime.

Loot Taken: $16 million

Loot Recovered: $2.3 million

Key Takeaways:

• The presence of anti-robbery measures only reduces robberies — it does not prevent them.
• Anti-robbery systems do not work all the time.
• Expect robberies to increase sharply as the economy worsens.

Here’s the story of the economic meltdown as told by one of Merrill Lynch’s economists. There are 76 slides  in this fabulous presentation. It includes 59 graphs that, together, paint a pretty ugly picture of what’s in store.

There’s a button on the far right of the Slideshare viewer that will make the presentation fullscreen (it’s the second-farthest from the right).

Filene just released an interesting study called “Who’s Joining Credit Unions.” Of particular interest is data that suggests a paradox between how people feel about branches and how they actually use them.

While credit union members think they need a branch nearby, the data tells a different story. According to the report, the majority of credit union members use a branch once a month or less.

Despite their low usage of branches, they want more of them. When asked what would improve their experience with their credit union, members’ #1 answer was “More ATMs.” The #2 answer: “More branches.”

Key Question: What the heck is going on here?

Branch and ATM convenience can’t be the only way to win deposits…can it?

Do people only want the perception of convenience?

To take a trip to a branch once a month (or less) doesn’t seem like that big an ordeal, even if it’s over five miles. There are plenty of people who drive further than that to go to Home Depot or Costco once a month. Heck, there are plenty of folks who drive five or more miles to get a coffee from Starbucks.

Key Question: Does branch and ATM convenience apply to people looking for loans? Or does it only apply to depositors and transactors?

Perhaps the problem lies in the type of question we — as financial researchers — pose to people. Give them a choice and they seem to say, “Hey, it doesn’t cost me any money when you build more branches, so go for it. Give me some more.”

What do you think? What’s going on here? Can you explain it?

Key Takeaway: If you don’t have a large branch presence — and most financial institutions don’t — your marketing needs to stress your delivery-channel alternatives to branches and ATMs.

Other insights from the Filene report:

• Credit unions look to have the most success targeting families with household incomes between $70,000 and $130,000.
• Friends and family continue to be the #1 way in which people hear about a credit union. Essentially, one-if-three new members come from the referral of a friend of family member.
• For credit unions with an open charter, one-in-16 new members are enticed by a newspaper ad. Around one-in-ten people learn about their credit union by driving by. One-in-100 come from the internet.

You can download the entire report from Filene here (registration required).

The FBI just released its fourth-quarter robbery data for banks and credit unions. Rather than wait for the FBI to tabulate four quarters and publish its findings, The Financial Brand added it all up and broke it all down for you.

Here’s the raw data for 2007, quarter-by-quarter:
Q1 | Q2 | Q3 | Q4 | TOTALS

Total bank and credit union robberies down 11.4%

2006 – 6,675
2007 – 5,917

Bank robberies down 11%

2006 – 6,154
2007 – 5,468

Credit union robberies down 14%

2006 – 521
2007 – 449

Injuries occur in 1.3% of all robberies

2006 – 94 incidents
2007 – 74 incidents

Employees are the most likely to be injured

2006 – 75 employees injured
2007 – 49 employees injured

Number of robberies in which deaths occurred

2006 – 13
2007 – 16

Robber is the most likely one to die

2006 – 10 robbers of 13 people killed
2007 – 12 robbers of 18 people killed

The data serves as a reminder that there are ways to engineer safe branch environments without creating “fortresses.” In the comments of The Financial Brand’s previous coverage of the FBI’s 2006 robbery data, Brett Conway of EHS Design suggested checking out SafeCatch, a branch design solution that minimizes risk of robbery. If your branches have security features like bullet-proof glass, you should definitely give it a look.

SafeCatch gets into robber psychology, recommending that front doors should not be visible from the transaction area because robbers always want to keep an eye on their exits. Good point.

The downloadable PDF includes a sample floor plan.

Here are the results from the latest effort to determine which financial institutions have the strongest brands, this one from Bancography.

Banks with assets > $30 billion

1. Wells Fargo Bank, MN
2. U.S. Bank, MN
3. The Northern Trust Company, IL
4. Union Bank of California, CA
5. PNC Bank, PA
6. Manufacturers and Traders Trust Company, NY
7. Comerica Bank, TX
8. Bank of America, NC
9. Branch Banking and Trust Company, NC
10. JPMorgan Chase Bank, NY

Banks with assets $2-30 billion

1. Woodforest National Bank, TX
2. Westamerica Bank, CA
3. City National Bank, CA
4. City National Bank of West Virginia, WV
5. Nevada State Bank, NV
6. First Interstate Bank, MT
7. S&T Bank, PA
8. The Frost National Bank, TX
9. Commerce Bank, MO
10. Amarillo National Bank, TX

