Rethinking your Field of Membership

As credit unions navigate their way through the current economic storm, I'd like to suggest that they revisit one of their most basic foundations.


As credit unions navigate their way through the current economic storm, I'd like to suggest that they revisit one of their most basic foundations:

How can the credit union serve its membership in a highly effective way?

The corollary to this question is:

Who we are supposed to serve and, more importantly, who is not in that group?

The field of membership in your charter should give you the primary answer to this question and your mission statement should more clearly define this target market. Practically any business is most effective when it clearly defines its target market and then focuses all its efforts, e.g. product design, delivery methods, and marketing, on that target market.
Contradicting that truism, the paradigm for many credit unions in the recent past seems to have been "grow your potential field of membership as large and as fast as you can, regardless of what group of people you add." Credit unions have used applications for expansions, charter changes, and mergers to aggressively pursue this end.

The result has been that many credit unions now have a target market (field of membership) that is one of two types:

  1. A disparate agglomeration of employment and geographic groups with little similarity to each other.
  2. A potential membership that is no more specific than "people living in the United States and businesses who may need financial services."

In many cases today, credit unions have unfocused potential fields of membership that they are not able to serve adequately. Trying to do everything for everyone is a road into the business abyss.

Want a quick metric to check if your credit union knows who it wants to serve? Ask your tellers and MSRs to write down what kind of members you want and what kind you don't want. If their answers do not reflect an obvious consensus, you have a problem.

How about another metric? What is your members-to-potential-members ratio? (This assumes that your potential membership is real. If it isn't, you should revise it.) This ratio number for the credit unions included in the 105 credit unions in the Fourth Quarter 2008 Callahan First Look database shows an average ratio of only 28%. The median ratio is only 20%. The average for all credit unions on Q3 2008 was still less than 50%.

Do these mediocre numbers sound like a success to you? What is your ratio? Another metric to use is your market share for major loan and savings products among your potential membership. If your figure is 15% or less, like most credit unions, perhaps you have not done an adequate job of serving your potential membership.

I worked with a credit union on the West Coast whose fields of membership included high tech research companies, a government agency, a university, and a service company, with each group's offices located many miles away from the others. This was completely unfocused. This would be like a retail business selling a disparate combination of high-end jewelry, discount hardware, on-line video games, and restaurant supplies. It is unlikely that this credit union will be able to provide a superior level of service to all these groups because their needs and desires are very different. This is a basic marketing 101.

Perhaps you should step back and take a look at your field of membership and ask the question:

If our credit union did not exist today, and there is a backer to provide the capital and start- up funding needed to found the credit union, is this field of membership the one we would choose?

If the answer is anything other than yes, it is time to seriously reexamine your field of membership.