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Payment Protection:Member Value, Marketing Combine for Win-Win
by Rich Trace, Director of Product Management, Credit InsurancePam Schnagl, Market Research Analyst, Voice of Customer
22
CUNA Mutual Group’s Payment Protection Research examines the product value and its
delivery. The research shows high value with benefits to credit unions and their members.
Compared to 1998 research conducted by CUNA Mutual Group, the importance of Payment
Protection in generating fee income has increased.
Credit union research indicates cross-selling efforts can be improved. Members’ needs vary,
and lending staff may be hesitant to promote given their level of understanding of these
needs. Training reinforces product knowledge, and can be used
to build confidence in addressing the member need. Credit union
members are looking for this kind of information and advice from
their credit union.
A sales approach is not always seen as a member service by
credit unions. However, in providing information about products
and services that meet needs, this is a service. Credit unions are seen as advocates for
their members, and because of this relationship, members are even more likely to want
information that will benefit them.
Compared to 1998 research conducted by
CUNA Mutual Group, the importance of
Payment Protection in generating fee income
has increased.
Executive Summary
3CUNA Mutual Group • Lending Strategies & Trends White Paper • December 2011
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3CUNA Mutual Group • Payment Protection: Member Value, Marketing Combine for Win-Win • December 2011
The research shows credit unions have a strong commitment to developing a
cross-sell environment. They recognize the need to take full advantage of all
opportunities related to cross-selling financial products and services. And in order
to be effective, a culture built on providing products that benefit members and the
credit union over the long term requires support. Because these products meet a
member need, credit unions will be able to serve as an advocate in delivering the
product, reinforcing a market strength.
As research shows, emotional connection alone will not create success. Companies
need to have the delivery, sales and service in place to be effective. Therefore,
streamlining this delivery and eliminating the barriers prove to be important steps
in facilitating that process.
The 2011 research shows:
•Ninety-twopercentofcreditunions
surveyedsayacross-sellculture
is very important to their success.
•Ahighpercentageofcredit
unions say credit life is a product
members need (82 percent) with
a similar number (83 percent)
sayingitisagoodvalueforthe
money. For credit disability, these
percentagesarealsohigh(82and
78 percent, respectively).
•Only33percentofcreditunions
say they are satisfied with their
cross-sellefforts.Creditunions
who are satisfied with their efforts
aremorelikelytoutilizetraining,
trackingandquotingtheloan
payment with Payment Protection.
However, the satisfaction
differencesaremuchlarger
forcreditunionsthatareusing
incentives,settingsalesgoalsand
includingcross-sellingresultsin
performance evaluations.
•Inthat59percentofcreditunion
members look to their credit union
for some type of help or advice
regardingtheirfinancialsituation,
members are interested in
information on financial products
and services.
•Oncesold,83percentof
credit unions say members
will repurchase. Given this
percentage,across-sell
investment is well worth it
because it provides the basis
forlong-termresults.
44
Research confirms loan growth is a top priority for credit unions, and it also shows that fee
income has become increasingly important. Fee income comprises a significant percent of a
typical credit union’s revenue and for many that percentage has nearly doubled since 2000. In
2010, the credit union system generated $13 billion in fee and other operating income. For the
last decade, the average credit union ROA would be below zero without non-interest income
and the trend doesn’t appear to be changing.
Introduction:
Return on Average Assets (ROA)
51
-82 ROA less Fees and Other Income*
Basis Points
Source: CUNA Economics & Statistics, NCUA and CUNA Mutual Economics *Note: The expenses associated with Fees and Other Income were not removed
Credit Union System Reliance on Fee Income Has Grown
*Note: The expenses associated with Fees and Other Income were not removed Source: CUNA Economics & Statistics, NCUA and CUNA Mutual Economics
5CUNA Mutual Group • Lending Strategies & Trends White Paper • December 2011 5CUNA Mutual Group • Payment Protection: Member Value, Marketing Combine for Win-Win • December 2011
Increasingmemberparticipation
in credit insurance/debt protection
appears to address two key
underlyingmarketforcesconverging
ontheconsumerlendingindustry:
consumers’ financial needs and the
lossofnon-interestincome.
The credit union industry faces a loss of non-interest income and perhaps a greater cost
to comply with new regulations. In CUNA Mutual Group’s Lending Strategies and Trends research
conducted in 2010, 41 percent of credit unions said they were extremely concerned about the
impact on fee income due to regulations such as “Reg E” and the Credit Card Act.1 The regulatory
environment has given consumers new protections against fees even though the credit union
industry historically doesn’t impose unwarranted fees on its members. Consequently, credit
unions have been caught in the crossfire.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law in July 2010,
will likely reduce income from debit card interchange fees. Perhaps a larger impact of the bill
will be the Bureau of Consumer Financial Protection that it created. The impact of this new
regulatory body won’t be known until it is in full operation. But it’s clear credit unions will face
higher compliance costs.
