Member Loyalty Group

The first time I heard that phrase, loyalty economics, was at the inaugural Satmetrix Conference in New York City in 2007. Fred Reichheld was the opening speaker. He has spent a working lifetime researching loyalty. His discovery? Quite simply, loyalty pays.

The Member Loyalty Group (MLG) is celebrating our second anniversary this month. In just two years, we have been fortunate enough to work with over 20 credit unions and have put Fred’s findings to work. The Filene Research Institute released Exploring Ongoing Member Loyalty: Net Promoter in Credit Unions last month. Authored by our own CEO, Michelle Bloedorn and Dr. Laura Brooks, Vice President, Research and Business Consulting at Satmetrix and coauthor of Answering the Ultimate Question.

So let’s look at member loyalty, by the numbers. The economics of loyalty comes in many forms:

1. Repeat business. On average it costs 5X more to bring in a new member than it does to serve an existing member. Fiercely loyal members will be less price sensitive and place value on their relationship.
2. Retention. Reichheld discovered that retention and loyalty are not necessarily the same thing. Retention is one benefit of building loyalty, but some members may be trapped in a bad relationship and leave. SF Fire Credit Union has a 98% retention rate and a five star rating on Yelp.com, so it’s easy to conclude that their retention rate implies loyalty.
3. Promotion. Some members may be fiercely loyal but are not buying from you because they don’t need your product – yet. That’s one of the problems with calculating household profitability. It’s a snapshot in time, and the components that go into calculating that profitability vary with life stage. Is it okay to have an unprofitable promoter? Reichheld would say yes, because they are still marketing (recommending) for you.

Reichheld said “Fewer than half the employees in a typical American firm think their company deserves their loyalty. If that’s true, customers would be nuts to put more faith in the company than the employees do.”

We know that credit unions beat retail banks on issues like trust, overall value and quality of service. In fact, the average NPS for credit unions is 56.6% while retail bank providers have slipped to just 11.0% What’s interesting is how they are able to do this.

The Filene study took a two pronged approach in their research asking:

• How well do credit unions command loyalty?
• How can they do better?

The credit unions with best-in-class scores, are, in alphabetical order:

• America First Credit Union
• BECU
• DuPont Community Credit Union
• Educators Credit Union
• SF Fire Credit Union
• Wright-Patt Credit Union

These credit unions are the leaders because they focused on four areas of performance where other credit unions typically struggle:

Prompt service. Remember, banking is an errand, and the faster a member can run their errand the better.

Inquiry and problem resolution. Mistakes happen, but when you make a mistake with someone’s money it needs to be handled in a way that brings back confidence. The best in class “over deliver” when it comes to problem resolution. It’s not just enough to fix it, you need to fix the relationship as well.

Timely access to new accounts. When someone opens up a new checking account, we often forget that what they’re actually doing is MOVING an existing account. It’s a major undertaking today with bill pay, ACH, direct deposit, etc. These credit unions looked for ways to make this as pain free as possible, which in turn has created new members that are promoters from day one.

Next: How credit unions are taking loyalty economics to the next level……