Wednesday, December 18, 2013

Save Small Credit Unions?  Marketing is the Answer

Rob Kimmett, Sr. VP Marketing, New England Credit Union Services, LLC

Small credit unions face tremendous pressure in the marketplace.  Go to any planning session.  The flip charts are resplendent with environmental factors that challenge credit unions – competition, low margins, the technology gap, lack of human resources, product development and compliance.  After these problems are discussed the conversation often turns to more global considerations like relevance, purpose and commitment.  The small credit union faces a tough upward climb, to be certain. 

However, if the credit union stakeholders are committed to fighting for their institution’s future then the answer is clear and certain.  Because after all of those challenges are examined, the fact that the credit union needs to attract a constant stream of new and profitable business. 

Large credit unions and those that are on the way to becoming large have embraced the need to “market.”  They actively, strategically and systematically identify opportunities to gain new business and they pursue it.  Are these efforts always successful?  Not by a long shot!  But one thing that every marketer knows is that a mere presence in the marketplace is not going attract enough trade to keep a going concern in business for long. 

Similarly a halfhearted effort is not going to yield results.  One ad will reach a small percentage of the target market.  It will strike a chord with a small percentage of that group and only a fraction of those will act.  Credit unions must pick their targets carefully and go after them with imagination and vigor.

It is much easier to say than to do, though.  Where does a small understaffed and underfunded credit union start?  Here’s a start:

  1. Build Consensus – It is absolutely essential that the credit union stakeholders buy into the idea that marketing is the key to the credit union’s future success.  If that is not accepted as a given then the necessary commitment is not going to be there.
  2. Be Prepared – Get your team ready, be certain your product/service offering is ready for prime time, spiff up the credit union and the website get point of sale ready to go, make sure you can deliver when the member inquires.
  3. Commit Resources – The credit union is not going to attract new business without some investment.  Hiding is not a strategy.
  4. Allocate Resources Carefully – Spend time, energy on money on the projects that are going to yield the biggest bang for the time and money.
  5. Be Enthusiastic – Selling the credit unions product is a service to the members.  It ensures that they are getting the best financial products and it helps keep their credit union alive.  Your people should be proud to do it. 
Posted by Rob •

Tuesday, October 15, 2013

Another Look at the Latino Market

Rob Kimmett, Sr. VP Marketing, New England Credit Union Services, LLC

Prior to the recession the senior managers and directors at credit unions in the Northeast spent a fair amount of time trying to get a handle on ways that they could make their credit unions and credit union in general, more visible and more appealing to the Latino community.  While the recession and the sub-prime crisis forced all of us to realign strategic priorities, the importance of the Latino community in our market remains constant. 

At a recent meeting of the League’s Marketers Network a group of marketers sat down to discuss the importance of learning about and  addressing the needs of the Latino community.  We were fortunate to have the General Manager of New England’s largest Spanish language television stations, Alex von Lichtenberg, Sr. VP of Entravision join us.   He shared insights gained in his over 20 years of experience with WUNI Chanel 27 in Boston and Worcester and their various online properties.  He also presented some intriguing research data.

We also were fortunate to have panel of credit union marketers on hand that have been actively engaged with the Latino population in their various communities.  These folks, Saritan Rizzuto from Metro Credit Union, Millie Zayas from RTN Federal Credit Union and Tim Draper from Navigant Credit Union provided the group with a great deal of information.

Three ideas really stuck in my mind, out of the dozens that were shared by the speakers and the network.  They were:

Latinos are Younger
In the Boston market (DMA) the median age of Latinos is 29.  The median age of a non-Latino is 42.  The median age of a credit union member is 47.

We spend a lot of time in our business talking about how we need to lower the average age of our membership.  The math speaks for itself.

The Latino Market is Diverse in Many Ways
We understand tha the Latino market is diverse with regard to country of origin (Puerto Rico, Dominican Republic, Mexico, etc.) but we don’t tend to consider the other important factors that stratify a market, such as age, income and lifestyle or psychographics.

It turns out that fewer than 15% of individuals that are Latino fit in the New Arrivals category but that is the category that we concentrate most of our attention on when we discuss this market.  These are the folks that don’t speak English at all or may not have green cards.  Credit unions, to their great credit, do a great deal to meet the needs of these folks. 

What I think we may be losing sight of though, especially here in the northeast is the valuable opportunity that the other 85% of the Latino population offers us.  These folks range from nearly completely assimilated (Americanzado) to established but still more comfortable speaking Spanish (Hispano).  These families have disposable incomes and need the same financial services that all of your other members do and they need them right now!

Latinos make great credi union members
The Latino consumer exhibit traits that we would love to see in all of our members.  

