The Evolving State of Credit Union MARKETING

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Lynn Gregory's first week as a credit union marketing coordinator was not at all what she expected.

Her boss at a small, military-based credit union had recently succumbed to the sales pitch of a visitor for "giveaway" items the salesman said would lure business, and he needed her assistance.

"I had to stand in the lobby for six weeks and hand out these sponges shaped like houses," she said. Other trinkets that included a screwdriver and a ruler soon followed.

"I knew that these were fine little giveaways that could add an element of fun to marketing," she said, "But I didn't think people were going to take out home equity loans because they got a free sponge."

Fifteen years later, Gregory is a SVP of Marketing at Johns Hopkins Federal Credit Union in Baltimore. The financial institution with $205 million in assets still serves its original sponsor, along with other education and health-related SEGS.

Not only does she oversee a team of four marketers on staff, Gregory said she is heavily involved in core processing and IT functions.

Gregory joins a long list of marketers within the credit union community whose roles have evolved over the past decade or so from keepers of prizes and creators of member newsletters to senior executives, strategic planners, business developers, even CEOs.

"I see credit union marketers growing in influence in the overall strategic planning of their institutions, increasingly as key players," said Teresa Freeborn, SVP of Marketing & Communications at Kinecta FCU in Manhattan Beach, Calif. "Depending on the culture of the credit union, there may be challenges in how much influence we can bring to bear."

Freeborn said she thinks marketers "still have a ways to go" in getting their voices heard, but thinks that their importance in helping credit unions grow is recognized. "At the end of the day, if you are looking at possible CEO candidates and one is a marketer and one is a financier, we all know what's going to happen."

While marketers don't have that "tried and true" reputation of moving into those ranks, she said, their responsibilities are far greater than they ever have been. "We determine pricing for the organization, we are definitely involved in strategic planning," she said. "At Kinecta, we provide key resources for the planning functions here."

To show the break in traditional roles, Freeborn pointed out that she is acting president of Kinecta Financial Management Company, the CU's CUSO.

With almost $3-billion in assets, Kinecta devotes "6% to 7%" of its overall budget to marketing, Freeborn said, noting that that budget includes staff salaries, government affairs, marketing research, public relations and community involvement.

If there is a glass ceiling for marketers, said Johns Hopkins FCU's Gregory, she's not interested in busting through it.

"I really love my job and love that I can be involved in all these things but still have the fun parts," she said. "I don't have the distasteful parts of dealing with the examiners and the new regulations or the investment and accounting roles. I'm quite happy where I am. I have the best of both worlds."

While Nicolette Lemmon, President of Lemmon Tree Consulting, Tempe, Ariz., said she could only name a handful of credit union marketers-turned-CEOs, Dave Dawson, president of Data Based Marketing in San Luis Obispo, Calif., said he knows of "quite a few" who have moved through the ranks into executive seats.

Among them is Gary Irvin, marketer turned CEO of FORUM Credit Union in Indianapolis, Ind. Irvin said the development of the MCIF and data mining tools has helped lead this evolution of the marketing function from a "department on an island to a department that is in the mainstream of credit union development and success."

"This increased knowledge of the business and heightened expectations help develop key leadership characteristics that are useful for today's CEOs of most organizations," he observed.

Today, the $870-million FORUM Credit Union has an executive level marketer and a hefty marketing budget - 7% of its overall budget-that is well protected during budget crunches.

"Every organization has to figure out what works best for them," he said. "In my mind, when it comes down to budget crunching, marketing is the last thing cut."

For perspective, he said, FORUM's central Indiana market includes seven out-of-state banks, three regional banks, and two other major credit unions, all with substantial budgets to put toward luring business. "When we changed our name from Telco to FORUM CU in 2000 and added counties (to our FOM), we really had to step up what we wanted to do with the public aspect," said Andy Mattingly, Senior VP, Strategy and Marketing.

Mattingly said while the other credit unions are not considered a threat-"Anything they do simply creates awareness for all credit unions"-the banking industry poses separate challenges simply because banks have a far greater brick-and-mortar presence. "The regional banks have 40 to 90 branches compared to us in the credit union industry with only 10 to 15 branches," he said, explaining that much of its efforts have been focused on raising awareness via TV and radio, highlighting pricing via direct mail campaigns, and luring deposits via newspaper advertising.

