Over the past year, credit unions have enjoyed a tremendous amount of earned media. From local newspapers to “The Early Show,” journalists have remarked on the nature of credit unions and encouraged consumers to look at these impressive financial institution alternatives. Meanwhile, advertisers reduced spending and local media often became less expensive.
Individual credit unions reacted differently to the recession, corporate fall-out, and rising consumer delinquency. Using its FirstLook program, Callahan & Associates analyzed the marketing expenses of credit unions. Excluding mergers, which affect annual growth rates, and setting a minimum quarterly expense of $10,000 as of March 2009, we compared three groups:
- Credit unions that decreased marketing expenses by 15% to 30%
- Credit unions where marketing expenses were essentially flat: -5% to 5%
- Credit unions that increased marketing expenses by 15% to 30%
Assets ranged from $8 million to $8 billion, though the average asset size for the three groups was between $250 million and $330 million.
Credit unions cutting expenses may have been under pressure to raise reserve levels, yet the net worth ratio for all three groups varied by less than one percentage point. Similarly, all three groups posted positive ROA before the Stabilization Expense.
In terms of marketing budgets, as expected, credit unions that increased marketing expenses had a higher concentration of these expenses as a percentage of total operating expenses. However, the increase in marketing expenses had no effect on member growth or revenue per member. Credit unions that decreased marketing expenses had the highest 12-month member growth level of 2.3%.
However, credit unions that increased marketing expenses saw marginally higher growth in deposit products and significantly higher growth in loan products than those that did not. Notably, credit unions with higher marketing expenses grew outstanding credit card loans by 12.4%, compared to the two other groups, which averaged 8.5%. The higher marketing expenses group also grew auto loans 4.8%, while the other groups’ outstanding balances declined. There was little difference among the groups in mortgage loan growth. Existing marketing campaigns may have been assisted by regulatory action (CARD Act) and the decline in captive financers early in 2009.
Marketing expenses spent over the past year will have a continuing effect. Regardless of marketing budgets, booking loans and building future income is critical to ensuring a profitable future.
|Performance Metrics By Credit Unions' Growth In Marketing Expenses
|Data as of March 31, 2010
|Number of Credit Unions
|Average Asset Size
|Net Worth Ratio
|Average Growth in Marketing Expenses
|Average Marketing Expense
|Marketing Expense as Percent of Total Expenses
|12-Month Loan Growth
|Credit Card Loan Growth
|Auto Loan Growth
|Mortgage Loan Growth
|12-Month Share Growth
|Share Draft Growth
|12-Month Member Growth
|Revenue Per Member