What Good Is The Credit Union Difference?

I’ve seen a number of blog posts recently about the credit union principles and the credit union “difference”. Josh Jones at CUNA, for example, expressed concern that:

“The credit union difference—our voluntary community involvement, commitment to financial education, service to the under-served, and so on—is becoming lost in the shuffle. The articles I’ve read tout credit unions’ better interest rates and lower fees. Yes, these are important selling points, but they’re not the only ones that motivate people to move their money or remain loyal. We can’t lose sight of our philosophical differences—either communicating them or operating by them—even though credit unions are enjoying large scale, positive exposure.”

Josh is correct that better rates and lower fees aren’t the only reasons why people move their money or stay loyal.

But it begs the question: To what extent do people move their move their money or become disloyal because they believe that their current provider doesn’t voluntarily get involved in the community, isn’t committed to financial education, doesn’t serve the under-served,  and so on?

In other words, to what extent does the credit union “difference” really play a part in a consumer’s decision to select a financial services provider?

For a prospective CU member, I have my doubts that it has much impact.

Prospective members are prospective members, broadly speaking, because they: 1) Want to move their money from existing account(s)/provider(s) to a new one, or 2) Have identified the need for a new account/product.

Regarding reason #1, what motivates someone to switch? Lots of reasons. Towards the top of the list: 1) Camel’s back-breaking bad service; 2) Poor product performance; and 3) Personal reasons (e.g., relocation).

It’s perfectly reasonable to think that there are people out there who don’t receive bad service from their bank, are satisfied with the rates/fees on their bank’s products, aren’t moving or experiencing other personal life changes — and still decide “I don’t like the way my bank does business and treats other people, and therefore I will seek out another institution.”

I don’t have the numbers to prove this assertion, but I don’t think that accounts for a lot of people in the US. (And I base that assertion on past market research that I’ve done).

Regarding reason #2, for better or worse, Americans don’t go into relationships with financial providers with the a priori intention or belief that they will do all their financial business with one provider or that they will stay with that provider for the rest of their life.

So when prospective members identify the need for a new account or product, what goes into their decision? Lots of things. Towards the top of the list: 1) Fees and rates; 2) Referrals/references; 3) Service experience (e.g., direct experience in the sales process); 4) Service reputation (e.g., not directly experienced, but perceived based on advertising, word of mouth, third-party rankings, etc.); 5) Perceived fit (i.e., is this a firm I’m comfortable doing business with?).

The credit union “difference” clearly impacts and influences perceptions regarding the last point on this list. But, it’s just one point among a number. And we could argue all day about how important any one of those reasons — or other reasons — are in shaping a prospective member’s decision.

For existing members making a decision on a new account/product, the “difference” may play a stronger role because the member is more likely to have either experienced the “difference” or not.

But let me ask you credit union folks a question:  Regarding the elements of the “difference”  — voluntary community involvement, commitment to financial education, service to the under-served, and so on — have you ever surveyed your members and asked them 1) How important are EACH of these things to you in selecting and staying with a financial provider? and 2) How well do we deliver on EACH of the elements of the credit union “difference”?

I may be wrong, but I’m betting that few credit unions have done that. (No, instead many waste their time with that stupid Net Promoter Score stuff).

(Notes to CUES and CUNA: A national survey of CU members that asks the questions I described above would be a great study for one of the two of you to initiate. And I’d be more than willing to work with you on it. And to CUNA: If you do conduct the study, and select one of my competitors to help you with it, I’m going to come out to Madison and kick your Wimpy-Wisconsin asses).

So let’s return to the key question here: What extent does the credit union “difference” really play a part in a consumer’s decision to select a financial services provider?

My take: Not as much as many credit union folks think it does.

Which isn’t to say that there isn’t a lot of value to the “difference”.  But this “difference” might be more valuable internally to a CU, than it is externally.

I’m reminded of something I think Jack Welch said. If I’m getting it right, he said the biggest value of GE’s advertising was improving the morale of employees.

The CU “difference” is similar in that regards. Even if it doesn’t influence prospective members to switch or choose, it gives CU employees something to believe in, something to strive for, and a purpose for what they’re doing.

And in no way do I mean to downplay that.

