What Do We Need Marketing For?

In my (very glamorous, high-profile) job as an industry analyst, I’m supposed to be on top of industry trends and happenings. For other analysts, that means talking to a lot of people.

Ugh. Mr. Cranky doesn’t like talking to people. 

So I’ve planted listening devices in the offices of leading financial services execs to hear what’s really going on.

The following is (as best as I can make it out, the audio quality wasn’t that good) a conversation between the CEO and CMO of JYAFCU (Just Your Average Federal Credit Union), on Monday, November 7th, the first working day after Bank Transfer Day. 

CEO: How did we do on Saturday?

CMO: (mumbling) You would know if you had bothered to show up.

CEO: What’s that? Can’t hear you. 

CMO: I said, “wouldn’t you know, we did very well.”

CEO: I read that overall, credit unions pulled in 40,000 new accounts and $80 million dollars in deposits. What did we bring in?

CMO: Well, considering we’re JUST YOUR AVERAGE credit union, we opened 6 new accounts, and added $12,000 in deposits. 

CEO: So that’s like, what? One account per hour that we were open on Saturday?

CMO: Uh, yep.

CEO: And were all branches open?

CMO: Uh, yep. 

CEO: So then, not every branch even averaged one new account per hour. 

CMO: Uh, nope.

CEO: How did we do in the month leading up to Bank Transfer Day? CUNA says credit unions opened 650,000 new accounts and brought in $4.5 billion in new deposits. 

CMO: Well, boss, seeing that we’re JUST YOUR AVERAGE credit union, we opened 91 accounts and took in $630,000 in deposits. 

CEO: Well, I’m no CFO, but something doesn’t seem right to me with those numbers.

CMO: I’m the marketing person. Maybe you better explain it to me. 

CEO: Well, on BTD we averaged $2000 in deposits per new account. As did the industry overall, for that matter. Yet, in the month leading up to BTD, we averaged nearly $7000 in deposits per new account. Why the discrepancy?

CMO: I don’t know. My people are working on it. 

CEO: OK, so let’s recap. Since the end of September, we’ve added 97 new members, did I get that right?

CMO: Sure did. 

CEO: So we currently have how many members?

CMO: That would be 12,783. We ended September with 12, 686, which, interestingly enough, is the credit union industry average. 

CEO: Well, I’m no CFO, but my trusty calculator says that’s about 0.8% growth in the month. 

CMO: That’s correct. 

CEO: Remind me again what our membership growth was from September 2010 through September 2011. 

CMO: We grew by the industry average of 1.7%.

CEO: And remind me again what our marketing budget is. 

CMO: Our marketing budget is 1% of assets, which is about the industry average, which comes out to $1.3 million. 

CEO: And remind me again what we spent to create Bank Transfer Day.

CMO: We didn’t spend anything to create Bank Transfer Day.

CEO: OK. Now remind me of one last thing: What do I need you for?

CMO: Huh? What do you mean?

CEO: Between September 2010 and September 2011, we spent $1.3 million on marketing which produced 216 new members. That means we spent about $6000 per new member. According to that Net Promoter guy from Bain, it costs 6 to 7 times more to acquire a customer than retain one, isn’t that right?

CMO: Ron Shevlin says that’s quantipulation.

CEO: When Ron Shevlin writes a bestselling management book, I’ll listen to what Ron Shevlin has to say. In the meantime,  I have to assume that the vast majority of our marketing budget is focused on member acquisition and not retention. So, even if the part of the marketing budget that went to acquisition was just $1 million, we still spent more than $4600 in the past year to acquire each new member. And what you’re telling me is that in the past month we acquired 45% of the total number of members we acquired in the previous 12 months — at absolutely no cost to us. I ask you again:

What do I need marketing for?

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Credit Unions: New Members, Boiled Lightly

Well, Bank Transfer Day has come and gone.

Actually, I doubt that it really has “gone” as I’m sure that credit unions will do everything under the sun to keep the glow of the Bank Transfer Day movement a-burning.

Ironically — and I don’t hear anybody else talking about this — credit unions might not have been the only financial institutions to have benefited from BTD. And I’m not referring to the “shedding of unprofitable customers” that some people talk about.

Anecdotally, I’ve talked to a few folks at mid-sized banks who have told me that they’ve seen pretty good growth in new customers over the past month or so.

But that’s not what this blog post is about. This one is about the Wall Street Journal.

I’m a big fan of the WSJ. Read it every day. Agree with the editorials far more often than I disagree with them. But when some press outlet screws up — whether I support it or not — regarding something related to the world of financial services, then I’m going to call them out over it.

And that’s what this blog post is about — calling the WSJ out regarding an article titled Credit Unions Poach Clients (you may need a subscription to access this article. Surprise, surprise, I have one).

