Posts Tagged ‘differentiation’

The business value of personal connection

May 23, 2014

Who are you striving to be?

10275516_705648832830172_5588543601566778944_oThanks to this photo of Roy Bergengren recently shared by credit union advocate Matthew Cropp of Vermont, I realize that we now have fewer credit unions in the U.S. than at any time prior to NINETEEN THIRTY-NINE. Think about that for a minute…. what does that mean? Now some would explain that away saying that overall membership in the U.S. is at an all time high. So let’s put those two equations together: more people, but fewer institutions. Is that a good thing? A bad thing? Just a thing?

What would Ed Filene and Roy Bergengren think? That after the past 75 years of credit union advocacy, we now have fewer credit unions serving all of America? Are the products better than before? Is the service worse than before? Is the differentiation between credit unions and banks better or worse than 75 years ago? Do we still have a need for credit unions, or has the reason they were founded pretty much gone away? Is there more opportunity than ever before for smaller CUs to succeed? Or is it just too challenging, and every CU below $10m in assets should just get merged into a larger one until there are none in this size range anymore? Do you need to offer every financial product and service that your competitors do in order to succeed? Or does that pursuit just drain time and money resources away from your CU’s core mission?

What is the mission and purpose of your credit union? Who are you trying to be? Who are you serving? What is your connection like with the members you serve? Tight? Barely there?

One of the reasons I bring up this topic is that it seems to me that more and more credit unions are basically operating as tax-exempt banks; attempting to grow no matter what, and becoming more generic in appearance and attitude (and losing connection with the group that founded them). To operate this way may serve the needs of the institution (although it may actually not), but in any case seems a disservice to the membership, and perhaps just as importantly, a disservice to the CU movement as a whole. If a credit union is going to operate like a bank, it should just acknowledge that fact and change charters and switch to being regulated and insured the FDIC instead of NCUA. That tax-exempt thing is not really that a great a business advantage anyway.

But the other surprising thing about credit unions operating like banks (aside from failing to live up to its mission statement) is that in many cases, the trend is away from generic large institutions and stores, and TOWARDS unique, local, and independent organizations. So-called “big box” stores are on the decline; while one-of-a-kind shops find their niche. Many people avoid chain restaurants in favor of unique eateries.

But being different, in and of itself, is not a sustainable business model. To increase success in business, you need to provide something different for which there exists a customer base. One way to approach this differentiation is to employ technology to make it easier for your customers to do business with you, whether that be in facilitating the process of ordering products and services, the delivery of those products and services, or help in using those products and services. From our own point of view; we’ve found that every time we make our own technology easier to use, more streamlined, and more personalized, it pays dividends immediately.

How are you using technology to differentiate and personalize your credit union? Are you using technology to strengthen the connection between your employees and your members, or is it weakening that connection? Who are you serving, and how are you making their experience with you easier and better? If providing “better, more personal service” is the differentiation point of your credit union (as many state), is your technology living up to that promise? What are your thoughts?

You’ve just been punched in the face

October 7, 2009

There was one presentation at Finovate that I, in my role as Credit Union Marketing advocate, rated a 1 (lowest possible score). And that was the presentation given by BankVue/First ROI announcing their new, rebranded Kasasa program. I think I can summarize the thinking behind their new announcement:

We have created an amazing rewards checking product that is going gangbusters in sales. Community banks and credit unions everywhere are signing up for this, offering it to their members, and we’re raking in large profits from it. But the public doesn’t know it’s really our product. Banks and credit unions are all offering our reward checking, but they are each calling it something different. So rather than have our product fractured in the marketplace, let’s rebrand it with OUR name, because it’s really our product that people want, not the financial institution that is re-selling it. And they blow chunks at marketing anyway, we could really pump sales up if we unify the market for this and do a national marketing campaign with slick TV and web commercials. That’s what our clients want – instead of being limited by their own regional marketing budget, they’d become part of a national campaign. We’re helping the little guys of the F.I. world, and big banks need not apply.

I think that’s basically the reasoning. I may be overreacting to their presentation, but that’s the feeling I got as I listened. I think they are dead wrong. At least I hope they are. This is the largest slap in the face to the credit union marketing world I have ever witnessed. They are saying several things with this announcement to F.I.s everywhere. 1.) You suck at marketing. We can do it better than you. 2.) It’s not your crappy financial institution that your members/customers want to do business with, it’s our reward checking product that they really want. 3.) National marketing trumps regional marketing.

Starting with point number 3 – Everything the past 10-20 years has taught us is that the OPPOSITE is true – more personalized, customized, regionalized marketing trumps impersonal generic national advertising. It’s about connecting with people, not about spending money on slick creative and TV commercials ad buys. This is the opposite direction that the trends have been going for at least the past decade. And as for points 1 and 2, the gauntlet has been thrown down. Are you credit union marketers (and community bank marketers for that matter) going to take this lying down? Isn’t it the relationship with your institution that your member/customers want, and not just your reward checking?