The economy has had prolonged high unemployment, lowering consumer confidence.
Unemployment remains high, at 9.1 percent as of September 2011. Perhaps a more telling statistic
is the number of Americans out of work at least 27 weeks, which was 6.2 million compared with
4.9 million in July 2009. By October, consumer confidence slid back to levels last seen during the
2008-2009 recession.
Increasing member participation in credit insurance/debt protection appears to address two key
underlying market forces converging on the consumer lending industry: consumers’ financial
needs and the loss of non-interest income. A loan package that includes Payment Protection
adds an expense for members, just as an over-the-limit fee does. But the cost of Payment
Protection yields a more substantial benefit - protection against financial hardship. And even if
no claim is made on the contract, members have said in numerous studies over those years that
it offers the intangible benefit of peace of mind.
Payment Protection: Member Value,
Marketing Combine for Win-Win
1 If you would like the Lending Strategies and Trends Whitepaper, please contact your CUNA Mutual Group representative.
66
A prerequisite to a successful
cross-sellisproductvalue.High
value translates to an easier sell.
Our research shows credit union
managersstronglybelievein
Payment Protection products.
6
The purpose of this white paper is to examine market perceptions of Payment Protection
products (credit insurance and debt protection) and show how Payment Protection marketing
can be enhanced. It is primarily based on 2011 CUNA Mutual Group research that surveyed 331
credit unions $50 million or more in assets on marketing the value of Payment Protection.
Payment Protection marketing can be enhanced through increased understanding of the market,
stronger emphasis on cross-selling activities and specific knowledge of member benefits. Cross-
selling impacts the credit union’s success more broadly, and tools used in the marketing of
Payment Protection can positively influence credit union culture as a whole. By addressing these
challenges, credit unions develop their competitive advantage in the marketplace.
This paper is divided into five sections.
Section 1: Value of Payment Protection: Based on the perceptions of credit union lenders, the
first section describes the value of Payment Protection to credit unions and their members.
Section 2: Credit Union Cross-sell Efforts: The importance of cross-sell efforts, tools and
resulting satisfaction are examined.
Section 3: Key Trends: This section summarizes changes in value, cross-selling and marketing.
Section 4: Credit Union Strengths – Relationship and Advocacy: Members see their credit
union as providing products and services that meet their needs. Credit unions are a trusted
source of information. As a trusted source, their role in delivery is enhanced.
Section 5: Sales and Service for Success: Value combined with effective delivery creates
opportunity for fee income.
Section 1: Value of Payment Protection
A prerequisite to a successful cross-sell is product value. High value translates to an easier sell.
Once value has been established, then those providing the product must have the skills to deliver,
and the processes have to facilitate its delivery. If a product has high value, then the focus is on
other components of delivery. Low value means the product needs to be assessed – first for its
relevance in the marketplace, and then if relevant for its marketing and positioning. To develop
cross-sell efforts, it’s important to understand the link between the coverage benefit and the
member need, as well as the perceived value the credit union sees the product providing.
One of the objectives of this study was to examine the value proposition. Credit unions were
asked about the importance of Payment Protection to them and their members. Payment
Protection includes credit insurance and debt protection. Our research shows credit union
managers strongly believe in Payment Protection products.
7CUNA Mutual Group • Lending Strategies & Trends White Paper • December 2011 7CUNA Mutual Group • Lending Strategies & Trends White Paper • June 2011
Highpercentagesofcreditunions
say credit life and credit disability
are products that members need
andprovidegoodvalue.
7CUNA Mutual Group • Payment Protection: Member Value, Marketing Combine for Win-Win • December 2011
Marketing succeeds when enough people with the same worldview come together so marketers
can reach them effectively. The marketer tells a story and this story resonates – and possibly
changes the way the consumer experiences it. So it is important to show the value in a way that
is in sync with the member. (Source: All Marketers Are Liars: The Power of Telling Authentic
Stories in a Low-Trust World, Seth Godin, 2005)
Member Value
Credit unions believe Payment Protection is a good value for their members. Many members
need it and they buy it because it’s convenient to do so as part of the loan transaction. These
products increase a member’s comfort in obtaining a loan. Members who buy Payment
Protection on their loan once will purchase it again on their next loan.
A high percentage of credit unions say credit or debt protection life is a product members need
(82 percent), while 83 percent say it is a good value for the money. For credit or debt protection
disability, these percentages are also high (82 percent and 78 percent, respectively). However,
only 52 percent of the total feel involuntary unemployment protection is necessary for members.
Regarding its value, 32 percent confirm it as good.
Note: These percentages are based on credit unions with either credit insurance or debt protection. Compared to
credit insurance, debt protection percentages for involuntary unemployment are significantly higher (83% for Need
and 70% for Value).
