Customer Experience and Credit Union Opportunities

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ISBN 978-1-932795-82-0
Customer Experience and Credit Union Opportunities
ideas grow here
Customer Experience
and Credit Union
Opportunities:
A Collaboration with
McKinsey & Company
Mark Meyer
CEO, Filene Research Institute
Ben Rogers
Research Director, Filene Research Institute
Foreword by Dorian Stone
Partner, McKinsey & Company
Filene Research Fellow
Customer Experience
and Credit Union
Opportunities:
A Collaboration with
McKinsey & Company
Mark Meyer
CEO, Filene Research Institute
Ben Rogers
Research Director, Filene Research Institute
Foreword by Dorian Stone
Partner, McKinsey & Company
Filene Research Fellow
Copyright © 2010 by Filene Research Institute. All rights reserved.
ISBN 978-1-932795-82-0
Printed in U.S.A.
Filene Research Institute
Deeply embedded in the credit union tradition is an ongoing
search for better ways to understand and serve credit union
members. Open inquiry, the free flow of ideas, and debate are
essential parts of the true democratic process.
The Filene Research Institute is a 501(c)(3) not-for-profit
research organization dedicated to scientific and thoughtful
analysis about issues affecting the future of consumer finance.
Through independent research and innovation programs the
Institute examines issues vital to the future of credit unions.
Ideas grow through thoughtful and scientific analysis of toppriority consumer, public policy, and credit union competitive
issues. Researchers are given considerable latitude in their
exploration and studies of these high-priority issues.
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replacing of the best there
is with something still better!
— Edward A. Filene
The Institute is governed by an Administrative Board made
up of the credit union industry’s top leaders. Research topics
and priorities are set by the Research Council, a select group
of credit union CEOs, and the Filene Research Fellows, a blue
ribbon panel of academic experts. Innovation programs are
developed in part by Filene i3, an assembly of credit union
executives screened for entrepreneurial competencies.
The name of the Institute honors Edward A. Filene, the “father
of the U.S. credit union movement.” Filene was an innovative leader who relied on insightful research and analysis when
encouraging credit union development.
Since its founding in 1989, the Institute has worked with over
one hundred academic institutions and published hundreds of
research studies. The entire research library is available online
at www.filene.org.
iii
Acknowledgments
For their help with, and participation in, this important customer
experience research, the Filene Research Institute would like to thank
Dorian Stone, Filene Research Fellow and Partner, McKinsey &
Company, San Francisco; and Kurt MacAlpine, Senior Engagement
Manager, McKinsey & Company, Toronto. We would also like to
thank the participants at each of our roundtables:
Linda Armyn, Bethpage Federal Credit Union, Bethpage,
New York
Barbara Bass, Credit Union League of Connecticut, Meriden
Michelle Bloedorn, Member Loyalty Group, Chicago
Kathy Chartier, Members Credit Union, Stamford, Connecticut
Jeanne Denton, Nikkei Credit Union, Gardena, California
Brent Dixon, The Haberdashery, Brooklyn, New York
Bruce Fafard, Ledge Light Federal Credit Union, Groton,
Connecticut
Rebecca Gerothanas, Summit Credit Union, Madison, Wisconsin
Lisa Ginter, CommunityAmerica Credit Union, Lenexa, Kansas
Lori Hall, American Airlines Federal Credit Union, Fort Worth,
Texas
Lucy Ito, California/Nevada Credit Union League, Rancho
Cucamonga, California
Steve Koenen, Altra Federal Credit Union, La Crosse, Wisconsin
Randy Kohout, CUNA Mutual Group, Madison, Wisconsin
Ken Landis, Pasadena Service Federal Credit Union, Pasadena,
California
Caroline Lane, Co-Op Financial Services, Rancho Cucamonga,
California
Jean-Albert Maisonneuve, Affinity Federal Credit Union, Basking
Ridge, New Jersey
Connie Mattis, Service 1st Federal Credit Union, Danville,
Pennsylvania
iv
Angela McCathran, People’s Trust
Federal Credit Union,
Acknowledgments
Houston, Texas
Tara McQuillen, Discovery Federal Credit Union, Wyomissing,
Pennsylvania
Robert Michaud, Mid-Hudson Valley Federal Credit Union,
Kingston, New York
Heather Nally, Purdue Employees Federal Credit Union, West
Lafayette, Indiana
Kerry Parker, A+ Federal Credit Union, Austin, Texas
John Parsons, First City Credit Union, Los Angeles
Pete Paulson, Corporate America Family Credit Union, Elgin,
Illinois
Carey Price, Baxter Credit Union, Vernon Hills, Illinois
Daniel Ptacek, United Nations Federal Credit Union, New York
Jon Reske, UMassFive College Federal Credit Union, Hadley,
Massachusetts
Cathy Rios, Travis Credit Union, Vacaville, California
Lynda Savoit, Orange County’s Credit Union, Santa Ana,
California
Patricia Shermot, CTCE Federal Credit Union, Reading,
Pennsylvania
Tansley Stearns, Connex Credit Union, North Haven,
Connecticut
Christopher Stevenson, Credit Union Executives Society,
Madison, Wisconsin
Joanne Todd, Northeast Family Federal Credit Union,
Manchester, Connecticut
Jennifer Ventimiglia, USA Federal Credit Union, San Diego
Suzanne Walden, Chevron Federal Credit Union, Oakland,
California
Joni Walker, Missoula Federal Credit Union, Missoula, Montana
Frank Weidner, Alliant Credit Union, Chicago
Jason Werts, Unitus Community Credit Union, Portland, Oregon
v
Table of Contents
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Foreword
ix
Executive Summary and Commentary
xi
About the Authors
xv
Stellar Customer Satisfaction:
Opportunity or Achilles’ Heel?