So here’s what I really can’t fathom about this Kasasa concept: Why would they think that credit unions and community banks would want to appear to be drinking from the same pool, even if they are? How does it help to further *my* F.I.’s brand if I’m offering the same product as every other credit union or community bank in my area? As a credit union marketer, I want the OPPOSITE. I want MORE differentiation for my brand, not this staggering morass of sameness.

The hubris from BankVue/First ROI with this move/announcement is mind-boggling. I’ve already been contacted with a nice email by the CEO of BankVue. He has basically asked me to please not paint them in a negative light, and that while we may disagree in strategy, they have the best interest of smaller community banks and credit unions at heart. BankVue/FirstROI is certainly welcome to chime in on this discussion here.

I’m more interested in hearing from credit union professionals (and even any community banking professionals too). I posted this same message last Friday on, and if you are a credit union professional, you can check out the animated discussion which ensued here.

A Report on CUs and Technology Outsourcing

October 26, 2007

Just heard an interesting podcast on a report which covers the past fifteen years of credit unions and technology, with George Hofheimer of the Filene Research Institute and Victor Stango of the Tuck School of Business at Dartmouth College. The podcast and report details the role of outsourcing IT in credit unions.

It seems rather obvious that CUs benefit from outsourcing IT. Namely, none but the biggest of CUs can afford to devote the time and money to developing one’s own core processor solution. Outsourcing to a third-party, who can devote all their time and energy and can spread the cost over multiple institutions, is the natural way to go. But there are indeed certain dangers along this route, one being the lack of integration from the members’ point of view (e.g. my mortgage, CU credit card, and online banking are disassociated from each other.)

Professor Stango says that CUs who outsource their IT spend more per member than CUs who do it in-house. I am not surprised by that finding, but what I really want to know is: Does the higher amount spent per member translate into a superior ROI? Because if it does, than I will continue to spend as many $5 bills as I can if it’s bringing me back a $10 bill each time. But the correlation between increased spending on IT and ROI may be extremely difficult to measure and pinpoint. It may be difficult to show what the ROI would have been had not certain technologies been outsourced.

This brings me to another point brought up in the podcast that savvy business people must consider: Professor Stango states that the outsourcing of IT has enabled CUs to offer a much greater diversity of products than if they had not. While that is true, I’d be remiss if I didn’t point out that diversity of product offering is almost never a good thing as far as businesses are concerned. In fact, usually it’s the other way around. Most businesses thrive with a narrow focus on their most profitable products. A diversity of products is good thing only in an environment where consumers have no other choices. And that’s clearly NOT the environment financial institutions find themselves in.

Which brings me to my final point. In the podcast, Professor Stango talks about the extreme consolidation in the core processor industry. While core processors have incentive to merge for increased profits, it actually could lead to disaster in our own industry. Let me explain: I belong to several financial institutions, if only to keep tabs on what various FIs are doing. And the only online banking service I’ve ever seen comes from ORCC. (Which is a horrid online banking interface — is it the cheapest one out there?) Anyway, online banking is increasingly becoming virtually the only contact the majority of members have with the institution. If all that I know about the institution is what I see via my online banking, and its the same as every other FI, what competitive advantage does my credit union have? If I were a credit union, what I would really want to know is if I spend more for a better online experience for my members, does that translate into increased ROI? I’m curious if the Filene report addresses this question.

I am not saying that the only point of difference a CU has versus a bank is their online interface. Nothing could be further from the truth. But when your members see that the CU’s online banking interface is identical to their banks’ online interface, what are they going to think?

What this means to the CU professional:
1.) Focus on making your best product even better, thereby further differentiating yourself from the competition. Eliminate me-too products, especially the ones that virtually none of your members care about. Those are draining time, energy, and dollars from the credit union. (As evidence, check out the eye-popping 20% loan growth rate of $800M Whitefish CU in Montana that does not offer checking accounts, and doesn’t have a web site that works.)

2.) Yell at the management of your core processor (politely of course): UNDER NO CIRCUMSTANCES ARE YOU TO MERGE. As an industry, because we depend on our core processors so much, we need a diversity of them so that competition and innovation continues to the greatest extent possible. When they merge with each other, they are not looking for the industry’s best interests necessarily (though they will put themselves out of business if they put us out of business), but they are looking after their own (short term) bottom line. In this regard, I agree with those who are calling for renewed commitment to establishing a CUSO-owned core processor. In fact, it would be wonderful to have two or more such organizations.

3.) Hammer on your Core Processor’s rep to allow you to SOMEHOW show your credit union’s difference via your online banking interface. You don’t have to put up with the bland awfulness that I’ve seen so far in online banking interfaces. As far as I can see, there is no reason for this, other than so far we haven’t cared very much about our online banking interface, beyond simply that we have one and it is functioning. If I’m wrong about this, let me have it. Use the new online tools to find each other, and gang up to petition to make this happen. Yes, it’s truly THAT important.