December 10, 2007
Calling Gen Y | After marketing gaffes missed a whole population of customers, Maine's credit unions are aiming for the next generation
By Brandi Neal
A funny thing happened with credit unions over the last 20 years. While doing steady business servicing the great generation of baby boomers, the industry unintentionally neglected another big segment of the market: Generation X.
While the 46 million members of Gen X are but a fraction of the 80 million in the baby boomer generation, credit unions around the country are becoming increasingly concerned that as America's largest generation ages into its golden years, there won't be anyone to pick up where the baby boomers leave off.
"The average age of a credit union member is 47 years old. And it's trending upward," says George Hofheimer, chief research officer for the Filene Research Institute, a credit union research group in Madison, Wisc. "It doesn't seem like young consumers are beating down the doors of credit unions."
The story's the same among Maine credit unions. "It's been a concern of ours," says Steve Van Rensselaer, vice president of marketing for Atlantic Federal Credit Union in Brunswick, of the aging membership of credit unions.
But while the Gen X population may have slipped out of credit unions' collective grasp, there's a movement afoot to capture its younger sibling, Generation Y ˆ a group that rivals the baby boomers in size.
Gen Y, which refers to individuals born between 1981 and 1995, have become the key demographic credit unions in Maine, and across the country, are looking to recruit as their newest members, according to Van Rensselaer. He adds that he's not sure why more marketing wasn't aggressively directed at Gen X'ers, who are now in the 30-40 age bracket, but speculates it could be because they represent a significantly smaller portion of the population than both baby boomers and Gen Y. "Baby boomers were in their prime. Ten years ago, they were really driving the credit unions," he says. "They've been a loyal following. Now, we realize we've missed a whole generation."
He's unhappy with the number of younger members at Atlantic, he says, and adds the credit union has tried a number of gambits to attract younger customers, from lowering the minimum deposit on its CDs to adding online banking options. Van Rensselaer and others in Maine's credit union industry want to make sure they don't miss the boat again. That's why credit unions statewide now offer online banking, school-based educational programs, shared branching nationwide, slick financial products and personal service as industry standards designed to capture the attention of Gen Y and the younger generations that will follow in their footsteps.
Atlantic Federal seems to be on the right track. John Murphy, president and CEO of the Maine Credit Union League, which represents 600,000 members in Maine, says the approach to attracting younger members is two-pronged. He cites both education and financial products that can be marketed toward younger generations as equally important tools.
Bits of bytes
At Atlantic Federal, technology is what's seen as the best bet to help lure the Internet-savvy members of Gen Y. Currently, the credit union offers free online banking, is in the process of rolling out free online bill payment, and in the next six months is expected to offer mobile phone banking and text message finance alerts.
"Credit unions, we get kind of a bad rap, people see us as being not as sophisticated," says Van Rensselaer. "[But] a lot of times we have been early adopters of technology."
However, all this new technology isn't free. For each new Web-based product, Maine credit unions are charged a fee upfront and an additional fee each time a member uses the service. Van Renesselaer wouldn't disclose how much Atlantic Federal pays for its technology, but says the credit union is able to absorb the cost and offer these services to members for free by investing its money. He says in the future the costs will balance out.
"We live in a world where the older generation still wants a physical location, and the younger generation wants e-services," he says, and adds that despite the fees, providing e-services is cheaper than building multiple physical branches, which will become less important as people embrace the Internet.
Adam Morris, marketing manager of Five County Federal Credit Union, also is using technology to attract new members. A few months ago, Five County was the first credit union in Maine to allow customers to open accounts online with a product called Opening Act, and Morris expects the credit union to offer online loan applications and transfers to other financial institutions. "And we're doing more advertising online to try to reach that younger generation," he says.
Hofheimer says the young credit union employees can help attract new members. The Filene Research Institute is readying the launch of an 18-month study to determine how credit unions can be more relevant to younger generations.
The institute has compiled a group of 30 twenty-somethings from across the country who are employed by credit unions, to serve as a problem-solving group. The group dubbed "The 30 Under 30 Group" will post its findings on a blog during the study.
Luke Labbe, president of PeoplesChoice Credit Union in York County, says credit unions need to overhaul their marketing efforts if they want to attract younger members.
In fact, Labbe says many credit unions have failed at even the most simple marketing task: letting people know they're open for business. That's because there's still a perception among consumers, notes Labbe, that membership in a credit union is exclusive to whichever church, county or company with which the credit union is affiliated.
For example, PeoplesChoice started as St. Joseph's and served members of the Biddeford parish in the church basement. These days, however, the credit union now accepts as a member anyone who lives or works in York County. Meanwhile, Five County Credit Union was built around employees of Bath Iron Works, but now accepts anyone living and working in Androscoggin, Cumberland, Lincoln, Kennebec and Sagadahoc counties. "Credit unions are misunderstood in the market place," says Labbe.
Hofheimer says credit unions lag behind in marketing because they didn't have to market aggressively to gain members until fairly recently. Because most credit unions were based around a company or other group, memos were simply put on employee's desks or inserted in the church newsletter. "Banks always had to be aggressive to gain clients, credit unions never did," Hofheimer says.