  1. Experts state repeatedly that Latino consumers seek deep relationships based on trust with the sellers of products and services.  They want someone to explain the nuances of products and help them get what is best for them and their families.  This invitation to build a long term consultative relationship is marketing nirvana. 
  2. When Latinos make a large purchase,( homes, cars furniture, etc.)  the whole family gets involved.  This type of mindset should be very appealing to credit unions that are working hard to market the credit union to the families of existing members.
  3. Latinos are far less likely to use a credit union now than non-Latinos.  Why is that good? Among Latinos there is a much larger untapped market.

Service to immigrant populations is part of the DNA of credit unions and that is especially true of credit unions in the New England.  We should constantly be on the lookout for ways to embrace this opportunity. 

Posted by Rob •

Thursday, September 19, 2013

Rethinking PFI

Rob Kimmett, Sr. VP Marketing, New England Credit Union Services, LLC

The financial services industry has been throwing the phrase Primary Financial Institution (PFI) around for decades.  Credit unions are no less enamored of the concept than are their for-profit competitors.   Certainly on the face of it there is a good reason for pursuing this lofty status with the consumer.  Strong relationships and share of wallet are the pathway to marketing efficiency, better share of wallet, and long term loyalty, which the data prove yield increased revenue.

However, like many popular catch phrases, “primary financial institution” gets tossed around without much care and it is often used in ways that are imprecise and meaningless to the audience being addressed. 

Some industry pundits speak of the idea of achieving a certain level of PFI status as though it is a measurable goal like a loan to share ratio or checking account penetration statistic.  They give the impression that PFI is conceived of and measured in an identical fashion from one institution to the next. 

So just what is the generally accepted measurable definition of primary financial institution?  Take your time.  Google it if you like.   A place where consumers have their most important and frequently used accounts is a favorite definition.  How do you measure that?  An institution where the consumer has their checking account?  Maybe they have multiple checking accounts?  Or maybe in 2013 “checking” is not a term that is meaningful to a sizable percentage of the population.  The point that I am making is that while PFI is a very important and meaningful concept on an individual credit union level, it is of virtually no use as an industry standard.  It is a “soft” term.

Another method of measuring PFI might be to poll members and ask them to declare which institution they consider to be their PFI.  The key flaw in this approach is that the phrase is not meaningful to the consumer.  Who sits around the kitchen table and says to their spouse or partner, “You know, I think it is time that we reevaluate our PFI relationship.”  Primary Financial Institution” is a term of art.  It is inside baseball.  It only matters to us, not the consumer.  A better way to get at the idea of PFI in a survey is to ask the consumer where they have their most important and frequently used accounts, but that line of inquiry is certainly not going to yield hard data.  If I’m 72 with multiple hundreds of thousands in CDs they are a heck of a lot more important to me than my checking account. 

Perhaps the most important thing to consider is the real validity of the concept.  I have addressed the value that we place on winning as much business from the member as possible, but what is in it for them?  Convenience?  Relationship pricing deals?  More consumer clout?  Is drawing the consumer into an all encompassing primary financial institution relationship, however you define it, going to become an increasingly heavy lift? 

When credit unions first began to pursue the goal of becoming PFIs, convenience was the key benefit that was pitched.  By consolidating accounts, consumers could easily transfer funds between them, make withdrawals, cover checks, and pay loans, all substantial benefits in the pre-online and mobile banking era.  Today those advantages still are real, but only to the extent that the consumer only has to log onto one institution’s system rather than many.

Today, convenience may be better served by getting certain products at one place and others at another.  For example, the grocery industry was one of the first to popularize the notion of “one stop shopping” with the super market.  Recently, while on the subway in New York City, I saw numerous signs advertising  This service offers delivery of the heavy bulky necessities that people usually buy at supermarkets such as laundry detergent, paper towels, cereal etc.  These items are hard to transport and they aren’t impulse buys and they don’t need to be examined like produce or meat.  In an urban market the advantages of this approach are huge.

The parallel in our world?  Maybe the mundane, everyday product, which is to say the checking/transaction account, is becoming more of a commodity than we would like to think.  Perhaps, with the expansion of mobile, this account may not be the real cornerstone of a lasting and permanent relationship.  It could be that our ability to help consumers understand and manage their borrowing and investments is where we really build value and, subsequently, relationships.  

Relationship pricing is an effective way to get consumers to bring more business to a single provider.  However, the consumer who is attracted by price will be fickle and those benefits must be readily apparent and meaningful.  The other problem with this approach is that price appeals tend to “commodify” products and services.  Great pricing is a must but it can’t be the only benefit that the consumer perceives or the next great price from another provider may well lure them away.

