Case Study: Old Brand. New Brand. One Brand? Two Brands?

A Midwestern credit union needs to appeal to a growing community membership but doesn’t want to alienate its long-time SEGs that represent the heart of the institution.

 
 
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It’s Time For A New Brand For Industrial Workers Credit Union … But What Kind And How?

Tom Hanson looked out over the expansive view from the top of the Gateway Arch. His cousin was visiting from California, and Hanson was showing her what St. Louis had to offer. The view from 630 feet up was terrific, and his cousin was impressed, but Hanson saw more than she did. His cousin saw the snaking Mississippi River, the bustle of Laclede’s Landing, and — of course — the field of Busch Stadium. Hanson saw something different: He saw neighborhoods served by credit unions. If things went according to plan, Hanson’s credit union would soon serve those neighborhoods. That’s what made him uneasy.

Some people thought Hanson, CEO of Industrial Workers Credit Union in downtown St. Louis, had the kind of problems they wish they had. His credit union had been expanding for the past decade, and it was about to expand even more. But this worried the 46-year-old CEO, who had been at the helm of IWCU for almost five years. IWCU was acquiring a credit union that had several select employee groups as well as a community charter for much of the western portion of the city and suburbs. IWCU was not going to be blue collar any more.

Started among the wharves along the river in the oldest part of the city, IWCU originally served a steel fabricator for ship and barge building. During World War II small defense contractor groups joined through metal workers’ unions. The 1940s and 1950s were good decades; membership grew, so did services, and the bottom line improved year after year. But beginning in the 1960s and into the 1970s, manufacturing declined in St. Louis. Membership stagnated. After the deregulation of the 1980s, IWCU expanded by embracing new SEGs along the riverfront and across the river in East St. Louis. But manufacturing was not going anywhere, and the credit union wanted to grow in all areas.

IWCU’s board brought in Hanson, who had been CFO of a dynamic credit union in southern California, with the hopes he could stir the pot and keep the fire burning brightly underneath. Hanson’s former credit union had it roots among aircraft workers and had grown with prospering aircraft and rocket and space industries. Facing a shrinking California aerospace industry and a post 9-11 consolidating airline industry, the forward-thinking credit union linked with surviving contractors as well as important think-tanks, university spinoffs, and recreational airports. It also built relationships with startups in Silicon Valley, thus earning a reputation for being ahead of the technology curve.  

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But Tom could see problems in his new position in Missouri. The St. Louis companies did not have the growth prospects of specialty engineering and contractors. He knew the credit union needed a game-changer. Along came an opportunity to merge with, or acquire (accountants might quibble over the language), West End Credit Union. West End had begun among parishes west and south of downtown and eventually had gained a community charter. It now has 10 branches, where IWCU has only four. West End has a crusty, rather tired board that is happy to let someone come in and take the reins for keeping products and services up-to-date. With the acquisition of West End, IWCU is going to grow its membership by 35% to 90,000 and its assets by 31% to $375 million. Its geographic range will not only cover East St. Louis and downtown St. Louis but also creep into the western and southern suburbs.

In fact, the new IWCU/West End will be one of the largest credit unions in the city. Hanson grew up in a working class environment (his father worked as a machinist in one of the California aircraft plants), and he is hesitant about moving the credit union away from the IWCU name. But “Industrial Workers” does not accurately represent St. Louis any more, not even the old industrial riverfront. Moreover, reports had informed Hanson that much of St. Louis believed Industrial Workers Credit Union was some sort of labor union, not a financial services organization. The takeover of West End is an opportunity for the credit union to rebrand and educate, but how to do it and at what cost?

As it happens, IWCU is at the point where it needs to invest in major upgrades to its software. The same holds true for West End, but such an endeavor is bound to be expensive. Hanson’s background is in finance, not in technology and certainly not in branding or marketing. Moreover, the TCCUSF assessment is looming large. Hanson is certain he does not want to alienate IWCU’s original SEGs, whose members had been the heart of the credit union for decades, nor does he want to jeopardize the good will built up among both the city’s working class and political establishment. He’s weighing the cost and benefits of jumping wholesale into a rebranding effort, which would require scrapping the IWCU name for something completely different, against trying to salvage some remnant of the credit union brand. He knows other credit unions have been able to keep their initials even when they no longer use the name of the original SEG, union, or school district. He’s also heard stories of Massachusetts’ Jeanne D’Arc Credit Union reverting — amid cheers — to its full name after a decade’s experiment with using the initials JDCU. He’s even familiar with several credit unions that operate under two names after a merger, using one name for some locations and another name for other locations.

Not feeling overly confident himself with the technology and branding pieces, Hanson has considered hiring headhunters to find strong leaders of these arenas. But he has to be mindful of his combining boards. There will be some tussle and readjustment as board members are squeezed out of seats. Moreover, the board members tend to be tied to their traditions and roots; some might not like powerful new managers moving in.

Any decision must take into consideration the mood of the city. St. Louis responded well to Dump Your Bank Day, and local media has been scrutinizing banks and speaking favorably of credit unions. Overall, the city seems to be accepting the credit union philosophy. Unfortunately an embezzlement north of the city came to light in early spring wherein the actions of a mid-level manager nearly sunk a 50-year-old credit union serving farmer organizations. The ongoing fallout from that has been a running story in newspapers and television, so anything Hanson does will have to fly in the face of that headwind.

How should Hanson proceed?

Click on the articles in the Feature Package below to read how three credit union executives respond to Hanson's challenge based on their own experiences.

 

 

 

Oct. 15, 2012


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