Strategic organizational growth doesn’t happen by accident, or without plenty of care and nurturing. This is especially true with credit unions, where members benefit from growth, not third-party stockholders. Creating an intentional and forward-thinking strategic growth plan is essential to long-term organizational success.
Credit unions can grow in a number of ways, including:
- expansion within existing geographic markets
- expansion into new geographic markets
- changing criteria for membership to include more segments or groups served
- merging with or acquiring similar organizations
Before growth opportunities are explored to identify the most advantageous options, there are seven elements that should be considered for your strategic growth plan. These elements can help you determine the right trajectory for your organization.
What community does your organization serve? Is it one with broad demographics, and thus broad growth potential? Or is it more niche in nature, meaning that growth may come through specialized offerings, rather than broader appeal? Here are the four most important demographics for building a strategic growth plan:
- Home ownership
2. Market Size & Growth
Beyond the question of market saturation, there is the consideration of the market size where you do business. Saturation and size must be paired variables when it comes to properly analyzing past performance and understanding future growth. In addition, the total number of households must also be considered, accounting for positive or negative growth, while also allowing for future market fluctuations. Finally, when considering market size and growth, look at deposits at market branches, and then compare in relation to historical and projected growth.
To restate the obvious, it’s not enough to consider your own credit union’s strengths, weaknesses, opportunities and threats. You’ll also need to closely study your competition. Where does your competition position its branches? Are there new entrants into the market? Evaluate, using public information, how your competition has increased their position within a region. Have existing banks and credit unions in your market been adding to their branch network? Are you anticipating competition to add additional branches to the market over the next five to ten years, or do you anticipate branch consolidation? Finally, assess how increased branching might impact average deposits, loans, or members per branch; and, ultimately, the branch profitability.
4. Member Penetration
Understanding the membership penetration within your target market is key to defining your market strategy. Membership penetration and product usage has historically been highly correlated with home or workplace proximity to branch location. Membership surveys have shown that, as the distance from the branch increases, the primary financial institution relationship declines. The greater the distance from the branch, the more likely the member will have a secondary or tertiary relationship with the credit union and be very selective in product usage.
Your credit union has an opportunity to expand relationships with secondary members through more effective delivery systems and marketing channels. Member and market surveys can help your credit union understand issues of market awareness, while also unlocking opportunities to set itself apart from competitors.
5. Product Demand
When evaluating markets, your credit union will want to understand the demand for various product types. For example, if your credit union is targeting high net-worth consumers, emphasis should be on markets with higher propensity to use investment products and wealth planning.
Additionally, you’ll want to look within your membership pool to determine the level of product demand that you’ve achieved. You likely have members that satisfy some banking needs through your organization, while also patronizing other organizations. Your strategic growth plan may benefit from opportunities to stimulate internal growth by gaining all member banking business, rather than providing only a service or two.
On the flip side, some of your offerings may not meet member needs or expectations. Your members may need a new generation of products – for instance, online banking and digital transactions – that you don’t currently offer. Evaluation of product demand requires consideration from three distinct angles: matching members with offerings, ensuring offerings meet member needs, and creating new offers to meet new expectations. Proper evaluation of product demand will ensure you’re ready to meet the demands of your members. Comparative product studies can also be a helpful tool for understanding growth opportunities in your markets.
6. Branch Delivery System Network
When considering how to best serve members through branches, your branch system should be subject to four areas of review:
- Evaluation of under-served regions – Are new branches needed?
- Relocation of existing branches – Will changes increase convenience?
- Consideration of under-performing branches – Are closures necessary?
- Update outdated branches – Will remodeling increase branch success?
7. Merger or Acquisition
The hardest part of a strategic growth plan – and the one most likely to achieve high results – is a merger or acquisition. Instead of growing internally, purchased growth – new locations due to M&A – may achieve better results, faster. This kind of increase in the field of membership (FOM) could help your organization achieve the type of regional penetration and growth that might otherwise be impossible. M&A plans can result in better member penetration and provide access to enhanced capital, while also yielding benefits for members of both organizations.
Most importantly, when creating a strategic growth plan, consider each aspect from the viewpoint of members. It is for them that the organization exists, and it’s through them that your organization achieves success.