More than half of US credit unions have failed to fully realize the ROI potential of their marketing investments. If your marketing isn’t moving the needle, take the first step toward more efficient marketing — and competitive advantage for your credit union — by gaining clarity into the downstream impact of your decisions.
By Lisa Cole, Chief Financial Strategist at True North Custom
While a small percentage of a credit union’s total operating expenses, marketing can boost the competitiveness, growth, and efficiency of a credit union — if done efficiently. Marketing can be an accelerator of growth, exponentially multiplying the efforts of all credit union employees.
Clarifying the Problem: Marketing Efficiency Relative to Revenue Growth
Being a non-profit does not excuse the organization from driving revenues efficiently. Marketing efficiency isn’t achieved by cutting budgets, producing fliers, expensive re-branding exercises or mass advertising. Instead, real progress in driving revenue efficiency comes from embracing more sophisticated and disciplined marketing and business development processes.
In fact, survival of the credit union movement requires embracing a completely new marketing & sales paradigm that embraces technological, cultural, and media changes that have changed the way your members buy financial services.
Connecting the Dots: Marketing Spend, Revenue Generation & Future Success
To understand this relationship, we looked at the relationship between marketing spend and year-over-year growth in terms of members, assets and loans for approximately 1/6 of U.S. credit unions.
We then compared their performance with industry averages as reported by CUNA in the most recent E-Scan report. CUNA’s benchmarking data (industry averages) used:
- Asset Growth: 7.1%
- Member Growth: 3.6%
- Loan Growth: 5.7%
- Marketing Spend/Member: $13.81
Knowing past behavior is the best indicator of future performance, we then segmented the credit unions into four quadrants of a compass based on their performance within a revenue efficiency scattergraph. The four segments on the compass are:
Slow/No Growth – Credit union isn’t investing enough in marketing to drive growth.
Ineffective Growth – Experiencing lower than average growth but higher than average spend, the credit union is wasting significant marketing dollars by investing in the wrong activities. Marketing spend should be reallocated to activities that will impact growth. This is synonymous with the credit union following its “magnetic north” — moving in the wrong direction by following an uninformed or misinformed plan.
Inefficient Growth – While growing more than industry average, your credit union is not achieving maximum productivity; the investments can be optimized to drive greater results.
True Growth – Credit union has achieved fully optimized, cost-efficient growth. The organization has invested wisely and is realizing the full potential of its investments.
The results are clear. Marketing efficiency makes a direct impact on revenue growth. In fact, studies show that 64% of credit unions spending less than industry average in marketing had lower than industry average growth (36% realized higher than industry average growth). Among credit unions that spend more than industry average in marketing, 78% had higher than industry average growth (22% realized lower than industry average growth.)
Counting the Opportunity Cost… and Taking Corrective Action
It’s clear that cutting marketing spend or misappropriating budget dollars will impact your credit union’s ability to grow — and could even be detrimental to your survival. While the tough economy is to blame for some of the challenge, the credit union legacy of mass marketing and haphazard, untargeted and untracked practices produces a significant waste in marketing dollars, which is harder to hide in difficult times. But there is a better way to spend those precious dollars.
With changing market dynamics, expanded media choices, advances in marketer skill sets, and evolving technologies perfected by best-in-class marketers across industries – there’s simply no excuse for the waste.
The bottom line: While a small percentage of credit union operating costs, marketing can — and should — be an accountable, measurable driver of revenue growth.