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The One Premium Some Members Would Pay

For a number of years consultants and experts have tried to get credit unions to recognize that "brand" does not mean color scheme or logo, even though this misconception continues to persist in some sort of bizarre logic that "Hey, we just switched our corporate colors, so now you have no reason not to do business with us!"

Instead, as those same consultants and experts have reminded, branding is all about the "experience;" in short, what comes to mind when I leave your branch or hang up the phone with one of your reps. All of that has always been a somewhat nebulous concept however, with no one really having any idea what dollar value "branding" brings to an institution.

Now, at least one company says it has determined such a value: $2.6 billion. Or, more precisely, one component of that experience that consumers say they value above all others: simplicity.

That's what a study conducted by the brand strategy firm Siegel+Gale has concluded after surveying 6,000 consumers in seven countries. In the case of U.S. consumers, the study found those surveyed said they would pay up to 4% more for financial products and services if they were simpler and more streamlined, if there were fewer rules and hassles (it's unlikely any of these consumers were willing to cut you a break over all the federal and state rules and regs with which you must contend).

The Simplicity Premium

Siegel+Gale calls this the "simplicity premium," and there's a very good chance you already have a product (and paid that premium) from a company that has built its brand around such simplicity: Apple.

As financial institutions, credit unions have a big hurdle to overcome in delivering simplicity to members: consumer perceptions. According to Siegel+Gale, of 102 brands that survey respondents were asked about, the institution that scored the highest-Wells Fargo-was ranked a full 70 spots below the highest rated brand in terms of simplicity-Netflix. (Even the Post Office did better at 31.) Overall, financial institutions were rated 10th out of the 13 sectors that the study probed, and that doesn't include an overlap with one of the sectors that were ranked even worse: utilities, insurance companies and credit card providers.

To some degree it has to be noted that there are some inherent challenges here for credit unions; getting a mortgage or an auto loan is a wee bit more complicated than downloading a movie from Netflix. Still, credit unions would be wise to borrow whatever they can from the success stories in delivering simplicity. David Srere, chief strategy officer and co CEO of Siegel+Gale, said in an interview that "one dimension of simplicity is ease. Another is greater transparency."

Lenders that have created processes, for instance, that update mortgage borrowers on an ongoing basis on the status of their loan have taken a big step toward transparency. Longer hours at branches or simplified online banking solutions are also good steps.

The Siegel+Gale survey found, perhaps not surprisingly, that those most willing to pay the "simplicity premium" are higher-income households. Seventeen percent of those with incomes above $150,000 said they would pay more for less, if you will, compared to just 5.9% of households with income under $20,000.

Something to keep in mind when rolling out a new product or service.

And while we're at it, here are four trends that will "redefine the banking experience" in the next decade, according to Intuit's Financial Services division and Emergent Research. The Intuit 2020 Report forecasts the following, at least three of which, frankly, makes you wonder what it takes to be an "academic" these days, as "academics" were cited as among those who contributed some of these rather obvious and and ill-defined "trends:"

* There will be a "new playing field for financial services" with increasing regulatory pressures and competitors that will require a "new business model."

* "Young and old consumers will demand more from their financial institutions," and "competition to serve mid-market businesses will intensify, further reducing margins."

* "Technology will drive service" and involve "cloud-based platforms and applications, advanced analytical tools, ever-larger data sets, and social and mobile computing to design and deliver value-added products and services to customers" (just in case you are returning from that long, long sabbatical in the Australian outback).

* And in the one "finding" in which something can actually be found, "reputation and relationships" will rule, as the "financial services industry will shift its focus from transactions to customized, value-added services... Financial institutions that provide useful customer insights will succeed."

That last point is an important one. But it shouldn't be seen as purely a technology-driven solution in which software "personalizes" the experience. More and more people will do their basic transactions online, and those who come into the branch will be looking for an informed member service rep who can do more than reach for a brochure or call someone else over to answer a question.

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NAFCU Services Corp. recently reported that it had selected as one of its "Preferred Partners" Cathedral Corporation. Perhaps we shouldn't be surprised that Cathedral is based in Rome, N.Y.

Frank J. Diekmann can be reached at fdiekmann@cujournal.com.

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