Loyal members—the Holy Grail for CU marketers—drive profitability.
July 29, 2013
Among credit union marketers—or marketers of any retail service for that matter—loyalty has become the Holy Grail. That’s because highly loyal members use more of your products and services than other members, which makes them more profitable. Beyond profitability, highly loyal members sing your credit union’s praises through social media and in face-to-face interactions. They’re your credit union’s most passionate advocates.
Some members merely like your credit union, but highly loyal members actually love your credit union. But loyalty, like most human characteristics, is complex. A tremendous amount of research has gone into answering the question: What creates high levels of loyalty between a consumer and a service provider?
Most loyalty research concludes that it’s difficult—and sometimes expensive—to achieve high levels of loyalty among consumers. For credit unions, you must measure multiple variables to determine which members are highly loyal.
One of the variables that contributes to loyalty is whether or not members call your credit union their primary financial institution (PFI). Credit unions have been making impressive progress in this area. Nearly 60% of members now say their credit unions are their PFIs, up considerably from 42% in 2009.
That sharp rise has come at the expense of banks’ PFInumbers. Banks’ numbers declined from 56% in 2009 to 38% in 2013.
“The financial crisis of 2008 and 2009 caused many consumers to question their loyalty to banks, which many consumers blamed for triggering the economic collapse,” says Jon Haller, CUNA’s director of corporate and market research.
At the time, national media portrayed credit unions as a more consumer- friendly, local option. Many consumers discovered and embraced credit unions’ not-for-profit, cooperative business model over banks’ for-profit model. The events spurred many existing members to shift their primary loyalties from banks to credit unions.
The first Bank Transfer Day, on Nov. 5, 2011, drove millions of new members to credit unions. From June 2011 to June 2012, credit unions opened about 2.9 million checking accounts—more than double the annual increases of previous years.
While the increase in the number and use of checking accounts—along with higher PFIlevels—are positive trends for credit unions, they’ve yet to translate into a significant spike in loan market share growth.