Three Lessons From Down Under On Biz Development
Mark Lynch got an interesting start in credit unions-he formed one for bank employees.
Along the way, Lynch learned a number of lessons about business development both at his own credit union and others in his native Australia, and he shared three case studies from Down Under during a presentation at The Credit Union Journal's SEG & Business Development Conference.
But first, about that credit union for bank employees, which was called just that: Credit Union for Bank Employees, or CUBE. "Why would bank employees form a first credit union?" asked Lynch, before answering, The fact is that banks in Australia are just as bad at serving employees as they are at serving customers."
Lynch, who chaired CUBE prior to its merger with another credit union, went on to become deputy chair of Australia National Credit Union, which is that country's second largest CU. Today he heads up his own firm out of Sault Ste. Marie, Mich., called Entertainment Works.
Lynch reported that Australia's credit unions have begun to roll out a new advertising slogan, "Credit unions: A different kind of banking."
"The reason for the new positioning statement is that research found it was almost impossible to explain the difference between credit unions and banks," explained Lynch. "Ironically, the banks have found that banking is not a very good word for them and you go onto a bank website you find that banking isn't used very often," he observed. "You have to go to the credit union websites to find the word 'bank.'"
Lynch said that Australia's credit unions today, in the wake of having lost their tax exemption, have a changed culture with most seeing themselves as small banks. In Australia the market is dominated by seven billion-dollar-plus credit unions that have large influence over the trade association and other country's credit unions. Lynch described the situation as "uncooperative and competitive."
Another challenge: "Credit unions in Australia have a significant problem with aging membership," said Lynch, noting that many refuse to invest in marketing to younger members and believe it is better to pursue people when "they are 26 or 27."
But at least three credit unions have put programs in place that may be of interest to U.S.-based CUs looking to build business. Below is a look at each of the case studies:
Case Study #1: Savings & Loans CU
The (A) $1-billion Savings and Loans Credit Union is the oldest in South Australia and the fourth largest in the country.
Seeking a way to raise its profile and also align with a local cause or charity, the credit union partnered with Women's and Children's Hospital. Lynch reported that research had found that consumers ranked medical and health causes as their No. 1 cause, and further found that 87% of residents considered the hospital to be a respected organization (74% ranked it as highly respected). "The goal was to raise a million dollars (for the hospital) over five years," said Lynch. "There are significant differences between the U.S. and Australian health care system. Hospitals in Australia, until recently, never needed to raise funds."
At the same time the credit union was seeking to raise funds, Savings and Loans Credit Union was seeking to increase new members and spur volume sales of its Visa card. It set out to work with the hospital to raise $1 million over the five years, and rolled out a series of related marketing pieces that led to free publicity for the credit union. The credit union's new Visa card pays a portion of proceeds to the hospital. Since launch, 30,000 of the cards have been issued.
"For an Australian credit union this is probably the most important result, which is to improve the number of relationships," said Lynch. The total number of members with three or more products with the CU is 44%. But 97% of cardholders have three or more products from Savings and Loans Credit Union.
Also since launch, 21% of cardholders have joined the credit union in order to carry the plastic, and cardholder usage rates have been increasing 38% per year. Penetration is highest among 25-34 year olds.
Overall, the program exceeded sales projections and usage objectives, increased sales in other Visa products, boosted staff morale and improved public perceptions, said Lynch.
Case Study #2.
Movement Marketing Database
Australia's credit union community set out to create what it calls its Movement Marketing Database of the 2.7 million Australians who belong to credit unions. The information is gathered every month and the database updated. It includes a detailed demographic, product and transaction data at individual member-level, and then parsed by analysts who turn that data into relevant information for the country's credit unions.
The Movement Marketing Database establishes a current "value" calculated for every member, with those members then segmented by value, behavior and demographics. All product and transaction data is generically coded to allow comparison across credit unions, Lynch said.
The objectives, he said, are to identify movement trends, underpin programs with movement-wide benefits (such as marketing position and lobbying), identify movement best practices, support strategic planning and marketing activities of individual credit unions, and support business activities of the national trade association.
"One of the lessons from the movement marketing database is that those credit unions that have focused marketing were doing a heck of a lot better than those credit unions that had scattershot marketing," said Lynch.
Case Study #3: Wagga Mutual CU
Wagga Mutual Credit Union is located in Wagga Wagga, a community of approximately 60,000 people in a rural part of New South Wales in Australia. Seeking a way to raise its profile in the region, Wagga Mutual created an account that generated much discussion during The Credit Union Journal's SEG and Business Development Conference.
Wagga Mutual developed what it calls its "Community Sponsorship Account," in which the community group of the member's choice receives one percentage point of the interest/dividend paid on the account each month. Once a year, the credit union aggregates the funds for each group being supported by members, and donates them to the organizations.
The idea for the account actually originaged in England and was brought to Wagga Wagga by an immigrant CEO who developed the idea of community sponsorship accounts related to a local football (soccer) club. As an example, if 140 members with an average account balance of $7,000 in each account nominate to support their community organization on June 30, that organization would receive approximately $10,000 according to the interest rates being paid at the time.
In 2004, 29 community groups benefited. The amounts ranged from $100 to $15,000, and a total of $50,750 was paid (compared with $20,000 one year earlier).
The benefits of the program have been obvious, said Lynch. In addition to the widespread favorable publicity, more than 500 people have joined the credit union just to be involved in the community sponsorship account.
"There are now 29 community groups directly linked to the credit union," noted Lynch, "and they have brought their business to the credit union, as well. It's meant increased awareness and a higher community profile. In a small community, this is big news."
There are also benefits to the community, as well, he said, including in addition to the funds, less pressure on the low-income families to give financial support to community groups, improved facilities and opportunities, and increased community spirit.
After South Australia's Savings & Loan Credit Union rolled out a Visa card in conjunction with a local hospital, it surveyed residents and got these responses when it asked, "Which financial institution do you associate with being 'community spirited?'
Savings & Loan CU 29%
Australian Central CU 22%
Commonwealth Bank 6%
Westpac and Nat'l Banks 5%
Your CU Vs. Benchmark
After creating a movement-wide member database in Australia, credit unions were able to measure their performance against national averages to see where improvements can be made. Below is a sample of the type of overview a credit union can be provided with.
Your CU Bench
Avg. Products 4.16 3.57
Avg. Prod. Value $530 $395
Transactions 142 124
Transactors 72% 68%
Cost Per Trans 14cents 37cents
Fees $22 $35
Net Value $532 $389