The beauty of imperfection: Why credit unions should embrace their flaws

Recently, a credit union executive expressed frustration with their growth rates and argued that their market did not understand that credit unions can do everything the national banks can do. Our response? Stop pretending you are just as good as the big banks. Credit unions have limitations, and we should stop pretending otherwise. For too long, credit unions have focused on highlighting our positives (which are substantial) and avoided talking about our shortfalls (of which we have plenty).

Do you remember the famous Avis rental car campaign? In a groundbreaking approach, Avis embraced the notion that they were not number 1 and focused on their strength, “We Try Harder.” It was very successful in moving share from the market leader as they freely admitted they were not the biggest in the industry and turned it into a benefit to potential customers.

Today, behavioral economists call this The Blemishing Effect. This effect can be a powerful tool to improve the perceived attractiveness and value of a product or services. Consumers tend to perceive positive information more strongly when a minor negative aspect is presented alongside. In study after study, consumers give higher consideration to products, services, and companies that have a small number of negative reviews on minor issues than for those who have only positive reviews.

This effect is a powerful tool, but it must be used wisely. Here are some guidelines for employing:

1. Lead with the positive attributes: It’s important to ensure that the positive attributes are prominent and clear, highlighting features and benefits.
2. Identify a minor negative aspect: This could be a small drawback or limitation that is not critical to your overall functionality or value.
3. Present the negative aspect alongside the positive: This can help to create a balanced perception of the product, where the negative aspect is seen as a minor flaw in an otherwise attractive option.
4. Frame the negative aspect as a benefit: It’s important to frame the negative aspect in a way that can be perceived as a benefit or advantage.
5. Be honest and transparent: Be clear about the positive attributes of the product, as well as the minor negative aspect. Don’t try to hide or downplay the negative aspect, as this can undermine the effectiveness of the strategy and damage your brand’s credibility.
6. Test and refine: Like any marketing strategy, it’s important to test and refine the messaging to determine its effectiveness. Experiment with different ways of presenting the positive and negative aspects and track the results to see what works best for your target audience.

What are examples of characteristics that could be leveraged using the blemishing effect?

1. Limited branded branch locations and ATM networks: Individual credit unions have fewer branches and smaller ATM networks than large banks, which could be perceived as a minor inconvenience for members who prefer to visit a physical branch or want to use branded ATM’s. However, many credit unions participate in shared branching networks and surcharge-free ATM networks, providing members with access to thousands of locations nationwide.
2. Fewer products and services: Credit unions may offer fewer products and services compared to large banks, which could be perceived as a minor limitation. However, credit unions focus on providing personalized service and competitive rates on products like loans and savings accounts, which can be appealing to members.
3. Membership requirements: Consumers have to “join” the credit union, a step not required by other financial institutions. However, a credit union could highlight the fact that becoming a member is a simple process that usually only requires opening a savings account with a small deposit. By doing this, credit unions can make potential members aware of the small barrier to entry, but also emphasize the benefits of being a member, such as personalized service, better interest rates, and community involvement.

By highlighting the positive attributes of the product and presenting a minor negative aspect alongside them, you can create a more balanced perception and become more appealing to potential members.  Credit unions should embrace who they are, be transparent about their strengths and weaknesses.  That honesty and transparency, properly leveraged, will do a much better job of attracting new members and potential employees than pretending to be perfect.

Embrace your imperfections!