The housing and financial market collapse has continued to affect more than just the economy. The uncertainty that these economic times have brought upon the world has caused many financial institutions to scratch their heads this fall as the next fiscal year’s budget cycle comes due. In a normal economy with steady growth, it would be easy to examine historical data to figure out the percentage increase over the past year or more. With economic numbers that declined in 2008-2009, budgeting has become a challenge for many financial institutions.
Historically, when an organization is faced with necessary budget cuts they decide to start with the marketing budget. Seen by many as a non-essential function of the business, the marketing department’s budget is usually cut, if not eliminated completely. Although this is a common practice by many organizations, it is never a wise decision. It takes marketing to attract new customers and tell current ones about products that may be useful to them. Cutting marketing will make the financial institution appear to be in severe financial trouble, which could then become a self-fulfilling prophecy.
It is possible, however, to cut the marketing budget without impacting the business too much. It is also possible to trim the budget in every area of the financial institution. This method can be difficult for any organization because employees who are highly involved with their particular area may think that certain products or services are necessary because they believe these products/services are important to the customers. Sometimes this could not be further from the truth. But it is difficult to guess what the customer wants. The easiest way to find out is to simply ask them what they want.
Hudson Valley Federal Credit Union (HVFCU), based out of New York, has done just that. They convene quarterly focus group sessions, called Advisory Groups, to gain insight on their business through feedback on marketing, products and services from their own members. Stephen M. Nikitas, Vice President of Marketing, has seen the success of the Advisory Groups, facilitated by a third party vendor, since they began in 2008.
Each group, comprised of about five credit union members, is segregated by generation so that the credit union can understand what is important to each target group. Also, members of each group will feel more comfortable voicing their opinions with others like them. The four age groups are Generation Y, Generation X, Baby Boomer and Senior members of the credit union. They are paid for their participation, and their feedback has been invaluable in shaping the credit union and its budget. The marketing department is then able to shape the best marketing ideas and delivery channels for those ideas, which helped them win the National Association of Federal Credit Unions’ award for best website in 2009.
Mr. Nikitas ensures that the credit union’s marketing designs are shown to the focus groups for their input before sending them out. This testing of the designs has proven to be invaluable. When marketing pieces utilize pictures as the focal point to grab the target audience’s attention, feedback from the groups can show that customers tend to get too focused on the pictures and the message gets lost. Opinions like this have led HVFCU to change its marketing design to push out the marketing message first instead of relying on pictures.
The Advisory Groups also help shape how the credit union moves forward in its marketing. Currently, Hudson Valley Federal Credit Union is going through a collateral audit, because they learned from the Seniors Advisory Group that even seniors are using the Web to find information rather than the multitude of brochures that HVFCU has available. Being able to examine the collateral and cut down the number of brochures that need to be developed and printed will save significant marketing dollars.
Hudson Valley Federal Credit Union believes that by taking a cautious and conservative approach to budgeting they will be able to weather the economic storm. As Mr. Nikitas says, they are “expecting the worst and hoping for the best.” This approach has spread to other areas of the organization. By simply looking at their vendors and renegotiating contracts and rates, they were able to cut costs. Doing things more efficiently, for example, by simply changing the courier they used to do transfers between branches, they were able to cut back on their spending.
Another way to stretch the marketing budget is to make marketing dollars work harder. HVFCU cut its marketing budget by about 20 percent in 2009 and is determined to keep working with the lower budget in 2010. They needed to examine how they were marketing without impacting their ability to attract new members or sacrificing their ability to let current members know about special incentives or products.
To do so, Mr. Nikitas utilized targeted communications to members and non-members who were most likely to use the products. Instead of sending out bulk direct mailings to anyone who could potentially be a member, they targeted their mailing to a select group, which allowed HVFCU not only to focus the message, but to significantly reduce the cost of printing and postage of those pieces. They have seen such a high level of success from the program in 2009 that they will continue with this marketing model going forward.
They also took the vendor negotiations approach to their marketing budget by working closely with the media vendors to cut costs, but still continue to target the right people who are most likely to do business with them.
Here in the fourth quarter, as banks and credit unions look at their budgets for the coming year, it’s important to consider the approach taken by Hudson Valley Federal Credit Union. Working closely with vendors to cut back whenever possible and selectively targeting your marketing message to save dollars without sacrificing marketing or service to customers may work as well for you.
