Mark Arnold :: Blog

CUNA recently published their Environmental Scan. I was fortunate to be able to write the marketing section. One of the key trends we identified is that Generation X is getting older.

Ten years ago, just about every organization in America was focused on marketing to Generation X. Many organizations have since shifted their focus to Generation Y, but ignoring Generation X is a mistake—especially for financial institutions.

The snapshot of a Gen Xer has changed dramatically in the last 10 or even five years. The stereotypical image of an Xer (has a nose ring, listens to grunge rock music, is indifferent towards life) is changing: Gen X is getting older (starting families, becoming career oriented, etc.)

Generation X describes people born between 1961 and 1981, according to Strauss & Howe, our country’s leading demographers. They range in age from 28 to 48 and represent about 28% of the population.

Generation Xers are family-oriented individuals. Their kids range in age from birth to high school, with a large concentration of them in middle school. Gen Xers are buying homes and SUVs and are very conscious of the rising education cost as they look ahead to their children’s college years. Generation X is currently a generation of borrowers.

Want to increase your loans? Go after Generation X.

Every credit union executive and marketer should read the E-Scan. If you haven’t ordered your copy yet be sure to do so today to read more about the aging Generation X and the other trends identified.

Certain words have a great psychological impact on us. These words evoke deep feelings, bring back memories and often motivate us to look at things in new ways. 

In preparing for an upcoming session I’m teaching at the CUNA Marketing Management School, I came across this list of the 16 most persuasive words in the English language. Very successful people use these words to add power to their presentations. As credit union marketers, we need to make sure we are using these words in our newsletters, brochures, website. Even our front-line sales folks can use these in their cross-sales efforts. 

The list comes from Wayne Berry, who is a sales coach/motivational speaker. Here they are: 

(1)  Discover
(2)  Easy
(3) Good
(4) Save
(5) Guaranteed
(6) Proven
(7) Money
(8) Safe
(9) New
(10) Results
(11) Own
(12) Free
(13) Freedom
(14) Health
(15) Best
(16) Investment 

In a typical recession most organizations reduce their marketing expenses. The first place to cut is usually marketing and training. While that can help in the short run the long-term effects can be devastating.

One marketing principle to keep in mind is “zig/zag.” When others zig, you should zag. Right now most companies are zigging by reducing their marketing expenses. Instead of zigging like everyone else you should zag: do more marketing. There is less marketing “clutter” out there so now is a great time for your marketing messages to be heard.

One credit union board is doing just that. Rosalyn Baker, member development and marketing supervisor for Double 11 Credit Union ($36 million in assets; 4,900 members), said, “My budget was actually increased from the original budgeted amount. Our board’s thought on this? You can't get yourself out there if you don't have the funds to advertise.”

A recent article from Knowledge@Wharton offered strong data for doing more marketing in a recession.

“The first reaction is to cut, cut, cut, and advertising is one of the first things to go,” says Wharton marketing professor Peter Fader, adding that as companies slash advertising in a downturn, they leave empty space in consumers' minds for aggressive marketers to make strong inroads. Today's economy “provides an unusual opportunity to differentiate yourself and stand out from the crowd,” says Fader, “but it takes a lot of courage and convincing to get senior management on board with that.”

According to Wharton, a McGraw-Hill Research study looking at 600 companies from 1980 to 1985 found that those businesses which chose to maintain or raise their level of advertising expenditures during the 1981 and 1982 recession had significantly higher sales after the economy recovered. Specifically, companies that advertised aggressively during the recession had sales 256% higher than those that did not continue to advertise.

Because we’re in a recession advertising prices are probably less than they have been in years. You will find exceptional value to any of your marketing efforts (billboards, TV, etc.). You can also do some great negotiating with rates. Every advertising venue is scrambling to find advertisers now. Leverage that to your advantage: negotiate lower ad rates at every opportunity.

The current banking climate also offers opportunities for credit unions. A lot of people are fed up with some of their financial institutions. They are placing blame at the feet of bankers. Use that consumer angst to your advantage. Credit unions are the good guys. Be the people in white hats who are here to help solve the current economic crisis.

We can look at the economy in one of two ways: either as a negative or an opporutinty. Credit unions that choose to go for opportunity are credit unions that will grow.

Organizations spend thousands of dollars a year to be the first link that pops up when consumers type specific words into a search engine. Search engine optimization is the process of improving the volume and quality of traffic to a web site from a search engine. The earlier a site is presented in search results, the better the chances of getting a hit. SEO can also target different kinds of search, including image search, local search, and industry-specific vertical search engines.

As a marketing strategy for increasing a site’s relevance, SEO considers how search algorithms work and what people search for. The key with SEOs is content and the way it’s built in your organization’s web site. There are companies who specialize in SEO that can help you. Yahoo, Google and MSN also offer pay-per-click type services. So does Bankrate.com, which may be a good option for credit unions.          

