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3 posts categorized "October 2011"

October 24, 2011

The Unengaged Member- Whose fault is it? The Credit Union or the Member?


Reactivation and growth from unengaged members seems to be one of the hottest topics in credit union marketing circles. Why?

Most credit unions just received their annual report on member profitability. Executive Teams and Boards are staring at a section that lists the percentage of their members that are considered "unengaged" by the profitability model. From the clients we've talked to, the percentage is staggering - ranging between 20% and 30% of total members. To put that in perspective, if you are a 50,000 member credit union, you’ve got 10,000 to 15,000 of those members unengaged! 

So now the bigger debate - whose fault is it that most credit unions have a significant number of unengaged members? The member’s or the Credit Union’s? 

I recently found out that a colleague had gotten his last car loan indirectly from a credit union through his car dealer because it offered the lowest rate. He took the credit union up on the offer and put $5 in an account to get the loan. After the loan was paid off he became the typical “unengaged” member. When I asked him why he didn’t do more with the CU he replied "I heard from the CU once or twice over the course of the four years when they sent me a paper newsletter. As far as I’m concerned, it’s their job to let me know what products and services they could offer and they didn’t do a very good job." 

Key take-away, don't assume members know your product set as well as you do and that they all use the same communication channel.

Want to get engaged?

A recent article on the Bank Marketing Strategy Blog "Collecting Behavioral Insights Increases Value of Relationship" states that best-in-class financial organizations supplement traditional new account opening with an onboarding process that includes a short survey of needs and behaviors of the new customer. While this survey can also measure customer satisfaction with the new account opening experience, most banks focus on gathering insights into the reason for opening the new account, communication channel preferred, the financial goals of the customer and what financial services the new  customer holds elsewhere.

In addition, some banks ask questions to determine key life events that may be on the horizon and determine who in the household will be in charge of managing the new account. 

Forget whose fault it is!

 If you believe the saying that "It is cheaper to get an existing member to do more with you than it is to find a new member", then marketing should be focusing heavily on the unengaged number in their reports.

As Jim Marous points out in the Bank Marketing Strategy article:

A deeper knowledge of the customer's financial goals, channel preferences, product usage, preferred channels and reason for coming to your institution is needed to personalize the onboarding communication and move the customer from product engagement to relationship entrenchment.

Think about it, an unengaged member could be viewed as a new member that may not even know about all the products and services available to them. The same on-boarding email engines and surveys used to educate new members could be turned towards unengaged members to learn more about their original reason for joining the credit union, gather current financial needs and to introduce them to the benefits provided by the CU. Click here to see some actual onboarding examples from one of our clients.

Bring us your Tired, Poor and Unengaged.

 Technology offers a fast, inexpensive way to reach your unengaged members. We’ve built an online survey to see what we can learn from unengaged members to help credit unions just like yours. If you’ve got the list of unengaged members and can supply ones that you have email addresses for, we’ll supply the online survey and email engine to try and reach out to them. We’ll survey you members and provide you with the feedback. It’s FREE for the first ten credit unions that take advantage of the offer. Simply go to our Onboarding page and click "Ask for more info". We'll contact the first ten credit unions that apply and get them started.

Want to share your re-engagement strategy? Let us know about it in the comment section.

October 12, 2011

The 5th of November: Is "Bank Transfer Day" going to do more harm than good?


by Ron Daly 

Occupy Wall Street might not be making much headway in terms of policy changes, but they've certainly got the public talking. They're showing up in major cities across the US, not just New York. They're reaching all demographics, from 99% to millionaire Rap stars (Kanye West and Russell Simmons showed up). Maybe more importantly, they've started a "holiday" called "Bank Transfer Day". 

On the fifth of November (Guy Fawkes day, or so says Wikipedia), people are encouraged to go to their bank, gather up their money and take it to a smaller, community institution -- namely, a credit union. After these last few years of "Move Your Money" rhetoric and an implied desire for a national CU campaign, we might just have one handed to us. 

But is that a good thing? 

Some people think the time is right. CU marketers across the country recently launched "no debit card fee" campaigns to counter the move made by Bank of America to charge $5 per month for debit cards. One credit union even went so far as to say they would pay members for debit card usage.  In no time at all, the Bank Transfer Day was born, causing a cheer among marketers who finally had enough spotlight and a groan among CFOs who are worried about a sudden influx of deposit accounts that will need servicing. 

Some experts see these new accounts as a positive, arguing: 

“Those aren’t high-balance accounts and are the most profitable accounts that credit unions have because of the fees they generate,’’ he said. “Also, any increases that credit unions see will take place gradually because those accounts are the hardest to transfer because of changes that have to be made when designating direct deposit and automatic bill pay.”

