Are Credit Unions Falling Short Of New Member Expectations?

Consider the two following pieces of news that crossed my desk yesterday:

  1. The December 2012 ACSI Customer Satisfaction scores for financial services revealed that credit unions scored higher than banks (as a whole) for the fifth straight year. However, credit unions’ score dropped from 87 to 82, a 6% drop, from the previous year. This comes was after a seven point gain in 2011 over the 2010 score.
  2. NerdWallet analyzed data published by the NCUA and found that half of all federally insured credit unions experienced an increase in membership from June 2011 to June 2012. According to the NCUA, credit union membership ranks grew by 2.1 million from October 2011 through September 2011.

My take: This raises some interesting questions. What caused the drop in credit unions’ satisfaction ratings in 2012? And, for that matter, what caused the huge jump in 2011?  Why would membership ranks continue to grow in the face of declining satisfaction? Would membership have grown even faster if satisfaction levels had remained at its 2011 level?

I can come up with two competing schools of thought to explain what’s going on:

1. Satisfaction rankings are worthless. Did credit union member service levels fall off a cliff (pun intended) over the past year? Did credit unions look back at their perceived Bank Transfer Day success and say “Great! We’re done. Don’t have to try anymore!”? Doubtful.

The more likely explanation is that the satisfaction scores don’t reflect just members’ satisfaction with their credit unions, but incorporate broader perceptions about banks and the financial services industry as a whole.

There is insufficient statistical history to draw on, but it appears that there may be an inverse relationship between CU and banks’ scores.

In 2009, CUs and banks’ satisfaction scores remained unchanged from their 2008 levels. In 2010, as banks went up a point, CUs went down four points. In 2011, however, banks declined a point, and CUs wen up seven points. This year, banks went up two points, and CUs lost five points.

The drop in credit unions’ scores in 2012 make no sense. As banks were eliminating free checking and imposing fees, credit unions held their ground. Based on the research done by Aite Group and Filene Research, credit unions significantly increased their investments in online and mobile offerings in 2012.

So how do you explain the drop in satisfaction score? Either customer satisfaction scores are useless, or….

2. New member expectations aren’t being met. Tom Glatt likes to argue that tCU membership gains aren’t exactly evenly distributed across CUs, and the NCUA data, which shows that only half of CUs experienced gains, bears that out. But that doesn’t negate the fact that over the past 18 months, a lot of Americans have become new credit union members.

Why? I’d argue that in many cases it was less about the superiority of a particular credit union, and more about the inferiority of the bank they were fleeing.

And what did they find when they started interacting with their new credit union?

They found really really friendly, helpful people — but people who weren’t that good at helping them make financial decisions. They found an online and mobile experience that, although the CUs were investing in them, were inferior to what they had at their big bank. And they found that, despite all the hype, credit unions still charged overdraft fees, inactivity fees, and a host of other fees.

In other words: Their expectations weren’t met. And the result was lower satisfaction scores in the ACSI study.

—————

Bottom line: If you’ve got more theories to explain the drop in satisfaction scores, I’d love to hear them. As for my two competing theories, I strongly lean to one of them as the right explanation. But I’ll play Fox News here — I’ll report, you decide. 

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11 thoughts on “Are Credit Unions Falling Short Of New Member Expectations?

  1. nice read, Ron.

    just like credit unions. nice read, credit unions.
    and that’s my take on why credit unions are dropping, banks are rising again, and relevance trumps nice when it comes to m-o-n-e-y.

    Public sentiment is and was ‘in our court’ to court over last 3-4 years. Hits and misses happened and are happening for those credit unions who seize and seized the opportunitays. These vision-focused CredUnions are building scale, honing style, and evolving the ‘people helping people” cooperative mission….to a “people helping people…help themselves” collaborative vision (substance).

    It all comes down to 3 things

    1. Substance
    2. Scale
    3. Style

    It takes continually a business mindflow of
    1. developing people (tacit minds over tactical action)
    2. simplifying processes, programs (ease of use-ability over mere availability).
    3. integrating channels, systems and brand (sleek,stable, and holistic delivery over disjointed “hey we have this new side dish now” slAPPit together mentality)

    Now mix those 3 things together and you will get…..enduring social and business RELEVANCE.

    Must get everything scaled, with core substance and deliver it in a style your target market may not have even thought they needed yet. Existing members will trust you to guide them based on your substance (relevant awareness and learning at its’ core). New markets? New members? Aaaah, that’s where scale (real partners) and style (fintech, socent) come into play.

    nice credit unions. nice cooperatives.
    relevant credit unions? relevant cooperatives.
    nice and relevant CRED unities? holistically thinking,nice and relevant collaboratives.

    better read, collaborators and collaboratives. It’s a big world out there, and m-o-n-e-y makes it go ’round.

  2. Ron,
    Didn’t the Occupy folks have a big push last year to encourage folks to leave their banks in favor of CUs? My guess is the folks who actually did this are out on the extreme and perhaps hard to satisfy anyway? In other words folks likely to share their complaints publicly. That may explain the bump in overall CU membership yet the corresponding decline in overall satisfaction.

