By Ray Birch
EDEN PRARIE, Minn.—Should your credit union partner with a coffee shop, an urgent care provider or even a bar to drive more traffic to your branch or just create more awareness?
While some financial institutions have been doing just that, there is debate among design/build experts over the best approach to take, or whether it needs to be taken at all.
“We all know what’s happening—credit union members can do their banking on their computers and their phones,” said Jeff Pflipsen, president/partner of HTG Architects. “If the trend continues, and we know it will, pretty soon it will be out of sight, out of mind for the credit union branch.”
As CUToday.info reported, MED 5 FCU in Rapid City, S.D. recently partnered with HTG Architects to build a new 75,000 square foot branch that has a coffee shop and room for other retail shops.
“With branch transactions decreasing, we have to figure out a way to get members and non-members to come into the building so they don't forget about the credit union,” Pflipsen said.
One Bank’s Story
Pflipsen shared a story about a bank that a few years ago added a coffee shop to a new location in a town it had never served before.
“That office achieved $230 million in lending in under two years, and the branch personnel said the reason is all the foot traffic,” said Pflipsen. “They would always have 10 to 15 people sitting in their lobby area due to the coffee shop. They even had people conducting business there. They said the coffee shop really built the bank’s brand awareness.”
Pflipsen said coffee shops are a good fit for a financial institution because they appeal to consumers of all ages. And although he has yet to set up such a partnership, he believes another good partnership would be with a cell phone store.
“Just think of all the foot traffic and the wide range of people who are always visiting a Verizon store, for example,” he noted.
Speaking of Blends
Pflipsen said it’s important to make sure the CU’s branch partner’s space is not seen as completely separate from the credit union.
“The two spaces need to blend together to be successful,” he said. “You don’t want to have a distinct stopping point, such as a door separating the two spaces. And you do not want to have two separate entrances for each business. Customers and members need to walk through the same door.”
Not Just About the Coffee
Jeff Winter
Jeff Winter, senior vice president at NewGround, said should a credit union consider such a partnership, it must realize the issue is about far more than a beverage.
“The Capital One Café 360 model is all about building relationships. And we built a North Peace CU (British Columbia) office with a Starbucks on the same pad, which maximizes foot-traffic,” said Winter. “I would say it is about creating a relevant environment that attracts people to your institution. Is your branch a billboard at night? Does the inside project and invite people to see your branch and services offered? Design your branch to attract members and potential members. Make your branch a billboard.”
With data showing branch transactions are falling steadily, CUs need to work on the “experience of having members walk in the door, said Winter. “Create an unbelievable member experience, that is what’s most important.”
‘More than a Logo’
It’s a point echoed by Tim Klatt, director of retail strategies at La Macchia Group.
Tim Klatt
“It’s more than a logo, but a journey from awareness to engagement. Every aspect of an individual’s interaction with your brand should be carefully thought-out and maximized. Increasing exposure to your brand, including by inviting non-members into your physical space, starts that non-member on the journey toward engaging with your brand,” he told CUToday.info.
Klatt said his firm is seeing more credit unions considering how best to use their physical space to invite the community in.
“The reasons are multi-faceted,” he said. “Perhaps most notable, however, is the recognition that a branch is among the greatest marketing tools a credit union has. It is critically important for credit unions to create reasons for non-members to visit to help increase exposure to the physical space that best embodies a credit union’s brand.”
Klatt said adding a coffee shop to a location not only fulfills key aspects of most credit unions’ missions to be a part of the communities in which they operate, but is also a sound business decision.
“We’ve worked with our clients to design, build and brand branches that include coffee shops, community meeting spaces, play spaces for kids and even bars—all open to the public—as a way to bring the community, and prospective members, into their branches,” said Klatt. “Branches in which we’ve designed and built these community elements are thriving. Not only are they seeing greater foot traffic within their physical spaces, they’re seeing increased membership rates, accounts per member and referrals—even in extremely competitive markets.”
Different Approaches
Casey Delaney
Casey Delaney, director of business development at L. Keeley Construction, said the trend can be seen in the ways the company’s CU clients have responded.
“Some are investing in digital only, others are downsizing their physical retail presence. Others are expanding their retail footprint with both automation and FTEs,” he explained. “There is no single response that could be considered a trend at this point. It will be several more years before we can characterize any one of these moves as a trend. Another thing to consider is that this shift has been occurring since credit unions began moving out of their traditional SEG charters into community charters.”
Delaney emphasized leasing space to a tenant is not co-branding.
“Coffee shops and credit unions do not keep the same hours, do not fulfill the same needs, or have complimentary services,” he said. “Coffee customers don’t expect banking to be included in their coffee service. Banking customers and members do not expect gourmet coffee to be included in their banking services and certainly do not want to be charged extra for it. Mortgages, insurance, investment planning, legal services—those services are opportunities for credit union co-branding.
‘Proof’ Lacking
“There are credit unions that lease space to Urgent Care providers too, but the business models are obviously completely different,” Delaney continued. “There is no proof that leasing space to another business improves the success factors of a credit union branch. Architects may love designing multi-use buildings, but there are no business cases out there, that I know of, that point to significant increases in branch performance because the branch lives in a multi-use space. Again, it is way too early to conclude that this is a trend and it is successful.”