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In a December 2004 report by Callahan and Associates on the state of the credit union industry, some of the news sounded grim. Overall, the rate of membership growth is declining, where growth corresponds with performance. Expenses are growing and interest rate margins are shrinking. The future of the industry, it was agreed, depends on credit unions’ ability to differentiate themselves from their competition and to adapt to changing business needs. Differentiation will occur through improved and targeted member service. In the face of lower margins, to keep the industry strong so they can continue serving members, credit unions now have little choice but to use methods that give them the most value for the dollar. One way is to leverage the increasing number of members coming to credit unions through indirect lending. As a credit union portfolio component, indirect loans are up. At the end of last year, credit union portfolios included nearly four million in indirect loans with a value of more than $52 billion. Some credit unions have begun indirect programs precisely for the purpose of attracting new members. People want things faster, cheaper, better – and car buyers are no exception. Credit unions have been at the forefront in meeting this need through point-of-sale and indirect lending to benefit their members. They also tuned in early to the opening this provides for increasing product penetration and growing the general member account relationships. While it is not practical to expect credit unions to delve into the private lives of each of their members, it is possible – and desirable – for them to understand enough about the groups of people who constitute their marketplace to go about making new members better members in a methodical, focused and ultimately successful way. The concept of “cross sell” – suggesting that customers buy additional, complementary, or related services or products during or just after their primary purchase – has come into its own. One simple Google search of the term will yield scores of results, including marketing companies offering seminars, industry articles outlining how tellers can recognize and seize on cross-sell opportunities, and even software that will trigger cross-sell communication based on certain member activity, such as a product sale or even a query. To date, credit unions have had only limited success in cross-selling members who join when they buy a car through indirect lending. As part of our ongoing effort to bring value to credit unions through the Credit Union Direct Lending program, we have taken considerable steps to identify the reasons this success is limited and to build a knowledge base that helps credit unions improve their relationships with indirect members and take a more active role in meeting those members’ needs. We decided to begin by conducting research using our own participants, with a view toward making the information available on a nationwide basis. In 2003 we hired a fir, which specializes in credit union research, to help pinpoint ways for credit unions to market to new indirect members and integrate them with the participating membership. We developed a “Top Ten” list delineating different types of contact that should be made, preferably while the new member is still feeling the buzz that comes with buying a new car. Then, in 2004, we co-sponsored another study done by a marketing and research company, to research the cross-selling of indirect members who come to the credit union through our CUDL program. We wanted to gain insight into the credit union awareness level of these members and to investigate the potential of this incipient relationship to bloom. We identified market segments based on demographic factors and proximity to a branch. One thing became clear: a one-size-fits-all approach was a vast waste of resources. While it had earlier been acknowledged that new indirect members should be marketed to differently from non-indirect new members, it now became clear that, even within the indirect new member market, different approaches, products and services should be designed for sub-segments of that market. The tremendous amounts of written material mailed to new indirect members, for example, had limited impact on awareness, perception or action/follow-through. For one thing, it was unrealistic to attempt to woo indirect members living many miles from any credit union branch to switch their primary banking relationship – mortgages, investment accounts, etc. – to the credit union; but credit cards and other consumer loan products were likely to appeal. We have prepared a white paper on the findings of this study, which outlines a staged, segment-specific action plan to maximize the cross-sell potential of indirect new members. There are some who question credit unions for cross-selling members with new products and services. Such doubt can often come from the uniformed, who associate cross-sell with annoying telemarketing calls that intrude on the family meal. Or they come from competitors, who are concerned at what they see as credit unions’ encroachment on their turf. Always keep in mind that cross-selling provides a service to members. It is about educating members – helping them understand the credit union benefits that will help them provide for their families, plan for their futures and generally enjoy life. Indirect lending is like a shop window, which brings people through the shop door into a space where the other possibilities become apparent. With intelligent segmentation of markets and a strategic action plan that targets the right products to the right members, there is no reason that every member who comes in through the indirect lending door cannot represent the beginning of a beautiful credit union relationship.

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