Introduction to Credit Union Marketing

Transcription

1 Marketers must devise strategies to achieve marketing objectives. The tools used to build these strategies are commonly called the marketing mix. Working in credit union marketing can take you in several different directions. You could apply your analytic skills in market research, or your creative skills in advertising, or use your people skills in public relations or marketing management. These different marketing career paths have one thing in common; they all combine to give you the ability to help your credit union succeed. You will contribute to building your credit union s brand, improving its product and service offerings, and enhancing member loyalty. In this introductory chapter, you ll learn about the marketing mix and target marketing strategies. You ll also become familiar with how credit unions go about the process of creating, communicating, and delivering member value. You ll also realize why the famous early ad-man David Ogilvy once said, It is useless to be a creative thinker unless you can also sell what you create. What Is the Marketing Discipline? The American Marketing Association (AMA) defines marketing as A set of processes for creating, communicating, and delivering value to an organization s customers. In credit unions, this translates into delivering value by solving members problems. Therefore, the scope of marketing in a credit union includes: 1. Creating value by developing Objectives Upon completion of this chapter, you will be able to 1. recognize eight components that make up the marketing mix ; 2. list three conditions a target segment must meet to qualify for a target marketing strategy; 3. recall three internal and three external must-haves of effective value proposition statements; 4. describe two methods for measuring member value. products and services that solve members problems or help them achieve goals; 2. Communicating value by developing advertising campaigns and publicity programs that convey the value of credit union products and services; and 3. Delivering value by monitoring operations to assure the products, services, staff, and public image are meeting or exceeding member expectations. Tools Marketers Use Marketers must devise strategies to achieve marketing objectives. The tools used to build these strategies are commonly called the marketing mix. The marketing mix includes the Four Ps CREDIT UNION MARKETING FUNDAMENTALS 3

2 Positioning drives many of your marketing decisions. of Product, Price, Place, and Promotion. This concept was developed at Harvard Business School in the 1960s, and still holds true today. Of course, additional Ps have emerged since the first Four Ps were identified. These include Public Relations, Positioning, Performance, and People (Staff). All of the Ps are components that a marketer can control, subject to internal and external constraints in the environment. That makes all of the Ps valuable tools in your marketer s toolbox, allowing you to create, communicate, and deliver value. In the Toolbox: The Four Ps The marketing mix represents the components of marketing that are under your control. If you control these components carefully, you will be better able to withstand some of the factors the economy, regulations, and societal change that are not under your control. Let s look a little closer at these tools, beginning with the original Four Ps of Product, Price, Place, and Promotion. The Four Ps include: 1. Products: Any product or service (or combination of both) that can be offered to a market to satisfy a want or need. 2. Price: The agreed exchange value for a product, service, or idea. 3. Place: All the ways products can be accessed or used. 4. Promotion: The communication efforts involved in conveying value, including advertising, public relations, and social media. Beef up the Toolbox with Four More Ps Nothing stands still. As marketing has evolved in recent decades, additional Ps have been added to the toolbox. Modern marketing training usually includes some combination of the following components in the discussion of today s marketing mix. Credit union marketers should add the following Ps to their toolbox in addition to the original four: 1. Public Relations: Activities designed to promote or to protect a company s image or its individual products. 2. Positioning: Giving a company s offering and image a distinctive place in the mind of the target market. 3. Performance: Measures used to evaluate how well marketing efforts are meeting objectives. 4. People: The staff, customers, suppliers, and competitors who come together for marketing and sales to take place. The marketing mix specific to credit unions, including all eight Ps, is discussed in greater detail in Chapter 2. Positioning Positioning has developed into a very important P in the marketer s toolbox. That is because positioning drives many of your marketing decisions. If you asked several strangers to name three local financial institutions, 4 CREDIT UNION MARKETING FUNDAMENTALS

3 Activity 1.1 Worksheet: Investigate Your Credit Union s Positioning which would they name? If you followed up with a question like what makes one different from another? what would they say? Their answers reflect those financial institutions positioning. Of course, all credit unions hold a position that sets them apart from commercial banks, because credit unions are the member-owned, nonprofit, financial service alternative. What other factors give your credit union a distinctive place in the mind of your target market? Among the many possible points of difference that create your positioning could be: convenience, geographic location, image (brand message), innovation, price (rates), product/service selection, and quality of service. Use Activity 1.1 to investigate your credit union s positioning. Complete the Activity 1.2 Knowledge Check to test your recall of the marketing tools discussed so far in this chapter. Segments and Targets Once, marketers made few distinctions among types of consumers. They used mass media to communicate with To investigate your credit union s positioning, interview a senior marketing staff member, review past market research reports, or come up with your own way to find the answer to the following questions. 1. Who are your key competitors? 2. How do you compare on the following points of difference? Check your answers. Leading the pack About the same Lagging behind Convenience Geographic location Image (brand message) Innovation Price (rates) Product/service selection Quality of service On which points are you leading the pack? These are your position strengths Through what communication channels are you conveying your position strengths? Use this worksheet (and others you complete while taking this course) to apply what you learn about marketing. CREDIT UNION MARKETING FUNDAMENTALS 5

