Members, Nonmembers Want More in Creating Their Desired Member Experience
HIGHLANDS RANCH, Colo. -- For many in the industry, it is a hard pill to swallow. If credit unions do such a great job with service and advocacy, why do they continue to languish in a small space within the financial service marketplace?
It is an enigma that required exploration, said Tom Davis, president/CEO of Davis and Co., a management consulting firm specializing in member focus group research, strategic planning, change management and board governance. Over the past 10 years, Davis said he has been intrigued with why credit unions have only 5% to 6% of market share. Based on his research, he discovered that there are two driving forces behind the lag.
"Market differentiation and strategic positioning and are at the heart of this issue and are largely responsible for credit unions' slow growth, lack of consideration," Davis said. "[For example], 'who do I think of or consider when I have a financial need' and paltry product penetration in a number of areas."
Davis culled feedback from more than 60 focus groups, each consisting of 10 to 12 members and nonmembers. The credit unions represented all types of fields of membership ranging from educational to military to technological to blue collar to community based. The market segments represented were demographically defined largely using the Raddon definitions and included fee-driven segments: age 18 to 34 with income more than $30,000; credit driven segments, age 18-34 with income less than $30,000; middle-market segments age 35-54 with income between $30,000 and $99,999; middle-income depositor segments age 55 and older with income from $0 to $99,999; and upscale segments age 35 and older with income of more than $100,000.
The research focused on achieving a number of objectives including gaining a better understanding of the determinants of a member's choice in selecting a financial institution and identifying the determinants in selecting a financial provider for specific products and services such as mortgages, business services and retail investments. Davis also sought to identify the characteristics of a "trusted advisor" and describe why the respective determinants were important to a decision.
"If there was one universal outcome that focus participants consistently described that they want from a financial institution, it is an experience that makes them feel good," Davis said.
That meant members were searching for what Davis has coined the "desired member experience model" of service, convenience, advocacy and credibility. Depending on the age, income and market segment of the focus group participant, that experience has variations with both rational and emotional components, he pointed out.
On the rational side with service, for instance, members related to staff friendliness, individual attention, recognition, having problems solved quickly, rewards for amount and length of their business, staff being able to negotiate certain fees and rates on their own and being responsive to requests. On the advocacy side, members wanted to be assured that their credit union had their best interests at heart, Davis said. That included asking questions to gain an understanding of their situation and explaining things at their level of understanding.
"Members expressed that credit union staff will act with objectivity and impartiality in providing the best products and services for them and will offer competitive rates and fees," Davis said, adding this finding is consistent with 2007 quantitative market research findings by Forrester Research where credit unions ranked the third highest of financial intuitions on advocacy.
Members defined credibility as having a staff that is knowledgeable about their own and competitors' products and services while convenience meant sufficient branch locations and remote access. Davis said the focus group participants did not rate credit unions high on convenience when it came to branch locations. They did score high marks for e-delivery channels and ease of use. Shared branching and ATM networks have gone far in helping the industry catch up to banks, he noted.
"The most significant outcome of the research came from asking focus group participants why each of the rational components was important," Davis found. "Their responses tended to focus on the corresponding affective or feeling dimensions related to each of the rational components."
Participants said great service translated into a feeling "that I am important and that you value me." Convenience was described as important because "if you are convenient, that saves me time and helps me to feel more relaxed and comfortable when I have a million other things to do."
With advocacy, participants felt strongly that a financial institution should "give me a sense that I can trust you and helps me to feel secure." Davis said credibility offered "a feeling of confidence in doing business with you and helps me to feel that I can rely on the information you are providing."
So, what is the bottom line for credit unions based on the research gathered? Davis said it is as simple as providing and delivering an experience that helps members to feel good. That desired member experience can encompass several things and many credit unions are already engaged in the process.
"No doubt some credit unions and staff are demonstrating many of these behaviors today. But most credit unions are positioning themselves on advocacy and/or superior service. Superior service is merely the ante to get in to the game today," Davis said.
Developing a credibility strategy should be a priority as focus group participants indicated that credit unions were deficient here, Davis said. That strategy may range from orchestrating and leveraging word-of-mouth testimonials related to the expertise and professionalism of staff to intense training on products and services and communicating why they are better than the competitors' offerings.
"For many, a visit to a financial institution can be an 'oh, hum' or even an unpleasant consumers experience, especially during times of economic downturn," Davis said. "The more credit unions can turn points of contact into a desirable and valued experience--to help members to feel good--the more likely member relationships and membership itself can increase."