Over the weekend, my family and I took a trip to Sea World in San Antonio. I scheduled these four days off and made all the arrangements. This would require several costs on my part:
- Four Hours of Drive (gas & time)
- Hotel Room (lodging)
- Food for two adults and a 15 month old daughter (some brought with us and some purchased at the park)
- Multi-day Admission to Sea World (tickets)
This is the same list for many people that take vacations to theme parks. The one thing that always runs true is that after you visit the theme park, you don’t think about how much you paid to get there. The only thing you are thinking about is that you and your family are having a great experience! Would it have been cheaper to just stay home and go watch a couple of movies? Yes. Would I have the same experience at a movie theater that I did at Sea World? No. There are many choices out there in the consumer entertainment business. This is the same for the credit union industry.
Consumers make choices based on perceived value using the following equation:
In the equation, benefit is what the consumer is receiving in return for their cost. Most often cost is monetary, but can also be time or anything you have to give up to acquire the benefit. Consumers do not carry a note pad with them everywhere they go to solve this equation before making every purchase. Usually this is done in the simplest of manners.
For example, you need gas for your car. You see the closest gas station on the corner. You see the price per gallon of regular unleaded. You start to pull into the gas station and remember that there is a gas station 10 minutes away that has gas 10 cents cheaper per gallon. You ask yourself, “Do I get gas here or drive 10 minutes to save 10 cents a gallon?” The value is you will have gas in your car. The benefit and cost differ depending on your choice. At this particular time, the gas station that is close to you has value because you are there already. It is the same gas as the other gas station. But the gas station 10 minutes away has value in that the gas is 10 cents cheaper per gallon. Some of you will drive the 10 minutes to the other gas station. Others will stick with the closest gas station. Who is right? The answer is both. Consumers weigh benefits and costs differently.
So think about what I wrote about in the first paragraph. How would you compare the value visiting Sea World and going to the movie theater? Sure, the cost of going to Sea World is higher, but the benefit is a once in a lifetime experience. The movie theater has value in that the cost is low for the benefit of watching a movie that cost many millions of dollars and hundreds of people to make. Which choice has greater value? Most people agree that the value you get out of Sea World is greater than that of visiting a movie theater.
That is the important thing to know from this example. You need to know how to create value for your members. By using the formula, you can create value by increasing benefits, decreasing costs, or both. Most credit unions do both. They increase the benefit by providing better service and easier to get loans. They decrease costs by offering lower rates on loans, no fee checking accounts, and other discounted products and services.
Providing value for members should be the top priority for all credit unions. Hopefully, my project will show how to add benefits thereby increasing the value members get in return for their costs.