Following a global health event, an ensuing economic crisis, a historic fiscal stimulus disbursement, and a succeeding global inflationary challenge, most credit unions and their leaders are begging for some indication of a ‘new normal’ in 2023. Most economists and academics agree that our best historic measurables—an inverted yield curve and successive quarters of GDP contraction—point toward an economic recession and further headwinds for the American consumer. A complicating factor is near record-low unemployment levels, but the Federal Reserve’s hawkish approach toward monetary tightening is set to prioritize inflation control over a soft landing for Americans and the money system.
Amidst this macroeconomic froth, credit unions have posted record levels of loan originations and balance growth, even gaining market share in key collateral segments. Liquidity has flipped from seeping into the windowsills and door frames to possible drought conditions if portfolio managers cannot find creative new ways to gather deposits. As credit union leaders—especially brand managers—develop budgetary forecasts for 2023, how might we ensure peak stewardship of our members’ resources in the New Year?
Budgeting as strategic discipline
How often have we told our members, “Create an intentional budget for your household and begin with the end in mind”? The same fundamental principle holds true for credit union organizational resource planning. Contrary to a common but misguided perception among many marketers, an annual budget is not a wish-list or a territory to be protected. The annual budget is a strategic discipline: a thoughtful response to the growth, engagement, and franchise value expectations of the cooperative.
Structuring for outcomes: Maximizing performance
Currently, the average credit union size in the American system is approximately $450 million in assets. Anecdotally, most credit union leaders below the $1 billion threshold share a desire to reach that watermark to feel any sense of long-range sustainability. As credit unions continue to consolidate charters at a pace of approximately 1 per business day, stakeholders look to the marketer not as an advertiser, but rather a growth-engineer.
For some marketers, the strategic discipline of budgeting is a focused effort to transform today’s member dollar into more for tomorrow. Managing the tension between short-term relevance and long-term franchise value, outcomes-focused marketers are building a budget that prioritizes account acquisition, balance growth, and optimal ROI. In general, these budgets forego one-to-many “brand” based appeal in mass media channels for scalpel-precise direct marketing forays. Audience intelligence and segmentation are key, as the 2023 credit union marketer is expected to translate the organizational need into the right message, sent through the right channel to the right person, at just the right time.
Structuring for impact: Maximizing awareness
While the realities of credit union growth and consolidation appetite are insatiable, many credit union c-teams and boards are tapping into a keen idea: stakeholder impact often supersedes financial outcomes. Credit unions have a different—and an additional—mantle of responsibility to their employees, their members, and the community they serve. As we discovered in early 2020 and have been reminded every day since, our stakeholders have problems no CAMEL rating, capitalization ratio, or net promoter score can solve.
In these purpose-centric credit unions, marketers who engage in the strategic discipline of budgeting focus their allocations on storytelling and reinforcement of community awareness. Rather than generalizing productivity assessments to “brand awareness”, impact marketers invest real resources in developing both internal and external centers-of-influence as proxy storytellers. These grassroots efforts are amplified by broad reaching lifestyle messaging oriented toward well-articulated audience segments.
A brief word about marketing math in 2023
Throughout much of 2021, American consumers were eager to stretch their legs, spend their “found money”, and make big-ticket purchases. This pent-up demand led to a record level of loan originations in 2021, followed by near-record highs in portfolio growth in 2022. With such remarkable degrees of demand followed by an aggressive tightening of the money supply by the Fed, originations and growth-rates are likely to cool in 2023. Despite thoughtful planning, design, and execution, many marketing efforts may not overcome macroeconomic factors. ROI models should take into account base effects of 2022 growth-rates on 2023 production calculations.
Facing uncertainty about an economic recession, and knowing that different aspirations should produce different budget structures, how should a thoughtful credit union marketer respond in managing the budget? We suggest a few key guiding principles:
Plan for the unexpected:
The circumstances of your markets and your earnings model are fluid at best heading into 2023. In other words, the only constant is change and your earmarks should reflect that reality. It’s not enough to “expect the unexpected”; your job as a steward of your members’ money is to plan for it. Is the possibility of merging another local credit union in the cards? Trust that M&A work will have a dramatic impact on your available resources. Is your technology team about to ink a deal with a new debit card processor? That little plastic card is a greater representation of your brand than perhaps any other aspect of your visual identity. Plan to give that change its due dollars.
Align to the organizational forecast:
Despite those tried-and-true rhythms of HELOCs in the spring, autos in the summer, checking in the fall, credit cards in the winter, your finance and lending cohorts may have very different expectations outlined in the FY23 budget. Ensure that your marketing allocations and the companion calendar are aligned to the broader design of your colleagues’ strategic plan and the master forecast. And, if your team is operating from a rolling forecast, take extra time to ensure those pre-planned media placements and monthly subscription accruals are actively managed throughout the year as the forecast changes.
Understand gross vs. net:
Marketing carries the banner and beats the drum, but what happens after you welcome those new members and balances to the cooperative? Gross production (originations) is certainly the chief measurable for marketing leaders, but net growth is what translates to organizational progress. Part of a holistic strategic budgeting discipline is a keen understanding of member and balance attrition (churn) rates and how they may change the priorities of the leadership table. If home equity outstanding balances are repaying at a faster rate than new draws, your campaign productivity may reflect a false-negative. Understanding this gross/net nuance and being able to articulate it in your throughput reporting is key.
‘Giving up’ is an option:
Every dollar granted to the marketing budget and spent toward education/promotion is a seed your members are allowing the cooperative to plant toward a more productive future. Often marketers will assume “more is better” and that having as much as possible to spend is ideal for the credit union. Frankly, there are real circumstances where spending less and conceding marketing dollars back to other areas of organizational need is the right call. If your website has healthy referral traffic through paid lead-gen but has an insufficient online account/loan origination front-end for applicants, would those dollars be better invested in your eCommerce stack? If member closures are outpacing originations, is retail sales/service coaching a better spend than your big direct marketing push? Owning the brand means being fully intentional about helping the organization keep its promises to your members and your community.
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