How To Differentiate Your Credit Union

On the CU Water Cooler site, William Azaroff wrote:

“When I look at many credit unions, I’m troubled by their blandness, their inoffensiveness. They used to stand for something, but now they’re moving away from differentiation and towards sameness. And many credit unions are doing this at the precise moment when differentiation is a necessity. The question is: do some people hate your brand? If some do, then I would say you’re doing something right. If not, then I’m guessing your organization is trying to be all things to all people, and should take a stand for something and embed that into your brand.”

My take: To quote former President Clinton: “I did not have sex…” No, wait, that’s the wrong quote. I meant this one: “I feel your pain.”

William is spot on that many credit unions aren’t differentiated in the marketplace. What William didn’t get into, however, is why few credit unions are effectively differentiated. There are (at least) three reasons why undifferentiated credit unions are that way:

  1. They don’t know how to differentiate themselves.
  2. They think they’re differentiated, but don’t know better.
  3. They don’t want to be differentiated.

The last reason might surprise you, or strike you as wrong. But after 25 years of being a consultant, I can’t even begin to count the number of times I’ve made a recommendation to a client to do something, only to be met with the following question: “Who else is doing that?” Risk adversity runs deep in the financial service business.

There are also a fair number of CU execs who think that their CU is differentiated. Almost to a man/woman they give the same description of what differentiates their CU: “Our service.” This is often — I’m inclined to say always — wishful thinking. Why? First, service may be what your firm does best, but it doesn’t mean your service is comparatively better. And second, because service means different things to different people.

The most prevalent reason why so many CUs are undifferentiated, however, is probably the first reason: They don’t know how to differentiate themselves. 

I’m not looking to pick a fight with William — I suspect he would agree with me here — but approaching the topic of differentiation from the perspective “what can we do to tick people off and be hated by some of them?” is not the right way to go about it. 

And with all due respect to my friends in the advertising business, the last thing a credit union should do is bring in the advertising people to help them figure out how to differentiate the CU. 

Why? Because there’s a prevalent — but misguided — mindset among advertising people that differentiation comes from “the story you tell.” (If you need proof, go read Seth Godin).

But the story you tell doesn’t differentiate you. What differentiates you is the story that your members tell. That they tell to themselves inside their head, and that they tell verbally to their family and friends. And those stories only come from their experiences with the credit union, not the advertising. 

Which means this: Differentiation comes from something you do

That “something” must be meaningful to members. And that something must be something that: 1) only you do; 2) you do measurably better than anyone else; or 3) you do measurably more often than anyone else.

Differentiation doesn’t come from standing for something, and it doesn’t come from your branding efforts (your differentiation drives your brand, not the other way around).

William’s credit union Vancity “stands” for community development and improvement.  So do plenty of other CUs. What differentiates Vancity is that — time and again — they do something about it. They can count the number of times they’ve done something about it, and they can measure the impact of what they’ve done.

Differentiating on service is tenuous. What does that mean? That you fix your mistakes better than anyone else? That the lines in your branch aren’t as long as they are in the mega-banks down the street? That Sally at one of your branches greets everyone by name and with a smile when they come in?

If you’re going to differentiate your credit union, you have to do something. Different, better, or more. None of those options is particularly easy to do. Technology initiatives intended to gain a competitive advantage — mobile banking, remote deposit capture, etc — are often easily (I didn’t say cheaply) copied. Better is hard to prove. And “more” requires strong commitment from the management team for an extended period of time.

This isn’t to say that aren’t opportunities for differentiation, just that they require commitment — and a lot of it.

So what can you do to differentiate your CU? I think it comes from committing to differentiate in one — and only one — of the following areas:

1. Advice. Managing our financial lives is tough and getting tougher. People need help making smart financial choices. But the advice available in the market tends to be focused on asset allocation and stock picking for the relatively affluent, or focused at the very lowest end of the income spectrum for people who need help with serious debt problems. What about everybody else in the middle? What about providing help with all those everyday/week/year decisions that have to be made? PFM holds the potential to provide and deliver this kind of advice, but the tools aren’t quite there yet. If this is the path you choose, you’re going to have to make some investments to develop them and get them to point where they can deliver on this promise.

2. Convenience. There’s one bank in the Boston marketplace that advertises itself  as the “most convenient” bank. Hooey. Having extended branch hours and free checking isn’t “convenience.” Making people’s financial lives easier — i.e. more convenient — to manage is a complex and difficult proposition. But when you’re really doing it, people know it. And you’ll be differentiated.

