Strategic Planning for Credit Unions - Internal Strategic Opportunities

When considering opportunities in strategic planning, many managers in credit unions will focus on market based opportunities. These are opportunities where the benefit is derived based upon the reaction of the marketplace to whatever you do. New SEGs, new membership, new geography, and new products all fall into this category.

Internal strategic opportunities can be just as rewarding, for they help us to think about how we excel as an organization. Here are a few of the most commonly beneficial internal ooportunities:

-Improve hiring, training and retention of employees
-Improve our IT to increase information availability, reduce cost, or improve service
-Renovate a branch
-Change compensation to motivate employees
-Improve out website or other marketing capability
-Merge with another credit union
-Process improvements to increase speed, reduce cost, or improve member satisfaction

There are countless others, but all of these opportunities have, at their core, one of three strategic benefits:

1. Reduce cost
2. Improve member satisfaction
3. Increase membership

The interesting thing about the internal opportunities is that they tackle these three worthy benefits indirectly - that is, by making your credit union better able to reduce costs, satisfy members or increase membership. While internal opportunities often seem to take longer to generate benefits, they almost always provide longer lasting, more stable benefit to your credit union.

One of the pitfalls of internal opportunities like these is that many credit unions will do the first part of the opportunity - change processes, for example - without taking steps to assure the benefit. This is dangerous, because it's often just as much work as doing it properly - after all, you are changing your processes - and employees will feel they have done their jobs well, even though they didn't really realize the benefit. This is a really important point for later on, when you are setting objectives. When you set out on a strategic project, always make sure your employees know (A) what you are doing and (B) what benefit you want from it. In my experience, if you only tell employees what you are doing, you have no business expecting any benefit, outside of completing the action.

As an example of this, I've seen countless organizations spend lots of time and money changing their computer system. Many of them treated installation of the new system as the objective. The successful ones inevitably reminded themselves over and over that the real objective was better information, reduced cost, or improved member satisfaction. This helped them avoid just "going through the motions" and really focus on getting the benefit out of their strategy implementation. Make sure your internal opportunities remain tied to their real benefits, and you can greatly improve your own strategy implementation.

Boutique Branding

Fact: Credit unions are struggling to grow.
Fact: 2006 was a pitiful year for share and loan growth in credit unions
Fact: You can’t expect dramatically different results unless you do something dramatically different.

So what is one possible answer to shifting this outcome? Boutique Branding.

Boutique branding is appealing to the members who are going to give you the best returns on services offered. The big question is how do you attract those members? Create the club within the club because they love to be part of the status by being an insider.

Airlines have designations such as Platinum member, or Diamond status for their most frequent users. Specialty retailers have private shows for their best customers. Rental car services have preferred services for their insiders. Nothing creates status for the elite members like when you belong to the club within the club. This creates loyalty and attracts more people like them.

Brand your credit union for the type membership you want to attract. If you want to attract members with credit ratings over 680 and active loan portfolios then you have to appear to their interests. For example, a Pontiac is a piece of transportation. A Porsche is an experience of transportation. Both will get you from Point A to Point B. Which is a more profitable car to sell? How do the dealerships differ? How does the show room floor staff differ? Which vehicle owner feels more part of a special club? One sells to the masses and one sells to a boutique niche. One has status and one surely does not. What do your elite members drive? Are they getting the same level of attention at your credit union?

Setting a strategy to attract a special type member requires a focus, a niche approach and an atmosphere that has a "Wow" factor to it.

What "Wow" factors is your credit union currently branded for? What services do you offer that would attract the elite member who wants to be treated special? Strategically, credit unions need to embrace the proper branding to attract the members they desire.

Measuring credit unions by number of members and asset size is commodity thinking. No longer is a new member something to rejoice over; in fact, some members can actually be costly to the credit union. It's more important to have better quality members than to simple have a member number.

Measuring a credit union by loan growth, high-profit product sales, and percent of members using the credit union as their primary financial institution is boutique thinking and a strategic approach to getting significantly different results from doing something significantly different.

