Cross-selling financial services: your credit union needs it, your members want it

The financial services world is consolidating. The Internet is homogenizing the marketplace,driving down the cost of both loan and savings rates. Members can shop nationally, online, making the local marketplace moot. These trends are helping competition burgeon and are contributing to a decline in credit union profitability. A sales and service culture takes on new importance as part of a larger plan to combat these challenging trends. Profitability is an urgent issue. The chart below shows an analysis of credit union net income in basis points less other income. This simple look at the profitability of our lending business clearly shows deteriorating profitability in lending. A more in depth analysis shows that only the smallest and the largest credit unions make money lending. The rest began to lose money on lending in mid-1999. Clearly, credit unions are facing a profitability crisis. What can credit unions do? Get on-line today, and continually enhance the Internet-based delivery of your products and services. Maximize non-interest income as you implement solutions to return lending to profitability. Fees are not a dirty word if they are well stated and fair to the member. Fees from insurance and investment product sales are appropriate for the credit union and provide valuable products needed by your members. Reassess the risk profile of your loan portfolio. Is it weighted too much toward lower risk loan types for fear of bankruptcies? Asset liability management software can help you make a rational analysis of your portfolio. Did you abandon the automobile market last year because the captives took all the business? It's time to look again at the auto market. Examine all of your processes to eliminate unnecessary expense. Market your products and services like never before to attract your member's business. Look for ways to reward employees that engage members in discussions about their financial services needs. Every member contact is a critical and precious opportunity to talk about the great things the credit union can do for the member's financial well-being. This is a sales and service culture in action. Sales Culture and Credit Union Viability Passage of the Gramm-Leach-Bliley act has guaranteed that the trend toward one-stop shopping for financial services, including insurance, investing and retirement planning, will continue. Credit unions are in an ideal position to take advantage of this trend because of the strong relationships they have with their members: people trust their credit union more than they do a bank that, like some sort of corporate X-Files shape-shifter, is forever being merged, bought out, renamed and re-branded. A strong sales and service culture will help you enhance your non-interest income and increase the likelihood that your member will turn to you for more of their financial needs. New research from the CUNA Mutual Lending Lab shows that members want financial advice and products from their credit union. CUNA Mutual's Lending Lab recently conducted research on member needs and sales culture. The research is baseis based on in-depth interviews with frontline staff and management at eight credit unions, and a survey of 406 randomly selected credit unions. A few of the highlights: Credit unions say sales and service is key to their future success, and they expressed a need for improvement. Its clear: ninety-two percent of credit unions surveyed say cross-selling products and services is very important to the success of their credit union and 91% say selling needs to be part of every employee's job. Forty percent say their credit union has a very aggressive sales culture, compared to 28% in 1998. Heightened level of importance. Credit unions agree: their sales and service programs are developing, but their opinions differ as to their stage of development. Generally, credit union employees are familiar with the concept, and credit unions are working to integrate it into their culture. They're experimenting with the different components of sales and service, and have developed tactics to support the implementation as an ongoing effort. In general, credit unions are tailoring their programs to fit employee and market needs. Sales and service is market driven, and its about relationship building. As the market becomes more dynamic and competition more intense, a sales and service culture becomes increasingly important. Market needs can only be addressed through a sales and service culture, and those needs in turn lead to the development of the organization. Front line staff say its much easier to sell when there's a relationship with the member, and as one learns about the member, cross-selling products and services happens more naturally. Basing a cross-sell on the relationship is a way to distinguish the credit union from the banking industry; the cross-sell is based on an understanding of member needs rather than sales goals. Understanding member needs is the key to successful sales and service. Insurance is an excellent candidate for this discussion since it can increase non-interest income at the same time that it helps fill member needs. According to credit unions, members don't assess their own insurance needs, and those needs vary greatly. As a result, members are at risk. Small percentages of credit unions say members routinely assess their needs for life insurance (22%) and disability insurance (20%). Eighty percent say their members needs vary greatly, and only 40% say they know what their member's insurance needs are. Focus groups with credit union members (1998, 1999) validate these findings. Members are not always sure how to assess their insurance needs. They say these needs vary by life stage, age, and the availability of other financial resources. Since needs vary for each member, credit unions should focus first on understanding members, rather than trying to promote benefits that may not match needs. The loan officer is in a good position to offer members information on insurance information and advice those credit union members want. Fifty-six percent of credit unions say their members regularly seek financial advice from their loan officer. For the advice to help the credit union and member alike, however, it must address the needs of the specific member in question. A fully-functioning sales and service program requires developing a number of components that work together to meet the programs goals and objectives. Credit unions recognize the importance of clearly communicating the focus of sales and service to their employees. Credit unions suggest that the term sales is actually inappropriate to the credit union focus. Its about education and the process, rather than the sale. The following components can help develop and maintain sales and service: communication, organizational alignment, job design, improved operational efficiencies, marketing, training, tracking, coaching, incentives, and member feedback. As time goes on and credit union goals change, these components need to be reviewed to reflect those goals. The result: a dynamic organization that's market driven. Feedback loops are in place and functioning. Management is responsible for meeting front line needs, and front line staff is ultimately responsible for meeting member needs. Feedback from the front line is critical for renewal. Research done specifically on credit insurance shows that knowing member needs, matching needs to benefits, one-on-one coaching, and providing relevant product information to the member increases credit insurance enrollment. If there's a relationship between these attitudes and behaviors and credit insurance enrollment, then there's most likely a similar relationship for the sales of other financial products and services. Members want the information, and by providing it, the member receives a product that fulfills a need. A sales and service culture has always been a critical strategy to meeting the member's needs and developing a longlasting relationship of trust. In today's environment, a credit union may not be able to survive without it.