Consumer clout or being a part of a true two way relationship is a benefit that credit unions are uniquely poised to be able to deliver.  In fact, it is a large part of our heritage and success.   This distinction is hard to communicate effectively but easy to demonstrate.  Good brand promotion, together with top performance, is the key.

So, is PFI a meaningful concept?  It is if it drives credit unions to continue to work hard for their members.  On the other hand, is percentage of PFI status individually or collectively useful as a benchmark for measuring success?  I don’t think so.


Posted by Rob •

Monday, September 09, 2013

The Facts and Nothing but the Facts

The recent NCUA quarterly state by state rankings provide some great data and give those of us who understand industry trends a good deal of useful information.  But data that are presented in broad strokes can give rise to questions from the press that reflect an incomplete understanding of the underlying issues.   It is important that we are prepared to interpret data and fill in the details when questions based on these reports come in from the media.

These questions might be along the lines of:  Why is you state lower than many others in membership growth?  Well, that might have something to do with the fact that this state has a far higher level of membership penetration and the opportunities for new business aren’t quite as abundant. 

Or:  Why is your state or credit union among the lowest in the nation in growth of deposits.  While that answer might be as simple as superior asset liability management practices it probably won’t fly in the popular press.

My point in this particular post is to encourage credit union management and communicators to be vigilant and monitor statistical reports on both credit union and state levels and consider the back story.  In some cases it is great news and in others it’s just plain bad and then we have to tale our medicine but often there is more to the story than meets the eye, at least at first glance.  Please put a call into the League if you have any questions how you might shine a positive light on statistical reports. 

Posted by Rob •

Thursday, September 05, 2013

Drive-Up Tellers —Running out of gas at BOA?

It seems that Bank of America has decided that the Drive Up teller is going the way of the Drive In theater and the they have begun eliminating this service at four of its locations in MA and has announced that it will “evaluate its remaining 50 Massachusetts locations featuring drive through tellers,” according to an article “Bank of America closing the window on some drive-through tellers,” in the August 23 edition of the Boston Globe.   Not everyone is on board with this strategy as Citizen’s and TD Bank North indicated no plans to change.

On the face of it the bankers on the consultants favoring the change make a very convincing case for transitioning away from live drive up tellers.  Convenience was the rationale for drive up teller stations and much of that work involved deposits and check cashing.   Direct deposit, remote deposit capture along with ATM and POS offer even greater convenience.  So one could see how the number of drive up teller transactions might be in decline. 

Bank of America claims that there is no cost savings in the move as they have no plans to trim staff in conjunction with it.  Down the road many of those lanes will probably be hosting ATMs which according to all analysts are still tremendously popular. 

An effort to find data or anecdote that verifies the notion that consumers are deserting the drive-up window is hard to come by.  Bank of America may be experiencing a greater than average decline in drive-up teller volume but conversations with a number of credit unions that offer drive up teller service didn’t back up the idea that there was a big decline in volume.   One thing is clear and that is that Bank of America undertook a great deal of effort to tell the public that they reason they are doing away with these drive up tellers stations  is because according to them the consumer doesn’t want them anymore.

Posted by Rob •

Wednesday, July 31, 2013

An Opportunity Named Santander

Rob Kimmett, Sr. VP Marketing, New England Credit Union Services, LLC

Changing a financial institutions name is a very delicate exercise as may in the credit union world can attest.  The institution must keep the existing customer base loyal while creating excitement and energy around the new identity in the hope of attracting new business.  The biggest risk is the possibility that current customers or member will think that their institution has been acquired and that they will have to deal with big changes in fees, rules and perhaps accessibility.

Given Sovereign’s history they are particularly at risk in this regard.  The bank’s U.S. operations are limited to eight states in the Northeast.  It was originally chartered in Pennsylvania in 1902 and it took on the name Sovereign in 1986.  The bank came to New England in 2000 when it acquired 285 branches in MA, RI, CT and NH that Fleet Bank shed in order to complete its acquisition of the faltering Bank of Boston.   The end result being that a large number of consumers found that they were suddenly doing business with a regional bank from Pennsylvania that previously had no presence in the area.  In 2004 the remainder of Fleets customer base ended up at Bank of America when Fleet ceased to be.

Sovereign Bank formed a partnership with Santander in 2005 and was acquired by this Spanish bank in 2009.  Santander is a huge Spanish banking company that prior to this banding move had no presence in the retail banking market.   According to the BBC Santander is the “Largest bank in the Eurozone.”   (Santander takes its name from a city on the northern coast of Spain near the border with France.  It has a population of less than 200,000.) 