Fierce competition for consumers' attention is a factor, too. Murphy says more financial institutions are competing for members and clients than ever before. He adds that MCUL is launching its own study in early 2008 to find out what consumers want in a credit union so it can better serve its members. "Financial services are more cluttered today than [they once were]," he says. "We have to do a good job of getting the message out. We're making progress."
Lesson plan
Meanwhile, credit unions are looking inward to attract younger customers. For example, the Filene Institute is focusing on a program that places summer associates with jobs at credit unions. "We want to emphasize career opportunities with credit unions for young people," he says.
A study conducted by the Filene Institute reports that credit union board members tend to be older, white males, and three-fourths of young credit unions members polled don't feel they are represented on the board. Integrating younger members into those boards, Hofheimer says, is key to understanding what the younger generations want from a financial institution. What's more, the industry's older members haven't often been early adopters of technological developments like online banking and electronic bill pay. "People who are in their 40s, 50s and 60s are dumbfounded at what young adults are doing with their finances," Hofheimer says. "You can say, 'I don't get it and I'm not going to do it,' or you can say, 'I don't get it, but let's bring someone in to explain it to us in explicit terms.'"
Murphy concurs and says it's important for a credit union's governing model to be representative of the people it's attempting to serve. He says credit unions in Maine are staffed by some young people, but hope to attract even more young workers in the future. "That's one of the things we're asking in our 2008 study," Murphy says.
School-related programs are the most popular way credit unions locally are working to educate young, potential members.
The Maine Credit Union League hosts annual Financial Fitness Fairs at various locations around the state. The program, which began in Lewiston and Auburn, is designed to teach financial literacy to school-age kids, but also allows credit unions to get to a young group that hasn't made a decision about what bank to join.
Van Rensselaer says Atlantic has adopted a similar approach. "We hope people take advantage of us as they learn what finances are all about," he says. "We go to high schools and give presentations hoping to get them financial literacy and education at a younger age. Maybe they'll get an auto or home loan [with us]."
Van Rensselaer is confident the new marketing and education tools will be successful in getting the attention of the next generation.
"I'm confident we'll be able to weather whatever happens," he says.
Still, Van Rensselaer say that failure to recruit new, younger members could result in damage to credit unions' financial portfolios and affect the interest rates they are able to offer, though Hofheimer says the proactive approach taken by most credit unions will make a difference. "If you're standing in the middle of the road and you see a steam roller coming at you 20 feet away, you have the ability to get out of the way," he says. "It's not like a freight train ˆ you have the opportunity to do something."
While the 46 million members of Gen X are but a fraction of the 80 million in the baby boomer generation, credit unions around the country are becoming increasingly concerned that as America's largest generation ages into its golden years, there won't be anyone to pick up where the baby boomers leave off.
"The average age of a credit union member is 47 years old. And it's trending upward," says George Hofheimer, chief research officer for the Filene Research Institute, a credit union research group in Madison, Wisc. "It doesn't seem like young consumers are beating down the doors of credit unions."
The story's the same among Maine credit unions. "It's been a concern of ours," says Steve Van Rensselaer, vice president of marketing for Atlantic Federal Credit Union in Brunswick, of the aging membership of credit unions.
But while the Gen X population may have slipped out of credit unions' collective grasp, there's a movement afoot to capture its younger sibling, Generation Y ˆ a group that rivals the baby boomers in size.
Gen Y, which refers to individuals born between 1981 and 1995, have become the key demographic credit unions in Maine, and across the country, are looking to recruit as their newest members, according to Van Rensselaer. He adds that he's not sure why more marketing wasn't aggressively directed at Gen X'ers, who are now in the 30-40 age bracket, but speculates it could be because they represent a significantly smaller portion of the population than both baby boomers and Gen Y. "Baby boomers were in their prime. Ten years ago, they were really driving the credit unions," he says. "They've been a loyal following. Now, we realize we've missed a whole generation."
He's unhappy with the number of younger members at Atlantic, he says, and adds the credit union has tried a number of gambits to attract younger customers, from lowering the minimum deposit on its CDs to adding online banking options. Van Rensselaer and others in Maine's credit union industry want to make sure they don't miss the boat again. That's why credit unions statewide now offer online banking, school-based educational programs, shared branching nationwide, slick financial products and personal service as industry standards designed to capture the attention of Gen Y and the younger generations that will follow in their footsteps.
Atlantic Federal seems to be on the right track. John Murphy, president and CEO of the Maine Credit Union League, which represents 600,000 members in Maine, says the approach to attracting younger members is two-pronged. He cites both education and financial products that can be marketed toward younger generations as equally important tools.
Bits of bytes
At Atlantic Federal, technology is what's seen as the best bet to help lure the Internet-savvy members of Gen Y. Currently, the credit union offers free online banking, is in the process of rolling out free online bill payment, and in the next six months is expected to offer mobile phone banking and text message finance alerts.
