In this environment, you can’t afford to stop thinking about boosting your revenue. Here, four thoughts on where to grow.
1. DON’T DO IT YOURSELF
You can see that the idea has potential. For instance, anyone who has spent more than five minutes with a group of small-business owners knows that the need for better business lending is real. Member business services are a great mechanism for building strong member relationships as well. Add in a new potential revenue stream and the chance to diversify your operations, and chances are good you have a winner.
Now, the hard part. If you know nothing about member business lending, you can’t just dive in – at least not successfully. “Business lending is a growth area for credit unions, but it’s a difficult business,” says Rick Slater, Chief Operating Officer at Northeast Member Business Service, a Keene, N.H.-based CUSO that provides 21 credit unions with help on business lending, including loan servicing, filing and documentation. “Without strategic help, it’s risky and the costs can be high.”
Taking advantage of cooperative systems like Northeast Member Business Service’s can remove some of the trial and error – and the accompanying risk. “We’re also able to save our clients some of the incremental costs of developing a program,” says Slater. “Although they still have to develop the sales side of the program – member business lending is a feet-on-the-street, handshake-oriented business – we have the programs and technology to keep the back-office operations running smoothly.
“Credit unions have to grow their earnings, and it’s important that not all of those earnings be tied to regulations,” says Slater. “With mortgage rates in the 4s and auto loan rates in the 3s, member business lending yields of 6 to 7 percent look very attractive.”
Diversifying is a critical tool, and partnerships play a key role in putting new ideas into action quickly. There are certainly times when developing your own internal systems is worth the time and resources. In many cases, though, having access to cooperative resources – whether new programs or new products, services, systems or support – makes innovation possible.
The upside? The faster and more seamlessly you get on board with a new idea, the sooner you see results. For Northeast Member Business Services, those results included a 19 percent increase in revenue in 2010 – not bad for a difficult economic year.
2. SEEK OPPORTUNITIES RELENTLESSLY
You aren’t doing everything you can for your members. Don’t believe it? Take a cue from Los Angeles Firemen’s Credit Union’s CEO Michael Mastro, who has been tireless about finding new ways to serve LAFCU’s members, in ways large and small.
Case in point: Insurance. Everyone needs insurance, but if you’re a firefighter, your insurance needs might be slightly different. For instance, you might want life insurance above and beyond your on-the-job coverage, but getting it at an affordable rate might be difficult. LAFCU recognized the need and not only secured good rates on behalf of its members; it actually launched a full-service insurance arm. “Today, Firefighter Insurance brings in over $1 million in premiums,” says Mastro.
LAFCU’s investment services division, Firehouse Financial, manages $100 million in assets – all while delivering specialized expertise in working with pension programs. “Being able to offer our members customized knowledge of firehouse pension plans has been a huge benefit,” says Mastro, especially as many departments have proposed changes to their pension programs or offered early retirement packages.
Because firefighters often start side or post-retirement businesses, LAFCU opened a business services division, which has now written $15 million in business loans. Their advisors are also on hand to offer guidance on various aspects of growing a business.
These major initiatives go hand in hand with LAFCU’s orientation toward comprehensive member service. Their ideals aren’t so different from most credit unions’ – operational excellence, convenience, personalized service – but with the added dimension of catering to emergency responders. As one member noted in a recent issue of LAFCU’s member magazine, Fireline: “When you’re on your way to fight a remote wildfire, you need to grab money quickly. With CO-OP ATMs, I can pretty much find money at any 7-Eleven.”
Does catering to your members’ every need pay off? Indeed it does. On the same day that Bank of America announced its plan to lay off 30,000 employees, Mastro reported monthly net income of $800,000 for August 2011.
3. ZOOM IN
If you could reach all of your members all of the time with every brilliant idea that came into your head, you would be…a pest. An unintended benefit of the ever-shrinking marketing budget is better targeting. Instead of mounting an extravagant system-wide campaign every time you want to make contact, it’s now possible to design small, highly-targeted, highly-effective campaigns using data you already have.