1
Defining and Improving
Customer Experience
11
Frontline Performance
and Customer Experience
21
Conclusion and Recommendations
37
Endnotes
41
vii
Foreword
By Dorian Stone,
Partner, McKinsey & Company, and
Filene Research Fellow
Recently overheard: “I have the best insurance agent; I even got
money back from my insurer last year since it’s a mutual. I’ll miss
them now that I’m switching.”
This consumer’s love-lost story is a common and pervasive one across
financial services. Over the past 10 years, property and casualty
mutual insurers have lost 2% of market share in premiums. That percentage could have been even bigger if the larger mutual players had
not moved as aggressively as they did on price. Mutual life insurers
have lost a full 40% of their market share (partly due to conversions
to public companies). In that same time, credit unions have lost 3%
market share of deposits even against banks smaller than $20 billion (B).
In many of these cases cooperative members are voting not at their
annual meetings, but instead with their wallets at the offices of forprofit competitors.
For decades credit unions have done a lot for their members and
deserve their place at the top of the customer satisfaction rankings.
Today, as a segment, they have the highest ratings—with small
banks following closely. But top customer satisfaction ratings can
be achieved in multiple ways, and different methods have profound
impacts on consumer choices on deposits, loans, and investments
and on the ultimate economic impact on the institution. In fact,
credit union efficiency consistently fell short of even the smallest
banks in the nation until the economic collapse last year.
What we’ve found at McKinsey is that banks and financial institutions that are winning market share compensate for “good enough”
customer satisfaction relative to the top marks of credit unions by
investing heavily in the convenience and functionality elements of
their product and service delivery. By doing so, they have achieved
a higher ROI on their customer experience performance that better
reinforces their economic position relative to credit unions.
Looking across the industry, high-performing banks have long driven
functional improvements into and across offers and channels. They
have invested in branches, sophisticated electronic delivery, and sales
staff. They have, however, lagged in most cases on the emotional
elements of the customer experience. Moreover, banks make explicit
decisions about whom they are targeting and what measures they
deem as successful in winning those customers. These banks know
they can’t please all of the people all of the time. As a result, they
make better trade-offs and decisions about where to invest, who to
prioritize in the use of those investments, and how to resolve complaints that arise.
ix
In contrast, many credit unions make explicit decisions to please
every member every time, to support every community as best as
possible, and to hold on to every employee as long as possible. As
a result, credit unions launch offers with high degrees of built-in
compromise, keep the wrong employees, and succeed in diverting
resources from critical functional operations.
Today, creating a stronger emotional bond and a more personal
frontline experience is a key differentiator for banks—but it is not
a differentiator for the average credit union. Why? Because credit
unions have forgotten to build the basic quality of service and
offerings that create fundamental value in consumers’ eyes. Credit
unions—and mutuals more broadly—underperform on that functional value across most industries.
Exacerbating the situation, most credit unions are building additional goodwill through a continued emphasis on emotional elements like consumer trust and personal touch in the customer
interaction rather than on consistently getting the basics right. Moreover, many credit unions often target customer experience excellence
as a goal in and of itself rather than as a means to an end. Customer
experience is a means to greater share of wallet, greater efficiency in
serving that customer and, ultimately, greater institutional value.
This report shows that in transitional times like these, credit unions
may survive by maintaining that historical goodwill—but they cannot win without a focus on delivering functional as well as emotional
value to the consumer, and doing so in a more effective manner.
In the last 12 to 24 months, many credit unions may have been
lulled into believing that the windfall of deposits they have experienced is a sign of longer-term shifts in consumer preference for the
average credit union. However, as we shared at a number of credit
union system conferences last year, our research suggests that this is
a short-lived window of opportunity. Depending on the near-term
stability of the banking sector, that window may close too quickly for
the typical credit union to make use of it.
x
Executive Summary and Commentary
By Ben Rogers,
Research Director
Every high school has a Tom. He’s a decent student, and he’ll attend
an OK college. He’s on the cross-country team but finishes most
races out of the top 10. His pants are a few years past the going style.
Tom is earnest and sincere, and actually pretty fun once you get to
know him. His sincerity has won him the confidence of many of the
girls.
But Tom has one big hang-up. When it comes to serious dating, Tom
always strikes out. He can get a date to the dance, but long-term,
steady relationships are where he falls short. It annoys Tom to watch
his friends fall for the wrong guys time after time—the jerk with
the nice car or the slacker who lives to party. Tom knows those guys
aren’t right for his friends, and deep down his friends usually know
it, too.
Every girl likes Tom well enough, but none of them will commit to
him. “Credit unions seem to be like the guy who’s best friends with
every girl in school but can’t get a date,” says Brent Dixon, a young
adult advisor at the Filene Research Institute. Credit unions are like
Tom.
