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4 posts categorized "February 2012"

February 23, 2012

Remember, Folks - "Target"-ed Marketing Needs Humans


by Ron Daly 

I know you've already read the Forbes article about Target sending baby-related coupons to the teenage girl before her father knew she was pregnant. In case you haven't, here it is. If you're too busy to read it, the short version is this: 

  • Girl buys pregnancy-related products
  • At point of sale, Target identifies those products as products pregnant women buy
  • Target sends girl baby-related coupons
  • Father finds coupons, calls Target, complains
  • Target calls back to smooth things over with the father
  • Father has to apologize to Target  -- daughter actually WAS pregnant

Stunning, right? Not really. 

Marketers have lots of information with which to work and can make offers and decisions about consumers that would surprise the average citizen. Target's got their system down. Amazon does it every time you log in, and weekly in an email ("Customers who bought this item also bought..."). Google's got a history of everything you've searched for as a Google user that they're using to put certain items in front of you. 

Is that a bad thing? Not necessarily. But when you take some of the humanity out of marketing, this is what happens - a girl has to break the news to her father that she's going to need those coupons after all. A major, life-changing event, a big secret, gets dropped on the dining room table and left for all to see. Not because Target had any interest in revealing this girl's pregnancy, but because, somewhere along the way, she went from person to data point. 

How do you avoid things like this? I have to believe, after more than a decade of working on things like this, that preference matters. How you communicate things to people, how you make offers, what they've told you, directly, that they want out of your relationship - that has to matter. 

When a consumer says they don't want offers, don't send them. 

When they unsubscribe, don't email them anymore.

When they refocus the message themselves, don't keep drowning them in information they don't want.

In the history of marketing, we've never had clearer insights, or a greater pool of data from which to draw conclusions. Just remember, emotional intelligence matters, too. 

Marketing needs humans and a little more humanity.

What are your feelings on this story? Let us hear them in the comments section.  




February 16, 2012

The Great Mortgage Refi: Should We?


by Ron Daly 

Remember Superman: The Movie when Superman flew around the world and spun time backwards? That way, he could save Lois Lane, stop Lex Luthor, and whitewash all the unpleasantness that ever happened. I'm not a physicist, but I'm not so sure that would work. And if it did, why stop there? Why not keep flying backwards and stop Lex Luthor before he even hatches his evil scheme? 

I bring it up because someone wants us to fly backwards and undo a disaster. Not a physical or natural disaster, but a financial disaster. The article "Time to consider mass mortgage refinancings" by Allan Sloan in the Washington Post sheds light on a shocking idea: that we could refinance the mortgages of qualified-but-financially-stressed borrowers and actually save ourselves some money and some risk.

From the article:

I’m talking about providing a cheap, streamlined and simple way to refinance fixed-rate mortgages backed by Fannie Mae and Freddie Mac, which own about half the nation’s mortgages and are now effectively owned by the federal government. Fannie and Freddie creditors were bailed out in 2008 when Uncle Sam put the firms into conservatorship to avoid their having to file for bankruptcy; as we’ll soon see, those creditors, consisting primarily of big financial institutions, would bear the cost of helping homeowners.

Mass Fannie and Freddie mortgage refis could provide billions of dollars of economic stimulus and support the prices of homes, many Americans’ biggest single asset. All while costing taxpayers nothing.

This isn't Sloan's idea - it was formulated by a group of experts from Columbia University; among them, a former economic advisor to George W. Bush. Their data and their proposal are available for review [click here to see it]. All of this comes around the same time as President Obama's plan for widespread refi, mentioned in his State of the Union 2012 address [click here], which draws much of its power from new taxes on institutions with more than $50 billion in assets. Many praised that plan, but it seems as though Congress won't play ball [click here].

My questions:

  1. Should these massive refis happen? 
  2. Will they happen, and when?
  3. Will it be the saving grace of the embattled housing market? 
  4. How will credit unions be affected? Positively or negatively? Do we get anything out of this? 

If you've got answers, I'd love to read them. Leave us a comment below and let's talk about it. 

February 07, 2012

Guest Author Marvin Umholtz: Stop Feeding the Strategic Crocodiles Snapping at CU Heels


The following strategy-focused overview candidly dissects the challenges and risks that are dangerously snapping crocodile-like at the heels of credit union leaders.  The mere fact that there is so much change going on and so much change that could go on in the 2012 to 2013 timeframe makes credit union’s reluctant to take major strategic steps when significant energy and resources might be demanded to manage through these unprecedented challenges.  Although potentially unsettling for those who like easy answers, this overview’s’ fundamental premise is that today’s credit union leaders must thoroughly understand what they are up against and mitigate it.  Credit unions aren’t paranoid if malignant forces are truly out to get them!  Use this overview as a discussion-starter at the next Management Team or Board of Directors meeting. 

