Why You Might Not Know Your Members as Well as You Think You Do

The last few years have seen the U.S. economy under attack by the longest and deepest recession since the Great Depression of the 1930s. Many economists and financial experts contend the recovery now under way is the vanguard of a "new normal" in economic activity-a level that will force consumers and businesses alike to adjust their activities to diminished expectations for the foreseeable future if not well beyond.

With little fanfare over the past year, Americans have adjusted their lives to elevate experiences over things. For example, a 2009 New York Times/CBS News poll found nearly half of Americans saying they were spending less time buying nonessentials, and more than half are spending less money in stores and online.

Given then the magnitude of this recession's impact, ongoing discussion in business marketing and management strategy sessions is focusing more and more on the question of what the post-recession consumer will look and act like. A majority of economic analysts and futurists perceive that people are in the midst of a fundamental paradigm shift in their economic behavior. This means that consumers' attitudes, behaviors, and habits have most likely been materially affected by the recession, and new norms of activity and expectations are now in place.

The loss of jobs and household assets during this recession has been a wake-up call for Americans, 16% of whom are living on reduced pay and 10% officially out of work. In general, the last two years have seen Americans "trading down," reports The Economist. If they still have jobs, they've been worried about losing them. Their homes are no longer cash machines and their investments have been on a roller coaster.

The New 'Frugality'

Household net worth fell by a staggering $11.2 trillion in 2008, but recovered some in 2009. In response, the national savings rate, according to the Bureau of Economic Analysis, Department of Commerce, was above 4% for the first three months of 2009-the first time it was above 4% for three straight months in a decade. It's all evidence of strong tendencies toward change in consumer behavior. Time magazine is calling this the era of the "New Frugality."

Lee Scott, former president and CEO of Wal-Mart Stores has asserted that people have indeed changed and have no desire to go back to the debt-driven consumption that imperiled their livelihoods. Procter & Gamble chairman A.G. Lafley believes that spending patterns have been altered forever-especially for the younger generations whose habits are being formed during this time of financial insecurity.

However, experts in public affairs and psychology point to the fact that although most of the population has been truly frightened by the economic crisis, they're not in a trauma state. Some aversion to debt will remain, but these experts contend that it's human nature to adjust to context very, very quickly. In fact, many behaviorists believe that a couple years of discomfort isn't going to make people resist the purchases that they perceive will help them enjoy life and social status.

Changes In Consumer Sector

According to financial consulting association LIMRA, some changes in the consumer sector do seem inevitable, whatever one's view of the recession's potential lasting effects. These changes include:

• Decline in employment in the manufacturing sector. When employment numbers begin to really recover post-recession, the jobs will be in different sectors with different pay levels and different levels of employee benefits.

• Growth in real family income has flattened and become more cyclical. This flattening means that many people may not be able to rely on a steadily increasing income as they did in the past.

• The equities markets have also become more cyclical. This means that active management will be more important for consumers investing in equities, and that other investment options will have an opportunity to gain market share.

Based then on the divergent views available to us, it may only be safe for credit union leaders to draw one conclusion as we emerge from the Great Recession: your knowledge and assumptions about your members' financial attitudes, behaviors, and expectations may be dangerously out of date.

That's why now may be the most important time in recent memory to investigate your members' current state of mind. This examination can be essential to help you identify how the recession has and will affect members' personal financial needs and behaviors so that you can-if necessary-chart a new or revised strategic course toward growth and sustainability.

Areas of member behavior and attitudes that can be examined in light of the recession include: changes in economic class/status; changes in availability and use of credit; changes in spending, availability, and use of savings; changes in debt, and member demographic changes.

Data based on each one of these inquiry topics can lead to your credit union making decisions regarding strategic resource priorities very different from those decisions based on a previous understanding of member behavior. And of course, having concrete data about the attitudes and behaviors of your members represents the potential difference between your credit union's success in the coming years-or lack of it.

Vicki Joyal is president, and Tom Dunn is senior consultant, with CVJ Strategic Intelligence, a Madison, Wis.-based strategic survey, research, and consulting firm. For info: info@cvjsolutions.com