Have you ever done a search for credit unions in your area, i.e. Dallas Credit Unions? Try it and see where your site falls on the list. When you type credit unions into Google, the first two search results aren’t even credit unions. Texans Credit Union is the third credit union listed. Texans has been using SEO for nearly a decade now. Here are some SEO resources:
a)      searchenginewatch.com
b)      pandia.com
c)      sempo.org
d)      seobench.com/keyword-density-analyzer
e)      keyworlddensity.com
f)        www.checkmypr.com

Consumers on average have 10 different financial accounts spread across more than four different financial institutions. Your credit union needs to capture more of your members’ business by looking in its own back yard. One tool to accomplish that is relationship pricing. 

Relationship pricing is rewarding members who do the most business with you with special deals. For example, it might mean waiving ATM fees in exchange for higher checking balances; or providing loan discounts for high balance CD holders Of course, the airlines have been doing this for years (Platinum, Gold, etc.).  

According to CUNA, here are odds of losing a member based on the number  of products a member has with your credit union: 

• 2 to 1 of losing member if have savings only
• 10 to 1 of losing member if have savings/checking
• 20 to 1 of losing member if have savings/checking/loan
• 100 to 1 of losing member is have savings/check/loan/4^th product

As  these numbers indicate, the more products and services you can get a member to have with your credit union, the more loyal they will be to you. 

So how do you implement a relationship pricing strategy at your credit union? Here are five key steps to take: 

1.       Know what your competition is doing
2.       Know what your members want
3.       Know what you can afford
4.       Have a financial objective
5.       Create perceived value for the member 

Many times we seek to grow our credit union by adding members. In today's tight economic environment, another effective strategy to credit union growth is to increase the number of products our members have with our credit union. And one way to grow that business is to implement relationship pricing.

Live chat support or instant messaging – better known as IM to users - is becoming more and more prevalent among retailers and service organizations. What once started out as basic customer service has since expanded to include tech support and similar functions. Communication companies like Verizon have offered live chat tech support on residential accounts for probably five years or more. If you shop on the Web, you’ve undoubtedly been offered the option to chat live with a “store” representative. Eventually, consumers will want it and expect it from their financial institutions, because it makes complete sense.

In most cases right now, when people logon to home banking and have questions regarding their accounts, they have limited options. They can send a secure e-mail and wait up to several business days for a response, or they can pick up the phone and talk to a person - as long as it’s during regular business hours. The phone call will require verification of the account number, among other questions, to establish account holder validity. There’s also the potential wait time to speak to a person. Ironically, the luxury of speaking to a person almost seems antiquated and less of a luxury – to certain demographics - when you look at the benefits of real-time online conversations with the same people. Imagine the possibilities of offering real-time IM communication inside home banking. That could be enough to attract an entire generation of members, especially if it’s a 24/7 service.

Tulsa-based SmartMax Software, Inc. (www.smartmax.com) offers e-mail, web mail and live chat/monitoring applications to help businesses better communicate with their customers. Its live chat program – SightMax - can either be purchased for use on an organization’s own server, or SmartMax can do the hosting for them. The company currently has over 10 credit unions using its live chat product. Bank of America is also a client. The SightMax Web site claims that “customers are three times more likely to make a purchase if they have chatted with a live sales representative.” The site offers this explanation to support its claim:

“Providing human interaction in a traditionally impersonal medium gives a distinct edge…Online customer service agents can greet customers and offer assistance as they would if they were in a physical store, allowing the customer to have a unique and personalized shopping experience while visiting your site.” 

Another vendor is Lending Solutions (lendingsolutions.com). It offers web chat services so members applying for loans online can communicate with a loan specialist during the process.

There are some who predict that e-mail is dying and IM will replace it. That is yet to be seen, but here’s what we do know. IM is the most used communication channel by teenagers, and college students use it three times more than adults. Most IM is done on a computer, but it can be done on cell phones, too. And, in other parts of the world, IM is equally popular. In Asia, patrons can even IM their orders when they walk into McDonald’s. 

We often talk about targeting members by age segment, but we also need to target market our credit union’s women members. Why? According to CUNA, approximately 68% of credit union members nationwide are women. 

If you sell the woman on the credit union, you sell the entire household. Women make almost 80% of the household buying decisions. One ad agency that handles multiple credit union accounts specifically uses a female voice over for a radio spot because of the women influence. 

Women will comprise 59% of total college graduates and control 60% of the wealth in the United States by the year 2010. Women also purchase 52% of autos. 

“The most important thing in the financial services area is the underserved needs and wants of women,” says best selling author Tom Peters. 

“Now is the time for the financial services industry to turn their attention to the female market sector,” says Evan Goldfarb, executive vice president of marketing and sales for Simmons Market Research Bureau. 

Women are still under-enrolled in retirement plans when compared with men. Credit unions should offer retirement planning seminars focused exclusively on women. For example, “How to Retire Wealthy Without Marrying a Man” 

If you connect one woman to your credit union’s brand, she’ll pass it along to her friends. Women are three times more likely to recommend a brand or service they enjoy than men are. 

“If you’re trying to build loyalty, go to women—they’ll bring men along with them. What women have going for them is word-of-mouth advertising,” says Paul Lucas, a consultant on marketing to women and former VP of marketing for 1^st Advantage Credit Union.

