Loyalty is a measure of the strength of the relationship between an organization and its members/customer. Strong loyalty results in some observable behaviors. People continue doing business with you and don't defect to alternative providers. They purchase additional products or services. They say good things about you in the marketplace. They recommend you to other people. They give you productive feedback on improving your service or product offerings.
These are behaviors that have very tangible, long-term implications for financial results. This isn't just fuzzy, feel-good stuff. Credit unions and other organizations have identified a clear, positive correlation between loyalty and key measures, including profitability, retention and product usage.
Credit unions show very respectable results in the loyalty arena. When loyalty is measured using the Net Promoter Score, credit unions, which average about 56%, outpace the 11% national bank average by a large margin. However, credit unions scores have been relatively flat over past couple of years. When compared to the top five NPS organizations including USAA, Amazon, Apple, Costco and Google, the credit union industry's average lags by about 20 percentage points.
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Statistically, the attributes that are the strongest drivers of loyalty among credit union members are quality service, a belief that the credit union delivers value and ease of conducting business. In general, credit unions do well in the delivery of interpersonal service and in providing value to the members, but have real opportunity to strengthen loyalty when it comes to enhancing ease of doing business and the process side of the member experience.
Members often use interactions with providers outside of the financial services industry as their point of reference for all of their service experiences. For example, they buy from Amazon where they experience a great online interface and get updates on the processing and location of their orders every step of the way. Then they expect but don't always receive the same level of communication and process consistency when opening a new account, obtaining a mortgage or during any other transaction. When you look at the credit union loyalty average by age, you see a notable decrease in score as age drops. An evaluation of the comments and supporting data show that this process expectation gap is an important factor in score difference.
Maintaining and increasing member loyalty in 2010 and into the next decade will require keeping up with a high and rapidly rising service delivery bar. Unfortunately, few credit unions have the infrastructure or resources to deliver on the level of an Amazon.
Collaboration in the form of CUSOs may be our strongest opportunity to deliver unique service experiences on par with best in class companies and to increase the loyalty lead over banks and compete aggressively with our nonbank competitors. CUSOs help to leverage resources, source the best ideas, share risks associated with development and innovation and thereby increase the likelihood of success.
Equally important, CUSOs allow us to keep our dollars, member focus and ideas within the credit union industry. If expertise and thought leadership in a particular discipline is not available among us, we can pool resources to obtain it. When we pay some outside service providers to enhance our core processing, home-banking or other tools to meet our strategic service goals, commonly those enhancements are quickly available to competitors who also use the provider. This can make it difficult to differentiate.
In the immediate term, there are excellent CUSO providers for many of the key processes that are critical to enhancing the member service experience. Credit unions should consider them versus an outside provider where possible and active engage with them to make sure that they are truly making a positive impact on the experience members are having.
In the longer term, think about the resources, human and hard dollars, currently being applied to projects such as remote deposit or mobile banking or social networking. All the initiatives are very likely to enhance member loyalty. It is not unreasonable to assume that hundreds of credit unions are working right now on each of these initiatives. In the end we will have hundreds of primarily similar outcomes because we are going to call each other anyway to find out how our pal at XYZ credit union is approaching it. There will be slight variations but it will be fundamentally the same. Combined, the parallel resources of any one of these initiatives applied intelligently and collaboratively, could be leveraged to create outcomes that would truly differentiate us from the competition.
A final note about building member loyalty. The sixth of the seven cooperative principles of credit union is "cooperation among cooperatives." It reads "Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, state, regional, national and international structures."
We can serve our members most effectively and strengthen their loyalty by working together to create amazing, difficult to duplicate member experiences.
Michelle Bloedorn is executive director of the Member Loyalty Group. She can be reached at 773-252-4901 or [email protected]
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