Members’ Lack of Loyalty to Their Banks Opens the Door of Opportunity

By Jon Haller
Director of Market Research
Credit Union National Assn.

With the ever-rising importance placed on member retention and growing interest in the concept of loyalty, more credit unions are measuring how loyal their members are and, to the extent possible, what tangible financial and/or other benefits their highly, or "truly loyal" members can bring to the credit union and its bottom line.

All told, nearly 25% of members are considered "truly loyal" to their credit union. This, according to CUNA’s just-released 2006-2007 National Member Survey report.

"Truly loyal" members meet all four of the following criteria:

• They are "very satisfied," overall, with the credit union.
• They "definitely would" recommend the credit union to a friend, family member, or co- worker.
• They indicate the credit union "definitely would" be the first financial provider they contact the next time they are seeking to open a savings account, or obtain a loan or other financial service.
• They indicate that the credit union is their primary financial institution (PFI) – the institution where they conduct most of their financial business.

An additional 20% are classified as being "moderately loyal" to their credit union, satisfying three of the four criteria. At the other end of the "loyalty" spectrum, about 20% of members are "not at all loyal" – that is, they do not satisfy any of the above four criteria.

The degree of members’ PFI reliance on their credit union and attitudes regarding who they would approach first when they have a financial product need drive loyalty in credit unions much more so than either of the other loyalty components (i.e., overall satisfaction and likelihood of recommending).

What bottom-line impact is associated with "truly loyal" members? The average amount in loans outstanding (excluding first mortgage loans) at the credit union among "truly loyal" members stands about 75% higher than that held by less-loyal members.

Moving on, the National Member Survey report reveals that members, despite choosing a bank over their credit union as their PFI by nearly a 3-to-2 margin, are nevertheless much less loyal to their bank.

The current levels for "truly" and "moderately loyal" (to the credit union) members can serve as valuable benchmarks for your own member survey studies. Conduct surveys to measure the percentage of "loyal" members within your credit union, and monitor these figures through time. Make the policy, procedure, product and service-quality changes members call for to better ensure that they remain loyal and don’t join the ranks of "not at all loyal" members or even "former members."

The 2006-2007 National Member Survey report provides a number of strategic considerations for building and maintaining members’ loyalty.

Its companion report, CUNA’s 2006-2007 Survey of Potential Members: Opportunities and Challenges in Growing Your Membership, explores the degrees of bank loyalty found among non-members who are eligible to join a credit union. The report also provides suggestions on how to best identify and leverage your credit union’s competitive advantages to lure eligible non-members away from their current provider(s).

These reports are available for purchase individually, or at a reduced package price.

Click on any of the three links below for more information or to purchase one or both of the reports.

• National Member Survey/Survey of Potential Members – reduced-price package
• National Member Survey report
• Survey of Potential Members report

Other Issues of Research Review

Previous Issue:
Credit Unions’ Remote-Banking Market Shares