Loyal members—the Holy Grail for CU marketers—drive profitability.
July 29, 2013
Some credit unions use the Net Promoter ® model—a tool Satmetrix developed for loyalty assessment. The Net Promoter approach is quite simple. It asks members one question: How likely would you be to recommend your credit union (or bank) to friends, family members, or co-workers?
Respondents indicate their position on a scale from 0 (not at all likely) to 10 (extremely likely). Based on their scores, they’re categorized as:
►Promoters score a 9 or 10. They’re loyal enthusiasts who’ll continue to fuel growth by referring others and actively using credit union products and services.
►Passives score a 7 or 8. They’re satisfied but unenthusiastic members who are vulnerable to attractive offers from your competitors.
►Detractors score from 0 to 6. They’re indifferent or dissatisfied members who can damage your credit union’s brand and impede growth through negative word of mouth.
To derive the Net Promoter Score, subtract the percentage of detractors from the percentage of promoters.
Credit unions, collectively, have a relatively high Net Promoter Score (“CU Net Promoter Scores”). More than half (57%) of members are “promoters” and would be “extremely likely” to recommend their credit unions to others. But 19% of members are “detractors.” That results in a Net Promoter Score of 38% (57% minus 19%), up significantly from 23% in 2009.
Banks, on the other hand, have a Net Promoter Score of only 8% (39% promoters minus 31% detractors).
Three-factor loyalty model
While some credit unions rely exclusively on the Net Promoter Score to gauge loyalty levels, many others want a more thorough measurement than a single question, which is why CUNA offers its three-factor model for measuring loyalty.
Haller believes credit unions’ reliance on the Net Promoter Score might have peaked a few years ago, and has since “lost its steam.”
He notes the vast majority of his member survey clients opt for CUNA’s approach, when given both options.
Members who are “highly loyal” in CUNA’s model meet all three of the following criteria:
1. They say their credit union is their primary financial institution (PFI);
2. They’re extremely likely to recommend their credit union to others; and
3. They definitely would contact their credit union the next time they need a financial product or service.
As might be expected, these more rigorous criteria yield lower loyalty levels. Or, as Haller puts it, “if you raise the bar, fewer members will be able to clear it.” Only 25% of members are highly loyal to their credit unions using this three-factor model, compared with the 38% of members who qualify as Net Promoters.
Members who are highly loyal, according to CUNA’s model, are much more likely than less loyal members to have and use credit union checking accounts and loan products, and to bring more of their loan dollars to the credit union. And credit unions have a much larger share of highly loyal members’ online and mobile banking activity.
“In this respect, the CUNA model offers more reliable behavior predictors than does the Net Promoter Score,” the cultivating member loyalty. Member loyalty, for the most loyal of a credit union’s members, translates directly into wallet share and profitability.”