3. Performance. You might not be the easiest FI in the market for me to deal with, and you might not provide me with any advice (maybe because I don’t want any), but if the performance of my financial life — that is, the interest I earn, the fees I pay, and the rewards I get and earn, are superior to everyone else out there, than I will consider you to be differentiated in the marketplace.

I didn’t say differentiation is easy.

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12 thoughts on “How To Differentiate Your Credit Union

  1. Ron:

    I agree with most everything you say but would like to clarify this statement, “And with all due respect to my friends in the advertising business, the last thing a credit union should do is bring in the advertising people to help them figure out how to differentiate the CU.” An advertising agency/business is defined as, “a service business dedicated to creating, planning and handling advertising (and sometimes other forms of promotion) for its clients.” You are correct that an ad agency can do little to help a CU differentiate itself. However, a brand partner, working from the inside out, can help a CU differentiate itself. What do I mean by this? By conducting significant research on the area, interviewing board members, executives, front line and back office staff, and, most importantly, members, a brand partner can share the multiple perceptions of the different groups with executive management and board to create a brand and brand position that is differentiated. It becomes the heartbeat of the CU and the community it serves.

  2. I was nodding my head and agreeing with your entire article until the end. What? Advice. Convenience. Performance. I’m surprised you didn’t add “service.”

    Next to service being a differentiator in the organization wanting to be their “Trusted Financial Advisor” is number two. Hoooey. And your performance analogy leads me to believe that you think a CU can be the WalMart of pricing. Not in this economy.

    You differentiate when you narrowly target an audience, solve a problem for them, and make the competition irrelevant.

    A perfect example. Amazon.com. Their original target was the book club reader. They don’t make money when they sell books to this target – they make money when they help them make purchase decisions. By building an infrastructure that allowed these communities to publicly rate the books they’ve read many thought it would hurt sales, when in fact, it boosted sales. By solving the problem of searching for titles from authors on books you MIGHT like, Amazon.com analyzes your purchases and ratings and compares them with others to kind of match you up. This is a HUGE differentiator, that was copied, but their first to market advantage has made them the largest online retailer in the world.

    Jimmy Marks asked in his video How to write a joke on Twitter: “Are you willing to alienate certain people in the quest to make others happy?” I think you have to have balls that big to differentiate.

  3. Banks and credit unions were built on sameness. Credit unions were different because they served a specific corporate sponsor. Banks were different because regulators did not allow competitors into their hometown. So culturally, differentiation devolved into you get a toaster when you open a checking account here, versus the one across the street.

    We now have to view being different in the context of different from the bank across the street, on the Internet, or in our phone. If not on price, then how should we do it? I agree with Ron and Denise, but the bridge to that place is long and your CU or bank better be dedicated to finishing the job.

    This is the first blog post I have ever read where “hooey” was used twice. There has to be an award for that.

    ~ Jeff

  4. “But the story you tell doesn’t differentiate you. What differentiates you is the story that your members tell.”

    That reminded me of Kathy Sierra (http://headrush.typepad.com/) who hasn’t blogged in ages and ages, but wrote passionately about these issues in technology and tech training. Definitely worth reading. She co-created the Head First book series, which is a very different sort of training material!*

    If nothing else, you might find this graphic amusing: http://headrush.typepad.com/photos/uncategorized/2007/04/06/buythis.jpg

    (* disclaimer, I was a technical reviewer for Head First JavaScript and Head First Ajax.)

  5. Hi Ron. Thanks for taking some ideas I was playing with and illuminating them broader. You’re right, I agree with you.

    Every organization has to know who they are, why they exist, and then differentiate in a number of ways, including via their brand.

  6. Pingback: How To Differentiate Your Credit Union | The Marketing Tea Party | Investing

  7. Ron,

    Way to go–this is one of the best pieces I’ve seen written on differentiation. I tend to agree with Denise, however. I’m not sure advice, convenience and performance are true differentiators. While possible, credit unions really can’t compete on convenience & performance. Those are just no-win solutions for their size (competing against big box banks). I like the financial advice angle and think it has legs (if done correctly). The best way to find out your differentiation: talk to your members and get to the core of why they do business with you. But you must dig deep: if it comes back “people” and “service” you have to go beyond that. What about the service, the people, the advice, etc. Differentiation is hard work–but well worth it.

