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May 24, 2012

GUEST POST: Mark Arnold on Becoming Your Members' PFI


Mark Arnold, CCUE, is an acclaimed speaker, brand expert and strategic planner. Mark speaks regularly to audiences around the country on branding, marketing, strategy, leadership, personal growth and generational issues.  With over 20 years experience in the financial services industry, Mark’s breadth of knowledge covers areas such as marketing, business development, human resources, training, and sales. You can follow him on Twitter [@jmarkarnold] or via his blog at blog.markarnold.org




“Credit unions must see themselves as relationship managers. As relationship managers, credit unions better position themselves to become members’ primary financial institution.”

—CUNA E-Scan 

While there is a big rush today to get more new members, one marketing strategy your credit union may want to focus on is getting more from your existing members. Most marketing experts estimate it is eight to ten times easier to expand a relationship with a current member than it is to acquire a new member. Just think about it: what would happen if every one of your members just added an additional product or service per household? Odds are, your net income would skyrocket.

Credit unions must get their members to go beyond just having a savings account and strive to become their members’ primary financial institution. “Financial institutions that make retention one of their top three priorities often enjoy deeper relationships, steadier growth and clearer focus on the core business,” says CUNA’s E-Scan.

According to CUNA, here are the odds of your credit union losing a member based on product usage:

  • 2 to 1 of losing a member if they only have a saving account
  • 10 to 1 of losing a member if they have savings account and a checking account
  • 20 to 1 of losing a member if they have savings account, a checking account and a loan
  • 100 to 1 of losing a member if they have savings account a checking account a loan and any fourth product

Product penetration and member retention are directly linked together.

Two steps your  credit union can take to going beyond just having your members’ savings account are:

1)      Offer relationship pricing

2)      Get sticky products in their hands

Offer Relationship Pricing

Relationship pricing is rewarding members who do the most business with you with special deals. The more business they do, the more profitable they are and better deals you give them. For upscale members, you might take away fees in exchange for higher balances and offer discounted rates on a loan.

TowerGroup Research showed that 70% of U.S. consumers would like to have all of their accounts at one financial institution.

“We see relationship pricing as rewarding those members who participate the heaviest in the cooperative based on their relationship with us,” says Eric Gagliano, senior vice president of MarketMatch. Prior to joining MarketMatch, Gagliano helped launch relationship pricing at River Valley Credit Union in Ohio. “We are rewarding members for their business,” he added.

Get Sticky Products in their Hands

A “sticky” product means something that “sticks” with the member in such a way that it has staying power with them. Examples of sticky products include a checking account, bill payment and a mortgage.

Having a checking account is still the classic definition of being a member’s primary financial institution. The challenge with that, however, is that many households now have multiple checking accounts. So you could have the members checking account and still not be their PFI. Having the checking account is just the beginning: you also want direct deposit and a minimum number of transactions.

Bill payment is especially important because you have to really upset the member before they will go through the trouble of making all those changes. In a recent Wall Street Journal article, a Bank of America executive noted, “Once a customer goes through the trouble of setting up electronic bill payment, he or she is 80% less likely to switch loyalties.”

A  mortgage is a relationship type of account. You have additional opportunities to market your other products and services. One financial institution had a “3M” strategy: they wanted all their customers to have a money market, a mutual fund and a mortgage.

If all you have is a member’s saving account, you really don’t have their business. Offering relationship pricing and getting sticky products in their hands can take your members beyond just having that savings account.

This article first appeared in the Texas Credit Union League's Lone Star Perspectives.



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