Credit unions with assets > $1 billion

1. Mountain America, UT
2. Arrowhead Central, CA
3. J. S. C., TX
4. University of Wisconsin, WI
5. Police & Fire, PA
6. GECU, TX
7. Chevron, CA
8. Tinker, OK
9. MidFlorida, FL
10. OnPoint Community, OR
11. Community First, WI
12. Security Service, TX
13. Members 1st, PA
14. Boeing Employees, WA
15. Lake Michigan, MI
16. Alaska USA, AK
17. Affinity Plus, MN
18. Indiana Members, IN
19. Apco Employees, AL
20. Keesler, MS
21. Redwood, CA
22. Randolph-Brooks, TX
23. Affinity, NJ
24. America First, UT
25. Veridian, IA

Credit unions with assets < $1 billion

1. ASI, LA
2. Trona Valley Community, WY
3. First Community CU of Houston, TX
4. White Sands, NM
5. Pelican State, LA
6. Utah Central, UT
7. Water and Power Community, CA
8. Golden Plains, KS
9. Midland Community, TX
10. Complex Community, TX
11. American Heritage, PA
12. Bull’s Eye, WI
13. Valero, TX
14. I.L.W.U., CA
15. America’s Credit Union, WA
16. Justice, VA
17. United Heritage, TX
18. EECU, TX
19. Navy Army, TX
20. Town and Country, ND
21. Austin Telco, TX
22. Neighborhood, TX
23. Idaho Central, ID
24. Actors, NY
25. Service 1st, PA

According to Bancography, this is how they calculated their rankings.

“Bancography quantified the proportion of each institution’s long term value that is attributable to the intangible factors that constitute an institution’s brand. These factors include the institution’s reputation, service quality, image and market awareness. The brand value index identifies institutions that produce financial results beyond what their capital base, market conditions, and competitive environments would predict.”

Key Question: How did they measure reputation? Service quality? Image? Market awareness?

It looks like they did a lot less measurement of intangibles like feelings, perceptions and emotions, and did a lot more mathematical number crunching. Bancography illustrates its system in the following graph:

“Institutions are ranked by brand premium,” Bancography explains. “The proportion of value that the institution’s brand adds to its book value. The red dots show absolute brand value.”

“In the banking industry, product offerings are often very similar, so it is paramount for financial institutions to build differentiating brands.”
– John Mathes, Bancography
Director of Brand Strategy

Translation? Basically, it sounds like they compared each financial institution’s financial performance with some sort of industry average to generate a “multiple.” Bancography says this multiple is based on balance sheet income, variability in earnings and varying market conditions. They excluded one-time windfalls like the Visa dividend and other extraordinary gains.

Reality Check: This system assumes that “brand” is the cause of any above- or below-average results without providing any correlating evidence, nor does it factor in many other variables.

Bancography is using this study to draw attention to its recently launched Brand Strategy arm. Bancography, a company better known for helping financial institutions locate their branches, did not have a Brand Strategy section on its website last fall.

Source: TMG’s Payment Industry Insider

Here is the FBI’s official data on robberies of financial institutions, including injuries and deaths for 2006.

TOTAL NUMBER OF ROBBERIES: 6,985

• Bank robberies: 6,154 (88%)
• Credit union robberies: 521 (7%)
• Other (e.g., check cashing): 372 (5%)

INJURIES:

• Number of incidents in which injuries occurred: 94 (1.3%)
• Customer: 17
• Employee: 75
• Employee Family: 0
• Perpetrator: 17
• Law Officer: 8
• Guard: 5
• Other: 7

DEATHS:

• Number of incidents in which deaths occurred: 13 (0.2%)
• Customer: 0
• Employee: 1
• Employee Family: 0
• Perpetrator: 10
• Law Officer: 1
• Guard: 1
• Other: 0

Credit unions aren’t robbers favorite targets. Small branches with no or small vaults lack the significant stockpiles of cash that tantalize robbers. Also, many CU branches are off the beaten path, and robbers prefer easy access to main roads, thoroughfares and freeways – the quick, easy getaway.

CUs can probably also thank their image for fewer robberies. Robbers may not see CUs as big, lucrative “scores” for the same reasons many people struggle to see CUs as full-service financial providers.

Unfortunately, the FBI either does not publish or doesn’t have data comparing robberies and injuries/deaths vs. various security measures vs. branch size/designs vs. cash handling systems.

As a financial institution responsible for your staff’s safety, it likely that your fears of employee injury and death exceed the reality. Only 1.5% of all robberies result in the injury or death of an employee – and that’s assuming you get robbed in the first place. Applying this ratio to CU robberies means that only five credit union employees are injured every year across the country from robberies. And only one credit union employee is killed every five years in the course of a robbery.

