Note: As part of the marketing section in CUNA’s upcoming Environmental Scan, I interviewed Matt Davis (a.k.a. the CU Warrior) about the importance of credit unions developing new and different products. Below is part of that interview (minus the excerpts used in the E-Scan). The full 2010-2011 E-Scan Report will be available in the coming months and is a must read for any credit union executive (yes, I’m biased!).
(1) Why should credit unions develop new and different products?
There's a stick answer and a carrot answer. Let's lead with the stick: Credit unions, at their core, are service organizations. Why, as consumer needs are rapidly evolving, would credit unions not evolve our solution set to keep up with or lead that evolution? The second we get out of the problem solving business is the second we are cast into irrelevancy. Here's the carrot: Organizations that invest in innovation are more profitable. With shrinking or non-existent margins, credit unions cannot depend on having "lower rates on loans and higher returns on deposits" to drive growth. There's a crowded marketplace for that claim. Growth for credit unions will depend on our willingness and ability to solve consumer problems no one else is addressing.
(2) Without a large (or any) R&D budget, how can credit unions develop new and different products?
Credit unions can develop new and different products, on any budget, by doing any of the following: 1) Collaborate with like-minded organizations to pool resources; 2) Embrace a "fail forward, fail cheap" mentality; and 3) Know your member base better than the competition.
(3) What are some examples of credit with innovative products?
Educators Credit Union's Fast Lane Financing campaign, and Addison Avenue's powerful mobile apps are great examples of credit union innovation. Note: Matt listed several other credit unions, which are highlighted in the upcoming E-Scan.
(4) How can the Filene Research Institute help credit unions implement new ideas?
The Filene Research Institute helps credit unions implement new ideas in several ways. Our portfolio of groundbreaking behavioral, economic and policy research helps credit unions make better business decisions, meet consumer demand, and adapt to the changing competitive environment. Our i³ teams, comprised of innovative credit union leaders from all over the continent, have produced dozens of new ideas over the years that have helped credit unions solve numerous problems for consumers. For more customized help, the Filene Research Institute's Applied Research team can help individual credit unions implement specific young adult programs, innovation ideas, or research findings on a consultative basis.
(5) How often should credit unions be introducing new products into the marketplace?
Perfection is an unattainable goal. The key to being innovative is in rapid prototyping. Basically, this means that we should be continuously finding the fastest and cheapest possible ways of testing new ideas. This means using duct tape, scissors, and bailing wire to bring your idea to life so it can be tested in a real world environment. Successful soft launches give your team the confidence to invest more in the idea and launch on a bigger scale. Negative experiences with these soft launches help you learn what needs to be adjusted with the idea, or that the idea needs to be scrapped altogether. Innovative organizations should be launching new ideas (in some fashion) within 90 days of their inception. If your team isn't focused enough to rapidly prototype the idea in that time frame, the chances are you don't love it enough to be successful with it.
(6) What are sources for new ideas?
Ethnographic research is a great way to find new problems to solve. Basically, this means putting yourself in the shoes of your target market, looking at things through their eyes, identifying problems they face, and working to find ways your credit union can solve them. You have a much better chance of creating an idea that's meaningfully unique if you are looking for problems no one else has discovered. It is also important that you become an information and experience glutton. The more stimuli you expose yourself to, as an individual or organization, the more tools you have to solve the problems you have identified.
(7) Are there any additional comments you would like to make with regards to the topic “developing new and different products” for credit unions?
At this stage in our credit union system's life cycle innovation is not an optional initiative.
National membership growth in credit unions is pathetic. The national average for membership growth is somewhere between .70% and .80% depending on which source you use. You read that right: less than one percent. In fact, many credit unions have net negative new member growth.
So how can credit unions overcome this trend? We can’t just say “let’s grow membership” and expect it to happen magically. Here is a brief formula that can help credit unions grow their membership. The secret is not the formula: it’s actually implementing the ingredients.
Brand + Value + Testimonials + Frequency = Growth
Let’s break each of those components down (although they each deserve their own post).
There are many definitions regarding branding. Ultimately, branding is the answer to this question: “What is your credit union about?” You have to be able to answer that question in six words or less. Branding is not a one-time thing you mark off your marketing to do list; you are constantly doing branding at your credit union.
If your credit union does not have a strong brand plan (mission/values, message, training, graphics, consistency, targets, etc.) then don’t expect to grow members. In fact, you’ll probably lose them over time.
