Credit unions are increasingly hiring their spokespeople through online contests. No wonder; the winners of these contests have displayed phenomenal talent at pulling in the deposits of thousands of young adults.
The secret to the spokespeople's success — using the Web to build a community that is still fundamentally local — may also benefit banks, experts say, though doing so would mark a fundamental shift in how many banks approach their audience.
"Could banks use some of the same techniques? Absolutely," said Brad Strothkamp, vice president and principal analyst for the marketing and strategy group at Forrester Research in Cambridge, Mass.
But it would not be an easy transition, he warned.
"This would take soul-searching on the banks' part about why an individual of this age would choose them," Strothkamp said. "From a Web perspective, this has not been their strong suit."
The online contests, and all that goes with them, are part of the Young & Free campaign, launched in 2007 by Currency Marketing, a credit union marketing company in Chilliwack, Canada. The campaign started from a fundamental proposition: Credit unions, faced with an aging population of members, had to do something to stay relevant and to gain a new, young base of customers.
Young & Free provides the tools to engage the youth market, using a combination of social media and contests to find a young, media-savvy credit union spokesperson. To connect with younger consumers, the credit unions that have run the campaign were also urged to create price-sensitive products, such as free checking accounts with low or no fees.
The campaign's successes carry some instructive messages about social media, particularly about the importance of having a sincere message and spokesperson. Banks and credit unions also need to tie their efforts to a larger community goal.
Young & Free "is not simply a social media campaign — it is a multichannel campaign for attracting Generation Y," said Ron Shevlin, a senior analyst at Aite Group LLC in Boston.
Credit unions that have joined the program have had dramatic growth in sign-ups of Generation Y members, who, generally speaking, fall into the 17-to-25 age bracket.
"We have increased our membership in that age group by 50% since launching the program in 2010," said Jessica Emert, the marketing director for ORNL Federal Credit Union in Oak Ridge, Tenn. The $1.3 billion-asset credit union started its campaign in February 2010 and now counts 3,000 Gen Y members among its 154,000 members.
Nine credit unions have participated in Young & Free, and many say they have more than doubled their Gen-Y membership year over year.
Only one credit union per state participates. The most recent entrant is Michigan First Credit Union of Lathrup Village, which announced its involvement Feb. 25.
The most prominent element of the Young & Free project is the search for a "spokester," an engaging, social-media-savvy young adult who will represent the credit union for a year in its marketing efforts to Generation Y. The spokester is chosen in a contest where credit union members vote for a favorite, "American Idol" fashion, through social media channels.
The spokester gets an annual salary from the credit union — typically around $30,000, plus a car used to attend community events and all the technology necessary to engage young members with social media (a video camera, a laptop and a smartphone, for example). The spokester also must run a website for the campaign, develop contacts through social media, write daily blog entries, interact with members over Twitter and post videos.
"We felt strongly that giving the voice to a young person and crowd-sourcing through content would be a great way to differentiate credit unions" from banks, said Tim McAlpine, president and creative director of Currency Marketing.
The first spokester, for Common Wealth Credit Union (now Servus Credit Union) of Alberta, was Larissa Walkiw. She became something of a credit union phenomenon in 2008: Her low-budget videos on the difference between credit unions and banks, which used stop-motion stick figures on plain, white butcher paper, have been viewed thousands of times on YouTube.
"Critical to the success of Young & Free was the spokester Larissa Walkiw, who turned out to be amazing, incredibly creative and brilliant," Shevlin said.
The word spokester, applied to all of the contest winners after Walkiw, was Walkiw's coinage.
Social media experts such as Frank Eliason, senior vice president in charge of social media for Citigroup Inc. of New York, have long championed the creation of social media "personalities" to help bolster these channels. At Eliason's behest, Citi plans to identify its representatives on Twitter by name and is encouraging them to build a following.
"We are striving to build personal relationships and rapport and trust [through social media] and one way is through a personal connection with the individual," Eliason said in a January interview with American Banker.
Only 11% of people in the Generation Y group had a primary financial relationship with a credit union, versus 15% of all other ages, according to an August 2010 survey by Javelin Strategy and Research. By contrast, 43% of Generation Y had a primary financial relationship with a top-10 bank, compared with 38% of all other consumers.
"The reason we see this is Gen Y's hunger for things like online banking and mobile banking and electronic relationships and ATM relationships," said Mark Schwanhausser, a senior analyst for Javelin Strategy and Research of Pleasanton, Calif. "These are all high priorities for Gen Y, and challenging for credit unions."
Though they may not have the technological reach of the largest banks, credit unions can boast some other important attributes that those banks cannot, Schwanhausser said. Namely, they have roots in a very local and specific community and, foremost, they are nonprofit.
"Our strategy looking at this demographic is not only about acting today. but what are they doing in 10 years," said Troy Hall, chief operating officer for South Carolina Federal Credit Union in Charleston. "Banks are not willing to invest resources for 10 years, but we have a history of being that trusted relationship, and we keep those members for a very, very long time."
South Carolina Federal started its Young & Free campaign in 2008. It says that 18-to-25-year-olds now make up 9% of its membership base of 141,000, compared with 4% previously. About 10% of its marketing budget is now devoted to Young & Free.
Growth for that age group "prior to Young & Free was basically nonexistent," Hall said.
Experts say it typically comes off hollow for banks to approach customers over social media, since their efforts are commonly seen as a blatant sales pitch.
"Gen Y really wants to be leveled with," said, Darryl Laplante, 23, the current spokester for South Carolina Federal. "And I speak the same language."
Laplante said that in addition to an honest message, one of the most important things for his generation is sensitivity to costs and fees. Free checking accounts are important, but so is forgiveness for occasional overdrafts.
Most of the Young & Free credit unions have taken this approach, but that standardization is something that industry observers say may ultimately be a drawback.
"It is a cookie-cutter approach to say you can have a blog and be on Facebook and Twitter, but what are you trying to achieve?" said Jacob Jegher, a senior analyst for the research firm Celent. Jegher said that any social media campaign must be aligned with institutional and business goals. The credit unions have an obvious goal — building a younger base of members. For banks, the goals may be less obvious.
"Social media is all about the creation of community, and that's also a big part of the credit union movement," Jegher said. "Banks may not have this approach."
Laplante says Generation Y also wants to do its banking online and with a mobile device. That's something experts say can't be overlooked in trying to reach them.
"This generation has grown up on technology, and it is integrated into how they run their daily lives, and it had better be there when they need it," said Cathy Graeber. founder of the consulting firm Swimming Upstream.
With that in mind, Michigan First Credit Union joined Young & Free this winter. Like its peers, it had an aging membership and needed to bring in new members. It also realized it needed to offer members the technology to go with their accounts.
So, Michigan First is doing many of the things other credit unions have: It has begun its contest for a spokester and it has started to offer something it calls First Gear, a joint checking and savings account for people 18 to 25. The product has no fees, and it forgives overdraft fees twice a year. It also offers signers a 1% discount on an auto loan for a new car.
Michigan First also hopes to use Young & Free to establish a set of best practices to engage consumers on its new mobile banking site.
"One of the reasons we wanted to launch the program was to have the Young & Free spokester, and to engage in a conversation with their peers, and hopefully to bring back ideas and suggestions to that age range," Linda Douglas, vice president of marketing for Michigan First, said.
"We want to enhance the mobile product offering, and we will hopefully get better ideas by talking directly to that audience," Douglas said.