Strategic Macro-Trends Affecting 2012:

  • Today’s political, legislative, and regulatory risks far exceed the traditional operating risks – credit, interest rate, liquidity, transaction, compliance, strategic, and reputation.  The crushing regulatory burden exacerbated by compliance’s escalating cumulative complexity now drags on the credit union business model and threatens its future viability. 

  •  The polarized Congress and the gridlocked legislative environment that results cause strategic uncertainty in financial services regulation, mortgage finance, and the economic recovery.  The November 6, 2012 elections could lead to a massive macro-directional overhaul of the federalgovernment.  That added ideologicaluncertainty makes scenario planning and financial modeling difficult at best – perhaps impossible. 

  • Many credit union officials claim that the National Credit Union Administration (NCUA) Board has been relentless in imposing its interventionist agenda on credit union decision-makers.  On a regular basis the NCUA Board demonstrates through its policy directives, supervisory edicts, rulemaking, and enforcement actions that its priorities too often stray from an emphasis on safety and soundness toward micro-management and counter-productive social engineering.  However, the biggest burning question – How much is the corporate credit union crisis resolution going to ultimately cost? – remains unanswered.

  • In addition to its own pre-disposition to re-regulate credit unions, the NCUA is mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the Consumer Financial Protection Bureaus(CFPB) statutory mission to examine for and enforce additional complex and costly requirements on credit unions.  The NCUA is destined to become a branch office of the marketplace-controlling CFPB enforcing a “level playing field” of fewer consumer choices and limited credit availability.

  • The global economic situation has not been this troubled in decades.  The U.S. Federal Reserve System Board of Governors has promised to keep interest rates at unprecedented lows through 2014.  Only slight improvements are expected in overall economic growth and employment over the next several years.  Consumers will continue to focus on deleveraging their debt and limiting their spending.  The federal debt continues to grow and the political inability to deal with demographically unsustainable entitlement programs embeds more uncertainty into the fiscal dynamic.  The wearying margin-less economic situation obstinately refuses to go away.

  • Additional strategic hot topics: net worth expectations, capital access, deposit insurance reform, moral hazard, too-big-to-fail, systemic risk, loan portfolio mix risks, charter conversions, prepaid cards, consumer activist groups, financial literacy, credit union service organizations, participation loans, partisan political polarization, and many specific credit union-identified hot topics.  

Key 2012 Strategic Takeaways:

1.     Fundamentally Different Decade Ahead.  The next decade will be fundamentally different – economically, competitively, demographically, culturally, and politically – from the preceding decade.  Using the same strategic approach to the financial services marketplace as in the past would be insane.  The economy in particular is expected to inch its way along impeding everyone’s business plan.  To keep the credit union’s metaphoric head above water, its leaders must fully understand the prevailing undercurrents that radically impact on strategy.

2.     External Risks > Internal Risks.  External risk factors – especially political risk, regulatory risk, and complexity risk – will have more impact on a credit union’s strategic success than will internal factors.  What one does not control will exceed what can be controlled.  Get used to it – uncertainty and how well it gets incorporated into strategy is critical to a credit union’s successful operation.

3.     Federal Government Not Friend.  The Congress, the National Credit Union Administration Board, the Consumer Financial Protection Bureau, and the Federal Reserve Board have their own political agendas and are not a credit union’s friends.  Don’t let them fool anyone into thinking otherwise.  Instead, expect them to keep making things more difficult.  Treat their increasingly costly, complex, and burdensome demands with deference – but validate, verify, and when appropriate challenge their directives.

4.     Ultimate Stabilization Costs Unknown.  Regardless of whether the NCUA Board’s loss estimates for the corporate credit union legacy assets are realistic or not, the Board sets the Temporary Corporate Credit Union Stabilization Fund(TCCUSF) assessment based upon those estimates and they drive the credit union’s costs.  Nobody knows for certain how deep the multi-billion dollar TCCUSF hole really is or how long it will take to pay it off.  Plan for the worst, hope for the best.

5.     Industry Infrastructure Fractured.  As a direct result of the 2008 financial system meltdown, the current credit union industry’s legacy infrastructure – including its in loco parentis regulators, non-risk-rated deposit insurance regime, and even its traditional trade associations – are showing signs of rust and structural weakness.  Proactive demolition and reconstruction of these faltering institutions sans dogmatic platitudes, entrenchedoligarchies, and one-size-fits-all approaches could go a long way toward restoring real return on investment for each increasingly diverse and independent credit union.

6.     Heavy Mortgage Loan Mix Untenable.  In the absence of a serious refocus of lending strategies credit unions are at risk of becoming the next Savings and Loan debacle.  Collectively credit union loan portfolios are dangerously loaded with low-return fixed-rate mortgages.  Many credit unions also rely heavily on originating and selling to the secondary market that is currently in flux due to the conservatorship of Fannie Mae and Freddie Mac, the glaring absence of any private market investors, and Congressional proposals that could radically reduce the demand for mortgages.  It’s an accident waiting to happen that credit unions must anticipate and avoid.  

