Membership Growth is One Key to Financial Success

By Jon Haller
Director of Market Research
Credit Union National Association

Your credit union’s financial success will be heavily influenced by how well it performs in two areas--member attraction and member retention. Member attraction serves as the primary "cash expenditures" component of "the attraction/retention equation," as the typical cost to attract a new member stands at about $200, according to Sheshunoff Information Services.

A recent Filene Research Institute study, "Asset Growth at Credit Unions: Growth in Membership Versus Assets Per Member," concludes that while retention success, in the form of growing assets-per-member levels, is important for credit unions’ growth efforts, even greater emphasis should be placed on attracting new members, if the credit union has rapid growth as its goal.

Filene’s study of fast-growing credit unions revealed that membership growth was about 1.5 to 2 times as important as assets-per-member growth in contributing to overall asset growth, according to CUNA’s upcoming 2005/2006 Credit Union Environmental Scan. "If you really want to grow, and you want to grow quickly," notes Bob Hoel, Filene’s Executive Director, "then... attracting new members is the key..."

While some credit unions are employing a growth-through-SEG-expansion approach, there are ever-rising numbers of credit unions converting to community charters to accomplish their growth objectives. Yet others are doing both.

Opportunities exist both within and outside of credit unions’ current fields of membership. Whereas--expectedly--community-chartered credit unions register the lowest member-to-potential-member penetration levels, no major field-of-membership classification records a penetration level above 13% (see graph), according to CUNA’s year-end 2004 "Credit Union Operating Ratios and Spreads." On average, over 90% of potential members in credit unions’ existing fields of membership can still be targeted for membership.

As such, it is clear that there is tremendous potential for credit unions to build membership, increase product penetration and develop loyalty from within their existing fields of membership, as well as through expanding to community charters and/or adding new SEGs.

Regardless of your credit union’s chosen growth approach, recognize that you will need strong retention success in addition to attraction success in order to survive. Seek the balance of retention and attraction--in terms of the financial, marketing, and human resources your credit union should devote to each--that best suits your credit union, your membership, and your specific growth objectives.

Additionally, conduct research of the residents living in your community and/or other potential members to identify how extensive your credit union’s awareness-building campaign will need to be in order to establish or enhance its presence in the marketplace, the degrees of "loyalty" that potential members have with their current financial services provider(s), how easy it will be to steal them away, and what the credit union will need to do to attract their business.

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