0%
20%
40%
60%
80%
100%Member Value of Payment Protection
LifeGoodValue
LifeMember
Need
DisabilityMember
Need
DisabilityGoodValue
UnempMember
Need
UnempGoodValue
888
Although more comparable to credit insurance customers on life (90 percent versus 82 percent)
than disability (87 percent versus 75 percent), debt protection customers are more likely to
see the value in the products. The difference was greater for involuntary unemployment at 70
percent compared to 22 percent for those credit unions with credit insurance. When looking at
member need instead of value, the differences were similar.
Not only is Payment Protection a good value, meeting a need, but credit unions also say it helps
to increase comfort. Fifty-seven percent say that purchasing Payment Protection increases a
member’s level of comfort in obtaining the loan. The level of comfort possibly translates into
greater ease in not only making the Payment Protection sale but in also making the loan sale
itself.
Credit unions indicate delivery as part of the loan transaction also fits member needs. Eighty-five
percent of Payment Protection credit union customers agree Payment Protection products are
purchased because they are convenient to purchase at the time the loan is made.
Credit Union Value
High percentages of credit unions also say Payment Protection products are a benefit to them.
Ninety-one percent say Payment Protection is a very important financial benefit to a credit union
in that it protects the credit union from loss due to death or disability of a member.
Eighty-four percent say they offer these products primarily because it helps cover financial
losses for members. Also importantly from a sales perspective, 73 percent say it is important for
their credit union to earn substantial income from their Payment Protection program.
As shown, a majority of credit unions acknowledge Payment Protection impacts the members’
comfort with a loan. A similar percentage (50 percent) believes having Payment Protection
products available is very important influence on a member’s decision on where to borrow.
Virtually all credit unions surveyed (95 percent) say a credit union should be offering Payment
Protection products to their members. And in terms of its priority, 77 percent say Payment
Protection is one of the most important products they cross-sell to their members during the
loan transaction.
Credit Union Role
Credit unions are motivated to sell this product because it not only benefits their member but it
benefits them as well. It is a win-win proposition. But their role actually determines their market
effectiveness. Ninety-three percent of credit unions believe it is the lending staff’s job to educate
members on the value of Payment Protection products. However, 73 percent say their lending
staff believes in the value of Payment Protection.
Virtually all credit unions say
Payment Protection products benefit
them in that they protect from loss due
to death or disability of a member.
9CUNA Mutual Group • Lending Strategies & Trends White Paper • December 2011 9CUNA Mutual Group • Lending Strategies & Trends White Paper • June 2011 9CUNA Mutual Group • Payment Protection: Member Value, Marketing Combine for Win-Win • December 2011
Credit unions strongly support the sale of Payment Protection products to their members. The
products have high value for its members and for the credit union itself. Based on this perceived
value, these Payment Protection products have potential. Regarding that potential, current
cross-sell practices are assessed next to determine whether there is room for improvement.
Section 2: Credit Union Cross-sell Efforts
In order for cross-sell cultures to develop, credit unions need to have the proper tools. Credit
unions actively working to develop their cross-sell cultures need marketing support to do so.
The Payment Protection marketing program needs to fit the credit union’s sales culture.
Credit unions need to educate members because their attitudes toward the product are not
always based on a specific knowledge. Credit union staff may have that product knowledge, but
they also need to be comfortable making the offer to members who might be more concerned
about the loan than they are about the Payment Protection.
0%
20%
40%
60%
80%
100%Credit Union Value of Payment Protection
CUShould
Offer
CUFinancial
Bene�t
MostImportantCross-Sell
CoversMember
Loss
ProvidesIncome
In�uencesLenderChoice
1010
Lendingmanagementsaysa
cross-sellcultureisveryimportantto
theirsuccess.Abouttwo-thirds(68%)
say their credit union is continually
developingandenhancingtheir
sales culture.
10
Credit unions with cross-sell cultures create an atmosphere where loan officers may be
encouraged to ask about other products in addition to Payment Protection. Cross-selling is one
component of developing relationships with members; other aspects include research, service,
and market communications. Payment Protection needs to be positioned in a developing cross-
sell environment to its best advantage.
Overall, this research shows credit unions value the Payment Protection product, and see the
benefits for the credit union as well as the members. However, they express concerns about their
cross-sell effectiveness.
Cross-sell Priority
In this research, lending management says a cross-sell culture is very important to their success.
Ninety-two percent say cross-selling products and services is very important to the success of
their credit union. About two-thirds (68 percent) say their credit union is continually developing
and enhancing their sales culture. More specifically, 60 percent say Payment Protection cross-
sale is a priority for their credit union.