Here’s are the issues I have with the article:

1. Credit unions did not poach clients. According to my handy (online) thesaurus, “poach” means infringe upon, trespass, or boil lightly. Sorry, but credit unions didn’t do anything of these things. I’m pretty sure that the new members that credit unions have signed up in the past month came over willingly. I also don’t think that credit unions went over to banks and “trespassed” in any way. And if you know of any credit unions that lightly boiled their new members, please — PLEASE — let me know.

2. Profitability of switchers is an unknown. The WSJ article claims that “people who gravitate to credit unions tend to be unprofitable for giant banks because of the small balances they keep on deposit…” Not so fast. Take a look at the report I did for BancVue. There are many credit unions — and community banks — who offer high-yield checking accounts (Rewards Checking) where the average balances are about 4x the size of free (no-interest) checking accounts, and whose profitability exceeds that of the free checking accounts. According to CUNA, 650k new accounts were opened at CUs leading up to BTD, with $4.5 billion in new deposits generated. That’s nearly $7k/account. Not exactly “small balances.”

3. CUs charge fees, too. The article says “banks try to recoup such costs [to maintain a checking account) by imposing overdraft fees and other charges.” While credit union members may — on average — pay less in fees than the average bank customer (let’s not get into the quantipulation inherent in that statistic), guess what WSJ? Credit unions charge an overdraft fee, too.

4. Banks are everywhere, man.  Johnny Cash shoulda done a song on this. The WSJ quotes a guy from NCUA (which it says is a trade group, which isn’t accurate according to @paulsworld) who says “many of the nation’s 7,200 credit unions are in rural areas where there is no other banking option.” I don’t think this is a supportable statement.

5. The housing bubble comment was a poor choice. The article states that “several large commercial credit unions…went bust after loading up on high-risk mortgages during the housing bubble.” True statement. But in comparison to the impact the housing bubble had on banks, calling out the impact on the credit union industry was pretty manipulative. 

C’mon WSJ: We expect a lot better from you.

p.s. If you want a copy of the report referenced above Financial High Coup: Why High-Yield Checking Accounts Trump Free Checking, contact BancVue.

Bank Transfer Day Should Be A BAD Day

Many people involved in the financial services industry know that this coming Saturday, November 5, is being called Bank Transfer Day. (You can Google the term to find more information about it, how it got started, etc.). 

And many in the credit union industry seem to be licking their chops, awaiting a slew of new members, as (they hope) millions of disaffected big bank customers observe this newly-ordained “holiday.”

I challenge credit unions to make Saturday, November 5, a BAD day. 

What does BAD stand for? I thought you’d never ask. Bank ACCOUNT AVOIDANCE Day.

What I DON’T mean by “avoidance” is simply moving one’s checking account from a bank to a credit union. 

What I DO mean is getting rid of the checking account altogether.

Aite Group surveyed consumers who use “alternative” financial services products (e.g., prepaid cards, check cashing services, etc.) to manage their finances, and identified a set of consumers who don’t have a checking account (not all users of alternative financial products are un- or under-banked, FYI), and rely instead on prepaid cards. 

The most prevalent reason why prepaid card holders who don’t have a checking account don’t have one? They don’t want to pay fees. Not just fees for using a debit card. But fees for insufficient funds, fees for reordering checks, or even basic monthly fees. 

This is an interesting perspective when you consider that many of the prepaid cards that these folks are using to manage their financial lives do have a monthly fee (and other fees) associated with them. 

Are credit unions prepared to identify consumers who shouldn’t have, or could do without having, a checking account? Will they recommend to these consumers that they NOT open a checking account, and use prepaid cards instead? And do they even offer prepaid cards in the first place?

We’ll see what happens on Saturday.

Bank Transfer Day Needs A New Name

Bank Transfer Day is a gawdawful name. I saw one CU person’s tweet alluding to it as BTD. Ugh.

What the hell does it mean? Transfer your money from one bank account to another?

Yes, I know full well it’s about moving your money OUT OF a bank (and into a credit union).  But how is that obvious to the 99%? 

One friend (who shall remain nameless unless he tells me it’s OK to attribute this to him) suggested calling it Tell Your Bank To Shove It Day.

Now we’re talking. 

How about CU Later Banks! Day? (Or is that too obvious?)

Or maybe Break The Bank Day is better. On second thought, Durbin’s already pretty much proclaimed 2011 to be Break The Bank Year.

Spank Your Bank Day is another option. Too violent?

I don’t know what the right answer is, and it doesn’t really matter what I think since nobody is going to change the name based on what I have to say. But maybe I can get the powers to be to rethink the name.

Having said that, who are the “powers that be”?

If you know, please let me know. Because after I ask them to change the name, I’m going to suggest that they change the date. Doing this on a Saturday isn’t the best idea.

And who came up with that picture? It looks like The Joker from the Batman series and movies.

What do you think the day should be called?