Ultimately, value answers the question “why should I join your credit union?” You must be able to answer that question in 30 seconds or less. Credit unions are now retail organizations. You must aggressively market your benefits and values.
What is the difference between banks and credit unions? Eight out of 10 consumers can’t explain it. Promoting values does not mean “the good ol’ credit union values” of people helping people, people not profit, member-owned, etc. Those are all well and good (and I whole heartedly believe in them). However today’s consumer is far more concerned with pocket book value: how much money you can save them on fees, loan rates, etc. Credit unions must consistently promote value or they won’t grow.
Why do members love you? Credit unions historically do great things for their members (for example, giving them a loan when no one else would). We need to capture those stories and start telling them. Let others tell your story for you. If you need tips on how to do this, check out the post on “Story Telling Marketing.”
The best way to grow your business is through referrals. Get your members marketing for you. If you haven’t read The Referral Engine, I highly recommend you do so. I’ll have a full book review in the coming weeks, but in the meantime if you want to learn how to build a systematic approach to growing members through referrals, pick up a copy of that book.
This is perhaps the one that trips credit unions the most. How often should you market? Try “all the time.” Yes, 24 hours a day, 365 days a year. People receive on average 3,500 marketing message a day. You have to break through all that clutter. And you won’t do it with just one billboard, a direct mail piece every three months and a website. You will have to increase the amount of information a household is receiving about your credit union. People can’t like you until they know you.
Every credit union wants to add more new members. Using this formula is a start to achieving that goal.
What ingredients would you add to the formula? Does this capture the essentials? Chime in with your ideas.
CUNA’s Marketing and Business Development Conference is a premier event. Every year top-notch speakers provide outstanding material. Attendees consistently walk away with strategic and tactical ideas they can use and implement at their credit union. I asked several people what they picked up at the event and to provide some short learning snippets.
Here are some great learning observations from people who attended. For those of us who weren’t able to make it, it’s a way to share in some of the ideas generated. Once you see these comments, hopefully you’ll begin making plans right now to attend next year’s conference. If you haven’t already, be sure to mark the dates March 7-10th, 2012.
So here are what some attendees had to say:
“I loved the ‘service is a commodity’ mention at #mbd11. We can't differentiate on service anymore, we need a ‘bags fly free’ mentality; which means we need to show them what our service means.
–Matt Hodson, Healthcare Credit Union
“The biggest takeaways for me were how efficient, creative, and passionate credit union marketers have got with their social media efforts. QR Codes, Flip Video Production, and mobile app development have really stepped up their value. Let your people be passionate without being TOO over concerned about our branding. Share members stories … no one expects 'Spielberg' quality
–Jason DuPlant, Neches FCU
“I learned that I'm not the only one with great ideas…share with others and learn from others.”
–Bruce A. Ulrich, Statewide Federal CU
“My biggest take-a-way was the importance of internal culture!”
–Amy Lawrence, Third Degree Advertising
“I learned that the CMBDC's members are passionate, talented, and ready to meet challenges head-on. As the new Chair of the Council, I am inspired by the Council's members and will rely on that inspiration to lead the Council to new heights and great accomplishments. The energy at this past conference was simply awesome!”
— Sean McDonald
“Social media is not about technology but people. PFM allows CUs to connect on personal and emotional levels.”
–James Robert Lay, PTP New Media
“I learned a bunch about social media, mobile marketing, QR codes, online relationships, and building brands that I thought my iphone would explode from all the notes I jammed into it. And I also was blown away by the attendees that stayed focus for three hours during my session with Neil Goldman(god love you!). And, I was also delighted to be reminded that our industry is filled with UBER amazing people that are creative talented and caring. And that I don't really have a job, because that means I would have to work, and when you love what you do and whom you do it for, it is not work.”
–Anne Legg, Cabrillo CU
“Lesson 1: Engage no matter what or how; Lesson 2: start somewhere.”
–Tim Draper, Navigant CU
“All of the sessions were extremely beneficial, but I particularly enjoyed the Building Member Relationships Online & Social Media seminars. While we are using our social media to promote financial tips, our blog, and community events, I still feel that we are getting caught up with product pushing (promotions) and losing sight of our goal of engaging and connecting with our members. We need to make things more personal!”