    • Dan: There was a lot of attention paid to the Bank Transfer Day “thing” (I don’t know what to call it). A number of parties claim credit for it, and there are different reports on how successful it was or wasn’t. If you’re asking me what the Occupy folks were pushing, you’re asking the wrong person. I see them as the real leeches of society. And if someone made a decision on who to bank with based on what the Occupy folks were advocating, that’s a someone who I’d bet isn’t a real good financial services customer (for a bank or a credit union).

      Your explanation– that the ppl who switched based on the Occupy’s influence are “extreme” and “hard to satisfy” — is defensible and logical. I don’t know what the right answer is.

  3. Here’s my two cents…

    Credit Unoin’s like other financial institutiions have had to scale back, becoming more efficient with less staff. That means essentially that there are less representatives to help members and wait times are longer. Sure, you can give the very best service, but if the transaction, loan or whatever else took longer than expected, that stays top of mind for most consumers. And your point regarding fee’s is spot on with expectations from consumer switching to credit unions higher than an average new member.

  4. Ron…

    First, thanks for the reference! I do like to argue, in general but especially about the “phenomenal” growth credit unions experienced in 2012.

    In any case, one thing comes to mind with regard to this whole issue of satisfaction. In past years, in particular when rates moved in more noticeable chunks, customer satisfaction fluctuated. I need to go back and find some of my old data, but at one point you could see an (arguable) correlation between satisfaction for credit unions and the general spread between credit union rates and bank rates. In other words, the better the rate advantage credit unions had over banks the better the satisfaction scores.

    In the current context of occupy and bank transfer day rhetoric about the better deal offered by credit unions, you would assume that consumers attracted to credit unions by this message are so attracted because of the promise of a better deal. It is no surprise to me, then, that there might be declining satisfaction scores for credit unions as these new credit union converts are confronted with the reality you mentioned above. Namely, that “despite all the hype, credit unions still charged overdraft fees, inactivity fees, and a host of other fees.”

    Far too many credit unions believe that satisfaction ratings have everything to do with how well you treat your members. For many members, however, price (rates, fees, etc.) is a much larger, more important component of satisfaction than the touchy-feely stuff.

    I expressed concern at the end of 2011 about credit unions allowing any outside group to define the value proposition for the industry as a whole and especially for individual credit unions. I think now we may be seeing the problems that arise when you allow that to happen. Consumers seeking a credit union solution based on an outsiders perspective of “credit union value,” picking a credit union that may not be equipped to deliver that value, and then feeling frustrated or dissatisfied when their selection fails to deliver.

    Thanks for the thought-provoking post!
    Tom

  5. I think it’s a matter of timing. By the time ACSI-CSAT figures were out (Dec. 2012), new customers had already signed up with CUs (through to Sep 2012). The CSAT survey is unlikely to have included them since they’ve been customers of CUs only between Sep. and Dec. 2012. Now, it’d be interesting to know how many customers were lost by CUs during the CSAT period – that’d be more indicative of whether CSAT plays a role in customer switching or not.

  6. If a FI has a declining customer satisfaction score is that really bad? If a FI is getting more customers is that afgood thing?

    These two data points are worthless!

    If the customer satisfaction of the unprofitable segment is going down and the customer satisfaction level of the profitable segment is flat or moving up, overall customer satisfaction will be lower as most FIs have more unprofitable customers than profitable customers. Within the unprofitable segment, what is the customer satisfaction of those customers who have the potential to be profitable? You do have the data to predict that right?

    Where is the growth coming from? If you are growing your profitable segment, good for you. I hope the net effect offsets your growth in the unprofitable segment.

    This is where you need to go. Dig deeper. I’m scratching the surface here. My examples were derived by using a trowel. Imagine what you can do with a simple pick axe.

  7. Ron,

    I am familiar with the ACSI, having used it at my last shop for over a year. It does a good job of helping you understand the main drivers of satisfaction, but you do need more variables than is provided in the industry score to understand what is driving it.

    There was always a lot of ups and downs in our score from quarter to quarter. It often had to do with the mix of members being surveyed and what was happening in the news or what we had been communicating to members the previous quarter. Why? While customer services was always fairly important, rates and fees were always much more important to member satisfaction than any other factors. If rates were perceived to be going down in a bad way elsewhere and we were communicating rate changes too…our satisfaction went down. If banks were being beaten up about their fees and we just happened to change one of ours and mailed a notice about it…another hit to satisfaction.

    I am with you on using different numbers to gauge the true satisfaction…I think you called it the referral score this summer. A member who is willing to refer and does indeed refer new business and adds more accounts themselves is a better measure of satisfaction…and has a bigger impact on the credit union. The ACSI is much better at identifying service and communication disconnects than the impact member satisfaction is having on the bottom line.

  8. Pingback: Bank And Credit Union Customer Satisfaction: Fact Or Fiction? | Snarketing 2.0 by Ron Shevlin

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