"Credit unions, we get kind of a bad rap, people see us as being not as sophisticated," says Van Rensselaer. "[But] a lot of times we have been early adopters of technology."
However, all this new technology isn't free. For each new Web-based product, Maine credit unions are charged a fee upfront and an additional fee each time a member uses the service. Van Renesselaer wouldn't disclose how much Atlantic Federal pays for its technology, but says the credit union is able to absorb the cost and offer these services to members for free by investing its money. He says in the future the costs will balance out.
"We live in a world where the older generation still wants a physical location, and the younger generation wants e-services," he says, and adds that despite the fees, providing e-services is cheaper than building multiple physical branches, which will become less important as people embrace the Internet.
Adam Morris, marketing manager of Five County Federal Credit Union, also is using technology to attract new members. A few months ago, Five County was the first credit union in Maine to allow customers to open accounts online with a product called Opening Act, and Morris expects the credit union to offer online loan applications and transfers to other financial institutions. "And we're doing more advertising online to try to reach that younger generation," he says.
Hofheimer says the young credit union employees can help attract new members. The Filene Research Institute is readying the launch of an 18-month study to determine how credit unions can be more relevant to younger generations.
The institute has compiled a group of 30 twenty-somethings from across the country who are employed by credit unions, to serve as a problem-solving group. The group dubbed "The 30 Under 30 Group" will post its findings on a blog during the study.
Luke Labbe, president of PeoplesChoice Credit Union in York County, says credit unions need to overhaul their marketing efforts if they want to attract younger members.
In fact, Labbe says many credit unions have failed at even the most simple marketing task: letting people know they're open for business. That's because there's still a perception among consumers, notes Labbe, that membership in a credit union is exclusive to whichever church, county or company with which the credit union is affiliated.
For example, PeoplesChoice started as St. Joseph's and served members of the Biddeford parish in the church basement. These days, however, the credit union now accepts as a member anyone who lives or works in York County. Meanwhile, Five County Credit Union was built around employees of Bath Iron Works, but now accepts anyone living and working in Androscoggin, Cumberland, Lincoln, Kennebec and Sagadahoc counties. "Credit unions are misunderstood in the market place," says Labbe.
Hofheimer says credit unions lag behind in marketing because they didn't have to market aggressively to gain members until fairly recently. Because most credit unions were based around a company or other group, memos were simply put on employee's desks or inserted in the church newsletter. "Banks always had to be aggressive to gain clients, credit unions never did," Hofheimer says.
Fierce competition for consumers' attention is a factor, too. Murphy says more financial institutions are competing for members and clients than ever before. He adds that MCUL is launching its own study in early 2008 to find out what consumers want in a credit union so it can better serve its members. "Financial services are more cluttered today than [they once were]," he says. "We have to do a good job of getting the message out. We're making progress."
Lesson plan
Meanwhile, credit unions are looking inward to attract younger customers. For example, the Filene Institute is focusing on a program that places summer associates with jobs at credit unions. "We want to emphasize career opportunities with credit unions for young people," he says.
A study conducted by the Filene Institute reports that credit union board members tend to be older, white males, and three-fourths of young credit unions members polled don't feel they are represented on the board. Integrating younger members into those boards, Hofheimer says, is key to understanding what the younger generations want from a financial institution. What's more, the industry's older members haven't often been early adopters of technological developments like online banking and electronic bill pay. "People who are in their 40s, 50s and 60s are dumbfounded at what young adults are doing with their finances," Hofheimer says. "You can say, 'I don't get it and I'm not going to do it,' or you can say, 'I don't get it, but let's bring someone in to explain it to us in explicit terms.'"
Murphy concurs and says it's important for a credit union's governing model to be representative of the people it's attempting to serve. He says credit unions in Maine are staffed by some young people, but hope to attract even more young workers in the future. "That's one of the things we're asking in our 2008 study," Murphy says.
School-related programs are the most popular way credit unions locally are working to educate young, potential members.
The Maine Credit Union League hosts annual Financial Fitness Fairs at various locations around the state. The program, which began in Lewiston and Auburn, is designed to teach financial literacy to school-age kids, but also allows credit unions to get to a young group that hasn't made a decision about what bank to join.
Van Rensselaer says Atlantic has adopted a similar approach. "We hope people take advantage of us as they learn what finances are all about," he says. "We go to high schools and give presentations hoping to get them financial literacy and education at a younger age. Maybe they'll get an auto or home loan [with us]."
Van Rensselaer is confident the new marketing and education tools will be successful in getting the attention of the next generation.
"I'm confident we'll be able to weather whatever happens," he says.
Still, Van Rensselaer say that failure to recruit new, younger members could result in damage to credit unions' financial portfolios and affect the interest rates they are able to offer, though Hofheimer says the proactive approach taken by most credit unions will make a difference. "If you're standing in the middle of the road and you see a steam roller coming at you 20 feet away, you have the ability to get out of the way," he says. "It's not like a freight train ˆ you have the opportunity to do something."
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