Marketing Tools
Credit unions were asked about the importance of marketing tools in the cross-sell. Ninety-two
percent of credit unions say tracking sales is key in a cross-selling effort and 79 percent believe
incentives definitely increase cross-sell activity. The percentage saying incentives are important
drops from 79 percent that believe in the overall positive impact (not specific to Payment
Protection) to 61 percent saying incentives to loan staff for Payment Protection sales are key
to successful cross-selling. So there are differences regarding how credit unions view the use in
incentives by product.
In addition, 73 percent say Payment Protection is continually reinforced by the management
staff at the credit union. Regarding marketing materials specific to Payment Protection, 58
percent say they are very important to their cross-selling efforts.
How the product is presented to the member helps determine the success. Although 74 percent
say their lending staff asks every borrower whether they want Payment Protection to cover
their consumer loan, a somewhat smaller percentage (65 percent) say their lending staff shows
members the benefits of Payment Protection based on the members’ unique needs. But when
members have questions, 78 percent of respondents respond to member concerns by pointing
out features and benefits and a comparable percentage (77 percent) say their lending staff
responds to member concerns by pointing out how Payment Protection will meet their needs.
11CUNA Mutual Group • Lending Strategies & Trends White Paper • December 2011 11CUNA Mutual Group • Lending Strategies & Trends White Paper • June 2011
Ingeneral,creditunionsatisfaction
withtheircross-selleffortscanbe
improved. Only 42 percent say
they have been very successful
inmarketing.
11CUNA Mutual Group • Payment Protection: Member Value, Marketing Combine for Win-Win • December 2011
Regardless of the tools, it is important to use them most effectively. The basis for Permission
Marketing, introduced by Seth Godin, is to engage the customer so the messages are relevant
and not viewed as an interruption. (Source: Permission Marketing, Seth Godin, 1999) Although
71 percent say their lending staff knows how to handle any concerns or questions the members
may have on Payment Protection, only 42 percent say if a member initially declines Payment
Protection that their lending staff tries hard to show the member the benefits.
Credit unions were asked about their use of specific marketing tools related to Payment
Protection. High percentages do product/sales training and tracking, while the use of sales goals,
cross-sale performance evaluation, and incentives are less common. Although 73 percent of
credit unions say Payment Protection is continually reinforced by management, only 53 percent
say it is part of performance evaluations.
Satisfaction with Cross-sell Efforts
In general, credit union satisfaction with their cross-sell efforts can be improved. Although 92
percent of respondents say cross-selling is very important to the success of their credit union,
only 33 percent say they are very satisfied with their cross-sell effort. Thirty-nine percent say
their credit union has a very aggressive sales culture.
A similar percentage (37 percent) say Payment Protection products are aggressively cross-sold
by their lending staff. Regarding Payment Protection marketing, 42 percent say they have been
very successful.
Tool CU Percentage Using Tool
Producttrainingforloanstaff 87%
Quote with the loan payment 84%
Salestrainingforloanstaff 78%
Salestracking 76%
Salesgoals 56%
Staffandmanagementperformanceevaluation 53%
Incentivestoloanstaff 50%
MarketingToolUse
121212
Seventy-three percent of credit unions say their lending staff is adequately trained. Their
comfort and cross-sell efforts illustrate the training impact. Comfort does seem to relate to their
willingness to make the offer.
• Sixty-nine percent say their lending staff feels very comfortable offering Payment
Protection to members.
• About three-quarters (74 percent) say the lending staff asks every borrower whether they
want Payment Protection to cover their consumer loan.
Credit unions satisfied with their cross-selling efforts tend to utilize training, tracking and quote
the loan payment with Payment Protection. However, the satisfaction differences are much
larger for credit unions that are using incentives, setting sales goals and including cross-selling
results in performance evaluations.
Tool Used Satisfied Not Satisfied
Producttraining 95% 83%
Quote w/loan payment 94% 79%
Salestracking 90% 69%
Salestraining 88% 73%
Salesgoals 77% 46%
Performance evaluation 73% 44%
Incentivestoloanstaff 70% 40%
Cross-SellSatisfactionbyMarketingToolUse
13CUNA Mutual Group • Lending Strategies & Trends White Paper • December 2011 13CUNA Mutual Group • Lending Strategies & Trends White Paper • June 2011
Once the sale is made, satisfaction
with the product translates positively
intofuturebusiness.Eighty-three
percent say members who buy
Payment Protection once will
purchase it on their next loan.
13CUNA Mutual Group • Payment Protection: Member Value, Marketing Combine for Win-Win • December 2011
Improvements to Cross-selling
So, credit unions want to cross-sell, believe in the products and that they are important products
for their members. Although training can be improved, high rates already endorse it. What
are the barriers? Only half (51 percent) of the credit unions surveyed say Payment Protection
products are easy to sell.
