In the midst of an overcrowded financial services marketplace, credit unions have an important competitive advantage: their strong community focus means that they can develop more intimate relationships with their customers and establish roots among specific groups of people.
This may explain why credit unions have fared better than banks following the recession. In 2012, credit union membership rose by over 2 million, according to the National Credit Union Association. Meanwhile, market research firm J.D. Power and Associates said that the rate of customer defection from a primary bank to another financial institution, such as a credit union, has been increasing every year. In 2012, banks lost customers at a rate of 9.6%, up from 8.7% in 2011 and 7.7% in 2010.
While it is impressive that credit unions have weathered the financial crisis, it would be unwise for them to rest on their laurels. As the economy begins to improve, larger banks will recover their footing in the retail space and credit unions will need to think carefully about what they can do to hold on to their competitive edge.
Many credit unions excel at forging strong, long-lasting relationships with their customers by researching the demographics of their constituency. Since their members generally have historically been drawn from a smaller pool of individuals, it is relatively easy for credit unions to do this. If a credit union’s members are teachers or military officers, for instance, credit unions can learn how to tailor messaging and offerings to these customers, thereby developing stronger and longer-lasting relationships.
However, things are changing. Many credit unions are expanding their membership criteria to include a wider range of customers.
With more-diverse member bases, the strategies that credit unions have been using to better understand and engage with their customers are no longer as effective. Moreover, bigger banks are adopting the latest customer analytics technologies which allows them to compete even more effectively with credit unions.
Advanced interaction management software and sophisticated predictive analytics allow banks to better understand and respond to customer needs by offering more seamless experiences and tailored offers across different channels. For instance, if a customer walks into a bank branch to deal with an issue that can’t be resolved over the phone, the teller is able to see the previous phone interaction since they are armed with detailed customer transaction data across channels and touchpoints.
This spares the customer the trouble of having to describe the problem all over again. As another example, knowledge that a customer researched mortgage rates online can be used to direct that customer to mortgage representative during their next branch visit. These technologies enable big banks to provide customers with the more relevant and more personalized experiences that were once the cachet of small, local institutions.
In the light of big banks leveraging data and technology to compete more effictively, how can credit unions stay ahead of the curve in terms of customer service? The first step is to adopt the types of technologies that the banking heavyweights are using to develop deeper customer insights and identify customer needs as early as possible.
Software solutions that were once considered too expensive for smaller businesses are now priced affordably for organizations of various sizes. The right kind of software will allow credit unions to gain a better understanding of each member’s current situation and context; use this information to develop meaningful best next action recommendations; and to present this guidance in a format that employees can easily access and action.
This means that credit unions do not need to make educated guesses about what their members need based on general information about them, such as their place of work or how much money they invest. These are ultimately just glimpses into members’ lives.
Credit unions can now arm their employees with the tools and the knowledge to treat members as individuals. With a comprehensive view of the opportunities deployed across the entire organization, credit unions can grow and protect their member relationships,
As credit unions expand their membership criteria, location intelligence and demographic and psychographic analysis will also become critical in their relationship management efforts. When a member interacts with the credit union, the representative will be able to access real-time information about this particular customer.
This data can be supported with intelligent, actionable prompts to help employees make the most of every encounter. Ideally, the same system can support call centers, store branches, mail marketing efforts and any modern customer communication channel ensuring that the credit union messaging is consistent.
To optimize the relationship, credit unions should collect and respect member preferences when it comes to communications. Data can help to determine which customers prefer to visit the credit union in person and which would rather take care of their business over the phone or through an app. The keys to success are understanding the relevant topics, channels and frequency of communication.
Another way for credit unions to stay technologically ahead is with location intelligence software. While credit unions already thrive because they are well-embedded in communities, they can improve their reach of potential new members by understanding the relationships between geographic convenience and relationship opportunity.
This type of analysis usually starts with an accurate geocoding solution. Precise location data allows credit unions to locate all the target customers that the credit union can comfortably support within their infrastructure. It helps them to assess these potential customers’ eligibility for their products and services in order to ensure that suggested offers align with their needs.
For instance, a military credit union can isolate individuals that live on a military base, have enough savings to consider buying a house and do not yet have a mortgage. Location intelligence software can also help credit unions identify what their local competitors are doing and by extension, which potential targets are worth pursuing. Better targeting allows credit unions to use their marketing spend efficiently and expand their membership quickly.
In addition to being priced for smaller businesses, these software solutions also present the information visually and in a way that it is accessible to business planners and leaders, not just data experts.
Credit unions’ customer service strategies have worked successfully in the past, but to stay current, these smaller organizations need to upgrade their customer analytic systems and location intelligence technology. By taking advantage of this technology, credit unions can deliver highly personalized, tailored service to customers that will help them increase market share, revenue and individual customer lifetime value.
It will also help them play to their strengths as the economy recovers and the financial services market becomes more competitive.