Get Active: Revive your Single-Service Sleepers

When you review your credit union’s unprofitable accounts, how many of them are inactive? Many credit unions find themselves with a segment of members who joined the credit union for a specific purpose (often a loan offer), and remain members with inactive low-balance savings accounts after they have finished using the product that enticed them to join.  These single-service households can become burdensome.  As you look for ways to expand your share of wallet among all members, a special focus on reinvigorating these single-service sleepers may help improve your profitability.

GET OUT YOUR MAGNIFYING GLASS
Examine.  Try to determine why these members are inactive and unprofitable by looking at vulnerability, profitability, and demographic details.  FIS (http://www.fisglobal.com/AboutFIS/index.htm) has tips on using analytics to help increase opportunities to leverage and expand customer relationships to improve your profitability. 1

KNOWLEDGE IS POWER
Educate.  There’s a good chance that when these members joined, they didn’t know a whole lot about your credit union – just that for a particular product, you had the best option at that time.  A targeted marketing effort can help you educate these members about what makes credit unions unique, as well as update them on current rates and offers that are available to them. The more tailored your cross-sell approach (What do they not have that they might need? Can you offer a better-than-market rate on another product?), the more likely you are to improve the relationship.

A LITTLE GOES A LONG WAY
Encourage. Involve your staff in seeking ways to improve relationships with members.  A recent CUNA study shows a more member satisfied means more loyalty and activity—both in using your products and recommending you to others. 2  Each time your employees have an opportunity to interact with a member, it’s an opportunity to build loyalty and prevent members from wandering into that inactive single-service category.  Develop and encourage an internal culture that supports loyalty—inspiring attitudes and behaviors.

ARE YOUR MEMBERS SEATED IN THE EXIT ROW?
Exit.  If you have made an ongoing effort to revitalize a non-performing member with no response, it might be time to consider an exit strategy for the relationship. You may want to consider charging inactivity fees or find other subtle ways of encouraging the member to move on rather than passively draining your resources.
It tends to be more cost effective to retain and develop an existing customer relationship than to acquire a new customer.   A strong service-oriented internal culture and targeted marketing efforts may just be the right prescription for your comatose single-service accounts.


1 Moed, Joyce. “Marketing and Sales Culture Target Inactive Accounts.” CU Times, 12/15/2010.
2 Credit Union Member Satisfaction, Growth, and Loyalty Report, CUNA 2010.

Northwest Georgia: Ringing in the New Year with Results!

With around $55 million in assets and two branch locations, Northwest Georgia Credit Union proves that savvy marketing and results-driven campaigns don’t just belong to the big boys.  In early 2010, Third Degree teamed up with the credit union to work on its brand position. (Check out VP, Creative Director Tara Street’s blog post showing the creative elements.

Northwest Georgia engaged Third Degree to put together an “un-banking” brand story to separate the organization from local banking competitors in Rome, GA. The campaign began running in April with three main goals:

1. Reduce membership attrition;
2. Increase annual loan volume by 10%, and;
3. Increase the amount of member services utilized per household.

RESULTS WITH MEANING
The results? In 2010, Northwest Georgia saw a 1.6% increase in membership, a 56% increase in annual loan volume, and 1.6% increase in member services utilized by household. Mission(s) accomplished!
With the new brand up and running, Northwest Georgia and Third Degree then collaborated on a mid-year auto loan campaign. After great success with high-yield checking in recent years, the credit union needed to increase its lending (like many credit unions around the country).

MORE BANG FOR YOUR BUCK
Starting the third week in July and ending in November, this program saw some big results. Northwest Georgia exceeded its loan goal by a whopping 82%. Plus, the auto loan campaign had a residual effect of drawing attention to the credit union’s overall lending product portfolio which led to a 25% increase.
So, this small credit union is proving that, “If you can’t run with the big (err, I mean small) dogs you better stay on the porch!”

Social Media Matters: Twitter "Virtually" Grounds Qantas

Social media doesn’t matter? It’s too complicated to figure out how to best use? Don’t tell this to the CEO of Qantas Airways, Alan Joyce.  After reports of aircraft parts dropping in Indonesia this past November, the Twitter world became a rumor mill leading to speculation of a Qantas plane crash. News outlets even began to pick it up. It was untrue, uncontrolled and not only impacting the company’s reputation but its financial position.