4 Activity 1.2 Knowledge Check: Marketers Tools A. Which of the following Ps were discussed in this chapter? People Performance Place Politics Population Positioning Preparation Presentation Price Products Promotion Public Relations B. The original Four Ps of the Marketing Mix are: C. The additional Ps marketers use today include: Refer to Appendix A to check your answers. D. Positioning: Consider the following positioning statements from actual credit unions. Which of the following points of difference do you think they are using to separate themselves from other financial institutions they compete with? Dare to compare our auto loans. Convenience Geographic location Image (brand message) Innovation Price (rates) Product/service selection Quality of service Do more. Start here. Convenience Geographic location Image (brand message) Innovation Price (rates) Product/service selection Quality of service Mobile banking puts you in charge anywhere, anytime. Convenience Geographic location Image (brand message) Innovation Price (rates) Product/service selection Quality of service 6 CREDIT UNION MARKETING FUNDAMENTALS

5 mass markets. But people don t behave like mass markets anymore. That strategy is no longer effective, except for a select few products and services that everybody needs or desires. Now marketers tend to define subsets, or market segments, that can be effectively reached through market segmentation and target marketing. Market segmentation is important because not everybody will buy your goods and services. Some are more likely to buy than others, and for different reasons. Target marketing is important because it focuses your efforts on those segments most likely to become profitable customers. Target marketing allows a credit union to select a group of members that have greater demand for a product being promoted. Target marketing is more cost-efficient and effective than simply sending the same message out to everyone. Market Segments A market segment consists of a group of members who share a similar set of needs and wants. A segment should be identifiable; that is, specific enough that you can tell who is in the group and who isn t in the group. The traits a segment shares may be geographic, demographic, psychographic, or behavioral. Geographic traits are grouped into geographic units, for example located near contact points such as branches or ATMs. Demographic traits are grouped by age, family size, gender, income, occupation, education, religion, race, social class, or nationality. Psychographic traits are grouped by psychological/ personality traits, lifestyles, activities, interests or values. Behavioral traits are grouped by known attitudes toward, use of, and response to the product. Information about market segments can be purchased from outside firms, or may be collected as part of an MCIF data system. Target Marketing Strategy A target market is the part of a segment that a company chooses to pursue as a source of sales. Not every identifiable segment deserves to become a target for marketing. Some are not large enough to merit the expense of a targeted campaign, while others may not be profitable to serve. A segment must meet certain criteria to qualify as a target worthy of its own marketing strategy. A target segment must be: 1. Available in the marketplace in sufficient numbers to merit the expense; 2. Readily identifiable; and 3. Able to be profitably served. If a target segment fails to meet any of these three conditions, the credit union should not attempt to target that segment. The marketing department must first identify specific segments, and then decide which ones to target. Take for example a credit union that has chosen to target segments of new car buyers for a loan promotion. They have chosen segments that include people who: CREDIT UNION MARKETING FUNDAMENTALS 7

6 Live within a close proximity of the credit union delivery channel (branch or shared branch) Are age Are aware of credit union offerings Have no current auto ownership Have a decent credit rating These segments are worth targeting because they meet the three conditions: They are large enough, readily identifiable, and likely to be profitable. To keep target marketing costs down, planners will pick targets for which specialized media exists. For example, you could target motorcycle owners for auto loans by advertising in a local motorcycle club s newsletter. Using Member Information in Target Marketing Member information becomes valuable when it reveals a member is approaching a life-changing event. A member s upcoming wedding, birth, or graduation might come to light through transactions such as a name change on an account, purchase of a deposit share certificate, or applying for a loan. Your credit union could develop a target marketing strategy offering auto loans to student members at graduation, or deposit accounts to all members with a birth event in a given month. Use your imagination to tie life-changing events to products and services you could offer the member. Remember, to warrant using a target marketing approach your credit union must have a sufficient number of members sharing specific circumstances. The targeted segment large enough, readily identifiable and likely to be profitable before a target marketing approach makes sense. Creating Member Value From the beginning of this chapter, you have been building an understanding of the marketing function. Now it s time to deepen your knowledge of how the marketing function creates, communicates, and delivers value to credit union members. Marketers use the term value proposition to describe the cluster of benefits a company promises to deliver. The value proposition articulates the experience customers will gain from taking PLAY PAGE You ll find a scenario that will give you practice spotting profitable segments to target. R eminder: To access the Play Page, go to or go to and type Play Page into the Search Box. Select the title of this module, and then the chapter you want to review. 8 CREDIT UNION MARKETING FUNDAMENTALS