But as a marketing tool, I’m not convinced that the CU “difference” makes a difference.

14 thoughts on “What Good Is The Credit Union Difference?

  1. As someone working in the field of business lending at a Credit Union, I would have to agree with your comments. I can try to sell the CU difference to potential members as much as I can, but what will really move them, cash money. For the most part, we offer pretty similar products as the FI’s in Canada, so if we are going to solicit new members from other Banks, they need to see a financial gain.

  2. Hi Ron,
    I fully agree with your take. I do want to add that I personally feel that the credit union trade associations, leagues and other groups have not done a good job marketing credit unions to the masses in these bad economic times. There should have been a nestegg of funds set aside for times like this that could be spent spreading the credit union message that we are here to help. We have no national brand campaign, no national spokesperson, no real catchy up to date advertisements and not much of anything out there that would cause anyone to look at credit unions.

    I thought that the Apple parody (bankerspank.com) was a great idea and a way to help capitalize on gaining youth and more market share but it lost momentum and no one in CU land really got behind it with some serious marketing financial dollars.

    Credit Unions will continue to struggle with this until we can all get together and truly put out some type of brand identity and really show that we are there for consumers. We can’t hang our hats on low loan rates and high savings rates forever. There has to be something else. There are approxiamately 90 million credit union members in the USA and many of those still think we are banks.

  3. You nailed the value of the Net Promoter Score. My snake oil detector registers quite high in this area. How about some real research on member perceptions of the “difference”.

  4. The CU difference is the mission employees can rally behind, so I think your point about its efficacy in reaching employees is very true. And to some extent that may be why all us CUers are so passionate, we are some of those employees who feel loyal to the mission of our organization.

    I argue that some of what CUs stand for can make an impact to consumers, but the language and activities need to change. We need to modernize what a CU means in this era to today’s consumers. That means shifting our priorities and evolving our cultures so they are less backward looking and more progressive and digital and social. I think CUs are in a pretty good place for this shift in many respects, but the cultural transformation is not going to be an easy one for many.

    In the end, consumers don’t care about the way we are democratic or co-operate with each other. Our governance model doesn’t interest them and we need more relevant modern brand proof points if we are going to try to make the CU difference our differentiator.

    Thanks for the great post, Ron.

  5. Filene has not done the surveys you’re talking about, Ron, although we do consider corporal punishment as a key factor in research decisions. So thanks for that.

    But, we do have some interesting findings from the past few years that could serve as proxies for the kind of questions you’re talking about. In an August 2008 study, we found that for multi-SEG (single SEG) credit unions the most important referral factors were:
    1) Friends/family: 29.4% (32.0%)
    2) Employer: 23.7% (31.7%)
    3) Drive-by branch: 9.8% (6.5%)

    The research didn’t attempt to capture the messages or value propositions conveyed during the referral, but it’s clear that advertising messaging (even in aggregate among newspaper, outdoor, TV, radio) was less important than traditional referral connections and the convenience (or perceived convenience) of nearby branches.

    A second report, also from 2008, only seeks to understand the choices of 18-34 year olds, but it gives another take. There, credit union members chose their institutions because of:
    1) Convenience (hours, location, etc.): 35.2%
    2) Product (rates, fees, variety): 27.1%
    3) Service: 20.8%

    Strangely referral scored very low in the second study, so perhaps I’ve confounded real causes here. The (unfortunate?) takeaway for me is that, as much as I believe in and appreciate credit union philosophy, it is a tertiary issue in attracting new members.

  6. Good questions.

    Every other year CUNA conducts two national surveys: one of current members and one of non-members. We contract with an outside research firm to tele-survey U.S. households.

    Generally, what moves consumers to join is convenience, which is defined by location, hours, and remote delivery channels; and recommendations from family and friends.

    The latter does imply to some degree an understanding of the less tangible values of CU membership such as the cooperative structure and volunteer board. However, it is safe to say that most consumers do not know about nor will they necessarily respond to the intangibles. Credit unions do not have a national brand.

    Individual credit unions do in many cases have a local brand — but not all since it depends on the resources applied to building a brand within a community. The movement has on many occassions funded national branding, marketing, and advertising programs that eventually sputter out due to lack of consistent funding from credit unions.

