DES MOINES, Iowa-Instead of cutting rates to battle tough consumer lending competition, CUs will need to gain greater relevance in the minds their members and communities in order to generate more loans.
Jeff Russell, senior advisor for The Members Group, shared that advice, pointing to the fact credit unions have been offering below-market rates for a long time, yet their share of the financial services market is small.
"We talk all the time about how we have the lowest rates on loans and pay more on savings," said Russell. "If consumers were economically rational we would have 100% market share, but we have 6% to 7%. That means somehow we are not resonating, not being relevant to consumers when they are making decisions about their financial lives."
Russell contended that credit unions must focus marketing efforts on this issue and find ways in 2012 to become top-of-mind with consumers, so when people talk about problems they are having with banks-and possibly switching-the credit union's name comes up. He reminded this strategy is even more critical this year with all the anti-bank sentiment. "We have a window of opportunity."
It comes down to the fact credit unions have to stop selling "commodity points" and start selling financial services packages based on where people are in their lives, insisted Russell. "Credit unions must get better at packaging all of their lending products, as well as their entire financial services, so consumers look to the credit union as the institution that can improve their financial lives. It's too competitive today to compete on rate.
"For example, if you are reaching out to 22-year-olds, they probably need a credit card, car loan, and checking account," continued Russell. "Let them know you have a good credit card offer, pre-approve them for a car loan, and give them free checking. Let them know you have the products and services they need and that you will take care of them. Take the same approach with different market segments, but change the product mix based on their needs."
Russell suggested CUs need to step up this effort particularly with markets they are not reaching to a great extent, such as youth and the recently displaced employees who are older and have started their own businesses.