What Is the Research About?
This report, a collaboration between the Filene Research Institute
and global consultancy McKinsey & Company, explores the mystery
of Tom:
• Why do consumers consistently give credit unions their highest
satisfaction scores and yet take their business elsewhere?
• And, just as importantly, what can credit unions do about it?
To address the issue, Filene and McKinsey convened three regional
roundtables in which participating credit unions were asked to
review McKinsey’s customer satisfaction and customer experience
research. Then they were asked to consider how credit unions can
leverage their phenomenal satisfaction levels among members. In the
roundtables, representatives from 31 credit unions ranging in size
from $27 million (M) to $7B in assets discussed the research provided by McKinsey and suggested best practices that credit unions
can adopt to track and use customer satisfaction to their strategic
advantage.
The primary material for this report comes from McKinsey’s indepth research on customer experience, employee engagement, and
customer satisfaction. McKinsey relies on regular, proprietary surveys
of consumers to inform its advice on a broad range of industries—
from grocery stores to airlines, and from hotels to Internet service
xi
providers. The 2009 customer experience survey on which most of
the report is based draws on 3,900 respondents who offered their
views on retail banking. The survey measures satisfaction, asks what
matters most for driving satisfaction, and seeks to validate the relationship between satisfaction and value creation.
Three McKinsey consultants shared their deep expertise with the
credit union groups, and their names show up throughout the report
as subject matter experts. They are:
• Dorian Stone, partner, San Francisco.
• Kurt MacAlpine, senior engagement manager, Toronto.
• Joshua Kanter, associate principal, New York.
Much of the additional material and best practices in this report
come from the three credit union roundtables and will be cited less
formally than in Filene’s traditional academic reports. The best practices and ideas that emerged from the roundtables are credited where
possible. The words “customer” and “member” are used interchangeably throughout the report to reflect the original McKinsey research.
What Did the Research Reveal?
Credit unions clearly and consistently garner high satisfaction scores,
but it’s also clear that satisfaction doesn’t necessarily bring growth
or market share. In fact, it may disguise underlying credit union
challenges.
The report’s key findings may be uncomfortable for credit unions
that embrace member satisfaction and empowerment at any cost. For
those credit unions, “cost” is the key word. Credit unions as a whole
are at the top of the customer satisfaction heap, which means that
few additional satisfaction gains are possible. Therefore, continued
investment in improving customer satisfaction will deliver little or
no marginal benefit. Instead, the report suggests that credit unions
should try to maintain their preferred status but redirect management efforts and resources toward improving crucial functional areas,
such as remote delivery, member wait times, and problem resolution.
In addition, the report finds that:
• Credit unions outperform banks handily on emotional factors,
like trustworthiness and member pride in doing their banking
there. But they have fewer advantages in functional categories,
like online tools and convenience.
• The type of customer satisfaction metric an institution uses is
less important than consistent analysis of changes in satisfaction
scores.
xii
• Frontline employees, especially branch managers, are the most
important link in good or bad customer experience.
What Are the Credit Union
Implications?
Credit unions’ basic structure impels them to consider the needs of
members before anything else. This report suggests that those needs
are not always best served by better and better personal service. If
they were, credit unions’ advantage in satisfaction would become an
advantage in market share.
Credit unions should treat member satisfaction and improved member experience as means to an end—never as ends in themselves.
The right satisfaction-driven goals will be different for every credit
union, but they should include concerns about long-term viability,
market share growth, wallet-share growth, and sustainable profitability. Member satisfaction efforts that do not consider ROI inflate
expenses. With margins thin, and likely to remain so for the foreseeable future, credit unions can’t afford satisfaction at all costs.
On the same note, credit unions already score at the top in customer
satisfaction, so most credit unions will find little marginal benefit in
trying to improve scores even more. A more sustainable strategy for
high-satisfaction credit unions is to monitor member perceptions
closely while introducing high ROI initiatives like improved sales
channels and streamlining delivery systems. If the members don’t
balk, credit unions stand to
gain.
The McKinsey research used as the basis of this report is availFinally, this report suggests
able to registered members of the Filene Research Institute. To
that credit unions build on and
view the data, please visit www.filene.org/publications/detail/
trumpet what leads members
mckinsey.
to be more satisfied in the first
place: high levels of trust, the
eagerness of existing members to speak well of the credit union, and
good overall value.
In other words, this report is designed to help Tom get more dates.
And then maybe a steady girlfriend.
xiii
About the Authors
Mark C. Meyer
Mark C. Meyer is the CEO of the Filene Research Institute. Mark
joined the Institute in January 2003, starting an open-source revolution in credit unions. He founded the prestigious Filene i3, a group
of next-generation credit union leaders focused on identifying and
launching transformative financial products, services, or business
models relevant to consumers.
An internationally recognized credit union expert, Mark’s opinion
and research have been cited in dozens of publications including the
Wall Street Journal, and he has contributed to National Public Radio.
He has lectured to hundreds of audiences across North America,
Asia, and Europe. He has served as an advisor to the U.S. Department of the Treasury.
