As in many get-out-the-vote campaigns, the focus was on a small group deemed likely to decide the outcome. But the voters in this case were not picking a political candidate.
They were deciding whether to approve a merger of Vermont’s two largest credit unions.
The deal, proposed in early 2022, sought to unite Vermont State Employees Credit Union in Montpelier and New England Federal Credit Union in Williston. But it was unexpectedly controversial, drawing fierce opposition from former leaders of VSECU, who took their case to local newspapers and online media outlets.
VSECU members ultimately approved the merger in November 2022. But the margin was slim: 318 votes out of nearly 15,000 cast.
“It was tense for months,” says Yvonne Garand, the chief brand and marketing officer for VSECU. Since the merger closed in January, her credit union has been operating as a division of New England FCU, under the latter’s charter.
While VSECU faced an unusual situation, its example offers lessons for other institutions concerned about how customers will react to a change in ownership. Its experience also applies more broadly in any challenge where the customer communications strategy can be a make-or-break factor.
Much More Emphasis on the Merger Communications Strategy
Banks and credit unions could never take for granted that customers would just roll with the changes in a merger. But now that customers can move money at the tap of a screen, they may be more inclined than ever to find a new provider.
Want to reduce the risk of customer attrition?
“Communication does matter.”
— Tricia Hrotko
“They’re gone now before you even know they’re gone,” says Rick Hall, managing director of BKM Marketing Associates in Hingham, Mass.
Executives once saw systems conversion as the chief risk in a merger and focused their attention on minimizing disruptions, says Hall, whose company specializes in financial services and M&A.
Now, executives increasingly try to engage with customers of acquired institutions to grow those relationships, not merely to retain them, Hall says. “It’s more about, ‘Can we hit the ground running?’”
To do so, executives need a clear understanding of the people being served by the acquired institution.
The buyer may feel its own products, services and technology are better. Nonetheless, the customers or members coming on board didn’t choose to bank with the acquirer on their own. So a little courting is in order. “You have a small window there where you can gain some traction,” says Hall.
Segmentation, a hallmark of VSECU’s approach, is one way to do it. At a basic level, for example, buyers may need to use different messages with digital customers than with branch-centric customers or hit on different themes with business customers than with retail customers. Buyers also may need to adjust their communication style to better reflect what the new customers are used to, in terms of style and tone.
The differences may not always be stark, says Tricia Hrotko, chief customer officer at Digital Onboarding, a Boston company whose services include helping financial institutions integrate new customers after a merger. But there might be enough variety in the customer base to consider breaking out specific subsectors for additional messaging.
And if a buyer can outperform the seller in its communications — not just in its products and services — it can reduce the risk of customer attrition, says Hrotko. “Communication does matter.”
Not the Same Old Merger Story for Vermont’s Two Largest Credit Unions
VSECU was founded in 1947 to serve Vermont state employees. New England FCU was founded in 1961, initially for IBM employees. Both now operate under community charters, Garand says.
In the realm of M&A, a deal where a credit union buys a bank has been known to trigger opposition at times. Sometimes those deals even get derailed.
But a merger of two credit unions is rarely contentious. In this case, former leaders at $1.1 billion-asset VSECU argued that the merger jeopardized their credit union’s focus on Vermont. New England FCU, though rooted in Vermont, has a field of membership that includes four New Hampshire counties.
No money changes hands in credit union deals, as they are member-owned. And since New England FCU would be the surviving institution, its roughly 100,000 members didn’t have to vote on the matter. VSECU’s members were the ones controlling its fate.
“We knew that to get this merger across the line, it was going to boil down to numbers. It was going to boil down to who’s going to go out and vote.”
— Yvonne Garand, Vermont State Employees Credit Union
After the February 2022 announcement about the proposed merger, VSECU and New England FCU worked together to ensure their communications were consistent, Garand says. But because they had different brands, they put the messages in their own voices.
VSECU’s brand leans on values-based banking and sustainability, providing more of an emotional connection, Garand says. New England FCU’s brand connects primarily through a pragmatic lens, with a focus on efficiency and superior customer service.
Garand and her team, however, took it a step further. They recognized a need to communicate differently with various segments rather than telling the same story to all of its 70,000 members. And to really resonate with them, it couldn’t be the typical merger story about greater scale and efficiency.
“All of those things are important,” Garand says. “But that’s our inside jargon. And we knew that if we came out with messaging and communications that sounded like that, people might not understand it, and it might even feel a little intimidating.”
