A Credit Union Journal article published earlier this year listed closed account surveys as one of the five most critical vehicles for improving member service.
While it is true that credit unions can sometimes stress growth goals too heavily at the expense of retention, both are really just two sides of the same coin.
In fact, retention research can lead to greater success in attracting new members. Here's how.
Closed account research reveals not only why members are leaving, but also who is leaving. Pareto's 80/20 Rule applies to credit union profitability: the vast majority of a credit union's profit comes from a small percentage of its members.
If it is largely unprofitable members who are leaving, any efforts aimed at retaining them may be an unwise use of resources.
Further, the very analysis that distinguishes profitable from unprofitable members on the retention side comes in handy on the growth side because it determines the type of new member the institution wants to attract.
This forms the basis of marketing research, which is to determine the profile of ideal new members, preferred relationships (e.g., multiple household) and target population.
Identification of the reasons why consumers close accounts is also beneficial on the growth side because it can be used as the basis for environmental research on competitors.
For example, if the reasons include branch closures, mergers, new fees and hefty minimum balance requirements, then which competitors are putting their members or customers at risk through these changes?
Since others are driving consumers away, it opens up opportunities to attract them.
Whether growth or retention, it's always dangerous to base one's efforts on mere numbers rather than on desired types of relationships and profitability.
Without an analysis of who is leaving and why and subsequent research to identify ideal new members, the individuals retained or attracted may well be of the least profitable and least desirable type.
Neil Goldman is President of Member Research. He can be reached at (310) 643-5910 or by email at ngoldman