What The Internet Has Meant

With the Internet and all the related technologies that came with it-including websites and online banking-marketers have a host of new channels to reach their audiences.

"The advent of the Internet in the mid-1990s opened the doors for all financial institutions to add an easily accessible delivery channel for their constituencies, and credit unions are no exception," said Kinecta FCU's Teresa Freeborn. "We are on the cutting edge of technology (as are banks)...and to have the ability to give members the opportunity to learn about and respond to product offerings online is certainly an advantage."

Freeborn called online banking a "boon" for credit unions as it "gave us an even playing field with banks, even though we don't have as many branches."

Poulos said e-marketing is a big part of Michigan First's efforts to spread the word about various products, services and special promotions. "We have a program that has e-mail addresses of our members," he said. "Very few unsubscribe."

Mattingly said FORUM sends selective messages at least twice a month to its members via online channels as well. And, he said, 750 of its 1,200 SEGs have given the credit union permission to market to its employees via e-mail.

Which Marketing Methods Work Best

Probably the most effective marketing tool for Michigan First, Poulos said, is direct mail campaigns.

"We use credit bureau histories to see who might be interested in a particular product and service then we try to sell them on it," he said, noting that the bulk of Michigan First's marketing efforts are spent on current members.

Like Michigan First, Johns Hopkins FCU also has a captive audience that responds well to direct mail campaigns.

"Last year, we had a promotion for adjustable rate mortgages-a tough product to sell-that did really well," Gregory reported. "We targeted people who didn't have homes currently, had decent enough credit scores and were within the age range of 18 to 40."

Its message, "Are you dreaming of a new home but staying awake at night worrying about the payments," turned the CU's downward slide in lending up by 57.7% over a period of four months. "By the year's end, balances were up 70% for mortgages."

It helped, Gregory said, that the credit union was able to offer a rebate. "I think that money talks," she said. "People like cash, so I budget part of my personal budget for rebates."

In this case, takers got $1,200 toward closing costs plus an ARM that was about two percentage points below other advertised rates.

"One of the reasons we promoted this product was that we reached a cap in our asset/liability module and couldn't do anymore on fixed loans," Gregory explained. "This was a niche product and I was delighted to watch the numbers go up."

The simple promotion targeted only 4,100 members or about 15% of its overall membership.

"I wish all of our promotions were that good," she said.

As it stands, the $205-million Johns Hopkins FCU has been growing steadily at 5% per year on average, Gregory said. It helps that its sponsor holds weekly orientations of new staff and invites credit union officials to join in sharing information and signing new members.

"We are also able to set up in the hospital and sign people as they walk by," she said. "We have a person who is devoted to business development and goes to various locations. She is out of the office most days of the month."

Gregory said other marketing methods include campus posters and fliers and some limited billboard advertising. She said she shies away from print and radio advertising because the field of membership is so narrow. "For us, it would be wasting dollars," she noted.

For the nearby $547-million Aberdeen Proving Ground FCU in Maryland, the same held true until last year when it moved to a community charter.

"Prior to the change, there was an awful lot of waste in newspaper, radio and billboard advertising," said Stuart Clode, SVP of Marketing. "With the change to a community charter, it meant I was spending the same amount of money but penetration levels were 100%."

Clode said becoming a community charter also made prospect mailing a lot easier. "We can do a lot more target mailing and outbound mail follow up," he said. "If we target a particular housing development or estate or group of garden apartments, we know that everyone there is eligible for membership."

At the same time, Clode said, the message has to be more powerful than just "We're here on the corner, we're a nice bank, come on down."

The message the credit union strives to convey is that a person's financial life is improved by belonging to APGFCU. "We want them to think, 'I can see by going to this place, my life is going to be enriched.' "

Clode said his approach is not to compete with other institutions on price alone, but rather to demonstrate the credit union's values.

"Our president and CEO, Don Lewis, is a huge inspiration on this," Clode said. "He says the driving force of our credit union is wealth-building through empowerment."

