Opportunities Abound, Efforts Lacking
"I'm just amazed by the lack of strategic direction many credit unions show when it comes to SEG development," says Paul Lucas, a marketing consultant to credit unions and CUSOs, and the former vice president of marketing for 1st Advantage CU (Newport News, Va.). "The typical credit union has business development/SEG reps, but they don't have penetration figures. They don't have an MCIF system. They have no way to measure the performance of these SEG reps, and none of them are on incentive contracts."
Lucas says that for any credit union to make the most of its business development staff, that staff must be managed properly, trained properly, and provided with the proper tools. Above all, he adds, credit unions need to recognize that business development is a sales function. That means that the position of business development representative must be looked upon as any other sales position.
"They have to be purely on incentive-driven contracts," says Lucas. "Let's say their salary should be $40,000. You pay them $24,000 as salary and then give them the opportunity through incentives to make far more than that $40,000."
Backing up a step, Lucas adds that a successful business development effort really starts with hiring the right people for the job. Adds Lucas, "The board will spend whatever it takes to get a good CEO, and the CEO will spend whatever it takes to get a good CFO, but when it comes to marketing, everybody gets cheap." Lucas suggests that credit unions should apply the same due diligence in filling its senior marketing positions as they do in filling other key positions in the credit union.
Lucas offers that credit unions many times take "good employees" from other areas of the credit union, send them to a marketing conference, and then expect them to fill important marketing roles. He likens that to sending a teller who balances properly every day to a CFO conference and then expecting that person to serve as the credit union's CFO.
Dominick Edwards agrees. Edwards is the president of New Vision, whose SEG Manager 2000 database product is designed to help credit unions manage SEG relationships. Says Edwards, "Many credit unions simply don't understand business development, so they're not positioned to take advantage of all the opportunities that are out there." Echoing the sentiments of Lucas, Edwards adds that the most common mistake credit unions make at the outset is in business development staffing, often drawing from other areas of the credit union. He adds that former bank employee are often viable candidates because of the sales-oriented nature of retail banks.
According to Edwards, business development representatives are typically given the directive to "sign up new companies." However, they're not given any training or direction in determining which companies are most attractive from the credit union's standpoint. "They don't pay any attention to the size of the company, what industry they're in, how long they've been in business, and whether they'd be a good fit for the credit union," says Edwards. The end result is that the credit union gains SEGs that don't prove profitable in the long run. "Business development representatives shouldn't be chasing after landscapers," he concludes on this topic.
The problem is further exacerbated when credit unions fail to actively enroll new members from their new SEGs and otherwise develop that SEG's potential. For this reason, Edwards says that a business development representative's incentive program should be based partially on the performance of the SEGs that the representative signs up.
Edwards warns that the opportunities that exist today for credit unions won't be around forever. He claims that a number of banks have instituted so-called "bank at work" programs wherein banks develop
SEG-like relationships with businesses in the community. He predicts that as these efforts begin to pay off, the practice will spread.
At first glance, the issue of business development may not seem to affect community credit unions. After all, by their charter definition, community credit unions do not recognize SEGs. However, Marc Selvitelli, executive director for the National Association of Community Credit Unions, suggests that business development is just as important, if not more important, for community credit unions.
Of the existing SEGs of newly converted community credit unions, Selvitelli says, "As long as the SEG falls within the geographic boundaries of the community charter, the relationship really doesn't have to change that much." He refers to these relationships generically as strategic business alliances, but says they still play an important role for a community credit union interested in growth. He adds that it only makes sense for community credit unions to continue developing these alliances.
"Developing these alliances makes even broader sense for the community credit union," says Selvitelli. "It allows for further business partnering opportunities. Whether it's through commercial account services or member business loans, I think there's a broader service that can be provided by community credit unions." He also notes that per-member acquisition costs are much lower through SEG/business alliance development when compared to the mass-market approach community credit unions are forced to take to get their message out.
SEG development offers many opportunities for credit unions of all sizes and all charters, and a number of credit unions have already perfected the art and science of it. However, for those credit unions that have not awakened to the realities of the current marketplace, the opportunities may be slipping away as savvy banks seek to fill the void.