Have you ever been faced with this situation? You conduct regular member satisfaction surveys and your scores are high, but you know your members don't give you all of their business, and you have members defecting when you have a slight adjustment in your fees or rates.
In the past, credit unions conducted satisfaction surveys and used those results to gauge how well they were doing in providing the services that met their members' expectations. But simply meeting members' expectations is not good enough. Members can report being satisfied with the services they receive, yet they do not give 100% of their business to you or they defect when they find a slightly better rate from a competitor. Traditional member satisfaction studies do an adequate job of measuring a member's current state of mind, but research shows a weak relationship between member satisfaction and member retention.
Loyalty scores do a much better job of predicting which members are likely to remain loyal when faced with fee increases and fluctuations in service, and which members are susceptible to the marketing efforts of competitors. The underlying difference is that loyalty research analyzes behavioral intentions and calculates a member's likelihood to continue doing business with the credit union, to give a larger share of his/her business to that institution, and to recommend the institution to others. The answers to these questions can be used to develop loyalty segments and categorize members as being loyal, neutral or vulnerable. These segments can then be used to improve the effectiveness of direct marketing campaigns or to streamline operations.
Any credit union that wants to retain as many members as possible while allocating its resources effectively, should move from member satisfaction studies to member loyalty studies. The results of loyalty studies can be used to uncover trends that are common among hundreds or even thousands of members, as well as to examine the individual responses of members, helping you develop a single marketing plan for the entire CU or to tailor marketing activities down to the individual member level.
In addition to questioning members on their likelihood to recommend, to continue doing business, and to expand their share of wallet, the general loyalty model also examines all the areas where members have contact with the credit union and form impressions of the CU to determine the effect each area has on loyalty. Typical process areas for most credit unions would be the quality of financial products, loan officers, financial advisors, member service representatives, website for online transactions, monthly statements, sales promotions, marketing communications, and problem resolution. Once you have determined all the process areas that involve member contact, generate a list of all the attributes for each.
As an example, within the member service representative process area, some attributes you might include in your survey would be the MSR's knowledge of financial products, attention to detail, treating members as valued clients, knowledge of the member's accounts, understanding the member's needs, being available when needed, ability to solve problems, communicating effectively, being ethical, and being professional. By asking your members to rate each of these process attributes, you can determine which attributes have the greatest effect on the process, and which processes have the greatest effect on loyalty. A low performance rating within a process area by itself signals an area's deficiency. But the combination of a low performance rating and a high impact on loyalty would make this process area a high priority for improvement measures.
A second benefit of member loyalty research is the development of the loyalty profile, which categorizes each member as either being loyal, neutral, or vulnerable. By identifying those members who are most likely to defect and discovering those attributes that have the greatest impact on their behavior, your limited resources can be used where they generate the greatest return on investment in member retention efforts.
You can use the results to determine which types of members are better for the organization. A recent study found that a firm had been allocating most of the resources of the member service department and the sales staff to trying to keep its vulnerable members happy. By examining the characteristics of the vulnerable member segment, it turned out that these members were price-sensitive shoppers who were not loyal to any one institution and would give their business to whomever had the best deal. Since this group of members was buying strictly on price, the marketing efforts to retain these members were being wasted, and marketing efforts were refocused where they would count.
By tying the results of your loyalty study to information in your member database, you can use member information such as type of account, average account balance, transaction frequency, method of transaction, and demographic information to better predict member loyalty and the outcomes of marketing initiatives and operational changes.
A third benefit of loyalty research is the ability to benchmark your institution against your competitors by asking your members to rate your processes and those of your competitors. This will give you a list of your competitive strengths and weaknesses.
However you use the results, member loyalty research is a valuable tool that gives managers results that are measurable and actionable.
Larry Seibert, Ph.D, is client service manager with the Loyalty Research Center, Indianpolis. Dr. Seibert can be reached at 317-466-5004, or via lseibert
Neither a borrower nor a lender be, For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry. - Shakespeare, 'Hamlet'
