We have good news and bad news for credit union marketers.
First, the good news. Helping members reach their financial goals has never been easier, since credit unions are awash in data about them. It’s easier than ever to identify their needs and tell them what to do.
Here’s the bad news. You can’t just tell people what to do. Research and long experience show that just doesn’t work. Simply explaining the right behaviours and financial paths doesn’t lead to success.
If credit unions have a hope of succeeding, they need to understand the latest research in such fields as genetics and behavioural economics and what the findings mean for members. Executives, managers and frontline staff also need to understand psychology and how to nudge people at the right time, in the right direction.
If a member connects, it’s easy to check the credit union computer and learn what accounts and products they have, how old they are and other personal data. This should make it simple to explain to them what they need to do and persuade them to act. But, did you know research shows that up to a third of a person’s financial decisions may be determined by their DNA? Credit unions don’t have access to their genetic information (hopefully no financial institution ever will).
Traditional economics held that people always make the smartest decisions, considering all economic factors from many perspectives. But behavioural economics, a relatively new field built on an understanding of human psychology, shows that a variety of factors keep most people from making the “best” decisions most of the time.
Where does this leave a credit union marketing team? How do they consider all these factors when building an annual marketing plan? A recent Filene Research Institute report, titled “Nature vs. Nurture,” states that “learning about human financial behaviour allows credit union leaders to infuse their operations with empathy. Understanding the complexity of a member’s financial life is rarely the only step necessary for solving challenges that arise. But is a critical first step — and one that serves to differentiate credit unions from banks.”
Hope Schau, who leads Filene’s Center for Consumer Decision Making and is a marketing professor at the Eller College of Management at the University of Arizona, says credit unions can identify “a lot of moments where you can be that pivotal resource that makes all the difference in the world.” Schau is working with Filene to try to determine how credit unions can take advantage of moments in time to reconnect to their members. She says many credit unions have been mapping a service journey and touchpoints “but they haven’t been really cognizant of what we’re calling ‘moments of reflection.’ ”
“I think that credit unions undersell their mission as a pro-social, non-exploitive banking option.” – Hope Schau
Schau highlights the success of Facebook at capturing such moments. When Facebook pulls up a picture you posted a few years ago, it “connects you to that moment in time and also to Facebook. That kind of moment of reflection is a chance to strengthen the relationship, the social bond, that you have with people engaged in that post and Facebook.”
Schau points out that credit unions have a lot of information about their members and should be able to use these touchpoints or reflections to connect with them. She offers a personal example. Recently, Schau received an email from Mint, the budget planning software app, congratulating her on paying off half her car loan. It came with a picture of the car model she had bought. “It’s the sort of thing that credit unions can do because they have the information and can make that moment happen and lead the person to reflect on how much they like their car and thanks for reminding me.”
Rachel Osborne, associate vice-president, marketing & business development, at Tandia Financial Credit Union, (29,600 members, $1.1 billion in assets), says the Hamilton, Ont.-based credit union regularly segments its membership using its data and offers products and services it feels will be of interest to individuals. “We want to hone in and be effective and efficient with our marketing dollars and find the right people who are most likely to purchase,” Osborne says. “We’re not going to market mortgages to anyone under the age of 25, or we’re not going to target people in their mid-50s and 60s because they’re coming to the end of having a mortgage.”
Osborne says that Tandia launched a new program earlier this year as part of the onboarding process when new members get their welcome letters. “We are sending our targeted marketing offer exclusively to the new members. We have a suite of different offers that we send out and it’s left up to their retail manager to decide what’s the appropriate offer for this member, based on their age.” For example, someone in their 20s gets a special loan offer, while someone in their 30s or 40s gets a mortgage offer. An older person receives a deal on high-interest savings or wealth management. “We try to get all members to do a member journey at least once every two years so we can tailor our products and services to whatever it is that their goals are at the time, not solely based on age,” Osborne says. “We help them set goals and ensure they are on their own journey to financial wellness. We know that’s what grows our relationship with our members.”
Schau adds that credit unions “have a great story and a great track record with our members, we just need to spark that moment where they reflect.”
In the past, credit unions’ connection was made by the personal touch found in a branch. That may have been lost as the organizations grew larger but now technology makes that connection possible again. “I think that credit unions undersell their mission as a pro-social, non-exploitive banking option,” Schau says.
“It’s something that a lot of young people don’t even know exists. We need to figure out ways at the industry level to get the credit union difference out and then have the branding of particular credit unions fall under that.”
Schau suggests that credit unions as a group need to highlight their distinctive difference as a way to attract new members. Then, once they have the members in the fold, credit unions will be able to use the moments of reflection to increase engagement.
Osborne says that Tandia, which is now open bond, with roots in the education and workplace safety industries, attracts new members from many age groups. But there is a gap in the 20s when most young people have started a relationship with a financial institution and aren’t looking to change. Tandia finds 50 percent of its new members come through its member-referral program. “Our members have had a positive experience, or received help along the way and so they’re telling their neighbours or co-workers,” Osborne says. This means many of the new members are similar to current members — in their 40s or 50s — looking for financial advice and careful about expenses.
“We try to get all members to do a member journey at least once every two years so we can tailor our products and services to whatever it is that their goals are at the time, not solely based on age.” – Rachel Osborne
At a Filene Research event in January in the United States, Richard Sias, a finance professor at the University of Arizona, talked about his research into the impact of genetics on financial decisions. For example, Sias estimates that half of the relationship between owning stock and risk aversion is explained by genetics; some people are simply wired to be more risk averse and conservative. Genetics impact the financial decisions and choices that members make, likely without realizing it, Sais stated. “I think you have to sit down to talk to people and get a better feel for what exactly is driving whatever financial decision they’re making.” He suggested that this might involve personalizing financial literacy and financial counselling to meet a variety of different underlying needs.
Dilip Soman, professor of marketing, Rotman School of Management, University of Toronto, is a leader in the field of behavioural economics. His research has looked at how minor changes in the way decisions are framed can increase saving rates, encourage more children from low-income families to attend university and help people avoid misuse of credit cards. Soman’s work illustrates the many factors involved in financial decision making and suggests there are numerous ways that credit unions can help their members. But credit unions must be aware of what truly drives members’ financial behaviour and how much of it is outside their control. ◊