Here a few reasons why credit unions should concentrate their marketing efforts on acquiring business from Sovereign during the transition:

  • The Sovereign brand is not among the strongest in our market.
  • The history of mergers and acquisitions endured by BayBank/Bank Boston/Fleet/Sovereign customers is not likely to make them amenable to the idea of a new bank or bank brand.
  • Santander has made it clear that they plan on touting their global foot print as a key brand asset.  Consumers are not likely to see that as a benefit.
  • Consumers that are paying attention to the world economy will know that the Spanish economy is not among the strongest in the Eurozone and while that should in no way effect their accounts it is not going to have a positive impact.
Posted by Rob •

Sometimes Encouragement Comes in from an Unexpected Direction.

Rob Kimmett, Sr. VP Marketing, New England Credit Union Services, LLC

As proof of that idea I offer a recent news report about book stores aired on American Public Media’s business program Market Place.

If any type of business was a candidate for dinosaur status it was the corner bookstore.  First it was the giant retailers that would do them in and then it was Amazon with help from the kindle and the Ipad.  But a funny thing happened and small credit unions might see some parallels and find some inspiration in it.

The ebook trend did create economic chaos but the victims turned out to be the big retailers, Borders and to a lesser degree Barnes and Nobles.  On the other hand since 2009, more than 300 independent bookstores have opened, and store sales were up by 8 percent last year.  How is this possible?  Industry experts point to the fact that the independent booksellers are becoming increasingly nimble and that they have established a strong presence online to compliment their main street retail stores.

Additional factors that analysts site are the “buy local” movement and personal recommendations.

The takeaway?  Size isn’t everything.  Ask the Brontosaurus.  

Posted by Rob •

Dealing with Consumer Affluence, Abundance and Apathy

Rob Kimmett, Sr. VP Marketing, New England Credit Union Services, LLC

Marketers are used to identifying and overcoming obstacles and credit union marketers are certainly familiar with this essential skill  One of the hardest parts of overcoming obstacles in financial marketing is the clear identification of just what the problem might be. 

Getting the attention of consumers might be one of the biggest obstacles that credit union marketers confront.  While competition, harried life styles and media choices usually get the blame when our message doesn’t hit the mark  I think the answer can be found among the three A’s:  Affluence, Abundance and Apathy.

Affluence is relative and in the 21st century in the United States the vast majority of people do not want for basic creature comforts.  In fact as most of us in the financial services industry have seen people are not inclined to deny themselves much.  Therefore it can be difficult for institutions like credit unions to market a message of financial common sense when it is so easy to be self indulgent.  It is critical that our message presents the benefits of making good financial decisions as opposed to  chiding our members to eat their “financial spinach.”

Abundance is used her to refer to the tremendous quantity of financial providers that we must compete with every day.  Consumers including our members are being hit with thousand of pitches a day and many of them from financial providers.  And that would be tough enough but many of our competitors are less than forthright about the true costs of what it is they are offering (0% financing anyone?).  This plethora of offers amounts to white noise that we have to penetrate in order to have a dialogue with the consumer.

Apathy is perhaps the biggest communication challenge that we face.  As hard as it might be for us to hear, “they just aren’t that into us.”  The consumer is far more important to the marketer of financial services than we are to them.  We matter to them when they need a loan or have to establish a checking account.  After that we are just part of the infrastructure of their life.  The trick of dealing with apathy is to learn how to understand it exists and communicate around it rather than trying to overcome it by battering it down.  A constant barrage of messaging will only ensure that the consumer will turn a deaf ear. 

Posted by Rob •

Who costs the tax payer more money?

Rob Kimmett, Sr. VP Marketing, New England Credit Union Services, LLC

Need a fresh sound bite for the pesky banker who just can’t get over the fact that credit unions are tax exempt not-for-profit cooperatives?  There’s a quiver full of possibilities.  I’m kind of fond of “Why don’t you convert to a credit union charter then?”  However, this one that is hot off the wire from Bloomberg may top even that golden oldie:  “All told, the financial advantages for the six biggest banks since the start of 2009 amounted to $102 billion, according to data compiled by Bloomberg.”

Turns out we are pikers!

According to a report issued by the Government Accounting Office (GAO) in April the credit union tax exemption was worth $1.1 Billion (and that is for 7000 institutions).   Of course this figure fails to incorporate any elaborate tax avoidance strategies (the type that the for profit banks are so fond of). 

And not only that, we convert all of the advantages we get into savings or earnings for our members who go out into the real economy and spend money on tangible goods and services.  I’m sure the mega-bankers can’t understand why we don’t turn the pittance that we manage to save into bonuses and big pay checks for directors.

That ought to send them away sputtering.

Posted by Rob •