Mark has authored market-leading reports on innovation, consumer
behavior, and the financial services needs of young adults. He also
serves as secretary on the board of directors for Summit Credit
Union, the largest credit union in Wisconsin.
Prior to his work at Filene, Mark served as an attorney at Montgomery, Little & McGrew in Denver, Colorado; as vice president and
legal counsel at Arizona State Credit Union; and as assistant vice
president at the CUNA Mutual Group.
Mark received his JD from the University of Nebraska College of
Law and his BS in business administration from Northern Arizona
University. He is licensed to practice law in Arizona and Colorado.
Ben Rogers
Ben Rogers is the research director of the Filene Research Institute,
where he manages and edits a large pipeline of economic, behavioral,
and policy research related to the consumer finance industry. He previously served as director of the Institute’s CU Tomorrow project, as
editor of the CEO Report, and as chairman of the National Directors’
Convention. Ben has been cited in the Wall Street Journal, American
Banker, the Credit Union Times, and the Credit Union Journal. He
earned a master’s degree from Northwestern University and a BA
from Brigham Young University.
xv
CHAPTER 1
Stellar Customer Satisfaction:
Opportunity or Achilles’ Heel?
Credit unions are rightly famous for putting
members first and keeping them happy. For
continued growth, happy may not be the right
focus.
Banks are hurting, and not just on their balance sheets. One effect
of the financial crisis that began brewing in 2007 and exploded
in 2008 is that banks saw a quick and significant decline in their
customer satisfaction ratings. From a starting score of 8.29 in 2006,
banks dropped 19 points overall to 8.10 while other industries—like
grocery stores, Internet service providers, and pay TV—won modest to significant gains. From the six other industries in a McKinsey
comparison, only one other—auto insurance companies—suffered
satisfaction losses (see Figure 1).
Figure 1: Banks Have Experienced the Largest Decline in Customer
Satisfaction
Industry
Change 2009
vs. 2006**
2006–2009 average
customer satisfaction (CSAT)*
8.45
8.40
Auto insurance
companies
8.17
8.18
Grocery stores
8.29
Banks***
8.10
8.07
8.16
Hotels***
7.61
7.72
ISPs
7.02
Pay TV
Airlines***
7.46
7.63
7.69
2006
2009
* CSAT was measured on a scale of 1–10; all data is weighted; 2006 is adjusted 0.06 downward to account for minor change in methodology
** Neutral unless change statistically significant with a 95% confidence interval
*** Primary and secondary company data included in CSAT score
Source: 2006–2009 McKinsey Cross-Industry Customer Experience Surveys.
2
It’s unclear from the data whether banks suffered satisfaction declines
because of tangible operational changes over the three-year period
or as a result of consumer sentiment that turned against financial
institutions perceived as being responsible for the recession. Regardless of the source of their discontent, customers have clearly become
disillusioned in recent years, which should present opportunities for
smaller, responsible organizations like credit unions.
Opportunities, yes; change, no. While total satisfaction with banks
declined from 2006 to 2009, credit unions’ market share of deposits
saw few gains, non-revolving credit merely stabilized, and revolving
credit continued to decline (see Figure 2).
Halo Effects
Size matters. Credit unions and small banks share the best scores in
customers’ overall satisfaction and their willingness to recommend.
Satisfaction and willingness to recommend scores go down as assets
grow. Credit union and small bank customers are 10% more likely
than those at regional banks to be satisfied and 14% more likely
than customers at large banks. Similarly, credit union and small bank
DEFINITIONS
This report refers often to consumers
Customer satisfaction: measures a
and members, but especially customers.
customer’s overall satisfaction with the
These terms are used interchangeably
business; a commonly used metric of
despite the fact that credit unions serve
quality of customer experience.
members. This is because the original
McKinsey research and data use “customer” language, which is retained here for
consistency and clarity. Where the word
“member” appears, it should be considered synonymous with “customer.”
There are several discrete terms that
hold specific connotations throughout the
report. Each is separate, but all are related.
Customer experience: total set of
elements (from promises and messaging to execution) that determine the
value delivered to customers and drive
Employee engagement: extent to
which employees commit to the organization and, as a result: (1) how hard
they work to please customers and
drive sales, and (2) how long they intend
to stay with the organization.
Functional value: describes tangible
benefits like proximity of branches, good
online delivery, and overall convenience.
Emotional value: comprises intangible factors like trust and feeling good
about telling others you bank there.
specific customer behavior that benefits
both the customer and the business
(e.g., repeat purchases, referrals).
3
customers are 10% more likely
to recommend their institution
than customers at regional or
large banks.
Figure 2: Credit Union Market Share
18
16
14
12
10
8
6
4
2
0
In addition to the emotional
connections customers have
to local institutions, one possible explanation of the large vs.
small split is the prevalence of
small banks and credit unions
1982
1985
1989
1993
1997
2001
2005
in smaller communities, argues
Non-revolving consumer credit
Revolving consumer credit
Kurt MacAlpine, a senior
engagement manager at McKSources: CUNA Operating Ratios and Spreads and Filene analysis.
insey. In cities and large towns,
options abound and consumers
are likely to be more aware of alternatives to their existing financial institutions, leading them to expect more from their current
relationship.
