INDIAN WELLS, Calif. -
At the recent CUNA OpSS Council conference here, Deb Smith used a simple game to demonstrate "opportunity targeting," which she said means credit unions understanding both their membership and their local market.
Smith, the managing principal of Upland, Calif.-based consultancy Focus Performance Group, had two attendees of an educational session on targeting sales efforts to local markets play a candy bar game.
On the first try, the players grabbed as many candy bars as they could in 10 seconds from a pile. At that point, Smith revealed the game's most important rule: each bar represented one member, but the various brands had different values to a credit union. Snickers bars were worth $1, Milky Way bars $50 and 3 Musketeers bars $100.
The result: player one had 17 "members" with a total "value" of $856, while player two had 14 members worth $654.
For the second round, the players knew which "members" were worth more and adjusted their strategy accordingly. Player two again nabbed 14 members, but as they all were 3 Musketeers bars, they were worth $1,400, more than double the value of round one. Player one slightly increased her haul to 22 members from 17, but the value nearly doubled: $1,443 versus $856 the first time.
"The value is not in the number of members, but what the credit union's relationship is with them," Smith declared at the close of the second round. "Members should be evaluated both on their current value to the credit union and their future potential."
Missing Link
The bleak statistic has been repeated countless times the past several years: despite a large number of credit unions switching to community charters, nationwide credit union membership growth is a stagnant 2%.
Smith said the challenge for credit unions is not merely competition with other financial institutions, it is integrating strategy with execution.
"The solution is a clear growth strategy with new metrics, developing a strong sales and service culture as well as consistent sales management routines, and incentive compensation to drive behavior," she said. "The missing link is the branch. No matter how great the marketing is, if the credit union does not have a trained, knowledgeable frontline staff, the campaign won't work."
According to Smith, branch managers must evolve to become "market managers."
She said few credit union branch managers are equipped to develop membership in their markets within the branch's trade area.
"They lack the tools, the training, and, often, the incentive to operate as 'branch business developers,'" she said.
Looking Beyond
The next step for CU growth is to look beyond the branch, Smith continued. She recommended management provide both a process and training to enable their branch managers to:
Identify opportunities in the current membership to deepen relationships.
* Identify underserved segments in the CU's trade area.
* Pursue niches in the local market.
* Grow into natural roles as community outreach representatives of the credit union.
Once an opportunity targeting process is in place, Smith explained, targeted tactics are used to build and implement a marketing plan.
"Teams should develop their tactics and marketing plan based on their own experiences," she said. "Credit unions worry too much about treating all members the same. It is true all members should get good service, but if a member only has one account with a credit union, and doesn't bring more business, that member is choosing to be a Snickers. If different members bring different value to credit unions, it makes sense to have different strategies."
Time to REAC
Smith said credit unions must "REAC," an acronym that stands for Retention, Expansion, Attraction and Channel management.
The highest priority, Smith advised, is to retain the "make or break members." A 95% retention rate sounds good, but what if the 5% that are diminishing or leaving are a credit union's top members? Share accounts that are open but have declining balances are 80% of the problem, she said.
"If a number of high-value members move a significant share of their wallet each month, a credit union's revenue can drop as much as 10%."
Credit unions looking to expand should target by segments, she said, especially those that have been most successful.
Once a credit union has identified segments it wants to attract, it can allocate staff resources accordingly.
Channel management means leveraging alternative channels to better serve all segments, said Smith.
"The top task is to find more members who 'look like' your top members. Be consistent, so the frontline staff can see what good tactics look like. Be focused - try one or two tactics at a time, all and manageable when it comes to target groups. And have a strong link between the frontline staff and marketing."