Statistically speaking, working in a CU is probably safer than working in a bar, night club or gas station. And it has to be a lot safer than working in construction jobs.

Reality Check #1: Just because you are in a cash-intensive business doesn’t mean you need to build your branches like fortresses.

When you wall your employees off behind bullet-proof glass, you’re erecting a barrier between you and the people you serve – physically, visually and aurally. This is a literal roadblock to building relationships.

Reality Check #2: You can’t have bullet-proof “bandit barriers” if you’re going to say you’re “all about warm, friendly, personal service.”

Do people really feel comfortable discussing sensitive financial subjects through a four-inch hole in an inch-thick sheet of acrylic?

Employee safety wouldn’t be an issue if your branches didn’t get robbed. Bullet-proof glass is a treatment for a symptom, not the root problem, and there are other things you can do to deter robbers.

For starters, you can move your teller lines as far away from the entrance as possible, and cutoff sightlines between the transaction zone and any exits. Robbers get uneasy with each step they take further into a branch, and they get really uncomfortable when they can’t see an exit at the height of the robbery.

Simply saying “hi” to a robber when he comes in to scope the branch is often enough to scare him off (hint: “greeters”).

Reality Check #3: Your average architect doesn’t know how to design “robbery-resistant branches.” Most local architects will design branches that look just like everyone else’s…because “that’s what branches are supposed to look like, right?”

Bottom Line:

• Building branches like Fort Knox makes you look just like everyone else.
• You can reduce your risk of robbery with careful branch design and how you manage your in-branch experience.
• A well-engineered branch not only mitigates risk of robbery, it also builds your brand and helps cultivate relationships

A study by Bigresearch says this is what people do when TV commercials come on:

• 41.2% of viewers take a peak at what’s on other channels
• 33.5% talk with others in the room or by phone
• 30.2% mentally tune out
• 5.5% pay attention to commercials

TV’s influence on consumers to purchase products declined, whereas new media options such as web radio, satellite radio, instant messaging and blogging all increased.

The report said also said that people’s consumption of more than one medium at a time is up as much as 35%.

Key Question: If people are tuning out to TV commercials, are they paying attention to online ads?Speaking of online advertising, it seems the financial industry is leading the way:

According to eMarketer.com, “financial services industry dominance of online ad spending is clearly in question for 2008:”

“The December 2007 industry online ad spending data are something of a last gasp,” said David Hallerman, senior analyst at eMarketer. “Those ads were contracted last fall, and the outlook has changed considerably since then.”

Informal research conducted by The Financial Brand indicates a significant increase in the utilization of video sharing tools such as YouTube by credit unions.

Search results for “credit union” on YouTube went up 47% over a 3-month period:

• October 2007: 524
• January 2008: 772

Google Video results for “credit union” increased 41%:

• October 2007: 755
• January 2008: 1,069

Googling the term “credit union” while limiting the search to only www.youtube.com yielded 44% more results.

• October 2007: 1,330
• January 2008: 1,920

Credit unions are using sites like YouTube for a range of purposes. Most, like Service Credit Union, are uploading their TV commercials such as this one.

But some are using it for other purposes, such as UK Credit Union who made a one-and-a-half minute video depicting light-hearted office humor.

Charlotte Metro Credit Union created a 5-minute video retracing all the work that went into their production of their TV spot featuring NBA star Muggsy Bogues.

Ad agencies are uploading commercials they produce for credit unions (with or without the express permission of their clients), such as this one from production company Kaye Lites for Service Credit Union.

There are also online videos from outfits like CUNA, whose “Little Guy” video for small business loans has been viewed almost 7,000 times.

As credit unions get bigger, more and more of them have the resources and need to pursue bigtime ad strategies like TV campaigns, some of which find their way on to video sharing sites like YouTube. The occassional credit union is even producing web-only videos.

Bottom Line: The trend speaks for itself. The irony is that credit unions’ capacity for mass media TV campaigns increases while traditional TV gives up more and more turf to the Internet.

The Northwestern Financial Review ran a story back in 2004 on research conducted by financial consulting firm NewGround Resources. The study included 480 credit unions. From the article:

• Only 2% of those in the survey believed that there is “lots of differentiation” among credit unions
• 68% said they expect their member representatives to deliver a memorable experience over and above the basics of good service
• 78% of credit unions said they were in the business of “building emotional loyalty”
• 26% said they had outgrown and changed their name
• 38% were planning to change their name
• 21% said lack of creative thinking was their biggest challenge
• 69% said their main competitor was a local or nationwide bank
• 20% said their main competition was other credit unions

Key Question: How can you deliver a memorable experience when you don’t offer anything different from your peers?

Reality Check: Credit unions now compete with credit unions. More community charters means more competition. This could strain the cooperative spirit that has historically existed between peers.