Nancy Crouch, Director, Card Services, American Airlines Credit Union, Fort Worth, Texas, has done just that – many times over. Using data she accesses through CO-OP Financial Services’ Total Revelation portfolio management, Crouch is managing card usage with enviable efficiency. Take a page from her handbook:
THE TARGET: Crouch identified 10,000 inactive cardholders who had either never activated their cards or had been inactive for 90 days or more.
THE OFFER: Members who activated and used their cards were entered into a drawing for a $750 statement credit.
THE RESULT: A 24 percent response rate, generating $2 million in purchase volume in 60 days. Long term, these cardholders maintained volume equivalent to the average user.
Crouch has also been successful in getting inactive cardholders whose card accounts are about to be closed to wake up and use their plastic. “We contact them 30 days before closing and offer them an incentive for making five transactions of $10 or more,” says Crouch. “By the third month, we’ve seen 51 percent activation and $1 million in sales.”
Crouch has used CO-OP Total Revelation to identify members with recurrent NSF transactions in order to offer opt-in to overdraft accounts. To assess the market for prepaid EMV cards (useful for members who travel overseas), she mined the data for international transaction volume. Are some cardholders underachievers? By zeroing in on folks with at least one but fewer than five transactions, Crouch can design incentive programs to spark usage.
CO-OP Total Revelation – an upgrade to CO-OP’s Revelation portfolio management tool that now includes both customized and predesigned reports as well as consulting – makes fast work of finding the right information.
“The problem for most credit unions isn’t lack of data,” says Michelle Thornton, Senior Product Manager, CO-OP Financial Services. “It’s being able to see what the data is telling you. With CO-OP Total Revelation, we wanted to make information simple and usable, so that members could take the data they have and create results.”
CO-OP Total Revelation enables users to find out who their most profitable members are, which ATMs and terminals are most active, where 18-to-24 year-olds are spending money, and even where fraud is most likely taking place – all at the click of a button. “Even when you log in, you see charts that give you a clear snapshot of what’s happening with your portfolio,” says Thornton. “It’s designed to make the information accessible.” And if having more digestible information isn’t enough to prompt action, CO-OP Total Revelation also includes consulting services that help users plug data into successful campaigns.
“The point is to help users understand their membership better and to capitalize on that understanding,” says Thornton. “We’ve priced it to be affordable for all credit unions. With so much competitive pressure on credit unions right now, how can you afford not to know all you can about your members?”
4. CLEAR THE ROADBLOCKS
Generating revenue doesn’t have to mean launching new programs. Sometimes it’s about improving existing programs that no longer work properly.
Consider the case of auto loans. Ryan Zilker, formerly with a credit union and now B2B Marketing Manager for CO-OP, remembers taking calls from car dealerships over the weekend so that members who were car shopping could apply for loans. “We literally had a special cell phone dedicated to this and certain members of the staff had to take turns bringing that phone home for the weekend,” Zilker says.
What could be worse? In today’s market, that system wouldn’t work at all. Car dealerships – and car shoppers alike – demand approvals on the spot. If credit unions hope to win any loans, they need 24/7 loan approval. “This has been one of the big benefits to adding CO-OP Lending Services through the CO-OP Member Center. Credit unions can be available to accept applications and approve loans after hours and on weekends,” Zilker says.
Removing these kinds of roadblocks isn’t a matter of improving efficiency: In many cases, it’s a matter of staying viable. Check operations for the little glitches that derail your best intentions.
Also, don’t be afraid to do what your big-bank competition says they can’t. Aite Group reports that one of the top retail banking trends for 2011 is eliminating free checking accounts. Big banks say they can’t continue to offer free checking with new Durbin regulations underway. But if your credit union is exempt – and almost all credit unions are – you probably can.
Remember, too, that improving programs and beating the competition isn’t worth much if you don’t tell the world what you’re doing. In this era of reduced budgets, it’s important to bear in mind that no news is not good news. It’s no news. However you communicate with members and your community – electronically, in branches, in the media, or preferably through a variety of channels – this is a great time to get the word out.
Sidebar: Ideas to Grow On
Need more inspiration? Visit CO-OP’s Growth Initiative Site for fresh ideas on building profits, improving relationships and helping your credit union to thrive.