2009
Savings
“Credit unions perform better than banks. We also know that small
banks perform better than big banks, and we know that medium
banks perform better than big banks. There’s this natural trend
toward something I feel more personally tied to. It’s in my community, or because I feel like I’m an owner of it, I automatically get a
lift,” says Dorian Stone, a partner at McKinsey’s San Francisco office.
Best Practice
In at least one sense, small is great. In the McKinsey analysis, institutions smaller than $20B in
assets count as “small,” and they consistently garner the highest customer satisfaction ratings. The
research doesn’t prove this, but it may well be that small institutions garner extra satisfaction simply because they’re small. Counteract the potentially misleading “halo effect” of being a small institution by tracking movement in customer satisfaction over time. Rather than taking great pride in
a score that is numerically superior to big banks, argues McKinsey’s Kurt MacAlpine, credit unions
should focus more on trends and direction in their own satisfaction scores.
Importance of Emotional
Connection
Several emotional connections drive customer satisfaction in retail
financial services. “Company I can trust,” with a 19% score, is the
most important underlying factor out of 15 customer satisfaction
drivers identified by McKinsey’s surveys. That is followed by two
functional drivers: “Provides good overall value” (17%) and “Service
in branch” (15%). The fourth, “Feel good about telling people that I
bank with them,” garners 13% and is also an emotional driver.
4
Figure 3: Emotional Factors Are Key Drivers of Customer Satisfaction (CSAT)
Derived importance of drivers of satisfaction (percent)
Company I can trust
19
17
Provides good overall value
15
Service in branch
Feel good about telling people that
I bank with them
Products and services meet my individual needs
13
8
Fees and charges are reasonable
6
Online tools
5
Service on phone
5
Bank sends me helpful information
5
Company Web site
2
Call center employees able
to handle complex questions
2
Branches are easy to use
1
Friendly and enjoyable branch atmosphere
1
Reasonable waits at branches
1
IvR use
Overall, CSAT in retail
banking is largely
driven by emotional
factors and other
intangible elements
that affect quality of
customer experience
(e.g., friendliness
of staff, customer
expectations)
0
Emotional factors
Sources: 2009 McKinsey Customer Experience Survey; team analysis.
Best Practice
Sometimes the timing of member outreach is as important as the content, says McKinsey’s Dorian
Stone. In an effort to improve customer experience while reducing costs, one insurance company
asked agents to make 10 unsolicited calls per day to let customers know they appreciated the business. The calls were deliberately timed so that the agents would usually just leave messages and
customers wouldn’t perceive the call as a solicitation. “Because it was unexpected, because no insurance company does this, it actually had a major pop,” Stone says.
A Chicago roundtable participant shares a similar story: “The last couple weeks of the year, we just
called members to say, ‘Have a great holiday, and we love you, and that’s it.’ Our whole purpose is
the call; we never mention a product. That’s the one thing that triggers the most positive feedback
from our members of anything we do.”
Credit unions, along with other mutuals, enjoy an emotional
advantage because of their structure, says McKinsey’s Dorian Stone.
“People do consistently like mutuals more than they like others
because there’s an emotional bond,” he says.
5
However, Stone says, “people also feel that mutuals do not actually
provide the value and the functional basics, the functional performance that’s needed, that they get from the for-profit, non-mutual
companies out there in banking.” So, despite the preeminence of
trust and the importance of “feeling good,” factors like overall value,
products that meet individual needs, and online tools weigh into
consumers’ decisions about financial institutions. This is especially
true for new and potential members, who have no history of an emotional bond.
Further, to many consumers
financial service decisions are
much more about economic
value (real or perceived) than
they are about emotion. A credit
union that resonates emotionally but fails to convey its
fundamental value to consumers is in danger of losing the
relationship.
Best Practice
One way to capitalize on local, emotional connections is to
emphasize products that are hyper-specific to your market. Jon
Reske of UMassFive College FCU in Hadley, Massachusetts,
volunteers the example of the credit union’s farm share loans.
In western Massachusetts, members often buy farm shares that
entitle them to a season of fresh produce, but some members don’t have the $900 necessary to pay the upfront cost of
the share. UMassFive loans the small amount and then takes
payments as payroll deductions over the course of the season.
Most local loans are not profit centers, but they build goodwill
and positive customer satisfaction. Other local loan ideas from
UMassFive: energy loans to pay for energy costs like heating oil
deliveries, fuel-efficient transportation, or Energy Star–certified
appliances; and bike loans for students.
Credit unions have historically
felt leery about introducing sales
into a culture that garners such
high member satisfaction. But
credit unions can actually convey
fundamental value to members
by ramping up sales initiatives.
An institution that offers products and service that are good for consumers has nothing to fear from emphasizing cross-sells, Stone says.
But a credit union culture that is too “nice” to assert itself stands to
lose market share and lose out at a key step in the marketing funnel.
Customer Satisfaction in the Funnel
The classic marketing funnel imagines customers moving through
several stages before they commit to a product purchase, whether of
sneakers or a checking account. First comes awareness, then familiarity, then consideration and deliberation, and finally purchase. At
each step the potential customer might opt out, and only a few arrive
finally at the point of purchase.
