Recently, I was having a conversation with two organizations; a credit union and a major financial player in the Caribbean Finance market. The credit union expressed the need to grow their membership while the other institution was basically seeking ways to gain more organic market share in new territories. While in discussions with the credit union, one question came up. Do you need more members? Do you really need more members? Do you really really really need more members? Interesting to note is that while we were having these discussions, I remembered a CU losing $+15M in shares due to member withdrawals to seek financing elsewhere. At the Annual General Meeting the solution was tabled to widen the target membership bond which was accepted. Shocking I thought! Often many CU leaders cast fire on the marketing departments for lack of membership growth when the main focus should be a usage strategy which is positively correlated to the tone set by your leadership. As you think of needing new members as a solution, here are my reasons for asking if that’s what you need:
- What’s your current member wallet share? How much of your current members’ wallets do you control?
- What’s your current member acquisition cost? How much does it cost you to get a new member?
- What’s your member retention rate? How many members consistently use products which you offer?
- What’s your active member ratio? How many active contributing members you have?
- What’s your member lifetime value? What is the member contributing to the credit union?
- What’s the plan to manage new members impact on Member Value Creation and Net Worth Sacrifice?
- What will it cost to upsell to current members? [Bonus]
- Have you exhausted your current membership? [Bonus]
The credit union didn’t have the answer to these questions due to lack of data and other reasons which is why I asked if they needed more members? Membership growth is easy as it doesn’t cost anything other than a few dollars to join a credit union. Membership Growth doesn’t always equate to Active Membership Growth or Membership Usage Growth. Membership Growth is a dependent measure and it can be can carries empty weight unless other variables are considered. Sometimes there is need to fix your ship internally before looking at external fixes. If you have a low retention rate, low wallet share, low usage rate, then most likely you’ll strain your new membership drive, frustrate your marketing team and erroneously reduce your marketing budget. The key is consistent active contributing members whether current or new. During this meeting, I received an email from a credit union where I am a member saying Happy 100 Days of Christmas with a loan product tied to it. I immediately thought another loan product, do you even know me?….how unfortunate!! A few days later, a neobank [digital bank] sent me an email saying Happy 100 Days of Christmas, here are some tips for Christmas budgeting. Caring I thought!
Often many financial institutions have a customer for 1 product lifecycle because the focus is more on loan growth/deposit growth tied to new members than long term customer relations, usage, helping and elevating the member. It’s what I term a Door Open Strategy. This basically means that you leave the door open for other players to get the usage from the member. To fix this, one may think a membership drive is the answer, when it may be your customer strategy. New members don’t always equate to new loans nor deposits. Sometimes your focus can be so much on membership growth that you may end up driving liabilities without earning assets. Think of it as linking membership growth to that sweet deposit rate and not being able to competitively lend or even do negative yield lending. Your liquidity looks good but your asset return performance is sacrificed while you have a dividend/interest on deposit obligation. Not a position to be in. Another angle could be the erroneous automatic link to membership growth and asset growth. A new member exposes the CU to new risks which could either be upside or downside. If your new membership growth is tied to a sweet loan product, do ensure that you can properly manage the incoming risks. You don’t want to be in a position of high membership growth, high loan growth and then high delinquency……have a think on it! Also you don’t want to chase new membership growth solely on favorable pricing….you’ll definitely have long term issues.
As credit union leaders, the answers to the questions above assist strategic thinking. If your credit union is to continuously grow, your focus should be on growing member contribution which comes with understanding who you serve! A good way to start is to classify members according to what they need from your organization. You may have high potential members within your reach; however, your constant chase for membership will add to you overlooking these members. Do note, you can’t be everything to everybody therefore you have to constantly engage those who need you while meeting organizational goals.
Retention and usage are ultra important. Fellow thought leader Bo McDonald stated that you must collect retention data while having the necessary plans to recapture before considering membership growth.
Remember this: When you maximize the usage of your current membership, you now create indirect ambassadors of your message which supports the marketing drive. People won’t become new members because your application process is easy and cheap but they’ll be interested in you solving a problem they have or meeting a necessary need and that’s the members you want! This sounds like a road to growth to me.