In 60 Trends in 60 Minutes, author Sam Hill says, “With a continual influx of immigrants and less stigma attached to not speaking English, Spanish will likely continue to grow, and there’s a reasonable chance that the United States may become a bilingual nation in a few generations.” The statistics on Hispanic growth are overwhelming: 

• 37.4 million people of Hispanic descent live in the U.S. (13.3% of population).
• Fastest growing population segment in U.S.
• $1.1 trillion in consumer spending projected by 2009.
• 38% of U.S. Hispanics have no financial institution relationship.

In some markets, however, it may not be a Spanish strategy, but another ethnic market (for example, Oriental, Indian, etc.). 

There are ethnic pockets wherever your credit union is located. In 1970, 5% of the U.S. population was foreign born. In 1997 it climbed to 10%.  

A long-term approach and strategy is needed when conducting ethnic marketing. Multilingual marketing will continue to grow. Your credit union may have to focus on operational issues (bilingual forms, applications, personnel, etc.) one year and then marketing in the following years. 

It is not something you just jump into and start right away. You want to make sure back office policies and procedures are in place first. 

CUNA’s E-Scan notes, “Credit unions that want to grow and thrive will be serving the Hispanic/Latino and other emerging racial/ethnic markets.” 

As you think about potential niche markets, be sure to consider ethnic marketing as an option.

Would your members recommend your credit union to a friend or colleague? If you haven’t asked them, your organization could be ignoring its most important indicator of growth. This idea is the foundation of a discipline known as the Net Promoter Score or NPS. Serving as an alternative to traditional customer satisfaction research, NPS helps companies grow by measuring and acting on their performance from the customer’s perspective. Most of the time, they do this by asking their customers one specific question. 

“When customers, employees, suppliers and investors invest in creating better, more valuable relationships, the loyalty effect will fuel profitable growth,” said Fred Reichheld, creator of NPS, on his blog at netpromoter.com. 

Calculating the Score

NPS works like this. Companies ask their customers a single question – how likely are you to recommend us to a friend or colleague (or a question distinctly similar in nature) – and ask the customer to rate the company on a scale of one to 10. Based on their responses, customers are grouped into one of three categories: promoters, detractors and passives. Promoters are customers who love the company so much that in addition to referring others, they increase their purchases. Detractors are the opposite. They usually feel they’ve been treated so badly that they leave altogether, switch to the competition and caution other consumers about the perils of doing business with that company. Passives are usually satisfied, but they lack excitement about the company and are therefore easily lured by the competition. Customers are placed in categories based on what ranking they give the company on the one-to-10 scale.

Promoters:  9 and 10
Passives:    7 and 8
Detractors: 1 through 6 

A company’s Net Promoter Score is calculated by taking the percentage of promoters and subtracting the percentage of detractors: 

% of Promoters - % of Detractors = NPS 

The philosophy behind this formula is that people who rate a company higher on the NPS scale buy more and refer more friends to the company than people who rate it lower. 

“Loyalty is indeed the key to profitable growth,” Reichheld said. “Yet because loyalty is rarely measured--or even carefully defined--in organizations today, this fundamental human value gets pushed back into the shadows and accounting profit becomes the predominant measure of success.”

Would your members recommend your credit union to a friend or colleague? If you haven’t asked them, your credit union could be ignoring its most important indicator of growth. This idea is the foundation of a discipline known as the Net Promoter Score or NPS. Serving as an alternative to traditional customer satisfaction research, NPS helps companies grow by measuring and acting on their performance from the customer’s perspective. Most of the time, they do this by asking their customers one specific question. 

“When customers, employees, suppliers and investors invest in creating better, more valuable relationships, the loyalty effect will fuel profitable growth,” said Fred Reichheld, creator of NPS, on his blog at netpromoter.com. 

Calculating the Score

NPS works like this. Companies ask their customers a single question – how likely are you to recommend us to a friend or colleague (or a question distinctly similar in nature) – and ask the customer to rate the company on a scale of one to 10. Based on their responses, customers are grouped into one of three categories: promoters, detractors and passives. Promoters are customers who love the company so much that in addition to referring others, they increase their purchases. Detractors are the opposite. They usually feel they’ve been treated so badly that they leave altogether, switch to the competition and caution other consumers about the perils of doing business with that company. Passives are usually satisfied, but they lack excitement about the company and are therefore easily lured by the competition. Customers are placed in categories based on what ranking they give the company on the one-to-10 scale.

Promoters:  9 and 10

Passives:    7 and 8

Detractors: 1 through 6 

A company’s Net Promoter Score is calculated by taking the percentage of promoters and subtracting the percentage of detractors:

% of Promoters - % of Detractors = NPS 

The philosophy behind this formula is that people who rate a company higher on the NPS scale buy more and refer more friends to the company than people who rate it lower. 

“Loyalty is indeed the key to profitable growth,” Reichheld said. “Yet because loyalty is rarely measured--or even carefully defined--in organizations today, this fundamental human value gets pushed back into the shadows and accounting profit becomes the predominant measure of success. The problem is that accountants can't distinguish between good profits and bad.”

NPS is designed to help companies deliver a better customer experience. Would your members recommend your credit union to others? If you don’t know, it’s time to start asking.