“What satisfaction is particularly powerful in doing is getting
[customers] to the consideration step. It gets you into the consideration set, but you don’t actually see it in the performance set,” Stone
says. High satisfaction doesn’t necessarily make you appear more
advantageous compared to competing product offerings. Having a
6
Figure 4: Marketing Funnel
Awareness
Familiarity
Source: McKinsey Quarterly, June 2009.
demonstrably better product is what
gets customers to purchase.
Customer satisfaction enhanced by
proactive sales will get potential customers much further along the marketing funnel, Stone says. “While people
may like us and consider us, it’s not
clear that we have any advantage when
Consideration
Purchase
Loyalty
we get further down the sales process
to get a greater share of their deposit or
wallet, [or] sell the next product. We’re
left standing just the same flat, toe to toe with everybody else.”
A key differentiator of the sales vs. service environment is that sales
cultures focus on individual products and talk to customers about
individual products. In order to get better, Stone continues, credit
unions have to focus on the tangible or economic value—on the
individual product and the individual interaction quality.
Importance of Functional Services
In McKinsey’s surveys, consumers indicate they are more emotionally connected to credit unions than they are to banks. Credit unions
also score better than banks in functional categories, but the advantage there is less pronounced and it may be misleading, according to
MacAlpine.
That’s because credit unions seem to enjoy an emotional “halo effect”
in their members’ minds. Members often enjoy a deeper connection
with their credit union, so they probably rank some credit union
services more charitably than a direct comparison would justify. For
example, members in aggregate rate their credit unions’ online tools
more highly than customers of large banks rank their banks’ online
tools (see Figure 5). But a dispassionate comparison between most
credit unions’ online tools and those of Citibank or Chase would not
be favorable for the credit union.
And credit unions’ traditional emotional advantage is fading, especially in relation to small banks. “Small banks have figured this out.
And you know what? They don’t have 150,000 employees to deal
with. So they’re actually taking action now and closing these gaps,
such that the differentiation that used to be so stark between a credit
union and the bank is diminished,” says Joshua Kanter, an associate
principal at McKinsey’s New York office.
7
Figure 5: Credit Unions Outperform Banks in Service and Emotionally Driven Categories;
Less in Overall Value or Functionality
Customer satisfaction (1–10 scale)
8.98
Overall customer satisfaction
Top five drivers of CSAT
9.08
8.37
8.26
8.14
8.02
7.91
8.66
8.47
8.39
8.19
8.25
8.15
7.90
7.94
7.83
7.82
7.70
7.45
7.36
7.34
7.13
8.14
8.10
7.84
7.62
7.65
8.37
8.47
8.39
Wachovia
WaMu
Bank of America
Service in branch (19.8%)
8.88
Company I trust (16.7%)
8.48
Brand* (14.0%)
8.85
Overall value (13.5%)
8.75
Online tools (6.9%)
Credit
unions
* “Feel good about telling people you are with them”
Source: 2008 McKinsey Cross-Industry Customer Experience Survey.
Advocacy vs. Function
An advocacy value proposition (i.e., “doing what’s right for the member”) can be at odds with a functional value proposition, because
doing what the member wants in every case is expensive. Even
though advocacy and function often overlap, they should be considered as separate values, argues Kanter. A credit union that insists on
better loan and deposit rates will not be able to afford what’s right for
customers in every instance, like making exceptions or performing
time-consuming research—especially in a downturn when resources
are scarce.
Seen differently, a credit union that wants to promote engagement
and emotional appreciation from members has to spend money on
staff time, communications, and exception handling that is expensive
over time. That is money that cannot be used to pay better rates to
member owners.
Consumer behavior shows that a superior customer experience does
not automatically equate to membership growth, perhaps because
customer experience is a measure of how existing customers feel
about their institution. So it does not necessarily lead outsiders or
non-users to consider a new financial institution.
8
7.95
Citibank
8.41
Chase
Expenses Force Tough Decisions
Credit unions’ historical expense ratios (noninterest expense divided
by net interest income plus noninterest income) are consistently
higher than those of even their smallest banking competitors. “If
you looked at the top 40 banks
in the United States, there’s
Best Practice
actually very little correlation
between scale and efficiency
One of the biggest inhibitors to switching checking accounts
ratio,” Stone says. “Your effiis changing bill-pay setups, says McKinsey’s Dorian Stone. So,
ciency ratio winners [are those
consider a concierge switching service. Members could send
that come in below 50]. Those
in a bundle of bills, an employee could enter the information,
on probation between 50 and
and when the account was ready an employee could walk the
55, maybe 60. And then the
member through the payment process over the phone.
people that were offenders,
which are the ones over 60.”
Banks’ expense ratios leapt up in 2008, but they will likely return
to historical norms, if not below, once the surviving banks work
through their charge-offs and the cost of heavy customer churn. The
work-through period will be wrenching for profitability, but it will
likely be economically positive in the long term because it will force
banks to slash expenses in the short term and start over from a leaner
cost basis during the next upturn.
Figure 6: Historical Efficiency Ratios
Weighted average efficiency ratios*
Ratio of noninterest expense to sum of net interest and noninterest income
0.70
0.65
0.60
0.55
0.50
0.45
0.40
0.10
0.05
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Non–credit unions**
Credit unions
Note: Calculation of efficiency ratio = Noninterest Expense / (Net Interest Income + Noninterest Income)
* Institutions used in this analysis had between $500M and $17B in 2008 assets
** Non–credit unions defined as mutual and non-mutual commercial banks, savings banks, and savings institutions
Source: AM Best.
