Credit union decision-makers are well acquainted with the fact that keeping a member is much less expensive than recruiting a new one. For example, according to CU2.0:
“It costs most credit unions over $400 to acquire a new member. Those members generate between $100–200 each in revenue per year. But with 25% member churn in the first year—and with an average attrition rate of 11%—more than 40% of new accounts will leave before they become profitable.”
Although this is a well-known phenomenon, what causes members to close their accounts, and what steps can credit unions take to reduce member turnover?
Why Members Leave
Credit unions have a reputation for greater customer satisfaction than retail banks. While this may lead to better retention than banks, credit unions still want to keep as many members as possible. The first step is to understand why members leave. Among the reasons may be:
More Options
The past competitive landscape included only brick-and-mortar retail banks. Today, various institutions offer numerous financial alternatives, both in-person and online.
Poor Communication
The flow rate of information from the credit union directly impacts member satisfaction and loyalty. At the very least, members want to find information about their existing accounts quickly. However, they also may be interested in learning about other potentially beneficial products and services. Communication from the credit union is especially crucial early in a member’s tenure. A lack of communication during the initial months could cause a fledgling member to doubt their decision to join the credit union.
Low Knowledge About Members
Members want to feel like their needs are understood and cared about. This requires that the credit union collect and act on data gathered about each member. Unless personalized data drives account-holder interactions, members may perceive that the credit union doesn’t care about them as individuals. Treating them as a herd rather than unique people will result in less overall loyalty.
Weak Customer Service
Poor customer service experiences cause members to question their loyalty to the credit union. For example, if problems consistently cannot be solved or questions go unanswered with one contact, the member’s frustration could make them more susceptible to competitive offers. Another example is inefficient processes causing slow loan or mortgage approval turnaround times. Members would naturally want faster, higher quality service.
Lack of Convenience
Consumers expect maximum convenience in their banking relationships. For instance, reliable and always available technology tools on multiple platforms are essential. Whether using their mobile phone, computer, or tablet, members want access to their accounts wherever and whenever they want. Organizations that fail to deliver on this should not be surprised if their member attrition rates are higher than average. In the same spirit of convenience, members also expect close-to-home physical branch locations and a broadly accessible ATM network.
Limited Products and Services Perception
While some big credit unions can offer a wide variety of products and services comparable to major banks, many smaller organizations do not provide such breadth. This may cause members to perceive that their credit union cannot meet all their needs in the long run, motivating them to look elsewhere.
Reducing Member Turnover
If these are reasons why members leave, credit unions can use these seven strategies to combat member attrition.
- Know Thy Member
Credit unions must first leverage data to develop a “360-degree” view of each member. This means thoroughly mining data already collected, such as demographics and in-house account holdings. Consider also purchasing externally collected data for each person. Data brokers can provide a vast amount of auxiliary intelligence that, when linked with internal data, provides an information foundation that can drive numerous initiatives.
- Focused Onboarding
A comprehensive onboarding program can set the tone for a long-lasting member tenure. A carefully designed plan to welcome new account holders aims to reinforce their decision to join. This could involve messages about credit union perks and other advantages of membership, like the yearly dividend. Other messages could focus on available information and educational resources. This is also a perfect time to offer products they don’t already have. To make this easier to implement, credit union decision-makers should consider either marketing automation software or outsourcing the process to ensure it is uniformly executed. Such a structured plan will provide solid metrics for evaluating program performance and set up the members for ongoing marketing efforts.
- Upgrade Customer Service
Credit unions have a reputation for excellent customer service, but there’s always room for improvement. Gather data on customer service interactions to look for gaps. Provide feedback mechanisms for members to report service lapses or suggest better service. Also, think about ways to be proactive. Using 360-degree data, look for opportunities to recommend other products and services as well as anticipate potential issues that can be handled before they become problems. Another proactive approach is to review customer-facing processes for improvement. Squeezing out inefficiencies to improve quality and speed up delivery will go a long way to boosting customer satisfaction. Finally, members expect conveniently located brick-and-mortar locations and a comprehensive low/no-fee ATM network.
- Loyalty Programs
Making membership “sticky” means the account holder feels that the advantages of staying with the credit union outweigh competitive offers. Beyond offering better rates and delivering excellent customer service, loyalty programs can be a member-pleaser. A study by PYMNTS found that 49% of member respondents liked loyalty programs, so credit unions would benefit by adopting such initiatives.
Loyalty programs might include:
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- Cashback or points programs for payments made with credit union accounts.
- Fee waivers for targeted minimum balances by account or across a total accounts portfolio.
- Travel perks that ease the cost of vacations and other excursions.
- Special discounts or offers are offered directly on credit union products and services or with external sellers like Amazon, Walmart, or local businesses.
These programs can be run with internal software or outsourced. An outcome of executing such a program is that usage data can be analyzed to personalize the program by member and to identify opportunities for further product and service offerings.
- Up-to-Date Technology
An up-to-date customer-facing technology platform is a prerequisite for success in consumer financial services. This means allowing members to seamlessly and securely access their accounts and easily make transactions 24/7/365 via multiple channels (mobile, tablet, computer, landline phone, etc.) This also provides the credit union additional avenues to communicate with members about products and other offerings.
- Comprehensive Communication
Without a robust communications strategy, members become much more susceptible to competitive offerings because they feel that the credit union doesn’t care about them. Successful communications emphasize high-quality targeted content and effective frequency across multiple appropriate channels. In this way, members will experience “touches” with relevant information on channels they prefer at a frequency that maximizes motivation while avoiding annoyance. In this scenario, member engagement builds loyalty and receptivity for increasing wallet share at the credit union.
- Personalization
The concept of personalization could logically fall under the communications heading. While this is true, this innovation deserves separate consideration because of its enormous power to increase member retention.
Traditional communication evolved from one-size-fits-all approaches to segmentation. Then, personalization emerged and totally changed the game. As noted in the prior Nook blog, “Marketing is Facing a Fundamental Shift. Is Your Credit Union Ready?,” marketing is undergoing radical technological advances. One of these is personalization, which allows tailoring communication at the individual level. This has, in turn, led to the development of innovations like Niche Experiences, where personalization technologies enable marketers to group members into sub-segments or niches for targeted communications aimed at building exceptional engagement and loyalty.