There is a key difference in the way consumers choose a store versus starting a financial relationship, according to Neil Goldman, president of Member Research.
Different stores have different value propositions a "formula" with three elements: quality, service and price, or "QSP." Consumers also measure financial institutions on their respective QSP scores, but they also add a fourth category: "C," for convenience.
"Wal-Mart and Nordstrom have different strengths and weaknesses," said Goldman. "Nordstrom has products of high quality and offers excellent service, but the price is not the best. Wal-Mart products are of medium quality, with moderate service, but the prices are excellent."
"When both stores are in a community, however, both do better."
For consumers, a financial institution's "convenience" score is determined both by physical access to ATMs and branches, and free access-which translates to free use of ATMs, and Saturday hours and extended hours in branches.
"In some ways, credit unions are losing the battle of perception to community banks, especially with people who don't understand exactly what a credit union is," he said. "Community banks are the biggest mental competition to credit unions, and mega-banks get business because they are convenient."
Goldman said his research has developed 10 criteria for "wowing" consumers, making it easier for them to select a CU over a bank.
The Top 10 Wow's
First, he insists, checking must be free.
"Without checking, you are invisible," he said. "As you move more members to online banking, even fewer people will see your newsletter because they don't bother to open their statements-the statements are old news by the time they are received. Make the newsletter a self-mailer and send it to your members."
Second, surcharge rebates are a must. CUs should make sure they are part of a coopoeratively-owned ATM network. Then, he said, be sure to tell members where the ATMs are. He pointed out that the mega-banks' ATMs are well marked, and members drive by them all the time.
Third, credit unions should have a "do it for them" account transfer process. Goldman said one focus group participant once told him, "I opened my account for convenience. I stay for inconvenience."
To combat this inertia, Goldman advised CUs to take standard "switch kits" a step further by having a personal transfer representative call people to say their direct deposit went through.
Direct Deposit Fears
"Direct deposit problems are a major fear, and a primary reason why people don't switch," he said. "People worry that their checks will bounce if direct deposit doesn't go through."
Goldman's fourth axiom is bill pay must be free and simple to set up. He said CUs need to understand that members don't "do the math"-they won't count up the money they save on postage versus even a nominal fee for bill pay-and they have free alternatives at banks. Fees are the No. 1 barrier among likely users, he said.
Fifth, he urged credit union to completely re-engineer the new account opening process.
"Slice and dice it," Goldman quipped. "Members should walk out the door after setting up their account with pre-printed, personalized checks, and photo ID debit and credit cards. Their Internet banking account should be set up and used once so they can see how it works, and bill pay should be set up. In addition, they should have a financial check-up scheduled, a universal loan application in hand, and direct deposit in the process of being set up."
"If you are not the primary checking account, you are invisible," he reiterated.
Sixth, credit unions should banish any "we'll get it later" mentality. "I'm not suggesting you be pushy, but you never get a second chance to make a first impression," he said.
Seventh, credit unions must be prepared to sell, sell and cross-sell some more. "Your members want to be cross-sold," he asserted. "You sell to be of service to a member."
Like doctors, CUs have a right and a responsibility to send members elsewhere if they need a specialist, said Goldman.
Eighth, and contrary to what many credit unions might want to accept, Goldman advised that they should be a bounty for new accounts-at least $50, perhaps more.
Ninth, target life changes by members, including marriage and new children.
The Top 10 Wow's
"Do financial check-ups every year so you can keep track of members' needs. Moving is the No. 1 reason why people change accounts. Know what is happening in your members' lives that affect their financial situation."
Tenth, CUs need to target residents near branches. He said people like using branches for deposits, withdrawals, loan applications and opening accounts. "You need to overcome the FUD-the fears, uncertainties and doubts-of consumers," he said. "And you must believe in your CU passionately in order to sell it."
