Consumers have dozens of financial institutions to choose from, all within a few miles of their home or a few clicks from their computer. If credit unions don't communicate what it is that makes them different, consumers will gravitate to institutions that do.
The credit union difference lies in its cooperative model. But the benefits of shared ownership don’t begin and end at the credit union doors. According to the Business Week article “Consumers Buy Into ‘Buy Local,’” local merchants are more likely to keep wealth local. In fact, a study by consulting firm Civic Economics and the Institute for Local Self-Reliance found for every $100 spent at a locally owned store, $45 remains local. For larger chains it’s $13.
One manifestation of the financial “buy local” movement is the Move Your Money campaign. But there are larger lessons to extrapolate from individual action. Just as consumers can make a greater impact when choosing to deposit and spend locally, so, too, can credit unions make a greater impact in the financial services industry.
“If cooperatives work toward the creation of a successful and sustainable cooperative economy by promoting the interests of cooperatives and supporting the growth and development of new and existing co‑operatives,” says Abdul-Shahid Mustafa, general manager at Mountain View Market and Board member of the National Cooperative Grocers Association, “then we will be able to gain market share while creating investment opportunities for a wider range of stakeholders.”
Looking outside the industry provides a fresh perspective on new strategies and lessons for member-owned establishments. Here, then, is a continuation of CreditUnions.com's examination of exemplary performers in the cooperative movement.
Increase Good Costs; Prune the Bad
In a recession, not all costs are equal. This is why it is imperative for credit unions to increase investments in good costs and prune bad costs.
Determining where to cut costs but still maintain service is a dilemma every credit union faces. Ace Hardware, whose stores are independently owned and operated, uses efficiency technology to identify cost-cutting opportunities. Ace’s technology uses shopping patterns to help store managers schedule the best times for tasks such as stocking the shelves and cleaning the facilities. The technology has helped ACE cut costs, maintain service levels, and expand evening and weekend customer service hours. The member focus of the hardware store landed it, again, in the Top 10 of BusinessWeek’s 2009 “Customer Service Champs” list.
According to a March 2009 press release, “Since 2005, Ace has experienced the largest expansion in its 85-year history. Ace has opened 420 new stores in the United States over the last three years. With more than 4, 600 neighborhood hardware stores, 50% of the U.S. population is within three miles of an Ace store.”
Here’s a cost-efficient cooperative with no concerns about convenience.
Provide Relevant Services
Consumers are weary. The recession, although technically over, has lingering effects. Consumers are thriftier and less willing to accept at face value “to good to be true” scenarios. And this doesn’t just apply to their financial services.
“Recent events in the wider economy have given rise to a crisis of trust,” said Vivian Woodell, chief executive UK-based The Phone Co-op, in a 2009 Eco-Interviews. “In our view, this relates to the fact that in most businesses, there is a fundamental misalignment of the interests in the customers and those of other stakeholders.”
The Phone Co-op emphasizes the alignment of trust inherent in its organization by providing more services that will resonate with its members. The England-based co-operative, wants its members to know “social responsibility isn’t a marketing gimmick.” It conducts business in a way that promotes the wellbeing of the people and communities it serves — its stakeholders — and minimizes its negative impact on the environment. It supports measures such as recycling, offsetting carbon emissions, buying green electricity, investing in wind power, and minimizing car travel.
Credit unions are no rookies when it comes to fostering cooperative initiatives, and in a market saturated with half-hearted promises from large corporations, that community spirit sets credit unions — as well as other co-ops — apart from the pack.
For more best practices from other cooperative players, read:
What REI (and Other Co-ops) Can Teach Credit Unions (part 1)
An Interview with the National Cooperative Grocers Association