Options For Credit Unions That Want To Stay In The Game

Positive Business Meeting.jpgEditor's Note: In part 2 of our two part blog series we take a closer look at what credit unions can do to change some of the grim statistics in the report. If credit unions want to gain back some market share, especially with the Millennial generation, they need to change some of the ways they are marketing their "different" services. 

If you read the post from earlier this week, and have just the exact same amount of not enough of a life as I do so that you have tuned in for the sequel, then you will recall the content posted on our 270° Blog has to do with some pretty dreary numbers Jeffry Pilcher, the chief at The Financial Brand, has assembled concerning credit unions. Jeffry's title for the article he wrote was most colorful and spot on: "Research Proves Consumers Know Diddly Squat About Credit Unions."

Without going back over the stats, on the chance you did not read the prior post and are now compelled to do so, let's just say there was almost no data that would make you feel sunny about the ongoing effort by credit unions to distinguish themselves from banks. So, Should Credit Unions Just Sack the Bats and Head Home? Some might say yes.

Their argument would be that even though some of the data shared in Jeffry's post was concerning, each stat did say some positive trends worth noting. For example, around 60% of the participants in the survey do know they can belong to a credit union. Many do know that a credit union's operational model is different than that of a bank and that credit unions offer online/mobile banking. There is a segment of our society that answered in a way that affirmed the credit union model. 

The problem with the silver lining in that cloud is the matryoshka doll effect created by how the questions of the survey were structured. While a person may understand that credit unions operate under a not-for-profit model - perhaps making them feel positively inclined toward  CUs - that same person may think credit unions have fewer offerings than banks, which is likely to keep them from exploring other credit unions further. To add more angst to the situation, some data indicates that even members of credit unions might not buy what their credit union is selling or might think of credit unions as more a political statement, something akin to what driving a Volvo tended to convey in the late 1980s.

For example, a quarter of members don't refer to themselves as members, which could imply either they don't know what differentiates a credit union from a bank or, most likely, they really don't consider being a member of a credit union is all that different than being the customer of a bank. In addition, only 60% of members identify their credit unions as their primary financial institution, possibly indicating the remainder like the credit union concept but are not completely certain it is a better option than banks. Sixteen percent of members say they would not join a credit union again. That's one stat that is pretty hard to not understand, unfortunately.

To overcome some of the hurdles identified in these numbers, credit unions need to take a different approach when trying to reach many Americans who would have no issue being one of their customers (intentional word choice). The approach would require two pretty significant changes for credit unions. First, they would need to shift their marketing dollars from educating consumers about how credit unions are different, focusing instead on competing directly with banks in every way possible - i.e. offering pricing that will make consumers want to consider credit unions when shopping for financial products and services.

Second, credit unions would need to beat banks to the punch when it comes to leveraging the Gen Y (Millennials) opportunity. This is no slam dunk but it is not unachievable as Gen Ys have a basic distrust of banks, especially those on Wall Street and in the Too Big To Fail Cabal. Many members of this generation were graduating from college the last time the world economy imploded and, rightly, they hold these financial institutions responsible. Credit unions are well placed to leverage this distrust but will need more than just the "we are different from them" messaging.

A credit union will need to leverage the focus this generation has on the "experience" and their love of sharing their lives within the social networks they use online. However, to give them a positive experience they will tell their cyber friends about, credit unions must find a way to get Millennials to engage with them. This means credit unions must speak directly and forcibly to one or more of the needs of Millennials; e.g., personal financial management. To achieve a connection with Gen Ys around an area such as this, the credit unions will need more than posters in the branch, envelope stuffers in the monthly statements, and media advertising.

For example, a credit union could start by first determining who among their current users are Millennials. Using text, mobile app, and social networks, the credit union could reach out to these members. This may uncover additional service opportunities for credit unions within their existing member base. In addition, demographic information is accessible for targeting and promoting this and other areas that address the needs of Millennials. Lastly, a credit union needs to include an offer or offers; e.g., a $10 Starbucks gift card for each Millennial signing up to use the credit union's personal financial management services. While only members could sign up for PFM service, a credit union could combine the offer to include this services with opening a new account. 

This trench warfare version is not as sexy as the cause marketing that credit unions do a good deal of now but, if you want converts in a capitalist society, it is more effective. It does not have to be all about price but pricing does have to be competitive, which most credit unions are quite capable of achieving given their not-for-profit orientation. Once a credit union has the attention of consumers using this approach, it can then share with them whatever other parts of their credit union story the data says will appeal to their demographic.

After all, as one credit union executive told me, "...we are supposed to be not-for-profit, rather than non-profit." There is a difference between credit unions and banks but those differences are not the headlines when trying to get consumers engaged for enough time, at enough depth to understand those differences. As the stats in Jeffry's posts surely suggest - it is time for credit unions to face this reality and change their approach.