Read more:
- Three Major Trends in Credit Union Mergers and Acquisitions
- Merger Communications Strategies Will Make or Break a Deal
Segmentation Strategy: Messages for Key Target Audiences
To figure out the best approach to its merger communications, the marketing team applied some of what it learned when talking about assorted financial products to different segments. It used what Garand described as a “human-centric approach” that ensured the messages were empathetic.
In this case, however, instead of pitching financial products to people at different life stages, the messages were crafted based on how the members related to the credit union.
Digital natives, who are increasingly attracted to innovative banking tools at larger institutions, heard that the merger would result in improved digital services.
Other messages targeted environmentally minded members who had embraced VSECU’s green-financing initiative. They heard how the merger would propel the credit union’s commitment to sustainability.
Another segment included members in the Burlington area of northwest Vermont, where New England FCU was more prominent. “We know that our members in that area continually ask, ‘When are you going to open branches up in the Burlington area, the northwestern area?’” Garand says. They heard how the merger would open up access to New England FCU’s eight branches, which are mostly in northern Vermont.
VSECU has nine branches, including one in Williston, outside Burlington, about a mile from the nearest New England FCU branch. Neither is slated for closure, Garand says. “Both branches are in high demand.”
Merger Critics Fuel Opposition in Vermont’s Capital
What ended up as one of the most critical segments were VSECU members who lived in and around the state capital of Montpelier in central Vermont. They were among the credit union’s longest-tenured members.
“We knew that this was probably the segment that would feel the greatest sense of loss because they grew up with VSECU,” Garand says.
The credit union’s messages to this segment acknowledged that change would be difficult. They also honored long-standing members for their contributions to the credit union’s evolution and reassured them about the potential impact, Garand says. “We really wanted this group to know that they were still going to have the same experiences that they have today.”
But it ended up taking more persuasion than Garand had anticipated. “It did take us off guard just a little bit, how effective this opposition was in the central Vermont area,” she says.
Steven Post, who was the chief executive of VSECU for 26 years before retiring in 2013, and other former leaders created a website called callingallmembers.org to rally opposition to the merger and publicize their perspective. They wanted the credit union to remain independent.
Merger critics won over the Vermont State Employees’ Association and the Vermont Retired State Employees’ Association, whose boards voted to oppose the merger. Given this backing, “we thought we were going to win,” says Post.
But the resources that VSECU brought to the campaign ultimately helped sway the outcome, according to the merger critics, a group that also included a former attorney general in Vermont.
“If we had had money to put ads on TV, I don’t have any doubt that the outcome would have been different,” says Jerome W. Diamond, the state AG from 1975 to 1981 and a former chair of the credit union’s board.
Read more about segmentation strategies:
- Ad Campaign Fuels Big Loan Jump by Using Segmentation
- AI Finally Makes Micro-Segmentation a Reality, as This Case Study Shows
A Get-Out-the-Vote Communications Strategy, Complete with a Political Consultant
As opposition swirled, Garand realized that she and her team were in more of a political fight than a marketing campaign. In response, VSECU hired a political consultant to help craft a get-out-the-vote campaign, using the data it had from past credit union elections.
“We knew that to get this merger across the line, it was going to boil down to numbers,” Garand says. “It was going to boil down to who’s going to go out and vote.”
Data from past VSECU elections indicated that roughly 6,000 to 8,000 members voted on average, with a high-water mark of about 12,000, Garand says. The data also showed that the typical voters tended to be older and from central Vermont, she adds. “That’s when we did a pivot, and our communications plan moved from merger awareness to get out the vote,” Garand says.
The marketing team relied on a mix of mail, email, social media, website FAQs, digital banners and branch signage, Garand says. The credit union did not use TV ads.
Knowing many “no” votes would come from the state capital area, the credit union focused on reaching potential voters in other areas of Vermont who might be more receptive to the merger plan. “We strategically focused on the Burlington market — Chittenden County — as well as other smaller regions in Vermont, to encourage those members to vote,” Garand says. “And it worked.”
Now the leaders of VSECU and New England FCU are working to craft a fresh brand identity for the merged institution, which has about 170,000 members overall and assets of more than $3 billion. They expect to decide on a new name by late 2023 and roll out new branding in mid- to late 2024, Garand says.
From the archives:
War of Words: Vermont Bankers Battle Credit Union Over B-Word