Based on the research, it seems that understanding member needs may be an issue. With a
wide variation in needs (77 percent say needs vary greatly); only 39 percent say they know what
their members’ insurance needs are. So, the majority doesn’t know their members’ needs, and
members could use this type of assistance. According to these credit unions, only 20 percent of
credit unions report members know their own needs for insurance. The 2011 Consumer Financial
Needs Research validates this – in that 59 percent of credit union members look to their credit
union for some type of help or advice regarding their financial situation. About half (48 percent)
of the credit unions surveyed say members have positive attitudes toward Payment Protection
products, and 41 percent say credit union members are interested in knowing more about
Payment Protection products.
However, this level of awareness may be impacting how concerns and objections are handled.
About three quarters (76 percent) say Payment Protection is more easily marketed on certain
types of loans with 56 percent saying it is more easily marketed on smaller loan sizes. While 65
percent are showing members the benefits of Payment Protection based on the member’s unique
needs, close to one quarter (22 percent) is deciding whether to offer Payment Protection to
members based on the age, income or occupation, and may be using more general parameters.
A successful offer to the member involves knowing how to address their needs for information
about the product, positioning it within the transaction in a way that answers their questions.
Once the sale is made, satisfaction with the product translates positively into future business.
Eighty-three percent say members who buy Payment Protection once will purchase it on their
next loan.
Members’ lack of awareness of their needs creates opportunities to educate, and provide
information. Given the insurance need and the peace of mind provided by the product, this
information has the potential to increase sales. Companies need to address their customers as
whole human beings. Insurance provides peace of mind and increases comfort with borrowing. In
these economic times, these benefits are more meaningful. (Source: Marketing 3.0, Philip Kotler,
Hermawan Kartajaya, Iwan Setigwan, 2010)
141414
Sales is a service in that it informs the
member about products and services.
Thefocusoneducationandcreating
awareness is important to members.
Attitudes towards Sales
An advocacy value proposition (e.g., “doing what’s right for the member”) can be at odds with a
more functional value proposition. Credit unions that demonstrate this advocacy spend money
on staff time, communications and exception handling. They may be less inclined to promote
products as value adds when they are less sure of the member need. Therefore, credit unions
may be more resistant to a cross-sell approach for all products, not just Payment Protection.
(Source: Customer Experience and Credit Union Opportunities: A Collaboration with McKinsey &
Company, Filene Research Institute, 2010)
According to CUNA Mutual Group’s 2011 Consumer Financial Needs Research, it seems the
low-key no-pressure atmosphere of a credit union may sabotage its ability to communicate
information about insurance and investment services. Many credit union members admit they
lack education in financial matters. At this point in their financial lives, these credit union
members crave education in a no-pressure jargon-free atmosphere. However, credit unions may
not be positioning themselves effectively to address these needs.
In Filene Research Institute’s report on customer experience and credit unions, McKinsey &
Company notes they have never found a specific industry so averse to selling. One prevalent
credit union barrier to building a frontline sales culture is staff fears that selling will detract
from member service and member relationships. However, in fact, when a member accepts the
offered product, their satisfaction improves because a product was offered that they didn’t know
he or she needed. So it can be a very positive experience. A lending event counts as a “moment
of truth” which provides the opportunity for customer satisfaction and positive customer
experience.
Sales is a service in that it informs the member about products and services. It can be about
education, and that process rather than focusing on the outcome, the sale. The focus on
education and creating awareness is important to members.
A sales and service program is crucial to be market driven. It is about gathering information on
the member and with this information providing them with information on products and services
that meet their needs. Borrowers know lenders have a great deal of knowledge about them.
This knowledge can be used to provide the member with ideas on how to better manage their
finances. Credit unions should be making this information available to the member. Exchanging
information, meeting needs, and adding value builds enduring relationships over time. Regarding
needs, in CUNA Mutual Group’s 2011 Consumer Financial Needs research, 65 percent of credit
union members said “having insurance is more important to me than it used to be.” This concern
can be considered somewhat of a mandate regarding providing that information to the member.
15CUNA Mutual Group • Lending Strategies & Trends White Paper • December 2011 15CUNA Mutual Group • Lending Strategies & Trends White Paper • June 2011 15CUNA Mutual Group • Payment Protection: Member Value, Marketing Combine for Win-Win • December 2011
Section 3: Key Trends
CUNA Mutual Group has tracked credit union perceptions of Payment Protection value and
cross-sell efforts. Comparisons with 1998 data show credit unions continue to show strong
support for the product and its cross-selling.
First of all remembering back to 1998, debt protection wasn’t offered yet, so the questions for
that survey used “insurance” or “credit insurance” rather than credit insurance/debt protection.
In 1998, the U.S. economy was in excellent shape, especially from a consumer’s point of view.
