Competitive Strategies Part 2

As I mentioned in the previous blog entry, competitive strategies define the direction the credit union is moving. Some credit unions has strategic plans that are so toothless they just drift along the tide and are at the complete mercy of the financial strength of the SEGs they serve.

Previously I talked about the Niche Strategy approach and ideas, so let's move on to two other strategies to move your credit union in a particular direction.

The Commodity Strategy

Some credit unions accept the fact they are not well positioned to serve a niche market and prefer to hold the course they have been on for decades by being another commodity in the market place. Although I don’t agree with using this as a long term approach for credit unions to be competitive, it can be a stop gap approach. Let's say you want to make some shifts over the new couple of years to better position yourself but you don’t want to just sit without any strategies until you get a better definition of who you want to become, so you want to at least maximize your current situation.

A commodity strategy accepts you are one of the pack of financial institutions and you want to attract high volumes with lower margins. This is a strategy that can be a profitable approach provided you have an economy of scale. The large banks in this country have hundreds if not thousands of branches across the country to serve their large numbers of customers. They have an aggressive approach to grow by acquisition as well as with service. Their profitability is based on their size! Their size allows them to offer slim margins because of the volume they can create. How does a credit union compare? Most credit unions have an advantage to offer slightly better rates and lower fees but the commodity shopper is mostly looking for convenience followed by best rates. Wal-Mart has become expert in their ability to use their economy of scale to drive out smaller competitors and the credit unions could face the same fate when trying to compete as a commodity.

Differentiation

By differentiating your credit union from the rest of the pack of financial institutions you are able to have the best of both worlds with high volume and high margins. How is this possible? When current and prospective members must be part of your organization you have the ability to operate from a greater position of strength. Differentiation is all about uniqueness and brand recognition. Apple has been able to create this with the iPod and now the iPhone. Apple is creating must have products where price is of much less concern to the buyer than the uniqueness of product and the brand of Apple. Obviously, Apple had to work hard to establish the brand with effective advertising and build the uniqueness in the mind of the potential customer where price was an after thought.

Differentiation for credit unions can come in your community involvement, in your stated culture in your marketing or in your unique efforts to grab attention and establish that you are a bit different. Try something like Vancity, Canada's largest credit union. On June 27th they kicked off their bike sharing program by "releasing" 45 brand new red bikes to the community. Recipients are being asked to hold the bike for no longer than three weeks and then give it to another member of the community to ride. If at any time the bikes are in need of a repair they can be taken to any branch of the credit union for a tune up. On September 7th all in possession of the bikes are asked to return them to the Vancity Centre, their main branch, and hopefully all bikes will be accounted for. The bikes will then be donated to PEDAL (Pedal Energy Development Alternatives), a local non-profit that will pass them on to individuals in low-income communities.

The publicity for the credit union is fantastic. This is great PR coverage for an idea to benefit the community. Each bike being seen in use will be a reminder of the credit union's community outreach, their stance on alternative transportation and it supports their campaign of Change Everything. This idea speaks volumes to their members and prospective members about what the credit union cares for and who they are as a different and unique credit union.

-- Russell