–Kristen Armstrong, Neighborhood Credit Union
“I need to talk more with teller lines. They are truly an extension of Business Development. Make sure they are asking members if they know who is in our field of membership, if there are any services they would like us to provide, etc. I also learned that we need to implement an agreement that any new SEG and BMI must sign. This contract will not only outline our expectations as far as number of visits allowed per year, document primary and secondary contacts, and expectations as far as how many members they would have to have join before an ATM could be installed, etc.”
—Sarah Borland, BMI Federal Credit Union
“From a session called “Strategizen” by Kelley Parks with Creative Catalyst, I learned a little statistic that I plan to put to good use: ‘Using a number in marketing increases your odds of selling the product by 52%.’ (For example, 88% of our members choose High Yield Checking over Free Checking.) We could all use 52% better odds.
“In her session on “Building a Mindshare Brand” Libby Gill, Executive Coach, Brand Strategist and Author gave us a marketing quote to live by: ‘When you capture the mindshare, the market share will follow.’ I believe this is the way to the hearts of members and potential members. When you appeal to their emotion, when they relate to your message, your credit union will experience growth and success.”
–Alice Hagerman, Linn Area CU
Thanks to everyone who contributed to this post. As you can see they had tons of great insights to share. You may also want to check out SharedIdiz’s conference notes. Kent Dicken did a fabulous job recapping multiple sessions.
What does your financial institution do better than any other? If you answered “service,” go directly to branding jail. Do not pass go. Do not collect $200.
So many credit unions say they do service better than anyone. You know what? So does every other financial institution, restaurant, grocery store, etc. Think about it. Have you ever driven down the road and seen a billboard that says, “We have great rates, but our service stinks?” or “Our service is lousy but our free checking rocks?”
If you want to differentiate yourself from other financial institutions, even other credit unions, you have to find your sweet spot. That’s a term for the one thing you do best for your target audience that your competition cannot. Naysayers will tell you there’s no way to differentiate financial products and services, because they are a commodity. Those people are wrong. It can be done. In fact, it must be done if you plan to be successful long-term.
In the March issue of my monthly e-zine, I introduce a case study about American Express. With fewer products in its portfolio than most credit union’s offer, this financial services provider turned a profit amidst immense competition from other credit card companies in the 1990s by focusing one those customers it could serve better than anyone else. The product introduced eventually became the company’s most successful one. Read my e-zine to find out which product it was and how American Express did it.
Every credit union has a sweet spot, because every credit union has a target audience it can serve better than anyone. Your sweet spot is already there for you to capture. You just have to figure out what it is. How do you do that?
Start by making a list with three columns: Product(s), Target Consumers and Competition. List everything you can think of in each column and then spend time analyzing which ideas might intersect. Be honest about your own credit union and your competition, and focus on what you already do well. The sweet spot is not always about creating a new product, and it’s never about doing something just because your competition does. It has to be something that’s unique to your credit union – something authentically you. Do what you do best and bring that authenticity into the marketplace. If you are giving your members what they really want, they’ll be back for years to come.
Read more about the sweet spot here.
Intuit offers a great deal of research information. In case you missed it, their Intuit 2020 Report offers some keen insights. Authored by Emergent Research, the report explores the demographic, social, economic and technology trends that will affect consumers and small businesses over the next decade. If you haven’t downloaded it yet, I highly recommend you do so.
Here are some of the report’s highlights (followed by some application points credit unions should consider). Remember, this is what Intuit says is going to happen:
- Digitally savvy kids grow up and change everything
- Baby Boomers gray, but don’t slow down
- It’s a she-conomy
- Localism creates a new way of life
So what does all this data mean for credit unions? Here are some things we should consider:
(1) Use technology to connect to kids now
You can no longer afford to wait on technology. The kids are just moving at too fast a pace. Mobile platforms aren’t just toys to them—it’s how they will conduct businesses. They will expect their cell phone to be a payment device (not just a way to track their money).
(2) Boomers may still borrow
More than likely, Boomers will borrow well into their retirement years. Unlike previous generations they will not go quietly into the retirement pasture. Many of them simply can’t afford to retire. In all likelihood they will continue to be a prime target for home equity loan products.
(3) Target females to grow your credit union
Females make the vast majority of purchasing decisions in the household (some say over 80%). Knowing that, credit unions must tap into that target audience. No one does this better than Verity Credit Union with their Verity Moms campaign.
(4) Highlight that your credit union is home grown
Local. Local. Local. People will invest in organizations and places that make a difference in their lives. Show how your credit union is helping the local neighborhoods.
Those are just a few brief highlights. There are a total of 20 trends they identify, all of which we can apply to credit unions.