“There's a lot of inertia about switching financial institutions. People tend to leave when they're upset,” said Mark Meyer, president/CEO of the Filene Research Institute. “Credit unions have to deliver something that is compelling.”

For $227 million Neighborhood Credit Union, that means uncovering every possible route that will lead to where the potential members are, said Carolyn Jordan, senior vice president of retail operations. In addition to looking at traditional demographic information and mapping around current branches to track future population growth, the credit union has targeted the number of financial institutions households are using and researching city planning documents to locate housing developments set to break ground.

“We're community based. What we like to focus on is the net growth,” said Jordan, who is also vice chair of the CUNA Operations, Sales & Service Council's executive committee. “As an industry, we're all fighting with this: we have all these products and services and wide fields of membership but we're not retaining members. The second [issue] would be expanding [current] memberships and making sure those relationships are growing.”

There was a time, about 30 years ago, when credit unions had an easier time identifying who their potential members were because most had origins with a single employer, said Bill Hampel, CUNA chief economist and senior vice president, research and policy analysis department. The equation got a little harder when family members of those employees could join that same single-sponsor credit union, he added. Then, “once a member, always a member” nearly threw the research into a tailspin. Still, with all the possible layers, Hampel doesn't give much credence to potential members, instead focusing on current member growth.

“Instead of going to the [human resources] group, credit unions had to start estimating,” Hampel said. “The biggest issue now is the community charter. Here, you can count anyone who lives or works in a district as potential members. Then, most community credit unions have the family membership rule so you're double counting.”

Meanwhile, even as credit unions continue to aggressively compete against banks and other new players for market share, wooing those who were previously shunned in the financial services mainstream is becoming more of a pursuit. Dupaco Community Credit Union, for instance, has had its community charter for more than 20 years, but from the start delivering valuable products and services has always been the best recruitment tool, said Mike Weber, vice president of marketing and public relations. “We could run a promotion where we give $100 cash to every new member but is that really a good idea for the long term,” Weber said. “Our whole belief system is in building relationships. Finding potential members depends on so many factors–where you are in the country, competition, what your financials look like. You could never use a one size fits all formula. It would be a big formula.” The $414 million Dupaco tends to err on the conservative side when it comes to going after new members, Weber said, adding the credit union does look at historical growth rates and what its own strategic goals are. For one, as many in the industry agree, it's very expensive to form new relationships and secondly, there's more revenue potential waiting to be tapped with current members.

As chairman of CUNA's Marketing & Business Development Council's executive committee, Weber said he's seen many queries from credit union executives that have gone to a community charter, but are baffled that the expansion is not bringing the new members they expected.

“The potential membership looks so big but credit unions are saying, 'okay, what do we do now,'” Weber said. “It all comes down to strategic planning and defining markets.”

As a marketing professional, Weber said he takes issue with those in the industry who complain that credit unions are not telling “their story” to bring in more new members.

“They say we're not telling the story but consumers want to know 'what's in it for me?' It's important to put the story out there but you also have to be able to back it up with products and services that come to light every single day,” Weber said.

Community-chartered credit unions, which have the greatest potential to court new members, can look to their business development teams to canvas businesses in the area and differentiate, Weber offered.

“The 'me too' philosophy is not going to work anymore” for credit unions, he said.

Another layer to figuring out growth from potential members could have much to do with a credit union CEO's background, Meyer said. When the Capital Adequacy, Asset Quality, Management, Earnings, and Asset/Liability Management or CAMEL system came into place, some credit union boards sought out and hired CEOs and executives with strong financial acumen. The focus shifted to managing financial ratios to stay in alignment with NCUA, he suggested.

“Now, with the focus on community charters, there's more pressure to hire someone with marketing or CFO experience,” Meyer said, wondering out loud if some of the “higher performing” credit unions have CEOs in these areas.

To put it all in perspective, as of June 2006, the ratio of members to potential members was 7.8%. Hampel said when he started his career more than 30 years ago, the ratio ranged between 35-40%. He's cautiously optimistic about the next phase of membership.

“When you're looking at peer comparisons, there's no hard way to compare [potential member growth],” Hampel reiterated. “You have to do it without those numbers. Maybe in five to ten years, when credit unions have settled down into new fields of membership, maybe those peer comparisons for potential growth will mean more.” –msamaad@cutimes.com

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Figuring Out How to Transform 'Potential' Members to Members Not Easy

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