Measuring member loyalty
How Likely Are Your Members to Recommend You?
Most credit unions are always searching for better ways to understand and serve credit union members. This fundamental tenant is deeply embedded in the credit union tradition. But imagine if each year 31 of every 100 members left your credit union for a competitor. Wouldn’t you want to know exactly why they left? Understanding the fickle nature of member loyalty is not always straightforward, but one thing that can help is evaluating you member’s Net Promoter score.
Net Promoter Score
A Net Promoter Score essentially answers this fundamental question: How likely is it that you would recommend our credit union to a family member, friend, or colleague? The response to this question has proven to be an effective means for measuring loyalty and ultimately long- term growth. In order to calculate the NPS, the question should be asked using a scale from 0 to 10, in which 10 is extremely likely and 0 is not at all likely. The NPS measures the loyalty that exists between you and your members, and credit unions are encouraged to follow this question with an open-ended request for elaboration, soliciting the reasons for the rating. These reasons can then be provided to front-line employees, branch managers, and management teams for follow-up action. To learn more about NPS visit http://www.netpromoter.com/why-net-promoter/know/
Credit Unions already have an Advantage
According to research performed by the Filene Research Institute and Satmetrix, developer of the NPS score, 75% percent of credit unions enjoy higher levels of member loyalty than even the best-performing banks. Credit unions’ advantage over banks is most pronounced in the quality of member service and support. Leading the pack is good, but it also means that credit unions can feel hard-pressed to find ways to improve their scores consistently. However, the study discovered that credit unions that actively track loyalty performance and proactively communicate that performance metric to managers and employees are significantly more likely to positively influence behavior and improve performance.
Measuring Loyalty Makes Dollars and Sense
Tracking loyalty and working to improve member experience makes not only good customer service sense, but good business sense as well. Members who are more likely to refer you to colleagues and friends are also more likely to hold more accounts, stay with the credit union longer, and be more profitable. Credit unions can increase members’ likelihood to refer by identifying important member touch points and then shaping their communications processes to match member expectations.
Loyal members express their loyalty in ways that drive credit union success and growth. These behaviors increase revenue, drive new business, reduce acquisition and service costs, and help identify opportunities for new products and services. The Filene study found four primary member behaviors that link directly to credit union growth.
Repurchase – Loyal members continue to buy goods and services because their experiences have led them to want to patronize your business.
Increased purchase – Firms are more likely to up-sell and cross-sell additional goods and services to loyal customers.
Referral – Loyal members tend to refer their friends and colleagues. This word-of-mouth advertising is a powerful benefit that drives new business while reducing acquisition costs.
Feedback – Loyal members are more likely to provide feedback and insights for improvements because they want your credit union to succeed.
Credit unions, banks and other financial institutions must recognize the importance of member loyalty and arrive at effective strategies to measure and improve it. Firms that are successful in doing so actively measure their members’ loyalty and identify the drivers of those positive (and negative) feelings. With this feedback as their starting point, best-in-class credit unions work to enhance performance dimensions that strongly influence overall customer loyalty—chief among them is the quality of service and support provided to members.