Membership loyalty is disappearing as is evidence by the significant reduction in credit union membership across the country. Define the niche of member you want to serve, give them the feeling of being part of a special club, and hold onto them for generations.

-- Russell

Lean into Your Strengths

What is your credit union really good at? I mean the one thing you really can slay the competition at?

I find that credit unions often look toward their weaknesses first in the planning process in order to make improvements and shore up areas they may not be doing effectively and this is a mistaken approach. I’m not saying ignore weaknesses, but be careful if you find yourself making them your main focus for your planning process.

We should be spending our time focusing on what we do well, and work on making it even better. For example, I’ll talk with executives about member service training and I hear the response, “Our member service is great, we don’t need to worry about doing that type training anymore.” The Ritz Carlton also has great guest service; in fact, it is one of their defining strengths in the hospitality industry, which is why they spend an inordinate amount of training dollars to maintain that strength and look for ways to make it even better. They are leaning into their strength, not taking it for granted until it disappears and needs refreshing. That’s waiting for your strength to turn into a weakness, and that’s too late.

Let’s assume your greatest strength as defined by you and your board is member service.

• What standards of excellence do you hold every employee to when delivering member service?
• What are the measurements you use month to month to monitor your strength in this area?
• Do you have employee turn over? If so, what is the training process every new employee receives to achieve those standards of excellence before being exposed to the member?
• When asking members what they like best about doing business with you is the first response always your member service?
• What ways can it become even better in order to stay in front of competition trying to match your service level?
• Are you the buzz of the industry as the standard for member service?
• Are you the buzz in your market?
• If people within your market both members and non-members were asked who offers the best customer service in the finance industry in your area, would you be the name on everyone’s lips?

Southwest Airlines is routinely the standard in airline customer service, Ritz Carlton is the standard for guest service. These are names known throughout the industry for their strengths and they are constantly looking for ways to improve on their strength as you want to do with your strengths.

This is leaning into your strength. Taking what you do well and making it even better. Making your strength your defining factor in the minds of competitors and the members and prospects you can serve. The planning process is the best time to make the steps and objectives to keep the main thing the main thing.

-- Russell

Strategic Planning for Credit Unions - a short video

Here is a short video of a speech I did recently. There were quite a few credit union people in the audience, so I talked a bit about how credit unions can differentiate themselves. I hope you enjoy it.

http://www.acidplanet.com/artist.asp?pid=991858&T=9704

If you'd like to have Russell White or myself speak to your credit union group, please drop us a line!

-Robert

How Do I Sell and Serve Remote Members?

A question I’ve heard frequently from credit union executives with declining membership: Most of our members are remote and don’t visit us at the branch, how do we service and sell to those members?

The simple answer is with the same approach you’ve always used in serving members; just using different technology and tools. If members are not getting the face to face time with tellers as they once did, then they must be connecting with the credit union through drive through traffic, on the phone or online.

What are the demographics of your membership by connection method? Do you find the more senior members still walk in, the middle aged members drive through and use the call centers, and the younger members are all about online banking? Once you find the breakdown of these demographics, you can then approach them in the ways they are connecting with you.

Do the research. List the reasons why each group chooses their point of contact with the credit union. Once you understand their reasons for that method, then you know why it is appealing to them and how to use that to your advantage.

Blogging and YouTube will not be the best approach for some members, yet others may find that their preferred method of getting information. Get to know your members by the products they use and the way they access your credit union.

Bottom line, providing good credit union information to the member, maintaining common courtesies, and speaking to the member about the specifics they are interested in hasn’t changed. It’s only the method and where the information is best placed has changed.

To maximize your marketing efforts, strategically know the proper channels to reach a target audience with a specific initiative. This will guide you in the direction of better returns for your efforts.

-- Russell

What is the "Happy Member Process"?

When working with credit unions in the past, I've often referred to what I call the "Happy Member Process". It's a simple concept, but thinking about it can lead to some great innovations.

Picture a member - or prospective member - who is unhappy about something that we can affect. That member has money, and unhappiness. Put the member through the Happy Member Process, and out pops the same member - perhaps a new member, now - but with more happiness and less money.

