Owners, Members, Customers… Is There a Difference? Does it Matter?

A few years ago a credit union made a decision to charge its members monthly dues which set off a fair amount of industry discussion and commentary at the time. It does not appear that this credit union maintained the practice. In any case, that decision inspired us to write a blog post about a comparison made back then between credit unions and Costco. It still resonates so we thought we’d share it again. Happy reading!

One of the more interesting opinions shared was one likening the dues charge to Costco’s membership fee which must be paid by Costco customers in order to enjoy the benefits of Costco services. In effect, the commenter said that if credit unions marketed themselves as Costco does, a membership fee would be a charge acceptable to most consumers.

The only problem I have with this viewpoint is that credit unions are not Costco.

Consider this…

Costco is a for-profit organization with shares traded on the Nasdaq. Its decisions are based on what all for-profit companies base decisions on – delivering value (stock price growth and/or dividends) to its ownership. Customers, and the membership fees charged to customers, are vehicles used to drive that value. This hardly describes the credit union operating model.

But the real question is whether this distinction matters. Does it matter that we are not stockholder-based companies but not-for-profit cooperatives?

Some argue that it doesn’t matter. Not any more. They say embracing the cooperative aspects of the credit union community is simply clinging to a value proposition (member-ownership and cooperative principles) that no one in America understands or cares about.  Some further argue that credit union “ownership” is meaningless. They claim that because you can’t buy or sell your ownership stake then there is no value and consequently nothing at all to really own.

The conclusion to such arguments is that the industry should forget about credit union principles all together – especially in marketing – eliminating the embrace of member-ownership, never referencing its existence lest consumers/customers/members be turned off by a feature they neither understand nor care about.

The fact of the matter is that while communicating the nature of the credit union structure to consumers is a marketing challenge, we remain cooperative institutions. Our very business structure is a valid, legal form of organization distinctly different than for-profit stakeholder-owned corporations. It is what we are, and the challenge inherent in explaining the structure – and communicating its unique value – should never keep us from making the effort.

If we minimize our difference, if we mask the incredibly simple path a regular person can take to actually own the place where they bank, we do so to the determinant of the cooperative business structure.

If we position ourselves as just like Costco, with membership fees defining not ownership but the ticket to service access and year-end patronage checks, we remove a particular incentive for our decision-making – driving real value for owners versus the value for the bottom line.

As soon as owners, not customers but owners, fail to be our highest priority then we cease to be cooperatives. At that point we may as well call it the end of the credit union movement and convert credit union charters to for-profit bank charters.

There may be nothing wrong with that path… if it is what our owners want. My suspicion, however, is that our owners don’t know what they want because we have failed to maintain the bonds of ownership, at least as well as we used to.

Yes, it is important for us to position ourselves as “good as banks” in terms of products and services, and certainly to tout our price advantages – but it is just as important to communicate why that value exists.

Any why does it exist? Because we are member-owned cooperatives.

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