PALM SPRINGS, Calif. – Credit unions that convert to a communitycharter in the hopes of reaping a sudden windfall of new membersand increased deposits and loan demand had better think again.Unlike the Field of Dreams idea of “build it and they will come,”the credit union concept of “convert it and they will come” justdoesn't hold up, at least not without a lot of hard work, effortand planning. That was the message offered by a marketing companyguru who advises credit unions and a credit union executive whosefinancial institution went through the conversion process in 2000.In a three-plus hour workshop, Mark Weber, president and chiefexecutive officer of Weber Marketing Group in Seattle, and GeriDillingham, executive vice president and chief operating officer atNorth Island Credit Union in San Diego, spelled out some of themisconceptions, problems and issues that credit unions face whendealing with a conversion to a community charter. “Saying you're acommunity chartered credit union does very little to help you,”Weber said. “You have to do a lot more.” One reason, he stressed,was because community members who don't know that they can join acredit union today will also be in the dark about whether they canjoin a community credit union, or even what it means to be acommunity chartered credit union. Weber and Dillingham spoke March16 at a pre-conference workshop at the 12th annual CUNA Marketingand Business Development Council Conference held here. A wide rangeof topics were covered, from attracting new members to deciding onwhether to change the name of the credit union when undergoing aconversion (Weber presented an educational session later in theconference dealing with the name change issue). Weber also outlinedwhat he said were the seven biggest mistakes and misconceptionsthat credit unions make in the conversion process (SEE SIDEBAR).“One of the things you learn about a community charter is you canhave all the strategy in the world but tactics become crucial,” hesaid. “The other thing is if you don't have a strategy, the tacticscan be worthless.” Weber's involvement with community charters goesback to when he was director of marketing for Washington CreditUnion. In 1981, the credit union became one of only a handful ofcredit unions nationwide to convert to a community charter. Hewarned that simply switching to a community charter was not goingto result in a stampede of new members, despite that expectation bymany credit unions chief executive officers and board members. “Itdoesn't happen,” he insisted. That push for new members “may be oneof the biggest mistakes you ever make if you do it at the cost ofrelationships with existing members,” he warned. “If you forget tofocus on relationship development and profitability, you're goingto have a huge loss. We've seen credit unions bring in 3,000, 4,000or 5,000 new members in a year at an average balance of about $86.That does not help grow the credit union in a solid way.” Gettingthe word out to the community not only will require a boost in themarketing budget, but also needs to include a change in marketingstrategy, he said. “You will need to rethink the way you approachmarkets, the way you approach members and the way you allocate yourtime resources of dollars,” Weber said. Dillingham agreed that itwas important to increase the marketing budget. “I don't think wereally estimated the necessity for that,” she said of North Island.“We knew we would incrementally have to put it up. We have doubledour marketing budget in five years. It probably should be higherthan that now. It probably should have doubled the day we changedcharters. I think we would have had a lot better results if we hadreally sat down and had a serious talk about how much money weneeded. “So regardless of your size, whatever you're spendingtoday, plan on spending times two that,” she said. North Island,with 12 branches and 360 employees, has assets of $1.5 billion.Dillingham noted that San Diego is one of the most competitivecredit union markets in the nation. “Getting clarity in San Diegois hard,” she said. “There are just so many financial institutions. . . that always is a challenge, getting a distinctive message.And it is more costly to attract new accounts. It is very hard. “Itis a tough tough road to go out and get the non-members who don'tknow you and don't even understand you,” Dillingham said. She saidNorth Island was refocusing its efforts this year on its selectemployee groups. “Banks would love to have them and I don't thinkwe have a good enough appreciation of what the gold was in therewhen we changed the charter,” she said. Dillingham reported thatmembership growth since the conversion was “not significant,”increasing only 6,000 members, from 120,000 in 1999 to 126,000 in2004. “We have lost a lot of unproductive accounts,” she said,noting that she expected membership to go up exponentially over thenext few years now that those accounts had been weeded out. “Ittook us a couple of years to get to that point but the quality ofthose is definitely getting better,” she said. “It isn't just aboutthe numbers,” she added. “It's the kind [of accounts] you'rebringing in.” Core deposits from 1999 to 2004 grew from 28% ofportfolio to 38%, she reported. Business deposits jumped from $8.7million to $63.7 million from 2001 and 2004, she said. Consumerloans, which totaled $750 million in 1999, were up to $1.2 billionin 2004; business loans in that same period went from $46 millionto $108 million, she reported. That represented a shift of a 76%loan-to-savings ratio to a 108% loan-to savings ratio. “The demandfor loans is intense out there,” she said. [email protected]