Nothing else – not assessments, interchange, or business lending – is more important to the long-term health of credit unions than sustainable membership growth.
But blockbuster membership growth is probably not the right goal. Instead, a strategy that produces 2% and 5% membership growth consistently every year is a good sustainable way to grow. It brings in more borrowers and and more borrowers mean a healthy credit union. Below is the full text of my recent responses for a Credit Union Times story on bucking membership trends:
Why do you think membership growth is a struggle for CUs?
Broadly, financial institution choice is driven by convenience, habit and inertia. Credit unions are keeping habitual members, struggling as an industry effectively to convey convenience to potential members, and generally not been able to motivate consumers to make the “switch” with better pricing or top service rankings.
Other considerations that weigh on membership growth:- FEAR…The recession put consumers even further into “bunker mode.” When you’re in bunker mode, you mainly come out for food and water and to peek around every once in a while. You don’t come out eager to stretch your arms and shake up your financial life. Even anger at the banks didn’t drive huge bank defections, and consumers are content to maintain their ‘it’s not too bad’ relationships.
- COST… It is reasonable to forecast that it will be more expensive to maintain accounts (due to fees) at multiple financial institutions, membership growth will struggle. The silver lining is that there’s an opportunity to catch consolidating accounts, but credit unions may lose accounts as members consolidate elsewhere too.
- COMMUNITY….The long-term trend in SEG-relationships is down. This is not new, but a lot of the membership growth credit unions took for granted from SEG partners even five or ten years ago continues to dissipate. Even credit unions with strong sponsor relationships have to constantly resell the value of the credit union.
- AUTOMOBILES…Nominal membership growth in the past ten years has come from indirect auto sales. With the collapse in car sales during the recession, it’s been hard to maintain those trends.
- PRICING…Many credit unions are not seeking new deposits and are in capital accumulation mode. Further, market forces along with sagging borrowing demand is keeping deposit rates low, making it difficult to attract new members.
- REGS & POLICY…Since the beginning of the financial crisis credit unions have had to juggle the complexities of a poor economy, regulatory changes and the re-shaping of financial services leaving little time or money for marketing or research to focus on the needs of consumers today, much less the evolving needs three to five years out.
Do you think CU membership growth has been trending up in recent years, or remaining stagnant or trending down? How so?
Membership growth trends are definitely in decline. CUNA Mutual analysis shows that, in 2001, credit unions added almost 2 million members. In 2006 it was 1.2 million. And this year we’ll be lucky to get 600,000 or 700,000. Bunker mode. Also, as the definition of “community” has changed, from employer, to city and now to like-interests or social network, credit unions have been slow to adapt on how to reach these changing communities.
Which member markets are the most difficult for CUs to reach and why?
Gen Y is definitely on the list. We have data from McKinsey & Co that show young adults actually trusted credit unions less than banks, even during the crisis. Many don’t know credit unions, and there are few built-in opportunities for them to get to know us. I was also struck by research the Credit Union Times cited showing credit unions trailing big banks in online satisfaction. As an industry, we can’t possibly attract young adult members without attractive, functional online delivery.
The “stuck banking” member is another target. It’s also been hard, and many credit unions will tell you this, to attract larger portions of individual members’ business—especially asset management services. We have ethnographic research from 2007 that shows members praising the credit union to high heaven, and then admitting that most of their funds are at Chase. Despite their love for the credit union, they just don’t think about the credit union enough to make the change, it’s a bit like dry cleaning…and back to the McKinsey research, credit unions don’t ask for the business.
Finally, as boomers retire credit unions are at risk of losing even more members. Are credit unions prepared to help the retiree manage their nest egg? My own father, a lifetime credit union member, moved his entire nest egg at retirement to a big brokerage house because of the brand, and the high-touch service. Fees were not a consideration. That’s a hard nut to crack.
What steps do you recommend CUs take to grow membership?
- Ask for the business. Sales is not a four letter word. Stop defining a sales culture by how banks have implemented with quotas and compensation awards. Credit unions are not selling tobacco, but the hopes and dreams of Americans.
- Doug Hall, Founder Innovation Engineering Institute says to be in business you need to be able to identify the three “P’s” and all from the board to the front line employee need to be able to answer: What is the PROBLEM you are solving?, What is your PROMISE? What is your PROOF? Translated: What do you do so well your members tell the world? If they aren’t talking about you, why not?
