Customer code

Cracking the customer code - From Connexux's Strategy Papers

Credit Unions emphasise their differences from other financial institutions – as the positioning statement “A different kind of banking” asserts.

The core difference is in organisation and ideology that directs that.

In this article, Philip Derham summarises findings from an extensive range of Credit Union research projects to demonstrate a need to change the ideological emphasis from members to customers – with the resultant improvement in Credit Union performance that this change would generate.

The Credit Union ethos is that they are democratic, member-owned financial institutions, with a one-member share-one vote equality and so differ from other financial institutions. This summary may reflect official views but broadly does not reflect members’ views and practices.

Why?

As an active description, “members” belong to an association and share a common aim or interest. Credit Union members are members of the credit union but no longer share common interests and so do not act as members, just as customers. (The past was different).

With an average of 20,000 members each, Credit Unions are just too big and member analysis consistently shows differences between members, not commonality. They differ by age and interests (sixty year old pre-retirees have little in common with night-clubbing twenty year olds though both use S1 accounts). Members differ in occupation and so in time use, income and financial capacity. They differ in geography – are scattered across the country – and so differ in housing and leisure and work needs.

Members see themselves as customers who accept the nicer term “member” as a description. They do not see themselves as owners and generally have little interest in the Credit Union viability or operations – as an owner or shareholder would. Rather, members assume somebody (probably the “Government” or the “Committee” or the Directors) will ensure the Credit Union runs properly and that their money is safe.

Generally, members do not think of the costs of running the Credit Union – though they say they’d reassess their relationship if fees rise – and leave the business to the professional managers and oversight by Directors.

The one share (and one vote equality) is seen more as an entry fee to use the Credit Union and not as a share as the Credit Union pays no dividends and lower fees and better interest rates returned instead are seen merely as competitive market responses.

The capacity for ownership is mostly restricted to the “dead man’s brake” capacity of voting on mergers and entity changes – though not with control – that is merely a formal capacity to vote on a pre-determined course. In discussing mergers and changes, the lack of member commonality is reinforced by consistent comment that “I never met anyone who voted for…”

Members join or stay in Credit Unions because they want to have or to maintain a banking relationship that enables them to meet their financial needs. These are more for savings and investment accounts, transaction accounts, credit cards or personal or car loans and current members mostly joined because of existing member recommendation or because their pay was deposited at the Credit Union.

Members generally report their own Credit Union is different to banks – it is friendlier and cheaper – though generally it offers the same services and facilities. Members who use their Credit Union and a bank are more “very satisfied” with the Credit Union service and facilities and are “satisfied” with the comparable bank services – providing opportunity to build on a positive start, but no strong reason to change. The banks are not bad, just different, members consider.

The need then is not to change the democratic, member-owned financial institution base but to reconfigure the approach. Few prospective members will join and few members now will act with the Credit Union just because it is member-owned.

Rather, when the Credit Union offers financial products and services that meet their needs – and when they know about the products - when they want to act – then the Credit Union will be in members’ consideration sets and so able to serve them. In this, membership equates to permission to find out about the needs and permission for the Credit Union to seek to satisfy those with its products.

Membership as such is no motivator to action. Understanding motives and “hitting the right buttons” only follows a change in mindset that requires Credit Unions to treat their members as customers, whose needs and motives must be understood and then met, and not assumed on the basis of a minimal association.

Thus, in changing the emphasis from “member” to “customer”, Credit Unions can, without changing their ethos, focus on identifying the needs and satisfying those – profitably – and so effectively serve their members now and in the future.

For more information,

When knowing will strengthen your decisions...^TM

please email Philip Derham today at derhamp@derhamresearch.com.au

or call him on 03 9897 3011.