Why What’s Seen As A Little Thing Can Really Be Big For CUs

Earlier this year during Credit Union Journal’s Grow Show one of the speakers, who has had some terrific success in growing a small business into a large one, urged credit unions to finally “come out of the closet” and admit to being a cooperative.

But let’s face it – you’re still not ready to. And why should you, anyway? Co-ops are fine for the tie-dyed, Birkenstock-wearing, dreadlocked, 20-hours-a-week-of-work-and-15-would-be-better scene. But not you. You’re a sophisticated financial institution serving sophisticated consumers of financial products who demand e-services and in-branch flat screens that is chasing Gen X and Gen Y and Gen Whatever’s Behind Them, whose only interest in interacting with you is if they can test the credit union.

I mean aren’t co-operatives so, well, Soviet? Besides, no one even belongs to those old relics called cooperatives, right?

Right–unless you count the 60% of the U.S. population who belong to and use co-ops, according to the National Cooperative Business Association (NCBA). That’s about 180-million people or so, or more than double the 85-million credit unions are always laying claim to as members. More than 100-million potential prospects? You’d think that would get the attention of credit unions.

But even with that attention, you say, the flip-side remains getting the attention of all those prospects (not to mention current members). At the heart of the challenge is making membership meaningful and increasing member involvement. Both go directly to ROI–for CUs in particular and cooperatives in general.

Paul Hazen, executive director of the NCBA, told a group gathered recently for CUNA Mutual’s Discovery Conference that co-ops by their nature and by their experience have much from which CUs could learn and benefit.

“The majority of consumers would rather do business with a co-op,” Hazen offered. “But just 40% of consumers understand co-ops. People feel better about co-ops. Ninety percent of people would rather buy products from agricultural co-ops, for instance.”

And then Hazen added some lyrics straight out of the Credit Union Hymnal: “It’s simple – we don’t sell ourselves. We don’t tell our story, we don’t talk about how cooperatives are different from other businesses.” Amen.

Mark Meyer, who heads up the Filene Research Institute, agrees the reasons are clear for why the “status of membership” should matter–it’s six syllables no respectable CU conference speaker would ever neglect to mention: differentiation.

And yet that issue keeps coming back to some basics, i.e., how can members and consumers come to understand the credit union is different when it’s likely folks at the CU itself don’t know. “What percentage of your credit union’s board members know you’re a cooperative?” Meyer asked.

Hazen recalled that he recently closed a mortgage at his credit union and was, of course, promptly cross-sold on a number of products. “But at no point did the member service rep ever explain why there is an economic value and benefit in being a member of a co-op,” he observed. “That was the time to do it.”

Hazen, who recommended every credit union leader read the paper, “Three Strategic Concepts for the Guidance of Cooperatives,” stressed again that CUs are ignoring the power of “cooperativeness” at their peril, reminding the structure has great appeal to most consumers, especially those sought after younger folk. He cited research showing people who know they are members vs. customers are more likely to buy other products and services and also much more likely to refer the co-op to someone else.

“Does member loyalty translate into anything more for co-ops? The answer is absolutely yes,” Hazen said. “I hear from co-ops saying ‘Our members only care about price.’ But there is real value in the member proposition you can build on.”

Perhaps then, a good topic of conversation at NAFCU’s annual meeting this week should be whether it’s time to come out of the closet.

Frank J. Diekmann can be reached at fdiekmann<at>cujournal.com. (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com