I just had the most fascinating discussion with a credit union marketing professional regarding the major concepts that their strategic planner had with their credit union. One of the themes coming from their strategic planning session was “protecting ROA”. Protecting ROA? Last time I checked, protecting ROA is not a strategy. Great ROA is the result of great strategy executed brilliantly. So what is the strategy to “protect ROA”? Build a new branch. Well, that is a very interesting tactic. But guess what? It is not a very good strategy — especially when you don’t understand your brand. It’s not a good strategy when you don’t know why your best customers do business with you. When you don’t have a good answer to the question “Why should I do business with you, and not the company next door to you?” The decision if, when, and where to build a new branch MUST be a brand-driven decision, otherwise it’s doomed for disappointment.
From what I understand, this credit union’s new branch is going into the “hot” and growing part of town. Well, that’s all fine and well. But who is going to go to this branch? Why should they do business there? Does this credit union have credibility with this population there? Or is that new population indifferent to the credit union and what it has to offer? My guess is that people in this other part of town already have a relationship with a financial institution, probably a bank. What does the CU’s current membership have in common with people in the new branch location? This credit union can not answer this fundamental question. (Which can only lead to headaches in the future.) This is a mistake which I find credit unions repeating over and over again. Maybe the new branch will be successful. Maybe not. Just being there, will not be enough to get people streaming in the door. Is this a risk a credit union can afford to take? Without getting a good pulse of its membership and desired new membership first?
Most credit unions do not realize that their strategic business advantage is not low rates, nor superior products, but in serving people with a common bond. Knowing your audience intimately, and serving their unique needs. Credit unions often think that it’s all about efficiency and geography. Other consultants try to boil everything down to these two factors. Well, efficiency and geography can’t explain why people will drive past a myriad of financial institutions to get to the one that they want. People will drive by five pizza shops on their way to THEIR favorite one. What motivates people to do this? Well, for different institutions and constituents, the reason is different. What works for one bank or credit union won’t work for another right up the street. Because their fundamental business DNA is different. Because their members/customers are different. And discovering those differences, codifying them, and cranking them up is what our branding work with individual credit unions is all about.
If I could wave a magic wand, and impart three pieces of knowledge to every credit union executive in the country, they would be these:
• With the aid of an experienced facilitator, conduct a focus group with your best members. I guarantee it will expand your mind and change your life.
• A credit union with $320M in assets, and a marketing budget of half a million dollars, had never been heard of by a random sample of people in its general community.
• You’d be surprised why your best members love you and do business with you. (What are you doing to solidify that relationship?)
• When a credit union expands its FOM, or builds a new branch without a clear plan, reason, or commonality with existing members, it is diluting its brand. And that can lead to a diluted ROA.
• Building a branch never leads to as much new business as management anticipates. I’ve seen this over and over again. Why? Because consumers have more choice than ever. Thanks to the internet, consumers are now informed more than ever. And most consumers don’t care about half a percentage point one way or another. Surprisingly, many other factors are more important. Usually management can not clearly and succinctly state the reason that someone should do business with them compared to another financial institution in terms that are meaningful to the CONSUMER. If you can’t fulfill this RULE NUMBER ONE, do nothing else until you can answer it. Most especially, don’t build another branch.
Okay, so that’s four things, but these are important points! I could add much more, but I’ll save them for future rants….