Everything Automotive: Returning to Your Roots
The 2014 economy continues to show promising consumer loan growth – quarterly data in new vehicle loans by themselves show an increase of 14% and some markets experienced growth as high as 33% (Callahan, 2014). But as the industry continues to suffer attrition in mortgages and home equity, the portfolio gap becomes more and more apparent. How do you fill it?
The answer lies in returning to your roots, the foundation on which your credit union was built. That would be your members.
One way to look at this is to imagine that your credit union no longer has access to the indirect loan channel of your auto loan portfolio. When you take that away, what does your portfolio look like? This exercise was recently put into play with a leading credit union and much to their surprise, they found that less than 5% of their membership was taking advantage of auto lending through their credit union.
Shocking, right? What would happen if you did this exercise? It is not beyond reason to speculate that any credit union offering direct and indirect products could have roughly the same results. This is especially true if not much attention was given to existing member loans.
Your members are with you because of the values you espouse and the loyalty they have to you and your brand. If you are to realize organic loan growth, you must capitalize on precisely those values and brand loyalty.
To fill the gap, you must re-engage your existing members. Educate them on why credit union lending is better, what is in it for them, establish relevancy with a product that speaks to them and entice them with more than mere rate.
Credit unions separate themselves from banks largely by being member-focused, and in all honesty, strive to serve their members’ best interests. But when taking a truthful and deep look at practices, findings indicate that the industry's marketing approach can often veer from a member's point of relevance and thus result in lack of engagement – all in spite of good intent.
For instance, industry practice has focused upon marketing rates with the intention that members will recognize the inherent benefits of financing with a credit union. But market research shows us that (1) credit union rates are sometimes not as competitive with captives and big banks and (2) that consumers, even when educated about the truth of 0% financing and faced with a choice between larger savings over a longer period of time or immediate gratification through cash-back incentives and the like, will choose immediate gratification.
But when you take the time and resources to educate members and give them the tools they need to make an informed decision before they even contemplate a dealer visit, you not only become their lien holder, but their partner. They will want to keep their loans with you and invest in other products that are in their best interest. Products such as extended warranties and GAP insurance – the products that a dealer typically throws in at point of sale and that you offer at better coverage and cost.
The point here is that there must be an alignment of intent and practice. Stop marketing from a point of intent. Start marketing based upon member needs, expectations, relevance and demand. Do this and organic growth becomes a natural progression.
The solution is one of layered simplicity. Simple in that a large part of the answer is to provide a streamlined, one-stop resource for members to research and compare cars and inventory along with applying for financing. The layering is in the marketing and engagement of such a resource.
Put yourself in the shoes of a typical consumer who is considering purchasing a home. The first thing Average Joe does is visit a real estate agent to find his new home. They don't visit their credit union or bank until they are ready to obtain financing. The same applies to auto buying. But, when you provide an auto buying resource to your members and market it appropriately, your credit union becomes relevant in the auto buying process.
When you then take into account that 97% of car buyers (CapGemini 2014) start their purchase online and that future car sales are slowly, but surely moving toward a strictly online encounter, the need for a credit union-branded car buying resource is crystalized.
And, when you provide members with a resource to shop, research and buy a car and market it relevantly and engagingly, your members will seek you out at the front end of their purchase.
So, get back to your roots, put your members first and realize your true potential.