Increasing Wallet Share
Higher loyalty levels can lead to a greater share of your members’ business.
How do you measure the depths of a member’s relationship with your credit union? And what does that measurement mean to your credit union’s bottom line?
Two indicators can give you a pretty clear picture, accord¬ing to CUNA’s 2011-2012 National Member Survey: primary financial institution (PFI) status and loyalty. But just because a member considers your credit union his or her PFI doesn’t automatically translate into loyalty. And neither factor guarantees broad service use.
Loyalty and service use
The National Member Survey’s findings show a strong correlation between credit union loyalty and service pen-etration. But the new findings also raise questions.
Overall, the proportion of members qualifying as “promoters”—those who are “extremely likely” (9 or 10 on a scale of 1-10) to recommend the credit union—is somewhat higher than two years ago—52% vs. 49%.
Among promoter members, 75% have credit union checking accounts, compared with 58% of “less loyal” members, or “nonpromoters.” Likewise, 67% of promoters use online banking, while 43% of nonpromoters do. And 42% of promoters have credit union loans, while 30% of nonpromoters have them.
But even members who attain promoter status still do a significant share of their business with banks. Half of promoter members have bank loans, similar to the 45% of the nonpromoter members.
For promoters, the average balance on a credit union loan is $7,111, or about 40% higher than nonpromoters’ average loan balance of $5,099. This difference has narrowed considerably since the 2009 survey, when promoter members had credit union loan balances that were nearly 70% higher than those of nonpromoters.
Looking at PFI status, 65% of promoter members consider their credit unions to be their PFIs. Among non-promoters, 48% are PFI members.
Two other numbers also show a slimmer differential than in 2009. Back then, promoters used an average of 0.8 more balance-carrying services at their credit unions than did nonpromoters (3.2 vs. 2.4). But this survey shows promoters now using only 0.4 more services than nonpromoters (2.7 vs. 2.3).
Note, too, that even among members who consider their credit unions to be their PFIs, 30% are bank
promoters, or “truly loyal” to their banks.
For members who are bank promoters, CUNA’s Nation¬al Member Survey finds that loyalty among this group appears to translate poorly into financial business for banks. Members who are bank promoters actually use somewhat fewer balance-carrying services, on average, at their banks than do less loyal ones—2.1 vs. 2.4, respectively.
Of course, this isn’t about edging out banks in a loyalty contest. What matters most is how much business those loyal members bring through your door. Some of the numbers suggest they might be bringing in less, pro-portionately, than they did two years ago.
The upshot: Awareness-building efforts must be ongoing to nurture and keep high levels of loyalty. Even your most loyal members need constant reminders about why they should think of their credit union first for financial services. As the numbers indicate, loyalty does make a difference in service penetration.
A 2010 study by the Filene Research Institute supports this notion. In Exploring Ongoing Member Loyalty: Net Promoter in Credit Unions, Filene examined the differences in profitability of promoter and nonpromoter members. This involved a case study of an $865 million asset credit union with the following per-member profitability figures:
- $35 per month for promoter members (scores of 9 to 10 on the “I would recommend my credit union” question, related to the Net Promoter Score);
- $27 per month for passive members (scores of 7 to 8); and
- $24 per month for detractor members (scores of 0 to 6).
Next: Net Promoter Score in action
Net Promoter Score in action
What’s this month’s Net Promoter Score? What are the three-month rolling average and year-to-date scores? Those are questions you’ll hear asked and answered during monthly team meetings at the Credit Union of Southern California.
“The Net Promoter Score is top of mind for us,” says Michelle Hunter, senior vice president of marketing and development at the $580 million asset credit union in Whittier, Calif. “Our employees are highly aware of how we’re doing.”
“The credit union began using the Net Promoter Score in 2006 to gather data, while still measuring member satisfaction as the primary scorecard goal,” says Ismael Muñoz, vice president of service and development.
But the credit union wanted to know more about its members. So in 2009, he explains, “we decid¬ed to use member loyalty and the Net Promoter Score as one of the primary strategic scorecard goals and still measure member satisfaction as an alignment goal.” At the heart of the Net Promoter Score is the question: “On a scale of 0-10, how likely would you be to recommend us to family and friends?”
“But the credit union also wants to know why members rate us the way they do, so we gather their feedback,” Muñoz explains. “The credit union evaluates members’ comments, and then determines what’s working well and develops strategies to make improvements.”
“We reward teams for hitting certain targets,” Hunter says. The credit union celebrates strong scores with team field trips to fun locations.
