WAIKOLOA, Hawaii–Paul Lucas’ message for credit unions gets right to the point: “Your sole purpose is to be the retail lender of your core membership. Never forget that.”
Unfortunately, as Lucas made clear in remarks to the Volunteer Leadership Institute meeting here, too many credit unions forget the “credit” piece of their names, which can be seen in their paltry performance metrics.
Paul Lucas speaking to Volunteer Leadership Institute.
“Remember this about being a credit union,” Lucas told the more than 400 CU volunteers on hand. “You have to become highly proficient at retail lending to your CORE community. Lots of credit unions are savings clubs. Your approval-to-loan-closing ratio should be 90% or more. If you’re at 50% or 60% there is something seriously wrong with your lending staff; they are not getting back to people.”
Too many credit unions, said Lucas, who leads his own marketing/branding firm that works with CUs across the country, focus on the wrong metric.
“I’m not concerned about membership growth; I’m concerned about ‘profitable’ membership growth,” emphasized Lucas. “You really have to pay attention to new members so that they are really engaged with your credit union. I had a client so ecstatic about bringing in 2,200 new members in one year. I asked them, ‘How many of those members have checking accounts, and of those how many have loans, how many have debit cards?’ Relevancy of your brand today is participation in the core products and services of your credit union. Adding a whole bunch of new members who are doing nothing with you makes you unprofitable and dilutes your brand.”
'No Magic Bullet'
Credit unions that are waiting for that one campaign or strategy to be the ultimate change-maker will be waiting a long time, according to Lucas. “There is no magic bullet. The teams that make it to the championships do all the little things right.”
Among those little things that can have big implications, Lucas said, is recognizing just how few members actually are profitable to the credit union. Citing Raddon data, Lucas said at the average credit union approximately 11.5% of members are in the top tier of profitability, generating $500 or more per year in revenue. The next tier, those who generate between $100 and $499 per year in revenue, represents about 11% of the average CU’s membership. The next tier, those members who generate between $0 and $99 in revenue for a CU, is made up of about 8.5% of households.
“That’s OK, we’re a credit union; we’re here to provide financial value to those that don’t always have the wherewithal to be profitable,” said Lucas. “But you can’t have 32% of members be valuable and give away all the value to the other 68%. That will whittle you away and kill you over time.”
For a credit union to maintain future relevance and increase profitability, said Lucas, requires three things: increased participation of the core membership (“Everybody has a core membership,” said Lucas); ease and convenience in using products and services; being a community, not just an institution.
Another Common Failing
Another failing for many credit unions is all too common, said Lucas.
“Never forget each staff member is key to your brand,” he cautioned. “One business development rep who is out every day, if they are saying and doing the wrong thing, they are a brand killer.”
Every credit union must grow, said Lucas, for three reasons:
- Growth maintains viability for members and, most important, potential members.
- Growth increases revenues that can be used to offer additional values and relevancy.
- Growth provides the monies for the ever-increasing costs of technology, convenience and personnel.
Lucas told the assembled credit union board members that they should make clear to their marketing staff that there are clear expectations around reporting as well as ROI metrics for marketing.
“Marketing needs to be clearly measured by goals and objectives based on NET loan growth first, and product and service penetrations second,” he said. “The marketing person can be the nicest person in the world, but they need to be measured. You need marketing people who have proven success in retail marketing who can drive growth. I can’t stress this enough.”
The goals and objectives set for marketers, said Lucas, must tie into core profitability strategies.
“The board should receive yearly profitability analyses that clearly outlines success and outlines goals and objectives for the next year,” Lucas added.
Finally, Lucas spoke to the importance of mission statements and brand strategies.
“You must have a mission statement that defines what your credit union is and its reason for being,” Lucas said. “The vision statement provides strategic direction detailing what we want to achieve in the future. That’s for you, not your members.”
A Test For Employees
When it comes to a brand strategy, said Lucas, “You need to ask employees, ‘What did you do today to live our brand strategy with a member?’”
Lucas told the VLI meeting a brand strategy is a long-term plan for the development of a successful brand to achieve specific goals.
“If you have a brand strategy that’s simple to remember, it then makes everything so easy for your marketing,” Lucas said. “Marketing and branding works when it’s all tied together.”
A slogan is not a brand, Lucas emphasized. “A brand is useless unless it has a personality. Does it speak to people who are in their 20s and 30s and 40s? Your brand must work for you, not you for it. If you have to explain who you are and what you do, you don’t have a brand. Your brand must have a foot in the present and a foot in the future. Good branding is really getting to the core of what your organization is.”