7.     Non-Bank Competition Toughest.  Big banks, community banks, thrifts, and even other credit unions are not a credit union’s biggest competitors.  Big box retailers, insurance companies, payday lenders, and other non-banks are running circles around traditional federally insured financial institutions and it will only get worse because most of the non-banks’ offerings are convenient, uncomplicated, and consumer-friendly.  Credit unions, and especially Congress and regulators, should learn from these competitors’ successes rather than try to stamp them out.

8.     Boomers & Seniors Rule, X & Y Drool.  Aging baby boomers constitute a major portion of credit union memberships and along with many seniors dominate credit union boards of directors.  Generations X, Y, and the very young will not be a credit union’s salvation in the near term no matter how hard they try to attract those smaller demographic cohorts.  Each credit union needs to find out what their existing baby boomer members want and find a way to profitably give it to them.  Neglecting boomers could be fatal to the institution’s bottom line.

9.     CU Business Model Threatened.  The traditional low-cost, high-service credit union business model seems increasingly at risk from its cumbersome governance structure, limited access to capital, reliance on loan and investment income, legacy modest means mission, innovation-killing hyper-regulation, and inadequate products and services authorities.  Credit unions desperately need additional ways to generate income, broaden service offerings, streamline delivery systems, and generate scalable growth.  The credit union business model will need to evolve in ways that will make the traditionalists uncomfortable, but the alternative is stagnation.  Credit union leaders must proactively advocate this business model evolution since it won’t be simply handed to them. 

10.  Urgency for Change.  Lead, follow, or get out of the way.  Credit union elected officials and management executives that are unwilling to be drivers of change should seek early retirement.  The future belongs to credit unions that are committed to and intensely involved in change.  A change management skill-set and a sense of urgency will be required if a credit union wants to emerge unscathed at theother end of the coming decade’s strategy-altering uncertainty-laden gauntlet.

 Have questions/comments for Marvin Umholtz? Leave them in the comment section below. 

February 02, 2012

Everybody's Reviewing It! Why Gen-Y Depends on Other People's Opinions Online


by Ron Daly 

Ah, Gen-Y - the "El Dorado" of marketing demographics. People are hazy about where they are, what they do, and the richness of the treasures they possess. And after about five years of hearing how critical it is to win over the Gen-Y crowd, we get a little insight into how they buy and behave with their money.

One of the critical things a business (or credit union?) must do, according to a study done by Bazaarvoice, is point Millennials to user reviews (which they describe as "user generated content", or "UGC"). The opinions of other online users of a product or service weight heavy, particularly with regards to electronics. They're more eager to hear from people with "relevant experience" and they're three times as likely as the Baby Boomers to ask for people's opinions on a social media network. 

Why would the opinion of someone a Gen-Yer has never met mean more than their real-world friends and family? Well, in the real world, maybe not. If someone runs up to you on the street and screams "BUY AN iPHONE!", it might not make you break out your wallet right then and there. But when Bazaarvoice means "stranger", I'm pretty sure they mean a "reviewer". And what does a review have? 

  • A star rating - Quick and easy. If there are five possible stars and three of those stars are filled, that's a metric. There are typically a row of those stars followed by a number in parentheses indicating how MANY people have responded/rated that product. If a product has four-of-five stars and a thousand reviewers, well, that product is probably pretty good.
  • Short write-ups - A short review says a heck of a lot. If it's thoughtful and fully formed, it tells you the reviewer took their time and is a smart, well-informed consumer. If it says "Dis produkt is h0rrible, teh wackness"? That person's probably not so trustworthy. 
  • A link back to more information - Some online channels will give you permission to see other things that reviewers have reviewed on that site. This helps you figure out whether a person is ALWAYS negative or just negative about the thing you want to buy. 

Online reviews are interesting and helpful because not only are you evaluating a product, you're evaluating its users. But you don't see a lot of online reviews on a CU's website, do you? At least, I don't. 

Why is that? 

According to that same study (presented in a friendly little infographic on this site), 29% of millenials won't make a decision about credit cards or insurance without feedback from other users. Maybe more important: 

"Most Millennials say companies that include customer feedback on their websites are "honest" (66%) and "credible" (53%). "

Pretty great first impression, right? Think that could work for CUs? Who's willing to start this out? We know of a few CUs over on Facebook that let Facebook users review their products, but who's going to up the ante and include a place for reviews on their actual website? Is some CU out there already doing it? 

And before you go on about how you want to manage all your content and control every aspect of your "online presence", consider that over six hundred thousand people in the US moved their money in the past three months and attributed that switch to Bank Transfer Day, an online event that largely happened TO credit unions, not BECAUSE of them. 

Food for thought. 

Want to "review" this article? Have some insight? Talk to us in the comment section.