Fierce Competition for Gen-Ys
The competition among banks and credit unions for Gen-Y members is bitter, and it is getting more so. As new services, products and technologies seem to redefine the market almost on a daily basis. Smart phones one day, tablets the next.
In this highly fluid environment, credit unions tend to have a leg up on banks with respect to trust, loyalty and customer satisfaction. According to a 2013 report from Filene entitled “Next Generation Needs: Examining Credit Union Loyalty Among Young Adults,” finds three priorities for young consumers, all of which are points of strength for credit unions:
- Service and respect.
- Easy and convenient.
- Help understanding financial basics, such as how to establish credit.
How can credit unions take advantage of their traditional strengths to attract and keep Gen-Y members? The following three credit unions — BECU, Redwood Credit Union, and Georgia’s Own Credit Union — are successfully reaching out to millennials with a variety of programs, products and services tailored for their very specific wants, needs and lifestyle requirements.
Read More: Why Gen-Y Is Passing You By
BECU, Tukwila, Washington
BECU has more than $10.8 billion in assets and over 800,000 members, making it the biggest credit union in Washington and fourth largest in the United States.
Stephen Black, Vice President of Marketing for BECU, says the credit union has deliberately targeted the 25-44 age range — what it considers the “sweet spot” for new members. He says that the 25-34 age group tends to comprise the highest percentage of BECU’s new members. Black also says that younger members make up the largest segment of BECU’s new auto loans and new home mortgages, products which have been heavily promoted heavily in the Seattle where the credit union is based.
2013 was a banner year for BECU’s auto lending business, and the credit union also captured a big share of mortgage activity from first-time homebuyers — those who are usually at the younger end of the housing market.
“I think younger people find credit union products and services — as well as the credit union story — more relevant than other lending institutions,” Black says. “We are large enough to be solid but not too large, and I think the younger generation likes the fact that we are a more active part of the community.”
While BECU has been successful in attracting younger members with its current marketing and promotional tools, Black says it is planning to launch a major initiative to reach even further into that population segment with what he calls a “responsive, multi-channel digital presence.” Key elements of the initiative include improving BECU’s website and mobile connectivity, as well as a more robust social media presence.
“We definitely want to be recognized as a tech savvy financial services provider,” says Black.
But just as important as being tech savvy is sensitivity to how social media vehicles are used, says Black. For instance, BECU does not to use its Facebook page for the hard-sell in deference to young people who see Facebook and other socially-oriented outlets as community and friendship sharing sites.
“Our experience underscores that misuse of these sites can be counterproductive if not downright harmful, especially in the social media realm,” says Black. “We use our site for community outreach and in some cases advocacy for the public good, such as donating to charitable organizations. Giving to charities is high on the list of what young people value in their own lives, and so do we.”
To measure the effectiveness of its marketing campaigns, BECU conducts tracking studies and leverages internal data revealing that during the past year about 21% of its new members have come from the 25-34 age range. Black says BECU also has its eye on the younger, 18-24 age group, which it is pursuing through a variety of means, such as a branded credit card for the University of Washington.
Reaching out to this younger market segment requires “boots on the ground” in terms of being where the young people are. One way that BECU does that is by “being in the community” at such venues as the Washington State Fair and the annual ZooTunes summer concert series that BECU sponsors at Seattle’s Woodland Park Zoo, a highly successful musical extravaganza.
Redwood Credit Union, Santa Rosa, California
Redwood Credit Union serves more than 230,00 members (consumers and businesses) and 400 groups and associations, and has $2.2 billion in assets. It is the 63rd largest of the roughly 7,000 U.S. credit unions.
According to Robin McKenzie, SVP of Marketing and Communications, Redwood CU is zeroing in on Gen-Y members. While the credit union has divided its Gen-Y population into two distinct segments — ages 18 to 24 and 25 to 35 — McKenzie says the main marketing target for 2014 is the 18 to 24 age group, where Redwood sees the most potential for growth.
With its marketing eye on cultivating members before they even reach early adulthood, Redwood encourages money management education before the age of 18 with its Youth Accounts, divided into two levels: Jr. Rangers for members 12 years and younger, and Jr. Partners for teens 13-17. These accounts offer dividends, savings milestone gifts, fun financial stories and educational activities through newsletters and access to CUNA’s youth-targeted Googolplex websites. McKenzie points out that about 80% of Redwood’s youth account members continue to be members of the credit union after they turn 18.
“For the most part, younger people have not made a firm decision on which financial institution they want to join and we believe they are more receptive to the credit union way of doing business,” says McKenzie. “We think it’s important to connect with them at that early stage and nurture them as valued members as they progress through life.”