The unemployment rate dropped to 4.3% that year; the lowest since the late 1960s. The
Consumer Price Index was also very low and the Gross Domestic Product was high. For credit
unions, total lending grew 5.8 percent.
The percentages showing Payment Protection as an important benefit to the credit union as
well as the member have remained unchanged. Today, credit unions see the member need the
same as they did in 1998. The percentage saying Payment Protection increases a member’s
level of comfort in obtaining the loan has even increased from 42 percent to 57 percent.
However, the importance of fee income has changed. The percentage that say it is important
for their credit union to earn substantial income increased by 24 percentage points from 49
percent to 73 percent.
So, there is additional pressure on fee income, and the data also shows some pluses and minuses
in regards to the cross-sell ease. On the plus side, credit unions are less likely to
market based on demographics (22 percent compared to 35 percent), and more likely to see
the importance in using incentives to successfully cross-sell Payment Protection (48 percent in
1998 compared to 61 percent today).
In 1998, only 28 percent of credit unions said their members were interested in knowing
more about Payment Protection products. This percentage has increased to 41 percent, which
combined with incentives should facilitate the cross-sell. In the 2011 Consumer Financial Needs
Research conducted by CUNA Mutual Group, 36 percent of members say they are likely to
purchase some type of life/accident insurance within the next five years. Members show greater
interest in the Payment Protection product. Interest creates a positive environment for the
cross-sell. However, their lack of knowledge can create barriers. There is a gap that needs to
be addressed.
There are other challenges as well. Although credit unions still say that Payment Protection is a
good value for the money (78 percent for disability and 83 percent for life), there has been a dip
of about 10 percentage points. As mentioned, though, 73 percent say their lending staff believes
in the value. These are still good percentages, but support the need for continual reinforcement.
Today credit unions see the member
needthesameastheydidin1998.
However,thepercentagesayingitis
important to earn substantial income
increasedby24percentagepoints
1616
Credit unions have adopted tools
(goalsandincentives)tohelpimprove
theproductpenetration.Training
andcoachingarestillveryimportant
toincreasingthecomfortleveltobe
effectiveindeliveringtheseproducts.
16
In 1998, credit unions were more likely to say members who buy Payment Protection on
consumer loans once will purchase it on the next loan than they are today. Virtually all (94
percent) said these members would repurchase. Today, this percentage is at 83 percent, again a
slight but significant dip. There is increased competition for that consumer dollar so this may also
illustrate the need for follow-up even with those members that have purchased in the past.
Although the use of most tools (training, tracking, quoting loan payment with loan protection)
has not increased significantly, credit unions may be moving more toward setting sales goals
(56 percent compared to 48 percent) and are more likely today to be providing incentives (50
percent compared to 31 percent) for staff. So belief in incentives has not only gone up, but use
has as well.
Comparisons over time show the increased importance of Payment Protection to the credit
union as a source of fee income. In a very positive environment related to perceived need, credit
unions have adopted tools (goals and incentives) to help improve the product penetration.
Training and coaching is still very important to increasing the comfort level to be effective in
delivering these products.
Section 4: Credit Union Strengths: Relationship and Advocacy
According to 2011 Consumer Financial Needs Research conducted by CUNA Mutual Group,
credit union members remain pessimistic about the economy and their ability to save enough.
Eighty-eight percent say they are worried about the state of the economy. Almost two-thirds
(62 percent) say financial security is their biggest concern right now. In in-depth interviews,
credit union members say they lack education in financial matters. They want education and are
interested in getting help from their credit union. Clearly, these concerns show a need for advice
and product information.
Credit Unions are highly valued by their members
Research studies confirm member satisfaction with their credit union. Member satisfaction
is a measure of success in fulfilling member needs. The 2011-2012 National Member Survey
conducted by CUNA and Affiliates reports member satisfaction with their credit union remains
extremely high. Survey findings show 71 percent of members are “very satisfied” with their credit
union, while 27 percent are “somewhat satisfied.” The “very satisfied” rating jumps to 81 percent
for primary financial institution (PFI) members.
The Filene Research Institute report, “Customer Experience and Credit Union Opportunities: A
Collaboration with McKinsey & Company,” discusses the importance of an emotional connection
17CUNA Mutual Group • Lending Strategies & Trends White Paper • December 2011 17CUNA Mutual Group • Lending Strategies & Trends White Paper • June 2011 17CUNA Mutual Group • Payment Protection: Member Value, Marketing Combine for Win-Win • December 2011
in driving customer satisfaction in retail financial services. According the report, “Company I can
trust” is the most important underlying factor out of 15 customer satisfaction drivers identified
by McKinsey’s surveys. “Provides a good overall value” and “Service in the branch” follow. The
fourth, “Feel good about telling people that I bank with them” is also more of an emotional driver.
