Just because a product sounds cool, doesn't mean you need it. You know your latest credit card that gives 3% cash back for grill purchases? It's probably great for a certain segment, but unless you're CEO of Grillmasters FCU, it is unlikely to appeal to few people in your field of membership. and the specialty product might be bad for your bottom line.
According to a study by William Jackson, a Filene Research fellow, diversification beyond sources of noninterest revenue can worsen your credit union's performance. High diversification in product lines can have negative impact on credit union performance. The old saying "You can't be everything to everyone" comes to mind as costs associated with hyper-specialization for niche audiences eat into product margins.
Additionally, consumer behavior research indicates one big reason for this lower performance is choice overload. Research by Eldar Shafir of Princeton and Sendhil Mullainathan of Harvard argues that people do not always make choices that benefit them the most due to "cognitive scarcity." In other words, stress impairs people's ability to think, effectively shrinking their world to only the stress at hand.
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Shafir and Mullainathan set out to prove this theory, working with Indian sugar cane farmers before and after harvest time. While they found no variation from control when testing after harvest, during harvest they observed farmers that appear to have lower I.Q.s, more trouble controlling their attention and are more shortsighted.
If stress can cause someone's eyesight to worsen, do we serve members better by providing tons of product choices and the stacks of paperwork that go with them?
In another overload study, the sales at a large online grocery store were examined before and after they cut options in every category. Cutting each by at least 54% resulted in 75% of customers buying more than before, and total sales increasing by 11%.4
This case study and others were used to create five tips to make it easier for your members to pick products: trim your product line, provide more information on the products that make the cut, bundle products, provide a default option, and, finally, emphasize the value in the options you present.
Everyone encounters stress during their day, but it doesn't have to be at the credit union. Offer customized choices that fit members' needs and don't expect them to self-guide. Or, in other words, unless you're CEO of Grillmasters FCU, cut out the grill card and add in more personalized sales conversations that lead members to the right products.
The Cooperative Trust is a grassroots organization composed of several hundred young credit union professionals. Its activities include meetings, mentorships online collaboration and development projects. Opinions expressed are the personal views of the author.
Brandon McAdams is business transformation director at Coastal FCU, Raleigh, N.C.
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