MADISON, Wis. (7/18/12)--Modern consumers prize loyalty, particularly in the climate of distrust of financial institutions that has arisen since 2008, according to a new study from the Filene Research Institute. Loyalty is an inherent advantage of cooperatives, including credit unions, given their emphasis on democratic participation, ethics and transparency Filene said.
Loyalty can also drive growth, leading to lower costs and higher revenues, according to the Filene study, "Exploring Cooperative Management." This means loyalty should be measured systematically, the study said.
Areas that generate and build loyalty include:
- Commitment and involvement of management to loyalty-oriented action and reinforcing behaviors;
- Internal benchmarking;
- Determination of member needs;
- Analysis of the competition's capacities;
- Ongoing measurement of member satisfaction and loyalty;
- Analysis of feedback; and
- Ongoing improvement.
The Filene study explores the ways credit union management should resemble and differ from the management of for-profit businesses.
Among the implications the study found for credit unions:
- Changing need for cooperative finance. Most North American credit unions were originally organized around a group that was poorly served by existing providers. However, today most North Americans have access to an overabundance of financial services.
- Defining a cooperative mandate. The oversupply of financial services in many communities means that credit unions must justify their existence as a cooperative in a competitive market.
- Being risk averse. Cooperative financial institutions are, on average, more risk averse than their competitors, leading to different, market-steadying behaviors.
- Providing reasons for growth and profitability. The traditional cooperative model has not always prioritized growth as a goal in itself, but without minimum levels of growth, profitability, and capital accumulation, the credit union business model is unsustainable.
- Returning value to members. Boards and management have a fiduciary duty to return value to members. That value, not limited to money, may be returned in various ways, but its form should be well defined and closely monitored.
- Engaging members. Ensuring that members' needs stay front and center is a key aspect of good cooperative leadership, said the report. To discover and address those needs in large and growing credit unions, leaders must use or, if necessary, create engagement and communication channels.