By placing emphasis on the Net Promoter Score “we’re all together as a team—the board, CEO, leadership, and team members—striving toward enhancing member loyalty,” Muñoz says. “We work hard at improving our mem-bers’ service experiences, so they’ll recommend our credit union.”
Convenience is key
CUNA’s market research department also digs deeper into the “why” of promoters vs. nonpromoters. Its research has pinpointed service factors that contribute to member loyalty.
Chief among them is convenient locations, followed by earning members’ trust, and showing appreciation when they bring their business to the credit union. On the product side, three key products in combination are vital to loyalty: a checking account, online banking, and a vehicle loan.
Promoters use online banking significantly more than do nonpromoters (67% vs. 43%), suggesting a strong link between online banking and loyalty. This finding aligns with one from the Filene Research Institute study, which compared characteristics of credit unions that had at least 70% promoters among their members to those that had 40% or fewer promoters.
The study found that the biggest gap between these two groups of credit unions was in ease of access. Credit unions with the higher proportion of promoters were ones that made it easy for members to conduct their finan¬cial business. Convenience services, such as online banking, go a long way in providing ready access to your credit union.
A March 2011 study by market research firm eMarketer had similar findings about the importance of online banking to financial services consumers, in general. This study also linked loyalty and online access. The re-searchers concluded: “Online banking customers are more likely than offline customers to take advantage of ad-ditional services with the same bank” and also are “less likely to switch to another bank.”
Next: Creating loyalty
CUNA’s Creating Member Loyalty™ program provides training to credit unions in how to build loyalty and dif-ferentiate your credit union from the competition.
It offers these pointers:
- Focus on what members do, not on what they say. Find out: Would they recommend your credit union to someone else? Is the credit union their PFI? Will they come to you for their next financial need?
- Create value for members and the credit union. What value proposition do you want to create? How does it tie to your business objectives?
- Evaluate simple measures. Focus on information that’s easy to collect and track. Adopt more sophisticated measuring systems later.
- Focus on developing relationships. Learn about each member so you know the right products and services to offer. Make sure members hear the message that, above all, you care about them.
- Support employees. Make sure staff understand what you’re all trying to accomplish together, and why. Pro-vide training. Consider a rewards system.
- Define the manager’s role. He or she needs the right training and tools to guide the staff in efforts to build member loyalty.
PFI status, satisfaction, and loyalty—all, ideally, ought to correlate with how much members use their credit union’s financial services. But the National Member Survey found that’s not always the case. Your credit union can make inroads, though, if you know members’ purchasing patterns.
Two areas of significant potential growth are:
1. Convenience services. CUNA’s survey shows that members’ most-used convenience services (from any finan-cial services provider) are checking accounts, online banking, and online bill payment. These services also rate as the services members use most at their credit unions.
Use of all three services at credit unions is up significantly since the 2009 survey. Two of three members have credit union checking accounts, compared with about half in 2009. Online banking use has increased from 32% to 56% in two years, while online bill payment use grew from 22% to 35%.
Use among “truly loyal,” or promoter, members is higher for all these key services: 75% have checking accounts, 67% use online banking, and 46% use online bill payment at their credit unions.
Abundant opportunities exist to convert members to these services from other providers. Nearly half (49%) of surveyed members use another provider for their checking account, as do 43% for online banking and 32% for online bill payment.
2. Loan market share. Whatever happens with the economy, credit unions can grow their loan portfolios by capturing more of their members’ current lending business. Members are taking plenty of loan business else-where—business they could be bringing to their credit unions.
Currently, credit unions have a 30% market share of members’ loan balances, excluding first mortgages, com-pared with 31% in 2009. Looking at market shares for other products and services also will indicate other prospects for growth.
While credit unions’ loyalty, Net Promoter Score, and PFI measurements have increased in recent years, credit unions’ membership growth rate was an abysmal 0.7% in 2010—down from an average annual growth rate of 1.5% from 2000 to 2009.
The low growth rate came at the same time millions of people—more than three million in 2007, alone—joined credit unions.
This suggests that member retention isn’t keeping up with new member growth. And given the tenuous nature of loyalty among today’s consumers, some of credit unions’ future success will need to come from within, by capturing business that current members might otherwise move to banks.
JON HALLER is CUNA’s director of corporate and market research. Contact him at 608-231-4346.
CUNA’s 2011-2012 survey reports:
- National Member Survey.
- Survey of Potential Members.
- Credit Union Environmental Scan.
- CUNA’s Creating Member Loyalty™ system of training
- Filene Research Institute