LESSON LEARNED
According to the article in the Wall Street Journal (December 28, 2010), Joyce noticed that share prices declined over 5% in half an hour (currently, the stock is around $2.30). Apparently investors had seen the tweets and, in a panic, started selling their Qantas stock. After confirming that the plane was safe and on the ground, Qantas quickly issued a media statement and pulled together a press conference with the CEO out in front.  All actions were part of a crisis communications plan, which had not included social media. Since this incident, Joyce has hired an entire team of people just to keep an eye on the social networking side of things. This team has already prevented other rumors from starting and spreading with regular tweets, Facebook updates and conversations with the public and media online.

FACING THE FACTS 
Like many companies (even large ones like Qantas), credit unions and marketing communications firms are still determining how to best strategize and utilize social media, one thing certain is that not participating is not an option. Whether you want to or not, your credit union will be a part of the chatter. The question is, will you be leading, following or scrambling to react to the virtual world?

Critchlow, Andrew and Kelly, Ross. “Qantas Copes With Aftermath of A380 Crisis.” The Wall Street Journal. 29 Dec.2010:B4. 

Purchasing Power

The Baby Boomers were the largest generation in U.S. history, and they currently make up the majority of credit union membership.  Armed with enormous purchasing power, Boomers have shaped our society and markets.  These days, though, Boomers are hitting the point in the income/expenditure bell curve where their earnings and their consumption will start to drop.  And while their generation has inherited significant transfer of wealth, there are a lot of Boomers – so a family inheritance is spread across multiple siblings.  In addition, Boomers are living longer, paying higher healthcare costs, spending on lifestyle choices rather than saving, and transferring wealth to their offspring in the form of college tuition and other financial assistance. Boomers are redefining what it means to grow older, and they need to know that their financial institution can partner with them as they navigate retirement planning.  Are your Boomer members aware of all the different services your credit union offers, and do they know that they can remain a member after retiring from a SEG?

CHIP OFF THE OLD BLOCK
Generation Y has now surpassed the Boomers in size.  Born between 1985 and 2005, members of Gen Y have been characterized as tech savvy and well informed; they also tend to be civic minded and seek a work-life balance.  Like most of us, they don’t want to feel like they are being sold to – and this generation is particularly adept at figuring out your intentions when you communicate with them.  Although the older members of Gen Y are entering the workforce, the average age for Gen Y is 15 years old.  Now is the time for credit unions to build relationships with Gen Y by providing education, offering value-based entry level products, and appealing to their sense of social and environmental responsibility.

A LANGUAGE WE ALL CAN UNDERSTAND  
Don’t overlook the overlap between these two powerhouse generations.  Boomers are parenting and paying for Generation Y; Generation Y has an impact on current Boomer financial choices and stands to inherit whatever the Boomers have left.  Are you leveraging your relationship with your Boomer members to bring you closer to Generation Y? Does your credit union know how to speak effectively to the needs of these two diverse and important groups?

Passing The Buck

"Transfer of wealth” is a pretty impressive sounding term that makes me think of sumptuous homes with marble everywhere.  In reality,  though, transfer of wealth is a term that simply refers to the shift of assets from one generation to another.  In aggregate, it’s a large number; in actual experience, it’s what happens when your Great-Uncle Ralph passes away and you inherit his great dane and a $50 savings bond, while the rest of his estate is divided among other family members, taxes, estate settlement, etc.

MAKE CENTS?
Economic growth in the US following World War II resulted in widespread wealth in our country – specifically, expansion of the middle class and reduction of poverty rates.  While the majority of wealth remains concentrated among a select few, this means that across the board the older generations in our country have some assets to pass on.  According to some estimates, through the year 2052 up to $41 trillion in assets will be passed forward.*  Although only a fraction of that $41 trillion will take the form of inheritance, it still means that the younger generations stand to gain significant financial power.  As the Silent Generation (currently ages 65 to 85) and the Baby Boomers (current ages 45 to 65) age and pass away, they will transfer assets to members of Generation X and Generation Y.  Keep in mind: both the Silent Generation and Generation X are small, so most of the assets will transfer from the Baby Boomers to Generation Y.

PURCHASING POWER
Even though members of Generation Y currently range in age from about 5 to 25 years of age, they are starting to make themselves felt as a powerful force in the market.  Not only do they influence what their (mostly Boomer) parents purchase, they are also beginning to make purchasing decisions at an earlier age than previous generations.  And where there’s purchasing power, there’s a need for financial literacy and financial services.