9
“The for-profit [banks] are leaner and meaner, and we [credit
unions] rest on our laurels, where we’re going to offer a little better
rate,” says one Los Angeles–area CEO. “Our margins are thinner
because our cost of funds is higher. Our loan rate’s a little lower.
We’re squeezed a little tighter [than banks].”
Add to that economic analysis a philosophical analysis, MacAlpine
says. He summarizes feedback from other credit union CEOs: “We’re
going through one of the worst financial crises of the last 80 years,
and most people I sat with around the table are saying, ‘I’m not
doing layoffs; we’re not going to replace or upgrade our workforce;
we’re going to toe the line.’ You wouldn’t hear that in most companies.” He contrasts that with two more typical reactions from companies during a downturn: Those that are marginal have to reduce their
workforces to survive, and those that are in relatively good shape see
this downturn as “the opportunity of a lifetime to upgrade the talent
that we have.”
The pursuit of positive customer experience can be an undermining
force if not weighed against the health of the organization and other
strategic goals. That’s not because a focus on customer experience
is bad for the members, but because it can exert cost pressure that
forces management to take undue risks.
Summary
Credit unions hold valuable goodwill from their members. It seems
that both their structure and their size contribute to positive emotional feelings, which spill over into high satisfaction scores.
Emotional factors and satisfaction get existing members to consider
opening new products with credit unions, but they are less effective
in closing the deal. Credit unions should beware the “halo effect,”
which leads members to think and speak well of them without necessarily bringing more business.
Credit unions, which historically have been less operationally efficient than their banking peers, should use the downturn to become
leaner and scrutinize the ROI of any new programs designed to
further please members.
10
CHAPTER 2
Defining and Improving
Customer Experience
Knowing what members want is hard enough.
Harder still: balancing better member satisfaction with operational expenses. The best organizations identify profitable satisfaction drivers
and ignore the rest.
Navel gazing is satisfying, but it’s not always right. One of the biggest mistakes companies of all stripes make is assuming they know
what their customers want, McKinsey’s Joshua Kanter says. But
pet projects or staff-designed initiatives won’t always resonate with
customers.
“You’ve got to understand what’s really important to people, because
there are the things that we believe we do particularly well and [that]
we want to matter to people. It doesn’t always matter to people,”
Kanter says. Furthermore, and
more subtly, “there are things
Best Practice
that people tell you are imporRegardless of your chosen customer satisfaction metric, use a
tant and other things that are
1–10 scale rather than a 1–5 scale, suggests McKinsey’s Dorian
really important to them.”
Stone. Doing so allows members to offer more meaningful
Taking that difference seriously
distinctions of whether they’re satisfied, neutral, or unsatisfied.
leads management to better
analysis. At the most basic level
it means polling members and soliciting feedback before and during
new initiatives. That function can be served by traditional or online
polling or in focus groups.
More powerful than polling, however, Kanter says, is measuring how
customers respond to new customer experience initiatives. While it’s
fairly easy to measure the return of a marketing campaign, measuring
customer experience is more difficult, because the indicators trail the
investments. Customers will respond to positive changes, but it won’t
always show up in satisfaction surveys overnight.
This is one of the reasons consistent customer experience tracking is more important than the kind of metric used, McKinsey’s
Dorian Stone says. Comparing Net Promoter (NPS) methodologies
to customer service methodologies yields few insights. And the cost
of changing from an existing method can be high considering the
implementation costs and potential confusion among staff, Stone
adds. “You might as well stick with what you’ve got. If you’re using a
CSAT, use a CSAT. If you’re using NPS, it’s good enough.”
12
The real value in these customer measurements comes from tracking improvements or declines that follow new initiatives. “The
member doesn’t necessarily know what they need, so we need to be
more [of an] advocate. We need to really take more of a consultative
approach,” says one Los Angeles roundtable participant.
Value of Customer Satisfaction
Measurement
Every executive, whether at a credit union or a computer manufacturer, is susceptible to the navel-gazing fallacy: assuming customers
want the same thing the executive wants and acting accordingly.
This thinking is particularly dangerous in gauging the value of
customer experience for two reasons: First, there’s no guarantee that
even an informed executive can know what customers want; and
second, a customer experience that may have worked perfectly in
the past may no longer be valuable. Worse, it may be valuable but
for exactly the wrong kind of consumer. Different demographic and
psychographic groups will value different customer experiences.
For example, high-net-worth individuals will prize a different experience than young borrowers, and middle-income professionals will
want a different experience than college students. So, before a credit
union decides to improve its customer experience or seeks to measure its results, it needs to identify its target groups, says Stone.
Best Practice
Verify the value of new customer experience initiatives with members before you invest. Consider using surveys, focus groups, or—most effectively—data about how similar investments have
changed member behavior in the past. Alternately, rather than offering a survey about whether
they would like a shiny new drive-through, give members options about whether they would prefer
the drive-through to mobile banking or better auto loan rates. “I see too many of my clients building the next big mousetrap,” says McKinsey’s Joshua Kanter. “Make sure that the things you’re
making your investments on are actually going to be valued before you go too far into it.”
