21 September 2009

Lessons from Cheesesteaks

Last year, the Credit Union Skeptic and I had a relatively public debate about the appeal of the credit union structure to the public. The Skeptic's take was essentially (paraphrased), "who cares what your structure is? People care about the products, services, and experiences you offer them."

My take was (and is) essentially "everything that makes credit unions great starts with their structure. I’m not talking about organizational structure, I’m talking about constitution – the basic building blocks of what credit unions are. The democratic control of an individual CU, and how each individual institution puts their philosophy into action is what causes differentiation and unique appeal to FOMs."

According to Frank Olivieri of Pat's Famous Steaks in Philadelphia, the Skeptic won that round. Frank says of his legendary steak sandwiches, "if the sandwich wasn't tasty and good, no matter how much passion you have no one would come back to buy it again."

He's right. The structure of Geno's and Pat's would mean absolutely nothing if their food was terrible. Their attitudes wouldn't matter. Their passion for cooking philly cheesesteaks wouldn't matter. While structure does mean something, long lines wrap around these two establishments because people love the product being sold.

Here's why I'm still right. The people in those lines aren't just buying cheesesteaks. Instead, they're buying a piece of Philadelphia. They are buying an experience. If Subway could create an equally great philly cheesesteak, I'd bet you an ice cold Mountain Dew that they still wouldn't be able to attract the huge lines of customers that Geno's and Pat's enjoy.

Structure is important for credit unions not only because of how it engineers our service offerings, but also for how it creates a distinction between what/who we are in business for versus what/who banks are in business for. For the cases in which credit union sandwiches look similar and taste similar to bank sandwiches, structure can be the sales incentive. It's why we buy the ProjectRED iPod instead of the blue one (or Zune). It's why we buy the pink Campbell's Soup can, instead of Progresso brand. It's why we buy our outdoor gear at REI instead of Cabela's.

While our sandwiches should taste better anyway, it's nice to know that we have the power of our structure behind us to sweeten the deal.


Ron Shevlin said...

The Skeptic didn't win diddly squat.

While Frank has a point that "if the sandwich wasn't good...no one would come back", he fails to mention that one reason WHY the product might be so good is influenced by the way Pat's Famous Steaks is structured, how it treats its employees, the level of service, etc.

The structure of a CU doesn't guarantee a great product. And just because a bank doesn't have the structure of a CU doesn't mean it couldn't produce a great product.

james w said...

I don't get why the structure means so much for credit unions, and I'm a credit union guy... I really like credit unions!

We're old school. In America, that may well be a good thing, you guys have some gnarly financial crisis that here in Australia we haven't felt so much. There are some really cool banks here in Australia breaking some new ground, with some new school thinking.

CU's here in Australia are just concerned with merging and conquering to be the biggest. Partly this is because of legislation requirements that are increasing overheads, but I think a large component is ego of senior management levels.

james w said...

I just realised I didn't really talk about what I wanted to. Stupid James.

I just have this feeling that the structure really has no bearing over the end product, or the user experience.

Some banks are doing some really great things, and some credit unions are doing some really great things.

Matt, the Credit Union Warrior said...

@Ron and James Thanks for the comments. A credit union or bank could have the best intentions in the world, but if their product stinks who cares? I don't think either structure necessarily yields better products. There are countless examples of banks out-credit unioning credit unions. Let's face it, banks must please their customers, too, if they want to stay in business. A model credit union, however, promotes member ownership/democratic control, embraces social responsibility, cooperates with other credit unions to maximize impact, and works for people, not profit. Banks CAN do that, credit unions MUST.

The issue you're having, James, is a similar one that many folks in America have: too many credit unions are not demonstrating credit union core principles. It's grayed the line between credit unions and banks, even though the contrast SHOULD be overly-conspicuous.

Denise Wymore said...

The one word missing in all of this is "reputation." That's why there are lines around the block. Period.

The national credit union reputation has suffered recently - but individual credit unions can protect theirs by staying true to the core principles.

That's money WIT meaning.