In order to connect, companies need to have the mission and values that are consistent. If a
company’s values are not in line, consumers may not buy a “needs-based” approach. (Source:
Marketing 3.0, Philip Kotler, Hermawan Kartajaya, Iwan Setigwan, 2010). According to McKinsey
& Company, credit unions along with other mutuals enjoy an emotional advantage related to their
structure because of this emotional bond. Emotional factors and satisfaction influence existing
members in considering new products with the credit unions. However, it is the operational
efficiencies that close the deal. Therefore, it is important to have a process in place that makes
the offer and facilitates the transaction.
The 2011 CUNA Mutual Group Consumer Financial Needs Research confirms, too, that credit
unions are valued because they appear to be the most friendly, personal, stable and moral entity
in the financial world. Those who do business in the branch report that personnel acknowledge
them by name and may even inquire about their family. Credit unions have a reputation for
higher interest on accounts coupled with lower fees.
According to Forrester Research Inc., members see their credit union as an advocate for their
needs. Sixty-nine percent say their credit union is more likely to do what’s best for them, not
just its own bottom line (Source: “Customer Advocacy 2011: How Customers Rate US Banks,
Investment Firms and Insurers”, Forrester Research, March 8, 2011). This relationship is
important to developing an effective cross-sell environment. Credit unions have the relationship
to be able to effectively promote these products.
However, credit unions struggle with cross-selling. In the 2010 Lending Strategies and Trends
Survey, 52 percent of credit unions with $50 million or more in assets say they are successfully
cross-selling lending products and services through multiple channels (41 percent in 2005).
Overall, 44 percent of surveyed credit unions (32 percent of those with $250 million in assets)
say their front-line staffs are still better described as order-takers than advisors or counselors.
Lending Strategies and Trends research confirms the challenges associated with developing
a sales and service culture in credit unions. However, a credit union’s positioning in the
marketplace certainly provides a distinct advantage. As mentioned, attitudes toward sales may
be curtailing effectiveness.
Since customer service is so
importanttothisengagement,then
understandinghowservice,formal
andinformalistiedtocross-selling,
willhelpinachievingitssuccess.
181818
Employee Engagement
Frontline behaviors have a direct impact on quality of customer experience. Borrowers want
expertise and professionalism. Throughout the course of the experience, the financial services
provider needs to demonstrate its skill. It demonstrates skill by providing information about the
process itself, the product options, and the issues that need to be addressed by the borrower in
taking out a loan.
Therefore, from a training perspective, it is important to empower the front line to be able to
address the needs of the borrower. Being empowered transforms the front line from order takers
to counselors or advisors—regarding not only the process but also options and other issues
related to the loan itself.
Borrowers want to improve their financial health. A loan transaction is just one experience
shaping the borrower’s financial situation and his or her perception of the credit union.
To continue the relationship, the credit union must help the borrower have other positive
experiences. One way is to help borrowers look at their finances and get a snapshot of their
financial health. Marketing occurs anytime someone talks about your credit union, the ability to
engage with your market. It is authentic and builds relationships. Customer service is included
in this definition – it is the type of the service that empowers employees to develop lasting
relationships with members. (Source: Unmarketing – Stop Marketing. Start Engaging., Scott
Stratten, 2010) Since customer service is so important to this engagement, then understanding
how service, formal and informal is tied to cross-selling, will help in achieving its success.
Emotional factors and satisfaction bring people into the credit union; however it is operational
efficiencies that are important in securing the deal. Therefore, it is important for employees to
effectively deliver to build on the valuable goodwill that credit unions have with their members.
Section 5: Sales and Service for Success
This white paper shows research that evaluates the current value of Payment Protection product,
its delivery and positioning in the marketplace. Credit union advantages related to member
advocacy in the marketplace support additional assessment of current delivery processes in
order to increase success.
As the research shows, credit union marketing strategies include a strong commitment to
informing members about financial products and services, including Payment Protection.
The credit union marketplace is changing. Regulatory and economic impacts create challenges,
and necessitate evaluating options to address. Credit unions are integrating sales into their
service cultures. It is important to recognize current competitive advantages to become more
effective in the cross-sell of other products and services.
19CUNA Mutual Group • Lending Strategies & Trends White Paper • December 2011 19CUNA Mutual Group • Lending Strategies & Trends White Paper • June 2011
Credit unions need to be proactive
inworkingwithmemberstoprovide
information about these products
and services.
19CUNA Mutual Group • Payment Protection: Member Value, Marketing Combine for Win-Win • December 2011
Although the credit insurance delivery has traditionally been through the face-to-face channel,
channel use is changing, with Generation X and Y showing greater preferences for remote. For
example, the percentage of Gen Y adults with a mobile phone sending or receiving texts is 85
percent. For Gen X, it is 68 percent. Percentages for younger and older Baby Boomers with a
mobile phone are 53 percent and 34 percent, respectively. (Source: Forrester Research, Inc.,
“The State of Consumers and Technology: Benchmark 2010, US” September 21, 2010). The
Payment Protection offer needs to be integrated into the loan transaction from start to finish.
