Marketing: A Critical Credit Union Advantage-Lost, Forgotten or Misunderstood?

My initial class at the Navy’s Supply Corps School in 1969 was inventory management.   The instructor opened the first session by passing out membership cards to Navy Federal Credit Union. As new officers, he encouraged all of us to join.   He said that it was an important benefit of being in the Navy.   The credit union would be available no matter where we were stationed-even at sea in some cases.

At that time my wife and I were living in a trailer home.  Base housing was not yet ready.  We lived paycheck to bimonthly paycheck. I didn’t want to split our only cash flow into two separate accounts.  So, I didn’t act.

However I still remember his friendly advice and effort to sign us all up.  Later we became members of United Credit Union in Yokosuka, Japan when needing cash for an R&R trip during an extended deployment.

Traditional marketing practices have an ambiguous history in coops.   The 5300 call report line item under which marketing expenses are listed is labelled “educational.”

One of State Employees North Carolina’s (SECU) contrarian tactics is eschewing all traditional marketing media and advertising efforts. At mid-year SECU reports total “educational” expenses of $185,000 out of a total operating spend of $490 million.   The intent is that SECU’s foundation’s many good works and press releases, plus word of mouth, provided the public messaging necessary to communicate its availability and value to potential members.

Rethinking “Marketing” as a Competitive Advantage

In September 2021 Bank of American announced it would eliminate the Chief Marketing Officer’s position.  Henceforth all marketing will be under the head of digital channels.

In a recent analysis by Visual Capitalist, its comparisons showed that Tesla spent $0 on marketing per car sold, whereas all its major competitors expensed from $400 to $660 per car.   The strategic advantage Tesla developed was in R&D.  Tesla spends almost $3,000 per car sold; the closest competitor of the big four, Ford, spends $1,100.

Word of mouth is Tesla’s marketing “strategy.”  The article summarized its market leading reputation as:

And while Tesla technically spends nothing on advertising, the company is a marketing machine that is rated as the world’s fastest growing brand, and Tesla often dominates press mentions and social media chatter.

Two Recent Examples of Credit Union “Marketing”

One of my credit unions recently mailed an expensive marketing package offering free $1,000, no-questions-asked term life insurance, plus the option to buy more at a fixed price.   My only question was why did I receive this marketing message at the age of 77?  Life insurance is not only unneeded, but a waste of money.

A second experience. Terminal C is United’s primary location for gates at Dulles airport.   To get to this outer terminal requires travel by underground, up an escalator and a 200 yard tunnel walk to the next up-escalator and the gates.  Along the walls of this walk are panels maybe 15 feet high and wide completely covered with ads for two products only.

The first is Capital One’s Credit Card.  Panel after panel announces its advantages. The second effort, right alongside,  is for PenFed’s Platinum Rewards Visa Signature Card.  Both offer no fee, initial bonus miles, multiple extra points for certain purchases,  cash back, and other benefits that the moving sidewalk traveled too fast to compare.

Both institutions have head offices close to in each other in Virginia.  The difference ends there.  Capital One has $370 billion in assets, the 10th largest bank in America.  It is the fifth or sixth largest credit card issuer in the US with approximately 75% of total revenue from its card program.   PenFed is $27 billion in assets with a card portfolio of $1.7 billion, or 8% of its total loan portfolio.

It hardly seems like a fair ad fight on the walls of this Dulles corridor by  two firms seeking business from the traveling public.

How do Credit Unions Win? Or Why Market?

The 5300 line item calls marketing “educational” expense for a reason.  Most credit union start with a common bond.  Members were most often employees who knew each other, recognize the board and shared a familiar place of work, worship or gathering.

Marketing was not needed to inform employees  about the credit union.  It was often referenced in new employee orientation as a company benefit. The credit union’s role was to inform members about fair value for financial products (educate) and be convenient to their place of work.

Once credit unions expanded their ambitions to larger areas these personal connections no longer existed.  Credit unions tried to reach these new groups by emulating the public marketing efforts of competitors.  The commonality shared by early groups was often lacking.  It became imperative to find new ways to attract members; so, why not do what everyone else does?

As this evolution continued, credit unions even shied away from  their unique design urging consumers to see them as “better than banking.”  Instead of replacing the competition, credit unions mimicked the institutions with which they compete.   Trying to beat the competition by becoming its shadow.

The challenge is not size, expansion or even growth. Navy Federal has been able even at $150 billion to focus on “members as the mission.”  With an added inference, not everyone can join-which is why you should.

Every organization wants fans, not just consumers who can be wooed away with a better price and slicker commercial.  Members are the roots from which every credit union grows year after year.  When the focus becomes the tree and not the roots, that’s when credit unions lose a critical advantage.

Credit unions will rarely out-market competitors.  The two largest credit unions in the country retain the connection with members as the center of their strategy and messaging efforts.   Their belief is that great organizations create great brands; great branding does not build great firms.


2 Replies to “Marketing: A Critical Credit Union Advantage-Lost, Forgotten or Misunderstood?”

  1. Strategy + messaging = your brand + marketing.

    Regardless of what you call it, or where you list it on a spreadsheet, marketing IS that connection with members.

    Marketing should be seen as a priority by every CEO.
    Not as a line item expense.

  2. Cant talk about credit unions in the US, but have some thoughts more generally about marketing coops.

    I recently talked with a friend who helps run a food co-op. He mentioned that they have 2000 people in their email list. A while later, another friend told me about a retrofitting coop that is raising money through an equity crowdfunding campaign (UK has a special financial instrument called “community shares” tailored for coops to raise capital through crowdfunding).

    This got me thinking about a need for a simple website with a directory of coops that want to promote other coops in their email lists. I sent a survey to 10 small and medium sized coops asking if they would like to promote other coops in their email list. Every single one of them said yes.

    Made me realise this is an advantage coops have in marketing – coops (at least SME coops) want to promote each other. Had I sent a survey to conventional shareholder owned SMEs asking them if they would like to promote other businesses just because those businesses are also shareholder owned, they would have found the question absurd and said “Why the hell would I do that?”.

    My idea is that the site allows co-ops to make different type of arrangements to promote each other in their email lists. They can set up cross-promotions (I promote you if you promote me) and “cross promotional circles” (I promote one other co-op every month in my email list, my co-op gets promoted in another co-ops email list every month). In addition, they can charge a fee or require the coop to put out a coupon code or some similar special offer for them to promote.

    What’s the relevance to credit unions in the US? Not much, yet. But if we create an ecosystem of many coops promoting each other, that can be powerful to credit unions as well. The US credit union movement has 125 million members, and most of them probably send them an email newsletter or something like that. If they would systematically promote other coops in their email list, and the coops would systematically promote credit unions, it could create virtuous cycle.

    From the point of view of an ordinary customer, once they would become a customer of one coop and receive their emails, those emails would include promotions of other coops. As a result, they would become customers of another coop that would promote in their emails to the customer more coops, etc.

    This could be strengthened especially if we would reduce regulations that limit investing in coops and promoting such investment opportunities. Once the market for coop financial instruments reaches a critical mass, would love to see index fund type of things that enable ordinary people to make recurring, low-cost, passive, diversified investments across small and medium sized coops. But now I am getting carried away even further to from the topic of your post :D!

Leave a Reply

Your email address will not be published. Required fields are marked *