MADISON, Wis. (4/12/13)--A new report from the Filene Research Institute uses a new tool to investigate how credit union managers can account for their members' use of competing financial institutions in translating high member-satisfaction levels into improved share of wallet.
"The traditional approach for identifying opportunities can be thought of as trying to find the answer to, 'What can we do to make you happier?'" wrote the report's author Lerzan Aksoy, associate professor of marketing at Fordham University. "Managers also need to understand exactly why [members] use each of the brands that they do.
"[Members] have legitimate reasons for using multiple brands in a category. Therefore, efforts designed to improve share of wallet that do not address precisely why your [members] also use your competitors are doomed."
Satisfaction and net promoter scores (NPS) explain less than 10% of the variation in members' share of deposits, according to the report, "Linking Member Satisfaction to Share of Deposits: Applying the Wallet Allocation Rule in Credit Unions."
This in large part explains why, although credit unions hold the highest satisfaction levels for any industry tracked by the American Customer Satisfaction Index, the share of deposits held by credit unions lags that of their bank competitors, the report said.
The key distinction of this approach is that instead of relying on the absolute satisfaction score or NPS, the Wallet Allocation Rule focuses on two critical factors in linking these metrics to share of deposits:
- The relative rank that this score represents compared with the other financial institutions that members also use; and
- The number of different financial institutions that members use.
Using the rule, managers cannot evaluate their credit unions without taking the competition into account.
Getting credit union members to move their deposits from banks will require directly addressing the reasons they use other financial institutions, Aksoy said.
Of those members who use more than one financial institution, each has on average about $25,414 in deposits going to competing institutions, the report said.