The strategic planning season is in full swing. Conference rooms everywhere are being filled with executives pouring over lengthy presentations covering financial data, operational costs, forecasting and budget proposals. Executives are asking themselves, “What am I going to do differently next year to drive growth?”
Critical to a credit union’s financial performance is loan income. There are several options for loan growth that a credit union will focus on but probably the most important is growth from within. Typically termed as organic loan growth, it is considered the most profitable loan revenue source as it comes from members already doing business with you. The more products a member has with their credit union, the more profitable they are and more likely they are to remain a member for life.
In this digital world, and especially with millennials, the credit union industry must find new ways to increase their products-per-member ratio. The first challenge many credit unions face is that it can be difficult to engage their members across the many marketing channels that are forever shifting. Second, how valuable are the products and services you are offering your members? You need to ask yourself from your members’ perspective … what is in it for me?
Focusing your efforts on the two points referenced above will position you more favorably with your members. It will also enhance the profitability makeup of your membership base. Now that we addressed some industry challenges, let’s look at where there are opportunities to capture more of your members’ auto loans and make them more “sticky.”
First, let’s look at all resources you may or may not have that could fuel loan volume by reinvesting in member relationships. Are you utilizing all channels to reach members of all generations? Keep in mind, organic growth doesn’t have to be limited to building stronger ties with just members. Try collaborating with outside vendors who can foster growth by engaging your members before they purchase their next car.
An example of this can be found in reviewing alliances in the auto loan industry that could play a greater role in benefiting all parties involved. Take for instance the benefits of incorporating local dealerships into the planning process and how best to serve them while benefiting both you and your members. More importantly, this has nothing to do with indirect lending. This direct relationship with dealerships has the opportunity to expand the credit union’s auto loan portfolio, but more importantly to do so with your existing members. This relationship can be very rewarding financially but it takes time and a dedicated approach to progress into a successful platform.
As we take a closer look, here’s why this area of relationship building is so important: When a member visits a dealership, there is no guarantee that loan will be captured by your credit union, even if you have an indirect program. After all, how much interaction do you have with your members before they visit the dealership? It’s time to increase the odds of capturing that loan by connecting with your members before or at the point of sale.
Remember, a member is typically focused on how much they are going to pay for a car – researching, shopping, comparing and determining the value of their trade-in – and less focused on the financing. More than 97% of car buyers begin their vehicle search online and spend four months researching, so make sure you’re messaging to them correctly and that you’re being heard across all channels. Stop focusing on the rate and remember to be more authentic with your members. Again, make sure your message aligns with their needs and wants … what is in it for me?
Providing your membership with your own custom car shopping platform that addresses the items listed above will put you in a much more favorable position. Think of all the members you can engage if you had your own Edmunds or AutoTrader site. However, your distinct advantage over these sites is that your members have established relationships with you and will be more trusting of your services. The key is to engage them first and then cross-sell your loan products and services. You know your members are using these sites, so it is time for you to exploit this opportunity!
Now, ask yourself, how much interaction do you have with your local dealerships? Depending on your answer, does the relationship focus on what the dealer is interested in – selling more cars and higher profits? If not, you are at a disadvantage if you think the dealer is going to push volume to your credit union strictly because of your low rates. If it always came down to rate, credit unions would have a much larger share of the auto loan market.
Getting past rate, the more successful credit unions have launched their own preferred dealer network to distinguish themselves from the long list of lenders a dealer can choose from. These credit unions reward dealers that send business back to the credit union by promoting these dealers to their members on their own car shopping site. Being a Preferred Dealer allows the dealer to piggy-back off the credit union’s strong brand presence while being promoted across the many delivery channels the credit union employs. More importantly, these members can shop and research at home, on the road or wherever their mobile device takes them. It is 24/7/365. Think of how much value a dealer would place in that type of exposure and why they would want to foster a tighter relationship with you. Now the relationship is built on more than just rate and is further enhanced by the credit union’s ability to drive sales and profit for the dealership. What the credit union now has, which is critical in any business relationship, is leverage!
Critical to influencing your trajectory in terms of auto loan growth is to review the various methods your credit union has available to help the member on the decision-making journey. Increase communications with the member and the dealership to build that bridge for greater loan growth. As the planning dialogue for 2017 continues, credit unions need to have the answer to the question: “What are we going to be doing differently from last year?”
Robert O’Hara is vice president of strategic alliances GrooveCar and CU Xpress Lease. He can be reached at 631-454-7500 Ext. 124 or rohara@groovecar.com.
