By Robert McGarvey
What consumers don’t know about credit unions will give you sleepless nights.
Numbers from CUNA data should shake you up. 64% of non-members are not familiar with credit unions, related The Financial Brand. It added that 71% of millennial non-members are not familiar with credit unions, and the problem is that millennials of course, are the future.
Worse: in conversations with credit union executives it becomes plain that many consumers do not get that at their very core credit unions are radically different from banks, and it’s not because banks offer more services, a misconception revealed via polling data in recent Harris research sponsored by Affinity Federal Credit Union in New Jersey.
The real problem is that consumers do not understand that credit unions are owned by their members, not shareholders, and that they are not for profit – and there could not be a more foundational difference. Credit unions exist to serve their members. Banks exist to serve their shareholders.
You know that. But do your members? Do your prospective members?
Bet that most of the prospects don’t. If they did they would be members.
And bet too that many members do not truly get the credit union difference.
Don’t give up hope. It’s up to you to change those beliefs.
Start by accepting the difficulties of the challenge. Banks, especially the big ones, have huge marketing budgets, and they wow consumers with a torrent of ads portraying themselves as friendly, helpful, and perhaps even cool.
Many credit union executives may snort that all those claims are untrue, but the reality is that consumers have been bombarded with bank advertisements.
How often have they seen advertisements by credit unions?
Understand too that over half of the credit unions—upwards of 3,000—have assets under $50 million. About two-thirds have assets under $100 million.
That group may have challenges in directly attacking member and prospect misconceptions.
Chris Otey, a longtime fintech executive who serves as chair of the board at South Bay Credit Union in California (assets around $100 million), shrugged: “I think credit unions struggle to differentiate themselves due to individual scale. Take my credit union for example. We are an 8,000 member credit union with a small footprint in our community. We simply do not have the financial resources to get the word out en masse about credit unions.”
Otey added that in his mind there’s another way to get out the credit union difference: “I have long thought the onus for differentiating credit unions from banks should and can be handled by the state leagues and national organizations.”
Probably all true but there also are steps individual credit unions can take on their own behalf.
Fabian Geyrhalter, a principal in branding agency FINIEN in Long Beach, CA, offered a starting point: “Credit unions have the massive advantage of always having led with empathy, the crucial emotional brand element that members seek and banks struggle to provide.”
Excellent point. Nobody has recently accused the big banks of practicing empathy – but this should be a key credit union differentiator. Credit unions really know their members – that may be especially true in fact in the smaller credit unions – and that message should be continually communicated.
Kirk Drake, CEO of CUSO Ongoing Operations and author of CU-2.0, offered still more concrete suggestions about ways to differentiate credit unions. He pointed to loyalty dividends as a powerful tool: “I believe this is an essential way to show members the credit union difference.” Banks don’t pay them to customers. Credit unions, many at least, do pay them to members. That’s a powerful difference.
Drake also suggested looking at how other kinds of cooperatives nurture member loyalty and he pointed to REI, the outdoor equipment and clothing company as a good one to study. He especially praised REI’s annual member dividend. The amount is based on the value of the member’s qualifying purchases, and for many crosses into three, even four figures.
He also praised REI’s roster of free training and noted that credit unions could do likewise where the credit union brings in experts to offer workshops.
He added that a key REI initiative is “making the member feel like they own the place” and stressed that credit unions can and should do similar.
Walk into an REI store and you will be reminded that members get dividends – that is discounts – non-members don’t. It’s a soft sell but it is persistent. And it gets across why consumers should shop at REI and not at the many other stores that sell similar stuff.
Right there are plenty of ideas about how to differentiate credit unions.
Bottomline: Never forget, a credit union is not a bank. But also don’t forget that prospects and even many members don’t know that.
It’s up to your credit union to get the message across.