Customer retention is critical in any industry, but retaining members is absolutely vital for credit unions that want to grow and remain profitable.
The good news is that credit unions seem to recognize this: Member and customer retention was cited as one of the most critical factors for growth and profitability in the 2016 Financial Services Operations and Technology Survey conducted by BillingTree.com.
Retaining vs. Attracting New Members
Many statistics have been published demonstrating how much smarter it is for businesses to focus more on keeping existing customers than attracting new ones. For example, according to the Harvard Business Review, increasing member or customer retention by just 5 percent can increase profitability by between 25 percent and 95 percent.
In a recent blog, credit union marketing expert Mark Arnold noted that it’s nearly 10 times easier to expand relationships with current members than it is to recruit new members. "Yet current members are the most overlooked demographic for most credit unions," he writes.
Arnold cites a few more statistics that are particularly relevant to credit union member retention:
- The average financial consumer has 10 different accounts spread out among four different institutions.
- The average credit union member attrition rate is between 12 percent and 24 percent. Or in other words, credit unions lose up to a quarter of their membership every year.
- Around 80 percent of credit union members who leave are not dissatisfied.
This last statistic, which Arnold sources to John Zells’ book Outrunning the Competition: Relationship Management, is especially revealing. If members are satisfied, then why are they leaving? According to Zells, it’s because credit unions have focused too much on mass marketing of products and services and not enough on building relationships.
Focus on Relationships
So one of the most important keys to boosting credit union member retention is learning about your members and building relationships with them. This way, you can personalize your marketing efforts to them by cross-selling and upselling products and services they are more likely to be interested in.
Strengthening relationships with members requires a combination of high-tech and high-touch. First, you need to have the technology in place to collect demographic data each time members conduct transactions. Second, your staff needs to be proactive in getting to know members on a personal basis. This is something that’s much more difficult for big banks to do, thus giving you a key competitive advantage.
Boosting Member Retention
Here are 5 suggestions for ways to increase credit union member retention:
- Assign responsibility for member retention to a specific person or department. There’s nothing like making retention someone’s or some department’s specific responsibility if you want to see results. This might be the marketing or the operations department, or maybe you could create a new department or position dedicated exclusively to retention.
- Pay especially close attention to new member on-boarding. In the first few months after members join, they are usually the most receptive to product cross-selling — or the most likely to leave. During this time, educate new members about how your products and services can benefit them while also encouraging them to move relationships they have with other financial institutions to you.
- Focus on selling “sticky” products. These are products that tend to tie members to your institution. Online banking and bill pay are good examples: Once members have set these up with you, they’re usually less likely to leave because it’s such a hassle. Mortgages are another example: Mortgage customers typically use the highest number of other credit union products and services.
- Learn how to spot vulnerable members before they leave. There are a few telltale signs that a member is about to leave. These include holding an account that has been inactive for more than 60 days, withdrawing all or most of the money from their account, and voicing complaints about the credit union, either verbally or in writing. Create a formal action plan you can launch immediately if any of these occur.
- Segment your membership. Divide your members into three main groups: Those with whom you have deep and profitable relationships, those who have the potential to become profitable relationships, and those with little or no potential for eventual profitability. Then allocate your resources, time and attention accordingly.
- Increasing member or customer retention by just 5 percent can increase profitability by between 25 percent and 95 percent.
- Around 80 percent of credit union members who leave are not dissatisfied — which indicates that credit unions have focused too much on mass marketing of products and services and not enough on building relationships.
- The average credit union member attrition rate is as high as 24 percent — or in other words, credit unions lose up to a quarter of their membership every year.