Redwood CU also reaches out to the younger generation through a free financial workshop for Sonoma County high school students, sponsored in partnership with the Sonoma County Office of Education and Santa Rosa City Schools. The four-day, 16-hour Banking & Finance Academy is based on the High School Financial Planning Program, created by the National Endowment for Financial Education. The curriculum teaches young people household budgeting, financial planning, saving and investing, credit and debt management, and other life skills related to managing money. This past summer was the ninth annual workshop and so far more than 300 high school students have graduated from the academy.
“As a cooperative, providing free access to education and information is one of our guiding principles, and we strongly believe providing financial education — especially at a young age — helps people develop essential money skills that will benefit them throughout their lives,” says Brett Martinez, Redwood President/CEO.
Another way Redwood connects with the younger generation is by offering a special Visa-secured credit card with a limit based on the amount of money the cardholder has on deposit in his or her savings account (as low as $200). The card is used the same as any credit card and is ideal for helping young people build credit while giving them real-world experience managing money. McKenzie says Redwood CU is planning to enhance the product in 2014 with what she calls a progressive secured card which will allow the credit limit to increase incrementally as the cardholder demonstrates creditworthiness over a period of time.
Taking a broader approach to the Gen-Y marketplace, Redwood CU is also in the process of providing more robust online and mobile banking services as well as more opportunities to engage with the credit union online and through social media. It is also evaluating the possibility of offering a reloadable debit card and developing a special first-time auto loan product, all of which will be attractive to younger consumers.
“While not necessarily designed specifically for Gen-Y consumers, these and other products that we offer or are planning have key elements that will be attractive to younger people,” says McKenzie. “It’s important to understand the dynamics of each generation and provide products and services that serve their needs and, if designed and executed properly, the needs of other generations. That’s cross-marketing and cross-selling at its best.”
To even better understand the dynamics and unique needs of its 18-24 age marketplace, McKenzie says Redwood CU has retained a market research firm that will not only take a deeper look at the Gen-Y population, but also the Hispanic community that Redwood believes offers significant growth opportunities.
Georgia’s Own Credit Union, Atlanta, Georgia
With more than 170,000 members and $1.7 billion in assets, Georgia’s Own Credit Union is one of the state’s largest financial institutions.
Georgia’s Own CU is fully onboard with the importance of Gen-Ys and the potential they hold for their credit union and the industry, says Laura Sterling, AVP of Marketing.
“Gen-Y consumers are extremely important to us because they represent the future of our membership, and the purchasing behaviors of this demographic will represent the status quo of future generations of consumers,” says Sterling. “If we can reach this group, we will have the ability to attract even younger generations of members.”
Sterling says Georgia’s Own CU targets the Gen-Y population in the 18-32 age range, and currently has about 32,000 members in that segment. It is also one of the credit union’s fastest growing membership groups, growing by 19% over the past two years. A major factor in that growth is Georgia’s Own CU’s i[x] program which was created to attract members in the 14-25 age range. The i[x] program is accessed online via a blog-based website.
The website content is designed to help young people “get control of their money” by offering financial products and services tuned to their age and life stage, with tailored assistance for setting up a checking or savings account, beginning investing or securing a new car loan. Georgia’s Own CU also publishes a quarterly magazine — Ne[x]t Magazine — which is sent exclusively to i[x] members.
“Since the program started in the fall of 2009, we’ve seen membership grow 35% among the 14-25 year age group,” says Sterling. “Our success is measured through total members, number of checking accounts and through outstanding loan balances among i[x] members.”
Although Gen-Y is a very tough demographic to reach, Sterling believes credit unions overall have done an outstanding job of marketing to this group. “Through social media, product development and branding, credit unions have changed the way they advertise and have dedicated enormous resources to this segment of the population,” says Sterling.
Since much of what credit unions and other institutions do to attract younger consumers centers on technology, the investment can be costly. “One of the biggest challenges we face is keeping up with the latest technology and the cost of that technology,” says Sterling.
But it’s a necessary expense. Kathy Igou, VP of Branch Services, points out that Gen-Yers pride themselves at being multi-tasking and financial institutions must respond accordingly. “While it may be expensive, this Gen-Y group needs a wide variety of channels,” she says. “They want it all. In our experience, we find that if we put it out there, they will use it.”
Delivering on the Things that Matter
As Filene’s “Next Generation Needs” study found, credit unions excel in the categories important to younger consumers — service and respect, easy and convenient, and a source for understanding the basics of personal finance. And, the experience of BECU, Redwood CU and Georgia’s Own CU shows that programs tailored to the specific wants, needs and lifestyle requirements of Gen-Ys will deliver new members and members that stay for years to come.