  8. Thanks Ron, for a well written piece. For the most part, I agree with it.

    I will, however, disagree that differentiating on service is tenuous. Service is tangible and measurable, and while it means many things to many people, it requires more specificity rather than avoidance.

    Each of your examples highlights a single aspect of the service quality dimensions of reliability, responsiveness, assurance and empathy, each of which is measurable in their own way. A service business – credit union or otherwise – can differentiate on any one of them, and measure that differentiation.

    “Advice” is (mostly) an empathy characteristic. How well do you know clients, how valuable is your counsel to them and what is the quality of the result that knowledge-based counsel delivers.

    “Convenience” is a responsiveness characteristic that gets to how easy the company makes it to deal with them. Convenience can also include where locations are, hours of service, speed at answering the phone, functionality of internet self-service tools. But what about other responsiveness characteristics? How do you react when a customer asks for something you don’t often do? Are your offerings customizable to the customer level, or are they “off-the-shelf”?

    “Performance”, most obviously, is a reliability metric. Yes, that includes performance in financial terms. It also includes core quality on transactions and effectiveness and speed of service recovery when things don’t go well. (that boring stuff that was discounted earlier)

    Missed almost completely (though arguably a component of each differentiator already mentioned) is assurance. People see this as the too-fuzzy “peace-of-mind” component, but contains tangible, measurable components like a price match commitment or a service guarantee. FedEx’ “when it absolutely, positively…” slogan, as example, was strong because it relied on two elements they had developed a great deal of – reliability and assurance.

    If the credit union wants to differentiate on service, it can be a very strong position to take. (I won’t tackle whether each of the service quality dimensions have enough value to be a viable differentiator – that’s for you and the other industry experts to decide) But an appropriate question would be which aspect(s) can they currently do, can with a little work, or credibly convince the market that they “own”.

  9. Chris,

    I found your reply so interesting I think I will send it directly to a credit union client of mine. Very well said.

    The challenge is, I’ve been in this industry for 19 years, and that is the first time somebody broke down “great service” to this level of detail. I wonder why?

    ~ Jeff

  10. Chris: Great comments, great thoughts.

    You’ve done an excellent job of ju-jitsuing my points of differentiation, and subordinating them into “service” attributes. (Nice job, well done).

    But I’m not referring to “advice” as a “characteristic’ of service. Instead, it’s something that the credit union offers. It might not qualify as a product, and might be considered a service, but I think we’ve been using the word service to infer the process of “customer service” and not the noun Service.

    I’m referring to advice to mean: “We will make specific recommendations on what specific financial products and services you should buy (apply for) and which one you shouldn’t, and we will make specific recommendations on which forms of payment you should use and shouldn’t, and we will make specific recommendations on what you should spend your money and what you shouldn’t spend your money on.”

    It’s more akin to what an investment advisor will tell you about how to invest. Instead, more focused on the customer’s everyday financial life.

    If you want to lump this into some generic bucket called “service”, so be it. But I don’t think it’s the same thing that most CU execs refer to when they use the term “service.” They’re referring to Betty in the branch, who’s really friendly and helpful. That’s great. But it’s what I consider to be unsustainable differentiation.

    Likewise with the notion of convenience. I didn’t do myself any favors in the blog post by not being more specific about what convenience is. It isn’t a claim. It’s an identifiable set of offerings that demonstrably provide a greater level of convenience to the customer compared to how s/he performed the task previously. In my mind, it’s not a “characteristic” — it’s an offering.

    As for my point about value, what I want to see CUs do is promise a “superior rate of return” on deposit products. This is NOT simply a matter of lower fees/higher interest rates. With the growing popularity of rewards programs (which are NOT dead — they’ll be replaced with merchant funded incentives over the next few years), consumers can EARN money in the form of cash-back, or SAVE money on their everyday purchases in the form of coupons on merchant funded incentives. That’s a REAL return on the ownership of the account — what I’m alluding to when I use the term VALUE.

    I wanted to clarify where I stood on this, Chris. but I’d love to hear more about how you would demonstrate that service is “tangible and measurable”.

    p.s Thanks again for the comment. I really appreciate you taking the time and effort to do that.

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  12. I was glad Ron didn’t resort to “service” as the main differeniator. Re: service, he said “Differentiating on service is tenuous. What does that mean?” That’s the problem. Are we saying we’re just… nicer?

    Chris R.’s earlier reply was helpful. But what does it mean to you, Denise? In practical terms.

    – Ken

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