MADISON, Wis. - As credit unions move away from single sponsors to multi-SEG and community charters, the face and behavior of credit union members is changing-meaning some long-held credit union strategies must change, as well.
That's the finding of a new Filene Research Institute study whose author recommends segmenting membership by tenure, stepping up marketing, and taking an "untraditional" look at expansion to spur growth.
Filene Chief Research Officer George Hofheimer, who headed the study titled "Who's Joining Credit Unions?" recognizes that CUs may be wrestling with an evolving membership.
"The changes to membership are sometimes slow and imperceptible," suggested Hofheimer, adding that credit unions often do not closely examine behavior of new members and instead look at membership as a whole. "When you look at the totality of your membership, behaviors won't change much from year to year. Now if you isolate the new members, you'll see some pretty significant differences from what we call legacy members and new members."
The biggest differences, according to the study, are that members who have been with the credit union longer tend to place more value on product features and benefits and use more services, such as direct deposit and online banking. Members who have been at the CU for shorter periods tend to use fewer services that are transaction based, and place more emphasis on delivery channels and convenience.
"Not surprisingly, if you look at pure demographics, newer members tend to be younger and have less income," Hofheimer said.
With new members, the study showed that convenience was a big reason they chose the credit union.
"We asked members how they came to join the credit union, and one of the really interesting responses we saw from newer members is a preponderance of those who said they drove by the credit union on their way to work, saw the sign, and gave it a shot," Hofheimer said. "But when we asked them how many times they actually go to the branch it was not as great as legacy members. We tried to interpret what that means, and our hypothesis is that the perception of convenience is very important to new members, but it may be a different perception of convenience than what's held at the credit union."
Hofheimer contends that credit unions should rethink their approach to expansion to attract and retain new members, who tend to see convenience in the form of kiosks and ATMs, as well as branches.
"With these types of surveys you can only make assumptions, but what we are promoting is the concept of signaling convenience in a little untraditional manner," Hofheimer said. "If it takes a million dollars to build a new full-service branch, we recommend taking that million and building kiosks, perhaps leased storefronts-have a number of locations rather than one large one."
The Filene study was conducted in 2007 using Raddon Financial Group data from single sponsor, community, and multi-SEG credit unions. The survey reached more than 1 million credit union households and achieved a 7.5% response rate. The research was also compared to a similar study conducted with bank customers, which led to an important finding, according to Hofheimer.
"In the eyes of the consumer there was very little distinction between what a bank and credit union offered. So the implication for credit unions is to continue to invest in the marketing function and focus on what makes a credit union different from a bank. Since credit unions began moving away from a single sponsor, they have been increasing their marketing efforts and they need to accelerate that even more," he said.(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com/ http://www.sourcemedia.com/