Here's the critical question: generally, members are less happy when they have less money. So why would this process make anyone happier to have less money? There are plenty of examples. A rapid turnaround fee for a loan application is an excellent one - we charge a fee, which means the member has less money, but we process the loan faster, and so the member is happier. One of the interesting challenges of the Happy Member Process is to see how much happiness you can cram into that member, and what the member would be happy to pay for that service.

-Robert

Don't Just Define Your Market: Dominate It

One of the areas most credit unions misunderstand is market segmentation. Having exclusive SEGs or a community charter-type boundary isn’t enough of a market segmentation approach. You don’t just want to be a player in the market you want to dominate a segment of the market.

Important point: You don’t want to satisfy every member and you don't want everyone to be a member.

I'll bet you read that at least twice because you couldn't believe your eyes. You can't be all things to all members successfully. As I mentioned in a blog entry last week I've seen credit unions offer up to 80 different products and services, no doubt in an effort to try and satisfy every need of their members. This is a wonderful idea in giving great member service but it begs the question: How can you be great at all of those products? The real answer is you can't. It's best to decide which products and services you can excel at and hit the market hard in those areas.

Which is better, to be an adequate option on a wide range of products thus making you a commodity, or to be the best at a select number of options where everyone sees you as the best at those things?

If your members shop your credit union as a commodity then they have little or no loyalty and will shop everyone else as well, which means your members only see you as an option.

When you dominate a market segment through proper positioning as the best in those products, your members and prospects will seek you out as the best in this area. Loyalty is high when members seek you out for specific services. This is how you get to be the PFI for those members.

Good market segments are usually made up of members who think about and buy your products and services the same way.

Ask yourself the following questions:

What are they buying?
Who is Buying
Why are they buying?
How do they buy?
How will they use what they buy?

How you answer these questions will point you in the direction of market segments you may want to hone in on so you can be the dominant player in the market.

-- Russell

Strategic Planning for Credit Unions - Thinking About Opportunities

In my opinion, opportunities are the key to great strategic planning. You've never hear of, for example, a company that became great by fixing all of their weaknesses, or avoiding all of their threats - and you never will. That's because great success comes from taking appropriate risks to make great opportunities pay off. Every great business success story is based on this - and yours should be based on opportunities, too!

When you consider opportunities for a credit union, it's helpful to remember that there are many different types of opportunities. Not all opportunities are, for example, going to come from the business development folks. Let's take a look at the main types we have seen in the past.

First, all opportunities can be broadly classified as either "market-based" or "internal". Market-based opportunities are specifically opportunities that will succeed or fail based on the reaction of the marketplace. Classic examples of market-based opportunities are new products (such as a seniors club) and entry into new markets (such as a new employer group or geography).

With market-based opportunities, we can further break down our options into four categories:

1. Current business (current products sold to current members)
2. New product augmentation (new products sold to current members)
3. New market augmentation (current products sold to new markets)
4. Diversification (new products sold to new markets)

Although it looks like a good way to ameliorate risk, diversification often turns out to be the most risky of these four options, because you are giving up your strategic competency in doing what you do for your current member base.

In my next post, I'll discuss the different types of internal opportunities.

-Robert

You Get What You Measure in a Credit Union

You may have heard this before - that you get what you measure. In business, this is definitely, true. However, in certain types of business - and credit unions are certainly in this group - there is SO MUCH being measured that it's sometimes difficult for employees to decide which measurements are really important. One rule of thumb that guides all of my thinking about using data in strategic planning is that most reasonably intelligent people can keep 6-8 things straight in their heads at any give time. Not 10, not 20, and certainly not 40.

So why do we ask people to keep track of so many numbers?

Well, first, we don't want to miss anything. Of course, this is a complete fallacy, since the easiest way to get people to miss a number is to hide it among 39 other numbers.

Second, we want to preserve the complexities of managing a credit union - oversimplifying might lead us to ignore some critical detail. This is true, but we shouldn't rely on a mass of numbers to convey the richness of our business. Rather, we should give human beings the ability to pick this richness out for themselves - which they surely won't do if they are overwhelmed with too many numbers.

