Meltdown Marketing: 3 Things Credit Unions Must Do
By William Quinn, Associate at Callahan & Associates
No matter how the financial rescue plan unfolds, the financial industry as a whole will not go back to the way it was. This challenging economic climate provides a historic opportunity for the credit union industry to step out from the shadow of banks and take a prominent place in Americans’ financial futures.
With this in mind, credit unions need to decide today where they want to be when it all shakes out. They must position themselves correctly to succeed. Let’s look at the three ways to reach your market:
- Marketing to existing members
- Marketing to potential members
- Member-employee interaction
1. Marketing to Existing Members
There is opportunity in enhancing relationships with existing members, and current statistics certainly show room for much greater penetration:
| Average Penetration Among Credit Unions | Percentage or # |
|---|---|
| Credit cards | 14% |
| Share savings | 46% |
| Number of accounts | 2 |
It is just as important to fully tap into your current membership as it is to generate new members. If your members aren’t getting credit cards, checking accounts, mortgages, auto loans, and other products from you, then they are getting them somewhere else.
Recently, the Washington Post printed a story about how many banks and card companies are slashing credit limits without regard to the credentials of the cardholder. This is leaving many consumers reeling:
- Negative effects on their debt utilization ratio, thereby lowering their credit score
- It leaves many dangerously close to maxing out without warning
Can you be the solution for consumers facing this problem and others like it? Let’s take a look at a couple of quick case studies of credit unions who say they can.
Andrews Federal Credit Union ($816M, Suitland, MD) increased credit card penetration by having employees show members the cost of paying late with Andrews FCU vs. banks. They explain that if the member has $2,000 balance for the entire year and make one late payment in August, the annual cost to the member for interest and fees is $263 at vs. $400-$600 with some of Andrews’ biggest bank competitors. There’s real, tangible value because members save hundreds of dollars.
Dupont Community Credit Union ($630M, Waynesboro, VA) increased savings among its membership by creating a checking program focused on member usage habits. The "Grow Green" high-yield checking account requires e-statements and 10 debit card transactions per month. The account includes a debit rewards program that is coupled with their credit card.
- 4.8% growth in # of checking accounts (Peer average: 3.9%)
- 16.9% growth in checking deposits (Peer average: -0.3%)
- Average 3 products per member (Peer average: 2.4)
2. Marketing to Potential Members
As you deepen your relationships with existing customers, the concurrent challenge you must also meet is starting relationships with new members. While public data only provides an estimate, the table below suggests many credit unions have difficulties gaining broad command of their field of membership.
| Credit Union Asset Size | Members vs. Potential Members |
|---|---|
| Over $1 billion | 11.63% |
| $500 million – $1 billion | 6.28% |
| $250–500 million | 5.09% |
| $100–250 million | 5.66% |
| $50–100 million | 5.67% |
| Less than $50 million | 7.58% |
| All U.S. credit unions | 7.08% |
There is a growing amount of opportunity for credit unions though. As upheaval continues throughout the banking industry, people are looking to move and secure their money.
- 19 banks have failed in 2008 according to the FDIC
- There have been a number of mergers, including a handful of high profile ones
On average, about one-fifth of deposit relationships move within 12 months after a merger. A PNC Mercantile branch saw a 26% decrease after their merger. As an article in USA Today noted about this shift in deposits, credit unions are the safe homes consumers are looking for.
So how should you respond? People need your help and services; make sure they know you’re there.
3. Member-Employee Interaction
This built-in form of marketing is also your least expensive. If everyone in your organization has a member-service mindset, it will serve you well in the long-term. Your frontline teller staff, your call center, your loan officers, everyone plays a key role. If members enjoy the experience with you, they are more inclined to do further business and that means:
- You can become their primary institution
- Your credibility and relationships are reinforced, making them more likely to talk to their co-workers, friends and relatives, giving you a better chance with potential members
- Member-Employee interaction goes beyond just marketing, it is about brand building.
- You are unique from the bank down the street, so prove it in more ways than just your rates
- Actions speak louder than words – show them what the cooperative model truly is