7 To create member value, every credit union needs to determine what benefit it promises to deliver. possession of the company s offering. For example, if the objective of a credit union is to provide superior member satisfaction, then the value proposition of this credit union should explain how its products and services deliver fulfillment of members needs, in a way that s superior to all competitors. Articulate the Value Proposition A value proposition builds on a positioning strategy by putting it into memorable words. A value proposition is a phrase or sentence that speaks about what members gain from the credit union s promised benefits. The value proposition of the March of Dimes is saving babies. From those two words, you can infer all the activities of the March of Dimes stemming from their mission statement: Our mission is to improve the health of babies by preventing birth defects, premature birth, and infant mortality. Credit unions need to capture the benefit they promise in a few words too. To create member value, every credit union needs to determine what benefit it promises to deliver. Then it needs to put that idea into words. The following examples are value propositions used by credit unions: Do more. Start here. Your best interest always comes first. Value Proposition Must-Haves A value proposition communicates points of difference that deliver value to members. Some must-haves are external (driven by members demand for them), and some are internal (driven by the credit union s operations). External (Members) From the member s point of view, a good value proposition will have: Relevance: Members find the point of difference personally relevant and important; Distinctiveness: Members find the point of difference unique and superior to alternatives; and Believability: Members must find the point of difference credible. An easy way to recall these externally-driven requirements of a good value proposition is to remember what a member might say: I care, I like, and I trust. Internal (Operational) From the credit union s point of view, a good value proposition will have: Feasibility: The firm is able to actually deliver the promised point of difference; Communicability: The firm can create a compelling message telling why and how it delivers the point of difference; and Sustainability: The firm must be able to continue delivering the point of difference over time. An easy way to recall these internally-driven requirements of a good value proposition is to remember what a staff member might say: We do, we say, and we keep it up. Try writing a first draft of a value proposition. Then test against the external and internal must-haves CREDIT UNION MARKETING FUNDAMENTALS 9

8 mentioned in this chapter. Activity 1.3 offers a worksheet to help you draft a value proposition for your credit union. Value Proposition Based on Positioning Positioning refers to the distinctive place in the mind of the target market that a company occupies. Two national consumer brands you re probably already familiar with offer examples of value propositions based on positioning. Their value propositions convey the benefits the company promises to deliver. Figure 1.1 gives examples from two well-known consumer companies. Use Activity 1.4 to practice stating your credit union s value proposition, following the format of the examples in Figure 1.1. Measuring Member Value Like all credit union business functions, marketing needs to be measured to determine how well it is delivering on the objective of creating, communicating, and delivering value to members. Performance is an important part of the marketing mix, measuring how well marketing efforts are meeting objectives. One way to measure marketing performance is to quantify how well you are delivering member value. Member value can be measured using numerical Activity 1.3 Value Proposition Worksheet Refer to your Activity 1.1 Worksheet: Investigate Your Credit Union s Positioning, as you complete this activity. An effective value proposition will answer the questions below. Try answering them now, to prepare yourself for writing a value proposition for your credit union. What are the potential purchaser s problems and issues? How do our credit union s products and services address those issues and concerns? How does the potential buyer benefit from these products and services? How do these offerings solve problems, or move purchasers toward their goals? 10 CREDIT UNION MARKETING FUNDAMENTALS

9 Figure 1.1 Examples of Value Propositions Based on Positioning Example: Volvo station wagon Target customers: Safety-conscious upscale families Benefits: Durability and safety Price: 20% premium Core positioning: Safety Value proposition: The safest, most durable wagon for your family, backed up by good service and a long warranty period. Example: Domino s pizza Target customers: Pizza lovers who value convenience Benefits: Delivery speed and good flavor Price: 15% premium Core positioning: Delivery speed for many years Value proposition: Good hot pizza, delivered to your door in 30 minutes, at a moderate price. Activity 1.4 State Your Credit Union s Value Proposition Try your hand at stating your credit union s value proposition by following the format of these examples. Example Credit Union Target: Members who need auto loans Benefits: Fast, easy, best rate possible Price: Market-driven Core positioning: The member-owned non-profit financial service alternative. Value proposition: Getting you (member) the lowest auto loan payment possible. Your Credit Union: Target: Benefits: Price: Core positioning: Value proposition: Remember to test your value proposition statement against these Must-Haves : Relevance Distinctiveness Believability Feasibility Communicability Sustainability CREDIT UNION MARKETING FUNDAMENTALS 11