Finally, numbers are often seen as the lifeblood of credit union management. Now, I have a slightly different theory about this - I think members and employees are the real lifeblood. But numbers, in many ways, are really the product or service that we provide our members, so it's easy to see where this idea comes from.

I'm not at all suggesting you shouldn't look at numbers in managing your credit union. They are vital, and you will have trouble succeeding without them. But you should aim to get a "feel" for a few critical numbers that relate to your effectiveness as a manage before venturing off into oceans of data.

As an example, consider your member retention numbers. Pretty important stuff. So, how many do you need? One. The only time you should be looking deeper than that is when there are customer retention issues and you need to explain WHY customer retention is changing. At that point, "retention of members with less than 1 year of membership" might help you understand exactly what is going on. But putting both member retention AND new member retention on a report simply makes it longer with data that is redundant a significant part of the time. And - this is the key point - a longer report will get less focused attention from the people who really need to use it to understand what is going on.

3 Important Questions to Answer in Preplanning

In many of my credit union training classes I ask, "How many products and services do you offer to your members?" Typically even the executives don't even know exactly. A few months later when I come back for another training installment they are quick to tell me how many they offer. I've heard from 30 to roughly 80 products and services. My next question is this: "If you offer 50 products and services how will you ever have a good sales culture expecting your employees to know how to talk about all that you offer?"

Trying to be all things to all people usually ends up making you nothing for nobody. A strategic plan needs to be focused not arbitrary. Ask three specific questions to guide your planning process.

1. What are you going to sell?

Just because you can offer a product doesn’t mean you should sell the product to your members. It's better to effectively sell fewer products than to offer many products and services your staff is not equipped to properly inform members about their benefits and features.

Knowing what you can sell effectively, that meets the needs of your market, is the key to knowing how to structure your approach to maximizing those offerings. Your preplanning homework should involve product analysis to determine what are your most frequently used products, what are your best margin or moneymaking products, and what are the products you want to be known for as the best in the market for your membership field.

2. Who are your target members?

As credit unions grow in their membership bases or even go more community charter it's easy to fall into the trap of trying to serve everyone. The first determination you must make is whether you want to be a commodity credit union or a credit union best known for a specific couple of products that are the best in the marketplace.

No one has an unlimited budget for marketing and even if you did would people believe you are good at doing everything? McDonald's has a huge marketing budget and have been in food service for decades but that doesn’t mean I'm ready to order a NY Strip Steak at their drive thru if they offer it. Why? Because great steaks isn’t what they are known for in the marketplace; no matter how much they market it.

Target marketing provides you with a narrow niche to maximize your investment of your marketing dollars and products you offer. It also makes research easier to determine what their buying habits are and what the best way to reach them is.

3. How can you beat the competition?

This is the big question isn't it? Avoiding the competition was the historical way that credit unions kept from bumping into each other. You had your SEG's and they had theirs. Those boundaries are dropping so not only are we still bumping against the banks, but now other credit unions as well.

So now it's time to explore ways to out-serve the competition in specific products and services, with locations or with marketing savvy and uniqueness.

To learn how to beat the competition you have to study the competition and the marketplace. Research into leverages, market gaps, under-performing products and find the weakness that presents the best opportunity to beat your competition.

These three basic questions will provide your board and executive team with clarity of the vision you have for the credit union and the strategic plan you expect to implement with resounding success. The upfront work on these questions will make the entire following process simpler and more focused.

-- Russell

Three Critical Components of a Strategic Plan

For a while strategic planning sessions spent an inordinate amount of time on mission statements, vision statements and core values descriptions. It became an exercise in semantics and took the focus off the three most important areas of a strategic plan: operations, finance, and the market.

1. Operations -- how you take care of the credit union, your employees, and your member experience -- is an area that must get total attention. Without solid operations you can lose good employees, inefficiently operate internal processes, and lose members because your technology is old, your fees are too high or you just aren’t fun to do business with anymore. What are the cutting edge ideas in this area you need to be incorporating? How are you planning on retaining your best talent? Who is trying to "steal" your members? Those are just some of the questions to be researched and addressed under operations.