- Invite every credit union employee to help solve the problem. Recent Filene research indicates your employees get the credit union difference and trust advantage. They need help translating the message to your current and potential members. Also, they have great ideas, but are waiting to be invited into the conversation and don’t always know how to make suggestions in a traditional organizational chart or meeting.
Have you noticed any trends that CUs have been following to increase membership (for example, a certain type of marketing strategy)?
We did research earlier this year with the California and Nevada Credit Union Leagues about just which messages and imagery resonate with nonmembers. Not surprisingly, words like ‘membership’, ‘join’ and ‘cooperative’ didn’t turn many people on. Instead, consumers liked seeing simple, individually relevant statements like “Save $200 a year.” And fortunately, another credit union chestnut did test well. People really responded to “For People, Not Profit.” We are still collecting data, however the initial findings are promising for future credit union awareness campaigns to reach nonmembers.
Branching is still on the list, but the sustainability of the expense of bricks and mortar is in question. Collectively credit unions actually have just as many branches as banks, yet a much smaller piece of the financial services pie, in part because these 20,000+ branches are under 7000+ brands. Many consumers make quick decisions about where to go based on proximity. Credit unions need to leverage their shared branching network.
I know social media is sexy right now, but I’m neutral on it as a membership growth driver. Our research shows that very few credit unions have a social media strategy, and even those that use social media are finding few ways to make it drive membership growth. Every credit union has to market based on its own field of membership, but credit unions will be more successful if they experiment, dip their toes into many methods and then double down on the ones that show promise. For example: search engine ads coupled with landing pages; Facebook ads; billboards; direct mail; even places like Pandora. Try it, and cut it quickly if it doesn’t work, but try it.
Finally, I believe the time is right for “credit union at home money parties” think Pampered Chef gone credit union. The only area of retail to grow in the Great Recession was at-home direct selling. The financial crisis made it hip for people to talk about the most sensitive part of their anatomy…their wallet.
For the first time in generations Main Street America is talking about the state of their finances and having conversations with friends and family. Introduce the trust of the credit union and “boom” you have an opportunity to have real dialogue about the benefits of the credit union in building hopes and dreams. Research consistently shows the most reliable way to grow business is by word of mouth.
Image courtesy of: doug88888
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In our experience, credit unions are not growing because most have no brand difference. They don’t stand for anything. There is no brand promise other than service. Well, guess what? Everyone has service, good or bad. If you interview members, frontline associates within the CU, executives and board members and ask them what the brand stands for and what is it that makes them different, you’ll most likely get as many answers as people you interview. Credit Unions have to have a differentiated brand and brand promise and be able to articulate it from top to bottom, inside to outside in order to grow. Without it, they end up in the pile of commodities who have to compete on price, or in this case, rates.
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Excellent article Mark. Canadian credit unions also struggle with the issue of membership growth. Our system’s difficulties in growing its membership is in my view one of our biggest challenge. However, it is also true that some credit unions are focusing on growing the share of wallet of the existing members rather than go after new members.
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I have seen our membership not grow as much as it could do to people not understanding what a Credit Union is. We are more than just loans and CD’s and IRA’s. We are Institutions with Full Banking capabilities. I can’t tell you how many times people will call the branch, request a loan and I ask them if they are a member. “Well, no. Joe got a loan there so I thought I could get one.” Then I go through the process of how to qualify, what we offer as an institution and if anything, I can at least get them started with a savings and checking with direct deposit and we move from there with the loan. That is how I like to get people in the door is let them know the benefits of Creating a Relationship with us and capitalizing on that. Its a good strategy to try.
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Excellent post! Indeed, membership is the KEY to success of CUs. But it is a bit more nuanced than that
-CU success will come only if the growth is derived from PROFITABLE members.Growth for the sake of growth resulting in incremental operating losses does not make sense. I think that most will agree with this. Yet, we see Credit Unions insist on executing strategies that lead to exactly this result. Instead, CUs should focus on acquiring, retaining and growing wallet-share with members most likely to generate year-over-year growth and profitability. Namely – Affluent consumers, High Net Worth Consumers and Small Business Owners.
Just a 5% increase in profitable member base will boost profitability by nearly 40%! Yet, targeting this group is not easy and requires unique / differentiating products. It requires strong relationship management capability to grow the relationship (eg. products & services sold) once the consumer becomes a member.
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