AUSTIN, Texas -
Indeed, during the Credit Union Journal's recent Business Development & SEG Conference Darren Williams, CEO of Wescom Credit Union in Pasadena, Calif., noted that it gains some 600 members per month via indirect lending-but it also loses 500 of them over that same time. "Only 17% of indirect members ever open a second relationship with us," Williams noted. Actually, Wescom's 17% success rate is high for the credit union community, thanks to a strategy it has put in place, as one person notes below.
Yet the quest to turn indirect members into multi-relationship members has an attainable, successful end in sight, according to several experts who shared their tips for taking indirect members beyond auto loans and into ongoing, active relationships.
"Some lenders are sort of accepting of the fact that this is just an auto loan and not worrying about getting them to become full-fledged members," said Bruce Callen of Teres Solutions. "But over the last few years, indirect margins have shrunk, and credit unions are increasingly interested in cross-selling to their indirect members."
The First Step
The first step, Callen suggested, is mining the data at hand. "There are couple of automated ways that we help our clients achieve this," he said. "There are cross selling tools and sales software. If someone who has just signed up for an auto loan qualifies for some other lending program at the credit union, we will identify those so the credit union makes an offer to that new member."
One perfect fit: the second car. "If you see a second vehicle on the member's credit report, you might want to offer to refinance that other car," Callen observed.
Another vital part of the process: outbound sales calls.
"You have to set up an outbound call program, where you're calling the member who has just joined through indirect lending and welcome the new member to the credit union," he suggested. "The message is that you're not just getting a great auto loan, there are other things we can offer you, many of them free services. This is when, instead of simply selling the auto loan, you are selling the credit union."
Amplify Credit Union in Austin, Texas, has had some good success with such an approach, according to Callen. The credit union offers free gas cards-a premium with high appeal as gas prices continue to remain high. The grabber: indirect members have to stop by a branch to pick up their gas cards, giving the credit union a chance to show off the branch and introduce the member to all the credit union has to offer.
"What's most important is that there has to be a cultural change at the credit union that this is a sales program and must be set up and managed as a sales program," Callen explained. "You are creating a sales call center. This doesn't have to be just about indirect auto loans. If you extend a home equity loan to a member, you should be looking at what are their other needs."
While indirect members typically join the credit union while at an auto dealership rather than at a branch, a key factor in converting that indirect member is how close that member lives or works to a branch.
"One of the things we have learned is that the proximity of the new member to a branch location is a key indicator of whether that member will end up having multiple relationships with the credit union," observed Jerry Neeman, EVP of Rancho Cucamonga, Calif.-based CUDL. "Wescom Credit Union has really proved the correlation between indirect members becoming multi-relationship members and their proximity to a branch."
If the proximity is there, it should be backed up with convenience and a good reason to go to that branch, Neeman added. "Wescom has gone to the seven-day-a-week schedule, and at the branches that are open on Sundays they're offering free copies of the Sunday paper. I'm not a member of Wescom, but I want to be. I told my wife then we could cancel our subscription to the paper and just go to Wescom every Sunday."
The Importance Of Follow Up
Like Callen, Neeman agreed about the importance of following up with indirect members.
"It's all about how soon you follow up and how you follow up with them," he advised. "Of course, you want to send them a new member package, but that's a general package. Then you also have to go to them with specific offers tailored to them based on the information you now have on them. Look at the other loans on account that you see on the credit bureau report. Offer a credit card."
Creating An Outbound Calling Program
Neeman also pointed to creating an outbound calling program. The best part: it's not a true cold call, as you already have an 'in'-you're calling to ask how they like the new car, and how they like the credit union. Patelco Credit Union (San Francisco) does this very well. They actually take the member online and show them how to set up online banking, where they can check up on their auto loan any time they want."
While the focus of these efforts often tends to be on selling more loans, Neeman said credit unions can and should go after the deposit account relationships, as well. "The biggie, of course, is the checking account," he noted. "That can be difficult. That's when (membership in) CO-OP is a great thing to have. You can show them all the convenience you have to offer. When I was in Hawaii recently, I needed money, and I looked across the street and saw an ATM with the CO-OP logo on it, and I knew it meant I could get at my money for free. That's powerful."
But it's not just indirect members who need to be cross-sold. "We deal with target marketing program to recapture auto loans and go after new loans, as well," said Denis Karandjeff, loan generation marketing manager for CUNA Mutual Group in Madison, Wis. "We look for someone who is already a member with an acceptable credit score who has recently financed a vehicle and then try to recapture that auto loan by offering to refinance it."
The CUNA Mutual program can also be used to go after potential members, either using a ZIP Code list for community charters, or using a SEG list scrubbed against current membership rolls for SEG-based credit unions.
The same process can be used for home equity loans and other products, as well, Karandjeff noted. Any such program requires good follow up from the credit union. "We like to see a second touch point used, such as a postcard or a call," he related. "Credit unions typically have a great rate advantage, but even if they can't offer rate relief, they can offer payment relief by stretching out the terms of a loan, for example. Maybe the focus is on the auto loan, but if you see other debt and offer a consultative approach, you can look beyond the auto loan."
As important as the follow up, he said, is offering some sort of premium, like a gas card.
Karandjeff said he'd like to see more credit unions offer open-ended lending programs-something on which credit unions are uniquely positioned to stay ahead of the competition.
"If you set up a master loan agreement with your members, then when they're ready to make a major purchase, you can get them set up without having to go through the entire application process again," he explained. "With just a few questions [to confirm that information the credit union has is still accurate], you can be ready to make a loan to a member right away."
