Member in Control

By, Stuart R. Levine
Published in CU Insights December, 2012
In order to position themselves for success in the future, credit unions and financial institutions must accept the fact that their relationship with their customers or members has changed and will continue to evolve.  Maintaining and growing their customer or member base will require that they re-evaluate their assumptions about people who buy their services, change how they interact with them which empowers them.

Customer confidence continues to erode impacting negatively on trust.  Those organizations that prevail in the long run will be the ones that evaluate regularly traditional marketing and “push” strategies by concentrating on member service.  Members need to feel that credit unions are anticipating their needs and developing systems to deliver the solutions they require.

The following data is meant to set a context for high level strategic direction:

Current situation

  • Customer confidence in banking has fallen, particularly in mature markets.
  • Customers have become much less loyal to their bank.
    • Nearly twice as many planned to change banks in 2012 vs. 2011.
    • 41% used a single bank in 2011, while in 2012 only 31% did so.
    • Nearly 1/3 of customers now use 3+ banks (vs. 21% in 2011).
  • Customers get financial advice from each other or the internet, not banks.
    • Over 70% seek banking advice from friends
    • 65% use financial comparison sites to find the best offers.
    • Social media gives customers more power as advocates and critics.
  • Customers want to actively tailor their own products and services.
  • Better value and improved service are key, but customers also want:
    • Improved online and mobile banking offerings.
    • The ability to contact and interact with banks on their own terms.
    • Expanded personal service for more complex dealings.
    • More transparency overall.
  • Banks are beginning to respond by offering customers different models:
    • Lower cost
    • Higher touch
    • More accessibility
  • While working to meeting increasing customer needs, banks still need to:
    • Watch out for competition from new entrants
    • Defend against niche product or market-segment specialists.
  • Part of the challenge for large retail banks is:
    • Delivering customer-required personalization and flexibility
    • Developing differentiated products and services
    • Lowering costs and generating sustainable profits.

What can credit unions do to increase their market share?

Provide members with more flexibility

  • Be more transparent about pricing and services
  • Offer segmented levels of member service
    • Let members know exactly what they’re paying for.
    • Align fee structures to achieve regulator-demanded clarity.
    • Convenience, not channels, matter to members.
  • Offer distribution through all possible channels
    • Leverage member data from branches, site visits, social media.
    • Make marketing offers member-specific, not channel-specific.
    • Allow purchase in one channel of a product seen in another channel.

Help members to shape their experience

  • Encourage self-service
  • Shift from “push” to “pull” marketing
    • Target satisfied members to use as advocates
    • Recruit online affinity groups
  • Develop flexible loyalty programs
    • Most members are looking for financial rewards.
    • Let members choose rewards based on their value to the credit union.

Shape business models around member needs

  • Use price incentives to promote the use of low-cost digital channels
  • Prioritize investment on critical member interaction
    • Focus operational improvements on what matters most to members
    • Critical member interactions include changes to fees, account switching, opening & closing, life events, complaint handling, etc.
  • Employ cutting-edge technology  to deliver the credit union of the future
    • Break down silos and create “omni-channel” distribution
    • Develop innovative loyalty rewards
    • Allow members to personalize their products and services

New technologies have made it much easier for members to compare and contrast offerings by competing institutions and become more demanding in terms of what it will take to win and keep their business.  They compare notes on which organizations provide lower costs, better service, more personalization and flexibility, transparency and trustworthiness.

In order to keep members, credit unions have to reconfigure their business model around members needs, providing greater convenience, choice and control, while making sure to convey their values and principles. Those principles should serve as a recruiting advantage.