10 values. Two different methods can be used to measure member value: 1. Total Member Value: This method involves calculating the difference between members evaluation of all the benefits received from the acquired products and services, and the effort and cost that the member has to invest to get those products or services. 2. Net Promoter Score: This method requires you to ask members to evaluate the credit union by answering the question, How likely are you to refer the credit union to friends and family? using a rating scale of 1 to 10. Because a credit union serves different market segments, calculating member value should be done for each key segment. Figure 1.2 describes how to quantify member value, using each of these methods. The Strategic Marketing Plan So far, you ve been introduced to the Marketing Mix the decisions marketers make regarding marketing strategy, target marketing, and the best value proposition to use. These are key components of the strategic marketing plan. A strategic marketing plan includes these components: Situation analysis; Marketing strategy for each identified objective and issue; Financial objectives; Strategies reflecting the marketing mix ; Marketing research; Target segment profiles; Budget; and Evaluation metrics. The other chapters in this book explore the components of a strategic marketing plan. Save the worksheets from this chapter for later use so you can write your own plan. Chapter Summary In this chapter we ve defined marketing as the ability to create, communicate, and deliver value to your customers. We ve introduced you to a large number of concepts that go into professional credit union marketing. These concepts and components of the strategic marketing plan will be further developed in the following chapters. We have introduced the term marketing mix to describe the components in your credit union marketing toolbox. When you use these tools to identify and effectively target market segments, you help market your credit union and develop your own future career options through contributing to your credit union s success. 12 CREDIT UNION MARKETING FUNDAMENTALS

11 Figure 1.2 Calculating Member Value: Two Methods #1: Calculating Total Member Value & Cost Use this form to determine Member Delivered Value for your credit union by completing the following steps. You could base your numbers on any time period for which you have data, but be consistent by choosing the same time frame for all data. Total Member Value and Total Member Cost = Delivered Value Member Delivered Value Total Member Value Total Member Cost Product Value Monetary Cost Service Value Time Cost Personnel Value Energy Cost Image Value Psychic Cost Start with the Total Member Value column on the left; begin at the bottom and work your way up. 1. Image Value: What is the cost for your image? Consider advertising expenditures plus any graphic design fees related to branding, such as the cost for merchandising, displays, and letterhead. 2. Personnel Value: What is the average annual cost of staffing for your branches? Ask your CFO or Human Relations staff for this figure. 3. Service Value: What is the cost of offering the services the credit union provides? 4. Product Value: What is the value of the product/service, e.g., for an auto loan in terms of low rate etc. 5. Total Member Value: Add up the values entered in the left column to calculate the Total Member Value. (continued on next page) CREDIT UNION MARKETING FUNDAMENTALS 13

12 Figure 1.2 Calculating Member Value: Two Methods (continued) Take a similar approach to the Total Member Cost column on the right; start at the bottom and work your way up. 1. Psychic Cost: What is the stress of having to think about a transaction worth to your Member? Like Image Value, the Psychic Cost is difficult to determine, but can be calculated using average transaction cost. 2. Energy Cost: What is the probable cost expenditure required of a Member to acquire products and services from you? 3. Time Cost: What time is required of the member to acquire products and services from you--that he could be spending doing something else? Put a dollar figure on that time. You could use an average wage of $15/hour, or seek a Time Cost estimate from your accounting department. 4. Monetary Cost: What fees, if any, is the member required to pay, separate from the price for the product or service? Identify any costs such as fees that may be barriers to purchase. 5. Total Member Cost: Add up the values entered in the right column to calculate the Total Member Cost. Now, subtract the right column total from the left column total. The total is the Total Member Value you ve delivered to your members. Taking the total Member value and subtracting the total Member cost provides the credit union with a specific, detailed picture on what the Member delivered value is. #2: Calculating Net Promoter Score Ask your members to evaluate the credit union on only one question: How likely are you to refer the credit union to friends and family? Use a rating scale of 1 to 10, with 1 being the lowest and 10 being the highest. Score 8, 9, or 10 = Promoters Score 7 or 6 = Ambivalents Score 5 or below: Detractors. To calculate your Net Promoter Score: 1. Total the Promoter scores; 2. Discard the Ambivalents; 3. Total the Detractor scores; then 4. Subtract the total Detractor sum from the total Promoter sum. The remainder is your Net Promoter Score. Try this with different market segments. If you find that some segments of your members give you a higher Net Promoter Score than others, investigate why. 14 CREDIT UNION MARKETING FUNDAMENTALS