The economic picture for members and potential members is increasingly K-shaped. What does that mean? It means some folks are on an upward financial trajectory ... while others are on a downward financial trajectory. On a graph, it looks like a big “K” (thus the name “K-Shaped Economy”). What do the differences between the diverging groups mean in practice?
Those on the upward part of the “K” have:
- Higher incomes
- Stronger assets
- Better job security
Those on the lower part of the “K” have:
- Higher debt
- Rising cost pressures
- Limited savings
The K-Shaped Economy poses plenty of operational and balance sheet risks. It also poses marketing risks. It’s hard to even bring people to the credit union in the first place if you optimize your message for the wrong group. You need to get it right. Especially in a period of such intense industry competition.
Here are some tips for marketing in this crazy, K-Shaped Economy:
- Know your market: Are your members more on the upper or lower end of the graph? Is there a mixture? Before you do anything, you need to know where your field of membership resides in the K-Shaped Economy. It’s hard to craft messaging if you don’t know who you’re speaking to.
- Develop different soundbites: Different audiences need different messages. Marketing guru Donald Miller discusses the power of soundbites—five short, clear messages that highlight problems, empathy, answers, changes and end results. You need different soundbites for the different branches of the “K” (problems differ, how you empathize differs, etc.).
- Create upper arm messages: For those on the upper part of the “K,” messages around getting good deals or saving money won’t resonate as much. These folks want to maximize the money they have and invest in premium services. Can you help them with investments? How about estate planning or life insurance searches? What accounts offer them the greatest returns? Form these relationships—you want their deposits at your credit union.
- Create lower arm messages: For those on the lower part of the “K,” messaging around deals, saving money, financial education and so on will be more effective. These folks are trading down and relying heavily on credit. It’s more about survival than it is about building. Do you have lower overdraft fees than competitors? Do you give people a chance on loan approvals? Or offer fantastic credit card rates and rewards? Form these relationships—you want to save them from payday lenders while acquiring the loan business.
- Segment your communications: Once you differentiate between the groups, the worst thing you can do is mass blast the same message to everyone. Segment your members and send them targeted emails/mailers/etc. based on their position in the K-Shaped Economy.
The K-Shaped Economy is a tricky challenge for credit unions. It takes an already difficult marketing landscape and adds a new dimension to it. And if you’re having trouble diagnosing a marketing gap in this complicated economy, you’ll want to perform a marketing assessment.
But make sure you tackle this challenge for the right reasons.
Distinguishing between the two parts of the “K” means you get to serve every member better. Meet every member where they’re at. Even if the economy is K-Shaped, you can bring those arms closer together while growing your credit union.
As Herb Kelleher once said, “If you just love others ... and have fun doing it ... you’ll make so much money you won’t know how to spend it all.”