Journal of Gift Planning, 1/2003, John J. Havens and Paul G. Schervish: “Why the $41 Trillion Wealth Transfer is Still Valid.”

The Earnings Bell Curve

Previously, we talked a little about the demographic wave – and how our country currently has small generations (like the Silent Generation and Generation X) that alternate with much larger generations (such as the Baby Boomers and Generation Y).  Knowing where your members fall in the wave and understanding the pool of prospective members within each section of the wave can help you shape your marketing strategy and your expectations for membership numbers across each group.


THE OUTCOME OF INCOME
Another important thing to consider is the income curve.  Average income and average expenditures tend to follow a bell curve, with both peaking at around 50 years of age. Credit union members tend to be most profitable when they are in the top portion of the bell curve – using a variety of products and services, particularly loan products.  The average age of a credit union member is 47 years old, according to CUNA.  That means most credit union members are likely Baby Boomers, who are somewhere near the top of the bell curve. The catch, then, is making sure you keep a steady stream of members climbing the bell curve to make up for other members as they age out of their prime profitability. 


DANGER: CURVES AHEAD! 
Now think about this bell curve in terms of generations.  According to a December 1, 2010 article in Credit Union Times, over 40% of credit union members are Baby Boomers between the ages of 46 and 64 years old.*  The group currently climbing the income/expenditure curve is Generation X, which we know has about 9 million fewer people than the Baby Boomer Generation.  This means that in order to make up for the smaller size of Generation X and maintain your current level of profitability, you need to extend your efforts to cross-sell products to the Boomers and start heavily recruiting the next big generation: Generation Y.


CU Times, 12/1/2010, Marvin Umholtz: “Nonconformist Boomers Are Unconventional Members.”

The Generation Wave: Age Appropriate

LOOK AROUND
When you look at your credit union’s membership in terms of age and other demographic characteristics, do you also take the time to think about the overall demographics of the market you serve? What about the demography of the US as a whole?  Or in more common sense terms: when you look at the number of members you have in a certain age range, are you basing your expectations on a comparison to how many people total there are in that generational age range? 


 If you are like most businesses (not just credit unions – businesses in general), the answer is probably “no.”  After all, your yardstick for comparison is probably your own past performance.  And that’s a good yardstick for a lot of things, but in this case it doesn’t give you the full generational picture.  That’s because not all generations are equal in size.  This sounds like common sense, but believe me – most of us don’t take the generation wave into consideration that often.  We really should, because knowing how large the pool of prospects is within each generation can really help shape products, delivery channels, and marketing efforts for your credit union.

FROM GI TO GEN Y
If you look at the number of people within each generation, it looks more like a wavy line than a flat line. There are some generations that are small and others that are large, and the generational pattern tends to alternate between small and large.  Makes sense, right?  If you think of a “generation” as a twenty year timeframe, a parent generation and its offspring generation will have a gap between them.  For instance, the Greatest Generation (also known as the GI Generation) was born between approximately 1901 and 1925.  Their post-WWII enthusiasm for one another spawned the Baby Boomer Generation, whose members were born between approximately 1945 and 1965.  The Boomer Generation is a very large generation, and in turn they have produced an enormous number of offspring known as Generation Y (children born between 1985-2005).  In between, you have two smaller generations: the Silent Generation, born between the GI’s and the Boomers (1925-1945), and their children the Generation X’ers, who were mostly born between 1965 and 1985.  Granted, dividing these generational groups up and identifying parentage is not an exact science – but it still serves as a good proxy if you look at the big picture.


THE BIG KIDS ON THE BLOCK
So, now we have this wavy population line.  This gives you some perspective for how many prospects are available to your credit union in each group.  The Boomer Generation is currently the largest and most profitable generation (we’ll talk more about that later!). Generation X has about 9 million fewer members than the Boomer Generation, so they will never be as large or profitable as the Boomer Generation simply because there are not as many Generation X’ers out there.  On a per capita level they are a profitable and viable generational group – they just happen to be a small generational group.  Generation Y is the next big group, poised to surpass the Boomer Generation in number and buying power as they mature.
Stay tuned as we talk more about these different demographic groups and how understanding them can help your credit union!