Instead of focusing on building up savings accounts, Lewis wants the focus to be on gaining financial knowledge, Clode said.

"Our role is not simply to give you the checkbooks, the loans, the IRA and the mortgages," Clode said. "Those are just the tools. The grander vision is that each and every family that we touch is going to have an improved economic position as a result of their relationship with us."

Unlike many credit unions that have outsourced many of the major marketing jobs, APGFCU does all of its work in-house with a six-person marketing team along with "a whole bunch of product managers and VPs."

"I do not have an ad agency and I do not work with a marketing consultant," Clode said. "All of our design, marketing, writing, ads and creative is done in house."

He said his budget goes toward "very sophisticated software and equipment and a well-rewarded staff."

In Indianapolis, FORUM tends to use outside agencies for its major marketing efforts, and is, in fact, shopping for a new partnership.

"We typically don't like to get too comfortable with one agency," Irvin said. "We change every four to five years."

That said, he does prefer that one agency handle all of the major campaigns to maintain consistency. While the credit union wants creative people on their team, Irvin and Mattingly agreed that a shelf full of marketing awards is not a major selling point.

"Creative design is not the mantra here," he said. "It has to be more about what that campaign did for you, not just the slick designs that won Addies."

Mattingly said his personal taste leans toward ads that grab attention with quirky words. For example, "One of our CD ads showed this lady with one big word-MOOLA," he said. "You look at that and then see the rate."

A recent television spot that did receive an award featured a man giving a tour of the credit union, touting all of its wonderful products and services. At the end of the tour, the viewers learn that the tour guide is not a longtime employee, but rather a new member.

Mistakes Credit Unions Make

Lemmon said one of the biggest mistakes that credit union leaders make is inconsistency in their marketing materials and infrequent campaigns.

Lemmon and others said credit union leaders sometimes hurt their efforts by using many marketers for separate campaigns.

"Allegiance to brand has not been the forte of credit unions," Lemmon said. "That has to do with trying to do low budget marketing promotions to stretch their dollars. But, if the member doesn't recognize it, those dollars are lost anyway."

In order to drive that message home, she said marketing materials "have to have the same look every time so people will say, 'Oh yeah, that's my credit union.' Everything should be the same-the colors, the position statement, the graphic identity."

Once you have that branding, she said, you have to support it with ongoing efforts. "I call it getting the flywheel going."

Lemmon has created what she calls "The Magic of Seven," a theory based on 20 years of marketing experience that members need to be "touched" seven times through various media to act on advertising.

"You can't just do one marketing thing and think that people are going to flock in," she said. "If you are not out there with you members on a consistent basis, they are getting romanced away by somebody else."

Of course, that also means a credit union has to increase its marketing budget, something that she finds many credit unions - particular smaller and medium sized ones - avoiding. "Budgets are a big hurdle. The ability to hire the kinds of talent they need is difficult for smaller or medium-sized credit unions."

What's most important, she said, is that the marketing efforts be ongoing and consistent. "If you stop the flywheel, to get it started again can take up to six months," she said.

Another mistake, Dawson said, is that many credit unions fail to do market-testing before launching major campaigns.

"Right now, there are many major credit unions that spend a lot of money on marketing, but don't do any testing beforehand," he said. "The movie is done and it's been edited. Well before it's shown to the public, there are private screenings. It should be the same for banking."

He said the reason it doesn't happen is that testing takes time. "And so many people are in a rush to produce something and get it out there that they consider all this other stuff a waste of time."

Irvin and Mattingly agree that testing and member surveys are important and worth the time and money it takes to gather the information. "We realize that things appeal differently to different age segments," Mattingly said. "Knowing that something is going to work for a particular market is important. We can't just do this stuff off the cuff."

Added Irvin, "I think marketers have to be tuned into what's happening around us, looking at industry trends and member feedback monitorings. They have to look at scenario planning and what challenges are out there."

Poulos said Michigan First surveys its members on a regular basis and in different formats. In addition to periodic postage-paid cards that ask them to respond to a series of questions that include quality of service and products and an annual questionnaire, he said member satisfaction is measured four times a day at the branches.

