Filene paper links member satisfaction, share of deposits
A new paper from the Filene Research Institute addresses how credit unions can translate high member satisfaction scores into improved share of deposits.
Credit unions spend a great deal of time and money trying to improve member loyalty by measuring and managing metrics like satisfaction and Net Promoter Scores (NPSs), according to the paper, "Linking Member Satisfaction to Share of Deposits: Applying the Wallet Allocation Rule in CUs." As a result, credit unions have far higher satisfaction and Net Promoter levels than their retail banking competitors.
However, despite having consistently higher satisfaction and Net Promoter levels, credit unions hold a small percentage of total deposits relative to their retail banking competitors. Part of the reason for this is that metrics like satisfaction and Net Promoter correlate poorly with the share of deposits that members allocate among the financial institutions they use. This fact runs counter to what most credit union managers believe.
The paper introduces the Wallet Allocation Rule, which takes into account the credit union's rank among all the financial institutions the member uses. For example, if a credit union is one of only two financial institutions a member uses for a given purpose, the rule shows that the difference between being the first choice and being the second can have a major financial impact. In such a situation, even being tied has grave consequences: Half of each dollar the credit unions could be collecting from the member is going to a competitor.