The Secret To Product Penetration May Lie In Your Region

Each region in the U.S. has a particular product penetration strength, from credit cards in the Southeast to real estate loans in the Northeast.

Credit unions exist to meet the needs of their members. But identifying those needs can be a challenge. What consumers are demanding on the West coast is sometimes completely different fromconsumers on the East coast. What worked well for a credit union in Florida might fall flat for a credit union in Minnesota. Product penetration metrics measure the percentage of members using a specific product. There are four main product penetrationmetrics: share draft, credit card, real estate,and auto. For this article, we divided the country into four peer groups: Northeast, Southeast, Central, and Western. (*See below for our breakdown.)

Rk Credit
Rk Real
Rk Auto Rk
Central CUs 44.7% 4 12.5% 4 4.4% 2 18.2% 1
Northeast CUs 48.5% 3 14.3% 3 5.7% 1 12.8% 4
Southeast CUs 51.1% 2 17.6% 1 4.2% 3 14.5% 3
Western CUs 55.5% 1 15.5% 2 4.2% 4 16.8% 2
All U.S. CUs 49.6% 14.1% 4.5% 16.0%

Each region was a leader in one of the four product penetration metrics: the West led in share draft penetration; the Southeast placed first in credit card penetration; the Central region ranked at the top of auto loan penetration; and the Northeast was claimed the largest percentage of members holding a real estate loan.

Other interesting observations emerged from this study that offer important takeaways for credit unions. Nearly 53% of credit unions in the Southeast offered credit cards in 2011, with an average penetration rate of 17.6%. Big players in the credit card market, namely Pentagon Federal Credit Union ($15.1B, Alexandria, VA) and Navy Federal Credit Union ($49.9B, Merrifield, VA), specialize in credit card lending and are headquartered in this region, and are boosting the Southeast credit card penetration. However, the West and Central regions hadhigher percentages of credit unions participating in credit card lending 65% and 54%, respectively yet they had notably lower penetration levels than the Southeast. This highlightsthe fact that a credit union may offer a product, but that does not mean members will use it. A high percentage of the credit unions that offer credit cards in the Central region had penetration rates well below 10%.

Auto loan penetration, highest in the Central region, uncovers another regional difference in strategies. At 18.2%, the auto loan penetration in this area is comfortably higher than the other threeregions. This could be because there are fewer competitors in the auto market in these states. Total auto market share for the Central states was typically higher than the nationalaverage of 14.6%. In contrast, market share was lower in the Northeast, where more players are involved with auto lending. With more alternative lending choices for their members, credit unions in the Northeast must increase their promotionsto keep their members borrowing from them.

National and regional trends can help paint an overall picture of product demands, but exceptions always exist, so credit unions should research their product offerings and continue to try to offer a variety of products. However, credit unions might wantto invest some time in considering what their members need most.

*Central: ND, SD, NE, KS, OK, TX, LA, AR, MO, IA, MN, WI, IL, MI, IN, OH

*Northeast: ME, NJ, VT, NY, PA, MD, DE, NH, CT, RI, MA, DC

*Southeast: WV, VA, KY, TN, MS, AL, GA, FL, SC, NC

*Western: AK, HI, WA, OR, CA, AZ, NM, NV, UT, CO, WV, ID, MT

May 23, 2014

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