"Our managers give a measurement card to the last person in the teller line," he said. The goal is to determine that the wait time is within Michigan First's acceptable timeframe of seven minutes.

"Very important to us is our quality of service and how fast we give it," he said.

As important as it is to market products and services, other analysts agree that community involvement is also key to a credit union's success in marketing.

"I'm seeing more and more that my long-term gain comes from positioning ourselves as committed members of the community," Clode said. "We are going to stand out in a community of 330,000 people by having our staff associated with such things as the Boys and Girls Club and Habitat for Humanity and not simply for gratuitous exposure."

Irvin said FORUM also prides itself on its community involvement. "We have a number of our officers or management team who are very involved in various chambers of commerce, rotaries and walk-a-thons," he said. "We are also probably involved in 100 philanthropic efforts."

To aid in those efforts, FORUM recently expanded its corporate office to include a community meeting room that seats 500 people.

"We have very high profile people coming through here," he said, adding that not only does it produce revenue for the credit union, it demonstrates FORUM's willingness to be a good neighbor. "There's nothing like it in northern Indianapolis."

Clode said Aberdeen Proving Grounds FCU is also banking on a new branding strategy that emphasizes "Building strong families for a stronger community" (see photos, page 14).

"The big challenge was 'How do I go out and tell the world that that's what we're all about," he said. "I can't really talk to the general market about that and the power of the cooperative movement."

Dawson agreed. "The consumer doesn't want to know the mechanics of your operation," he said. "They want the relationship side - somebody knows me."

He said even institutions such as BofA and Wells Fargo have managed to maintain for customers the familiarity they crave. "The staff becomes the brand, and if they don't turn over frequently, that brand works. The customer feels a connection."

That's why, marketers said, they also should have a hand in internal affairs. "It's terribly important that our own staff can identify with everything we do and touch as they are on the line of member contact."

The reality is, Dawson said, that credit unions are still a geographic business. "You have to be close to their pattern of travel," he said. "They want to go by you when they do their chores. It's on the same level as a grocery store, a drug store or the gas station."

Certainly, Internet banking has made its strides in cutting down on some foot traffic, but Dawson and others agreed that brick and mortar remains important, which is why credit unions are building more branches than ever.

And, oftentimes, it's that face-to-face contact that will make or break a relationship. For example, he said, "Orange County Credit Union's whole focus is just to provide insanely great services that you wouldn't even want to consider going anywhere else."

Indoctrinated With Message, But...

He said that message is not only understood by the members, but by the employees as well.

"It's a very simple message. The rates are decent, they're not the best," Dawson said. "But they make is so easy and have it so ingrained in their marketing culture that rates don't matter."

Take for example, the young college student who had applied to OCCU to get a loan for a new computer. "He got a call at work saying his check was ready," Dawson said.

Unfortunately, the young man arrived 10 minutes after closing time. After peering into the window with his "puppy dog eyes" an employee opened the locked door and listened to his story.

Not only did this young man-who happened to be Dawson's son-leave the credit union that day with a check for his new computer, he got his first VISA card. "Somebody showed him the respect and was willing to bend the rules. They gave him more than he expected."

Now engaged and "pulling down a decent salary," Dawson said he's certain his son will go to Orange County Credit Union for all of his financial needs.

"People have to work a little harder to keep the consumer," he said. "You can't just hang your hat on the fact that they are members of your credit union...every credit union marketer I know got indoctrinated with the not-for-profit thing and can sing the song and do the rap real fast, but does that message really resonate with the consumer?"

The Path To CEO's Chair

INDIANAPOLIS-Among those who have become CEOs after starting in marketing is Gary Irvin, CEO of FORUM Credit Union here. "I started 28 years ago when our credit union was at $35 million," Irvin said. "We produced a newsletter using a mimeograph machine." Keep in mind, he said, that while he joined the industry with a marketing degree, he has worked his way through many other disciplines to get to his current position.

"Marketing can be one path to the CEO chair in today's marketing world because of the increase emphasis on results over creativity," he said. "Today's marketer has to analyze data, make recommendations and use more sophisticated methods to meet objectives."

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