Remote lending necessitates a review of the process and how to integrate most effectively.
When surveyed by CUNA Mutual Group (Lending Strategies and Trends, 2010) credit unions
forecast lending growth. However, to meet their revenue goals, they may need to take full
advantage of all opportunities related to cross-selling financial products and services.
Payment Protection product acceptance is generally positive, with room for improvement
in cross-selling, especially in helping members assess their need for Payment Protection.
The research shows credit unions believe cross-sell capabilities are important to their success
and that Payment Protection is a product that credit unions perceive as providing strong benefits
for themselves and for the members they serve. Payment Protection is an important product
offering.
Credit union and members also may have limited awareness of their needs for insurance. This
may create delivery issues that need to be addressed. For example, if staff presumes members
know what they need, and will ask for the product and do their own needs assessment, this
may not be the case. Credit unions need to be proactive in working with members to provide
information about these products and services.
A strong sales orientation/culture is built on providing products that benefit members and
the credit union over the long term. Cross-selling must become part of the lending culture
with continuous support from the leadership team and coaching among the lending staff.
Long-term development is necessary for this growth. Service needs to continue to find ways to
integrate a sales perspective that advocates for the member.
Comparing 1998 and 2011 results from CUNA Mutual Group’s credit union surveys, it appears
there may be a shift occurring regarding the increased use of sales goals and incentives. These
are important elements of a sales culture. Still, about a third of the respondents are very
satisfied overall with their credit union’s cross-selling efforts and only about 42 percent say if
a member initially declines, their lending staff tries hard to show the member the benefits of
Payment Protection. In short, credit union sales cultures are evolving.
Beyond paying incentives, credit union lending staffs should commit to a continuous coaching
environment. It’s typical for Payment Protection sales to spike immediately after training
sessions. By providing support, attitudes and behaviors change.
P.O. Box 391
5910 Mineral Point Road
Madison, WI 53701-0391
800.356.2644
www.cunamutual.com
20
P.O. Box 391
5910 Mineral Point Road
Madison, WI 53701-0391
800.356.2644
www.cunamutual.com
CUNA Mutual Group Proprietary and Confidential. Further Reproduction, Adaptation, or Distribution Prohibited.PR-0112-3E21 © CUNA Mutual Group, 2011 All Rights Reserved.
If you have any questions or comments
about this study or anything else related
to our Voice of Customer program,
please feel free to contact, David Polet,
Program Director, at 800.356.2644 or
CUNA Mutual Group is a leading provider
of financial services to credit unions,
their members, and valued customers
worldwide. With more than 70 years
of market commitment, CUNA Mutual
Group’s vision is unwavering: to be a
trusted business partner who delivers
service excellence with customer-focused,
best-in-class products and market-driven
innovation.
Experienced Payment Protection coaches who provide one-on-one training within branches
accomplish two critical advantages:
• Immediate feedback on how to improve the lending experience for members and how to
uncover any needs the credit union may be able to fulfill.
• Knowledge transfer about how Payment Protection has benefited members and the
credit union.
Especially when lending staff turnover is high, new employees need help understanding
how to give every eligible member the opportunity to make an informed decision. Employee
engagement is fostered by helping credit union staff stay close to their roles while trying to
provide best practices, increase comfort, and monitor performance.
Advocacy has been a credit union strength. Therefore, the member relationship is a catalyst
for change. Research shows members want information on product and services that meet
their needs. They trust their credit unions to provide them with this information. Cross-
selling or sales provides a service to members by letting them know the options. Being
flexible as to how a relationship is developed with the member increases a credit union’s
competitive advantage.
Another trend, the consumers’ role in marketing has also increased over time. Social media
has contributed but face-to-face with family and friends is still viable. In order to involve
the consumer, we need to join the conversation and be actively engaged. (Source: Word of
Mouth Marketing: How Smart Companies Get People Talking, Andy Sernovitz, 2006)
For the last decade, the average credit union return on assets would be below zero without
non-interest income and the trend doesn’t appear to be changing. As new regulations
continue to curtail fee and interchange income, how will credit unions replace it?
Credit card annual fees, the demise of free checking and a host of other new fees are
making headlines as large financial institutions seek to replace lost overdraft protection
and interchange income. Opening or expanding income streams that create value for
members -- rather than implementing more fees that have been largely portrayed in the
media as punitive -- is a logical credit union solution. CUNA Mutual Group’s credit union
surveys confirm the great majority of credit union leaders see Payment Protection as a good
value for members, and an opportunity to meet their needs as well as improve income.