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:
Next: Net Promoter Score in action