For most of its life, Communicators FCU in Houston, Texas, was a telecommunications credit union, before expanding to take in portions of the medical community. But it was a decision it made in 2001 that has altered the credit union's direction more fundamentally: it added an "underserved" geographic area of the city .
Communicators FCU is not alone. According to NCUA, during 2002 more than 22-million low-income Americans were added to the rolls of potential members by federal credit unions alone. Nevertheless, during The Credit Union Journal's SEG & Business Development Conference here, a show of hands revealed less than five were actively seeking such expansion.
Shelly Horan, marketing director with Communicators' CU, urged the rest of them to rethink their position. Horan told the meeting the CU's expansion into a low-income community has been a positive one, and offered attendees several suggestions and lessons learned.
The first step, she said, is to establish a good foundation through "homework." Research your existing membership base, then identify and research your new target audience.
"Get in your car and drive," said Horan. "Go look at the neighborhood. What retailers are in the area? What is the location like? Is your branch convenient for the people in this area? Also, who is your direct competition? What financial institutions do potential members have to drive past to get to you?"
The second step is for a credit union to identify the products and services it has that will effectively serve the new market. It must also consider products it currently doesn't offer that might appeal to its new, underserved membership.
"For the underserved market, payday loans and check cashing are products people use, which is why they are something Communicators is looking into," she said. "If you have any doubts this market is profitable, talk to check- cashers and payday lenders. Communicators is hoping to beat those high rates and still make a profit."
While making the transition to a community-based focus, it is important that a CU not forget its "old friends." Horan suggested one strategy that has worked for her credit union has been to partner with its various SEGs in sponsoring community events. Another method is to identify non-profit SEGs and ask them what the CU can do to increase its visibility in the community.
Community involvement should include locating smaller festivals and joining the local Chambers of Commerce, she said. Educate the public with free financial education-as Communicators has done at inner-city high schools and Salvation Army residence halls.
In addition to existing social gatherings, Horan said a credit union should develop its own event-complete with local dignitaries and celebrities.
"Communicators created an annual community event. The No. 1 radio station in Houston did a remote spot from our event, and the cheerleaders for the (NFL) Houston Texans attended," she said.
Because a community credit union has to appeal to a broader base of individuals, it has to use mass advertising, direct mail, targeted marketing and e-mail marketing. It is a sharp contrast to advertising to a SEG, which is a lot easier and less costly.
"You need to make sure your message is getting to the market you are looking for," Horan said. "Take great care with e-mail marketing so you do not offend people by sending them unwanted Spam."
Indicative of the changing market, Communicators Credit Union isn't alone in chasing after the large underserved market. Horan noted that CCU is currently competing with four other credit unions with overlapping FOMs. Any CU expanding into the community should think about changing its name to reflect its new status. Horan said Communicators is planning on changing its name, because, after 12 months of marketing, advertising and community involvement, focus groups told them it sounds like a telecom CU.
Finally, a CU needs to get its board of directors involved, she said. Form a Community Development Committee, including members of the community. This will provide a forum for local community members and leaders to work together, she said.
The impact of the community on the CU's penetration is noticeable. Just 12 months into the foray into the underserved market, community members make up 7% of Communicators' membership. Horan said the community "SEG" is the most profitable of Communicators' groups.