CUs Are Adopting Retail Strategies

thePoint
May 27, 2005

With many credit unions changing to community charters, they are casting a wide net for new members, building new branches, marketing in sophisticated ways, and designing their products to appeal to a whole new crowd and generation. Change has affected everything from the name, to the look and feel of credit union branches. More than one in four credit unions (26%) said they had outgrown and changed their names, and an additional 38% are planning to change their names, according to a survey of 480 credit unions by NewGround, a Chicago-based design/build and branding firm.

"The new marketplace definition of the majority of credit unions is providing a unique and critical opportunity to build a more meaningful brand in their market that is integrated with the place they do business and culture of their associates," Charlene Stern, chief experience officer of NewGround, recently told the Northwestern Financial Review.

Eighteen percent of the credit unions surveyed said they had created lots of innovation for members, and 35% said they had updated to high technology in their branches.

"College-age members are attracted to many of the new things credit unions are doing in their branches," said Stern. "Now, instead of walking into a sterile institutional building, kids can belly up to a juice bar or an Internet kiosk while they check their balance or simply surf the web with high speed access. The new branch environments encourage members to hang around, browse, learn and buy, where before it was all about the quick transaction."

Two-thirds of credit unions polled said a "compelling and engaging environment" makes their branches work to sell their services. To that end, some credit unions have done away with tellers completely, opting for "retail associates" who can do transactions as well as loan duties, and new accounts.

"The new branches more closely resemble retail stores than banks," said Stern. "No employees are sitting. No one has a home base. There is no teller line. Floor personnel are moving; it's alive, just like its customers." Beyond branch design, younger members may also be attracted to the more sales-oriented member representatives they encounter in a redesigned credit union. Nearly seven in 10 credit union officials (68%) said they expect their member representatives to deliver a memorable experience over and above the basics of good service. In addition, 78% of credit unions said they were in the business of "building emotional loyalty." Thirty-seven percent of credit unions said the "changing marketplace" is their biggest organizational challenge. By the same token, 21% said lack of creative thinking was their biggest challenge, and 10% cited lack of ambition.

Indeed, most credit unions surveyed said they consider banks to be their main competitors. Sixty-nine percent said their main competitor was a local or nationwide bank. Only 20% said their main competition was other credit unions.

One of the survey questions attempted to identify the most interesting things going on in the credit union industry. Thirteen percent of the respondents said there is "increasing sameness" among credit unions, while only 2% of those in the survey believe there is "lots of differentiation" among credit unions. Furthermore, 18% said credit unions had been "innovating for members." Thirty-five percent cited "technology" as the industry's most important development. Fourteen percent cited an increase in the number of branches at credit unions.

This article was prepared by the staff at the Point for Credit Union Research and Advice and is published online at http://thepoint.cuna.org/. Reprinted with permission.