    In my many years at CUNA, I have witnessed the National Advertising Program (credit union Rose Bowl Parade float), the National Marketing Program, and the National Branding Campaign. The first used spokespeople although its been so long I am embarassed to name them: Lorne Green (Ben Cartwright) and Chad Everett (the TV show Medical Center). The last one that I am aware of was figure skater Dorothy Hamill in the 1980s.

    In the late ’90s, some of the nation’s largest credit unions did kick in the dollars for a pilot National Branding Campaign that focused on the intangibles and tied them to better service and addressed some of the questions here.

    The results of the pilot, which occured within several large metropolitan areas, clearly showed a marked improvement in non-member perceptions and awareness of credit unions and a willingness to join.

    However, the costs of mounting a truly effective national campaign and to sustain it were simply beyond the movement’s financial ability. Of course, this project occurred just as major media channels were splintering into niche markets due to cable television, the Internet, and most recently social media. There likely are brilliant marketing minds out there that could effectively design something using the new media that is more successful than what was done.

    For an example how a national or at least a regional brand can be built and succeed, you can look at the success of the Desjardin credit union system in French-speaking Canada. There, it is the Desjardin brand that is marketed not the individual credit union brand and the result is 70-plus market penetration in the province of Quebec. It’s not just the marketing and advertising campaigns, it is the use of Desjardin-branded payment cards, call centers, investment brokerages, etc.

    Desjardin has an entirely different business model than that which eveolved in the states, but there are elements of it that are still adaptable in terms of strong collaborative efforts some credit unions are experimenting with (back office, online banking, other forms of Credit Union Service Organizations known as CUSOs).

  7. Great Discussion. I believe what is more important that the actual credit union “difference” is relationships. What I mean by this is if a consumer were to have a good experience with someone in the community that happens to work at a credit union, they would be more open to hear what they have to say and possibly open an account. Unfortunately, this works for banks as well. Back some 20 years ago when I was a teller at a large commercial bank, I knew all of the customers that came in, as did all of the other tellers. Those customers did not necessarily care about whether they were banking at a for profit bank or a not for profit credit union, they cared about “Sally”, the teller. This is why I believe credit union folks need to become more engaged in community work (volunteering) – locally or nationally. In these tough economic times, most people remember what is important – family, friends, community and they remember the people helping make their community a better place. Do I believe this is the only way to increase awareness or membership, absolutely not. Yet I believe it needs to be one of the components in building awareness.

  8. Thought I’d weigh in with my community bank perspective. As CU’s move away from single/multiple employer based membership and become open to everyone, they run into the same issue as smaller banks. We differentiate ourselves as the “local bank”, committed to the community, but what does that really mean? To most customers, their local branch is important, and they don’t really care if the headquarters is in Charlotte or Buffalo. And many of our large competitors can use their charitable donations to be local. Ultimately, the local aspect means more as a sense of pride for the employees in supporting the David vs. Goliath approach for smaller FI’s.

  9. Many of the CU marketing folks also are responsible, either directly or indirectly, for the business development function – specifically, those activities associated with SEG development or community activities (if you’re a community charter). When a prospective member walks up to your booth at the local community business association trade show and asks why they should join, do you immediately respond with “volunteer board”, “member ownership”, etc.? If so, has it been effective or do they look like a deer in the headlights?

    My guess is that, at best, it’s something along the lines of the “better rates, non-profit, etc.” discussion because those are generally what matters. If you’re not sure, ask your branch managers or front-line folks, they’ll know EXACTLY what matters.

  10. Denise: Thank you for asking.

    Well, first off, I operate by the Seven Cooperative Principles for Market Researchers that my competitors don’t abide by.

    And unlike my big bad competitors — who provide terrible customer service and treat their clients poorly — I have the advantage of the Shevlin “difference”.

    Specifically, I voluntarily get involved in the CU/banking community, I’m committed to educating the CU/banking community, and I provide research services to the under-researched.

  11. Great post. Next you should conduct the “twitter test”. Ask as many bank or credit union union employees why people should bank with them – and they have to answer in 140 characters or less. I would bet that employees of well run CU’s and banks will answer very similarly and clearly, while employees at poorly ran FI’s will be all over the board and have trouble articulating anything of substance.

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