MADISON, Wis. -- While thousands of enthusiasts recently waited overnight in long lines to purchase the highly-hyped iPhone, many opted to wait it out a few months concerned that there might be a few more bugs to work out with Apple's latest invention and that the $599 price might eventually drop.

CUNA Mutual Group can probably understand why some might want to wait. The company is in the midst of totally revamping how it rolls out new products after discovering that not enough beta testing among its credit union clients was being done to iron out the kinks before a full launch.

"One of the big problems when I first got here was building a product and just throwing it into the market," said David Lundgren, executive vice president and chief products officer who joined CUNA Mutual in 2005. "The way we do it now is we take partners from the credit union marketplace and they become our beta partners. They work with us on finalizing and documenting before the actual launch. This gives us the opportunity to form deep relationships with key thought leaders."

For starters, CUNA Mutual is conducting a pilot with five credit unions to test out offering the company's 401(k) plans to employees at member-owned small businesses. More than anything, the purpose of the beta test is to garner feedback directly from the testers on what's working and what might need tweaking.

"The reason why we like this is commercial members are right in our current sweet spot of who we serve--small to micro. It's a nice alignment of the needs of members," said Kevin Thompson, vice president of asset accumulation products at CUNA Mutual.

The $2.8 billion Alaska USA Federal Credit Union is the furthest along having been in the pilot since the first of the year, Thompson said. While none of the credit union's commercial members have adopted the 401(k) plans yet, CUNA Mutual is aiming to do a full launch by the end of July. In discussions now are giving credit unions a preference of private labeling the service, he added. The feedback from Alaska USA has been "very positive," Thompson noted.

CUNA Mutual is staking its new way of testing on its track record. Thompson said the company currently manages 4,500 plans totaling $5.5 billion with more than 130,000 participants representing 50% of the credit union market share.

Meanwhile, one of the ongoing challenges for credit unions has been stagnant membership growth, Lundgren said. One of CUNA Mutual's transformation initiatives is to build products and partnership through deeper relationships with members and "parallel markets." The 18-21 demographic is a prime target, he pointed out. CUNA Mutual is looking at is taking a centerpiece like a student loan and wrapping other kinds of products around it to create a package exclusively for high school juniors to new college graduates. Another example might be low limit credit cards or renter's insurance. CUNA Mutual is still in the concept and development phase here, Lundgren noted.

While "credit unions have excellent [youth market] programs on their own," Lundgren said, "we're very interested in unlocking that marketplace."

Another area CUNA Mutual is looking to develop was initiated by its own credit union member database. The company is working on becoming a "thought leader" in areas like member segmentation and helping credit unions identify risk patterns as they enter new businesses.

"We have not really positioned ourselves as true partners," Lundgren explained. "True partners share risks. A lot of this begins with unlocking and using information in a more productive way."

CUNA Mutual CEO Jeff Post has talked about and advocated the company being an "incubator." The process of looking at new services and products for credit unions and not only listening to their needs but acting on them is the premise, Lundgren said, who acknowledged that in the past, the process has been "highly decentralized" and "operated in a vacuum." For instance, CUNA Mutual sees "real opportunities" in non-traditional insurance programs. In the works is the creation of a Web page for credit unions to put in words their ideas for new products and services.

"We can take a look at the ideas and see if we can manage them," Lundgren said. "We want to be able to better connect [with credit unions]."

CUNA Mutual is also working with six credit unions to find out what it can do better to help convert members into more active ones, Lundgren said. Post has earmarked a "significant amount of money" into building stronger relationships here. The timing is critical because as lending moves more to indirect lending, credit unions have to figure out more ways to draw members in. A number of credit unions wanted to participate in this beta test, but Lundgren said they wanted to keep the focus group small.

"Discipline helps up build products quicker," Lundgren said. "We're listening better to help make the final transition before launch."

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