CUNA Chief Economist Bill Hampel agreed with Dollar that any increase in deposits will come gradually. But Hampel said that the challenges to credit unions won’t come in the form of increased liquidity as much as additional strains on their operations.

“It’s a nice problem to have and that’s where they could see challenges for their staff,’’ he said. (full article here)

Some worry that an outflow of bank customers to credit unions would draw the attention of the FDIC and that they would shut down the process entirely. Rob Rutkowski

Let’s assume for the sake of argument that a good percentage of the population actually did get that mad and moved their money in one day. What would happen? It’s actually easy to predict: utter chaos. It turns out that having too much by way of assets is not a good thing for a credit union. The influx of cash to the credit union movement would immediately plunge the receiving credit unions into a state of ill-health.

Meantime, on the bank side, we have historical evidence of what happens when everyone takes their money out of the banks at once. It’s called a run. During the depression, many banks went out of business for that reason. The exposure would be so great that the Federal Reserve would act, most likely, to close down consumers’ access to banks and credit unions until the dust settled.  You think people are mad now?  Imagine hundreds of millions of people not being allowed access to their bank accounts for a week!

On his blog Marketing Tea Party, Ron Shevlin thinks BofA is using the $5/month fee as a purging fire to get rid of do-nothing accounts. From his article:

If they’re truly the least profitable customers, BofA’s average customer profitability increases. And with less unprofitable customers to serve, the bank can more easily shrink to a more manageable size.

But you know what else happens?

Unprofitable — or potentially unprofitable — go join credit unions or open accounts at community banks. The credit union folks think this is great because it probably means the average age of members goes down. Hooray!

But oddly, the credit union’s profitability is adversely affected. Because if it’s low balance accounts  walking in the door, the income accelerator — the revenue generated on deposits beyond the spread and fees — is diminished. (This by the way, is one of the key reasons why high-yield checking accounts are more profitable than no-interest accounts. See my report on Why High-Yield Checking Accounts Trump Free Checking).

So, the big questions that need answering:

  1. How many of the "99%"  will actually move their money?
  2. Will the regulators get involved?
  3. Will the sudden rise in bank accounts help or harm credit unions in the long run? 

I'm not saying I have the answers, but those are the big questions. I'd love to hear your thoughts in the comment section. 


October 03, 2011

Bringing a Knife to a Gun Fight - Why Cutting Marketing is a Bad Idea


by Ron Daly 

I'm sure you've heard the old adage "never bring a knife to a gun fight". Good advice - even though I've never been in a gun fight, I know I'll never be bringing a knife. Why? Because you're not only under-prepared, you're going up against someone with a huge advantage. 

I bring this up because of an article in the CU Journal by Paul Lucas, a branding consultant who's worked with a number of CUs and companies (including my own) on their branding. Based on a recent Bankrate article about what consumers shop for in a financial institution, Paul came up with some pretty interesting conclusions about the role branding and marketing play.

From Paul's article:

...17% of shoppers start looking for a new bank because of dissatisfaction with rates and fees, but only 4% of them choose their new bank because of rates and fees.

Why does that happen?

Because shoppers are swayed by brand image, advertising and bank branches in convenient locations. Perhaps this disconnect helps explain why more people are changing banks more often.

How did they choose which institutions to shop? The selection drivers lead me to believe that brand awareness is the key, and of course that's heavily driven by brand image. The big banks get strong awareness by buying it.

Paul also mentioned that BofA spent $2 Billion dollars on marketing in 2010. Two. Billion. Dollars. Spent by one bank. In one year.

What percentage of your budget goes into marketing? Paul makes a good point: 

The banking industry spends around 5% of income on marketing. If the credit union industry spent 5% using smart, targeted creative we could increase awareness, making us more competitive against banks.

Instead of spending more, however, many credit unions have cut the very things that sustain brand image: advertising, branch maintenance and member services staff. It's a downward spiral that left spinning long enough can take a credit union out of the game.

While CUs might have it where it counts (low fees, better rates, more specialized service), every inch of ground they gain gets thrown out the window when they don't pay to make it known.

Now for my two cents -- You really want the business? Time to start asking for it. Maybe the "gun" you bring to the fight isn't $2 Billion, but as any shooter will tell you, firepower's not the only important factor - having a better aim means a LOT. Time to really focus in on the member/potential member. What do they need? What do they want? What do they fear? 

One other important fact from Paul's article says the main reason people start shopping for a new FI is because of a shift in their life's circumstances. Maybe it's time you started wondering what those circumstances are...and how you can be there to help. 

I welcome your feedback in our comment section.