Want to Boost Loans? Increase Member Loyalty

CUs likely will have negative loan growth in 2010—the first time that’s happened in 30 years.

November 16, 2010

CUNA projects there will be negative loan growth (0.1%) in 2010—the first time in 30 years that loan growth has been in negative territory.

Behind the lending downturn is high unemployment, a protracted recession, and a desire by members to pay off existing debt before taking on any more.

As if these challenges weren’t enough, credit unions are dealing with a shrinking pool of strong potential borrowers (members ages 25 to 44), which limits lending opportunities even further.

Some credit unions have discovered the best way to grow their loan portfolios is to capture loans members have gotten from other lenders. To do this effectively, credit unions first need to increase members’ loyalty, according to CUNA’s Member Survey Benchmarking Database and its Credit Union Member Satisfaction, Growth, and Loyalty benchmarking report.

The Ohio Credit Union League’s eLumination Newsletter examines the future lending landscape and what credit unions must do to be successful during these trying times.

“Loan demand isn’t going to grow, and most likely it will continue shrinking. Therefore, the key will be growth through taking market share from other financial institutions, rather than waiting for new demand.”

The opportunity is clearly there for the taking. At least half of members with loans got those loans from a lender other than their credit union, according to CUNA’s Member Survey Benchmarking Database:

Market Shares

The eLumination article points out, “Credit unions that find ways to capture existing loan market share will enjoy a future in the credit union movement. Many are having success through diligent efforts to leverage member data to solicit new lending.”

Next: Exploit member data



Exploit member data

Member surveys can help credit unions grow their loan volume. Credit unions should:

  • Conduct surveys to measure members’ loyalty to your credit union, and your share of members’ loans.
  • Determine how member loyalty and loan market share at your credit union stack up against other credit unions’. Are you a leader or are you lagging?
  • Use these findings to identify opportunities and develop strategies for improving your loan service and building stronger member ties.

This is important because members who are “truly loyal” (the highest loyalty level) to their credit union carry outstanding loan balances at their credit union that are nearly 70% higher than less loyal members: $7,749 versus $4,613, according to CUNA’s Credit Union Member Satisfaction, Growth, and Loyalty benchmarking report.

“Truly loyal” members satisfy these requirements:

  • They “definitely would” recommend their credit union to others;
  • They “definitely would” contact their credit union the next time they need a financial product or service; and
  • They choose the credit union as their primary financial institution (PFI).

Member loyalty tends to increase as asset size increases, with the highest loyalty levels found among credit unions with assets of $500 million or more:

Loyalty2

Net Promoter scores

If you monitor member loyalty using the SatMetrix Net Promoter® Score, you can use “promoter group” information in your benchmarking efforts:

NPS2

Credit unions trying to increase their loan volume and build stronger member loyalty should use member surveys to create targeted marketing, operations, staff-performance, and service-delivery strategies.

Informed strategies, based on reliable member-research data, will help you reach your objectives.

JON HALLER is director of corporate and market research for the Credit Union National Association. Contact him at 800-356-9655, ext. 4346. To learn more about how CUNA Research can help you with member surveys, call us at 800-356-9655, ext. 4172, e-mail us, or visit us online.