Has The Credit Union Been Sold?
"What's in a name? That which we call a rose by any other name would smell as sweet."
The thousands of credit unions that have changed their names in recent years tout their new names as signs of progress and growth. What many don't realize is that a name change often sends a different, mistaken message to members-the credit union has been sold.
Moreover, reports one person who has been involved in research related to name changes, there is fallout from name changes on more than just members-employees and sponsor companies also frequently feel anxiety related to name changes.
Neil Goldman, president of credit union consultancy Member Research, has been involved in the name change process for many years. He told The Credit Union Journal he has consulted with or done research for dozens of CUs that were thinking about changing their name for various reasons-ranging from a switch from a single-sponsor charter to a community charter, to simply looking for a better public image.
The Key Consideration
The key consideration, Goldman believes, is whether the credit union's current name is so limiting that potential members might not consider it as an option for banking and-or financial services. That, he said, must be weighed against the numerous challenges a name change presents, such as losing a sense of history or the potential alienation of current members or sponsor.
"A name has to help you. It has to support a brand that is welcoming and appealing," he explained. "And don't forget, people are impressed by heritage in financial institutions, especially in light of the innumerable bank mergers and acquisitions. They like knowing their institution has been around for 30 or 40 years. Change is very scary. People hate change."
One common misconception among members following a name change may surprise credit unions-members frequently believe the credit union has been sold, or is merging with another institution. Other potential problems include some of the members or the sponsor feeling a sense of abandonment upon hearing the CU is changing its name. Staff members may fear the imposition of a "sales culture," in which they will be expected to make cold calls and meet monthly quotas. Plus, they fear losing the feeling of knowing the majority of members who walk in the door.
And Goldman's research has uncovered additional risks: many current members of a credit union believe that when a credit union goes to a community charter making it possible for "anyone" to join, the new members will be of a lower class than themselves. These "newbies" will default on their loans more frequently, the thinking goes, which in turn will drive up loan rates.
"People forget that membership gives only the opportunity to apply for a loan, but not the right to obtain a loan," Goldman said. "People also think teller lines, and therefore waiting times, will increase dramatically if a credit union switches to a community charter. Consumers care most about two things: 'free' and 'convenience.' Convenience means physical convenience."
The fear of long lines probably is the least credible of the anxieties related to name changes, Goldman said, because he doesn't know of a single credit union where a new moniker opened the floodgates of people joining.
"People don't leave a financial institution for an offer, they must be looking. A credit union can't just change its name and expect people to come. They join a financial institution for convenience, and stay due to inconvenience."
Change Driven By Necessity
A name change often cannot be avoided. For example, if the sponsoring company goes out of business, the credit union must find a new sponsor or switch to a community charter in order to survive.
In such a case, Goldman acknowledged, changing the name usually makes more sense than continuing an association with the defunct company. However, he said, credit union management should realize that if "Company Name Credit Union" changes its name to "ABC Credit Union," it is the "Credit Union" part of the name that is the most limiting in the public's eye.
"It still is a credit union, and many people think they can't join," Goldman said. "Some consumers, those unfamiliar with credit unions in general, think of a labor union and assume it would not be available to them."
Goldman lauded the CU movement for its efforts in recent years to educate the public on this topic. He cited Pasadena, Calif.-based Wescom CU as an example of a community credit union that has used radio advertisements to shape a positive image and let people know they are eligible for membership.
"Wescom tells people, 'We give you what's right, not what's left,' " he said, referring to the difference CUs can offer without the added financial burden of stockholders to satisfy.
As the public becomes more educated about credit unions, the twin messages that CUs are not-for-profit and the members are the owners slowly are getting through, Goldman continued.
"These things resonate with non-members," he said. "Most importantly, the message that credit unions, especially those with community charters, are available to everyone continues to grow."
Goldman said an interesting finding from research on CU members is that many people have started to blur the line between credit unions and banks. "They refer to their credit union as 'my credit union' and 'my bank' interchangeably. Is that good or bad for credit unions? It certainly doesn't help the cause to stave off taxation and to secure differentiation from banks in the minds of consumers. It does, however, indicate that credit unions are starting to be thought of in the same league."
Testing the Waters
For credit unions contemplating a name change for any reason, Goldman advises a thorough investigation of the current name and all potential new names.
He said names should be tested in focus groups to see if they have any "equity," or if they carry a particular meaning for both members and non-members. This goes for acronyms, as well.
"A few months after the Enron accounting scandal, the Enron Credit Union changed its name to Star Trust Credit Union," he recalled. "The star is an important symbol in Texas, and trust was something the Enron name didn't have. Those two words together were a good combination."
Goldman said it is useful to test names and logos before a formal announcement is made, because a change during the development stage is much less expensive than it is to roll out a name and later be forced to spend thousands of dollars changing signage and stationery. Testing also should ensure that proposed names, tag lines and symbols are not the legal property of another business.
"If a credit union is not careful, it might communicate something it didn't mean, which might be limiting in a different way. Special care should be taken when using names with geographical identifiers. And if you use the word 'community,' people sometimes think of a church," Goldman said.
As an example of good intentions gone astray, he recalled a consulting group that developed what it thought was an interesting symbol for a technology CU that expressed a "scientific look." However, upon testing the symbol with current and potential members, they rejected it because it was the symbol for radioactivity-and unrelated to the work the sponsor company did.
Goldman said the CU was too close to the logo to realize the problem, but the focus group participants spotted it immediately. This research saved the credit union from a significant-and potentially costly-error, he said.
Communication is the Key
Many credit unions pursue change for the benefit of their members. Goldman believes that benefit is the only reason to change.
More important than the name change itself is what the credit union does next. When Motorola Employees Credit Union became Tru West CU and changed to a community charter, Goldman said it did a good job of communicating with its members and made significant efforts to communicate with its staff.
"Management developed a list of 17 or 18 key points from its research. They sent a letter to all members addressing each of these points, plus they put a list of frequently asked questions on the website," he said. "Focus groups allow you to see what members' concerns are."
The most important thing to remember, he added, is the name is ancillary to the true purpose of any financial institution.
"Members say, 'I don't care what you call yourself, just take care of my money.' But, on the other hand, if the name is not inviting, the credit union might not ever get the chance to handle the money."