2. Finance is also a critical area for in-depth planning to ensure safe and sound business practices, to comply with federal or state regulations, and although credit unions are non-profit organizations, sounds financial ledgers provide better services to members and better benefits to employees; not to mention, better positioning for future growth opportunities. What would it take to have every member consider your credit union their PFI? Could you handle it if it happened?

3. The market is also a critical area for strategic planning for the simplest of reasons: credit unions do not operate in a vacuum. A shift in local employers, a shift within current SEGs, and a new competitor in town can all have an impact on shaping your future strategic vision. The market is where you touch your members through advertising, with a sales culture, and with the products and services you offer. The right mix can have you flush with membership growth; the wrong mix can have you in a dire situation.

The planning and decisions in these three areas should be the foundation to making any credit union visions a reality.

-- Russell

Customer Behaviors in the Credit Union Market

Customer behavior is both a fascinating topic and a frustrating one - because, in reality, there are an infinite number of actual behaviors. For our purposes, we want to find a way to simplify how we think about those behaviors, so we can come up with a limited number of market segments.

Here are a few of the most common classes of members:

1. Rate Shoppers
2. Convenience Buyers
3. Social Members
4. Linked Members
5. Service Shoppers
6. Multi-buyers

The simplest behavior to identify and segment is the pure commodity member. This person is joining your credit union to get the best rates and fees, period. The positive thing about the Rate Shopper is the he or she is easy to get - just make sure you have the lowest rates. The bad thing about that, of course, is that it's easy to end up losing money on these members, and they are likely to switch to another financial service provider the minute they see a better deal.

Convenience buyers are a bit more tricky, since different things create convenience for different people. The most obvious convenience factor is location - a CU that is on the way to or from work is likely to attract a lot of convenience members. These folks don't switch as readily because changing credit unions is, of course, somewhat inconvenient. The downside is that it's hard to get them to switch from wherever they belong now.

Social members join a credit union for the social activity of the branch they frequent. This can be as simple as the people behind the counter, the other members who frequent the branch at the same times they do, or more organized activities around the credit union. While it's a little more difficult to attract these members, they are also very loyal, because they view the credit union as part of their network of friends.

Linked members are very similar to Social Members, in that they join because of some outside relationship - a friend who works for the credit union, for example. They do not, however, view social life at the branch as a value. Linked Members tends to be a small group, but a very loyal group - as long as you keep employing their friend.

Service shoppers are like rate shoppers, except that they value service over other factors. If you provide excellent service, this group will be loyal and profitable, but they tend to be demanding and may switch if they become dissatisfied.

Multi-buyers are members who have multiple accounts at your credit union, and may choose to join because of their experience with the other accounts. The most common example of this is someone who has separate accounts for their personal and business finances. These members tend to be affluent, and quite profitable, since the multiple accounts increases your convenience value for them.

Are You Proactive or Reactive?

One credit union executive I tried to work with had pretty much given up on his credit union. How did I know he gave up? When something negative would happen such as an increase in loan delinquency, or a new competitor came to town, he would always have the same response: "Whatcha gonna do?"

He went on to say he only needed to make a few more years to retirement, and besides, the world is just a different place than it once was. Then he would shake his head, tell me he had no need for my services because he wasn't sure he could afford them, and even if he could, it wouldn’t make any difference.

He was right about one thing: the world is a different place than it once was, and he had been CEO of that credit union for over 40 years. Times have sure changed.

Because of so much going on it's easy to fall into reactive mode or heaven forbid, "victim" mode as this gentleman had allowed himself to do. Waiting to see how things shake out and then reacting to that is waiting too late. Opportunity can be lost. Also, since you waited for everyone else to start going the same way, you are now just an option in a commodity market. The credit union environment has changed and those getting ahead are those taking a proactive stance on planning for the future with a specific vision in mind. When you are proactive in your vision and plan, it rallies people behind your direction, it gets people excited to buy-in and you become more in control of your vision.

Not to mention, employees respond better to an executive who takes a proactive stance instead of waiting for the opportunity, then makes a reaction. Would you rather be in control and design your results or wait and hope for the best? You are in charge -- you call the play.

-- Russell