Is Credit Union Marketing Back?

As a strategy consulting resource for credit unions, I am often asked by clients about the strategies of other credit unions in areas such as lending, branching, and technology. I’m also asked about marketing – and frequently whether other credit unions
have decided to recover the marketing dollars “lost” due to recession-era budget cuts.  Some certainly wonder, or perhaps assume, that all credit unions have maintained reduced spending in marketing. Though the recession and its impact is becoming more memory than present reality, the question remains: Is marketing back, or is it still suffering deep recession-era cuts?  During the worst year of the recent recession, for credit unions anyway, the credit union community was forced to find budget cuts to maintain capital. Contrary to what many credit union professionals might believe, cuts came not from compensation but from other areas of the budget. Marketing was particularly hard-hit.

The first thing to appreciate is just how much marketing was cut during the recession. The chart below illustrates the percent change in marketing expenses year-to-year. Up until the recession became a reality too pressing to ignore, marketing budgets tended to be ever-increasing, with percent changes in marketing budgets generally outpacing percent changes in overall budgets. Once the recession hit, not to mention the financial impact of share insurance recapitalization and corporate system stabilization, credit unions “trimmed” marketing spending by nearly 12%.

If you had aspirations of hanging out a shingle as a credit union marketing consultant, 2009 was not the time to make the leap.

Since the drop off, however, it would appear that credit unions have reversed course, expanding the dollars spent on marketing. But, has marketing really recovered its lost ground?

For further exploration consider the next chart, shown below. It illustrates the change in actual dollars over the same time period referenced in the chart above, plus the three years following 2009. It also provides an additional layer of clarity not only in terms of how much of the marketing budget was cut, but how much of the budget has been added back.

As the chart shows, credit unions increased their marketing spending by approximately $47M in 2008. The very next year saw a decrease in spending of $137M. Since that time, however, credit unions have been adding back marketing dollars.

It would appear that marketing has regained its lost budget, but to be sure, it helps to look at total marketing spending as well as the percent of marketing expenses relative to total expenses – both of which are illustrated in the chart below.

The chart suggests an interesting, perhaps split perspective on marketing expenses.

While credit unions have indeed increased total marketing expenses, eclipsing the prior high point set in 2008, marketing occupies a smaller percentage of total operating expenses now than it did in 2008. What are we to make of this?

One point of consideration is that total operating expenses remain impacted by NCUA assessments, with budgets increasing accordingly. Another point is that 2012 saw a near-seven percent increase in employee compensation after three successive years of increases averaging less than 3%. I’m sure credit union employees appreciate that the marketing budget is, anecdotally at least, secondary to employee comp.

All-in-all, it seems safe to say that marketing has recovered a fair amount of the budget dollars lost during 2009 cutbacks, but you could certainly question whether it has recovered enough.

Consider this… although 4th quarter 2012 membership grew overall by just over 2%, average membership growth for individual credit unions was below 2%. How can that be? Membership grew, but not for every credit union and certainly not at the same level, and I think those not growing at a healthy clip are the ones lagging in marketing spending.

While I am concerned that some funds will be funneled into the “tried and true” marketing strategies of the past (which were largely ineffective if we consider membership growth a measure of such effectiveness), it is good to see marketing spending increasing – most especially if it means more members and potential members alike will be made aware of the great value offered by the nation’s credit unions.