Study: The Price of Growth Is Loyalty

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Credit unions as a whole are viewed more positively by consumers as acting in consumers' best interest than competing banks and other providers, according to newly released research.

But credit unions finished behind a number of well-known financial providers on the issue of acting in the best interests of customers/members.

While the consumer poll conducted by Cambridge, Mass.-based Forrester Research, Inc. found credit unions were also rated most highly among consumers asked about the likelihood of considering them for their next financial purchase, the news is tempered by one caveat: those depository institutions that fared best were also those with the least national brand recognition, beginning with credit unions, followed by provate banks and trust companies, then regional and local banks. Ranked least positively were the giants that have grown through acquisitions, including J.P. Morgan Chase & Co. and UBS AG.

As first reported by Credit Union Journal affiliate American Banker in a special report on Brand Value, Forrester Research indicated that it is "customer advocacy" that consumers most want from their financial institutions. It defines "customer advocacy" as acting in the best interests of the customer, rather than the institution. Advocacy, said Forrester, is the strongest predictor of customer/member satisfaction and retention.

A credit union community accustomed to finishing ahead of banks in the annual poll conducted by American Banker and Gallup may be surprised to know that when consumers rated institutions according to "perceptions of advocacy," the leader was $90-billion bank holding company BB&T, followed by Merrill Lynch, Fidelity Investments, the Vanguard Group, and then credit unions.

Consumers Are Leery

The study found that consumers are most leery about taking the advice of big-name companies that they judge to be looking out for corporate interests and not those of customers. Indeed, when Forrester asked consumers if they agreed with the statement, "My primary financial provider offers me products and services that are best for its bottom line and not mine," 7.7% of credit union members said they agreed with the statement, while 11.4% of regional/local bank customers agreed, 17% of Wells Fargo's and 19.6% of Washington Mutual's customers agreed. Interestingly, Washington Mutual has backed considerable mass advertising positioning itself as different from other banks in its customer-orientation.

One thing credit unions shouldn't be counting on is an increased exodus by bank customers to other providers. According to Forrester, only 7% of respondents in the survey said they plan to switch primary financial providers in the next year. But the survey similarly uncovered lukewarm sentiment among customers who plan to stay put: just 26% of the average bank's customers expressed any interest in considering it for their next financial purchase.

That scenario is what Forrester has dubbed a "cross-sell crisis." In July, Forrester released another report that found "overall loyalty to brands declined 11%. Moreover, nearly half of U.S. households tell us they have switched their financial provider at least once, specifically because they were not satisfied with their previous provider. More than a third of these dissatisfied consumers have dumped their providers more than once in the past."

Sweeping Change

The study further found that 52% had not made such a switch, even though they were similarly dissatisfied. The likely reason: the difficulty of moving checking accounts, direct deposit and e- bill pay.

Since 1997, Forrester Research has polled nearly one-million people as part of its quarterly surveys, and found that over that time consumers have grown more anxious and suspicious, especially younger consumers. In its July report, Forrester analyst Ekaterina O. Walsh stated, "The shifts are gradual, but deep and sweeping; they are evolutionary and their impact will be lasting."

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