Large, sophisticated companies often track their customer satisfaction scores, but they don’t delve deeply enough into the drivers
behind the satisfaction, Stone adds. For example, it’s tempting to
assume that satisfaction at the credit union is improving because
frontline staff have been asked to greet members by name, when in
fact the improvements are more closely linked to a new Web service
or streamlined underwriting.
13
GEN Y AND CUSTOMER EXPERIENCE
Consumers increasingly demand function-
me, walk me through this, hold my hand,’
ality from their financial institutions. That’s
and then [it’s], ‘Leave me alone because
in addition to any emotional bond institu-
I’m impatient and I want to be able to do it
tions can make, and in no cohort is this
any time.’ ”
more apparent than with Generation Y.
Multi-channel relationships are increasingly
“What the younger generations now care
important because young adults say con-
most about is actually less to credit union
venience is most important to them when
strengths,” says McKinsey’s Dorian Stone.
they first choose a financial institution.1 And
They are looking for multi-channel relation-
convenience for the modern financial cus-
ships, and they want to receive that in a
tomer includes:
way that feels personal for them.
•
Branch locations.
•
ATM access.
•
Extended business hours.
•
Telephone access.
younger members: first, the desire for
•
Internet access.
heavy up-front engagement, followed by
•
Mobile access.
That personalization is key. Lori Hall, of
American Airlines Federal Credit Union in
Fort Worth, says that her credit union’s
research shows two clear needs from
the desire to be left alone. “First it’s, ‘Teach
Figure 7: Why Young Adults Choose Their Financial Institution
40%
37.4%
35%
30%
23.8%
25%
21.7%
20%
15%
10%
5%
2.8%
2.7%
Inertia
Reputation
0%
Convenience
Products
Service
Source: Jinkook Lee, Attracting Young Adults: What Do We Know About Their Use of Financial Institutions and Payment Behaviors? (Madison, WI: Filene Research Institute, 2008), 7.
14
GEN Y AND CUSTOMER EXPERIENCE (CONTINUED)
The importance of familiarizing young adult
unions hold sizeable advantages in trust-
members with the credit union’s diverse
worthiness among consumers aged 35
systems can be summed up neatly, Hall
and older, that trust dissipates among 18-
adds: Members want to understand it, and
to 34-year-olds. In all age groups, credit
then they want to be left alone.
unions hold trust advantages over mutual
fund companies, brokerages, financial
Younger consumers trust banks more than
advisors, and insurance companies.
they trust credit unions. Though credit
Figure 8: Consumer Trust by Age
“How much do you trust the following entities with your money?”
Top-3 box responses (“trustworthy”) less bottom-3 box responses (“not trustworthy”), percent
14
4
18–34
–17
8
–21
–25
–19
–34
–36
–31
–29
–35
22
35–54
–25
30
16
55+
–23
Bank
Credit union
Mutual fund
company
Younger consumers trust
banks while older consumers
trust credit unions most
Most trustworthy
–25
Full-service Publicly traded
Financial
brokerage firm
insurance
planner or
company
registered FA
Younger consumers exhibit
~10% smaller trust deficit than
their older counterparts
Second-most
trustworthy
Source: McKinsey Financial Institutions Consumer Insights Survey, September 2009.
15
Managers who have a hand in customer experience, like those in
operations or IT, should be asked to show the ROI of projects aimed
to improve customer experience. Even more, Stone argues, they
should be challenged to improve customer experience while cutting
costs. In the long term, that’s the only way to bring credit unions
into the same efficiency range as their banking competitors (see
Figure 6).
For example, one of McKinsey’s insurance clients wanted to prioritize
customer retention, so it matched the customer satisfaction scores of
its agents against their retention rates. The useful finding, Stone says,
is that the company found that each point of customer satisfaction
was worth between 1.3% and 1.5% better retention. With specific
data like that, the company could make ROI decisions about how
much to invest in improving customer experience.
Similarly, a credit union interested in member referrals might
measure any rises in referrals affiliated with improving customer
satisfaction. Separately, a credit union interested in driving cross-sales
should understand how cross-sales rise or fall with changing customer satisfaction rates.
As shown in Figure 9, one bank benchmarked its “delighted” customers (those ranking the bank between 8 and 10), assuming those
Figure 9: Attrition Levels and Referrals by CSAT
Large retail banking example
Household attrition level* by CSAT
Relative to delighted customers
Referrals** by CSAT
Relative to dissatisfied customers
×2.7
×3.2
×1.8
×1.5
=100%
Dissatisfied
(1–4)
Neutral
(5–7)
Delighted
(8–10)
=100%
Dissatisfied
(1–4)
Current market upheaval presents
opportunity to truly differentiate on quality
of customer experience, retaining uneasy
customers and rapidly capturing market share
* Within 3 months of survey
** Within 1 year of survey
Source: McKinsey with disguised client data.
16
Neutral
(5–7)
Delighted
(8–10)
customers were retained at the highest possible rate. From there, it
was apparent that “neutral” customers (ranking between 5 and 7)
showed attrition levels 50%
higher, and “dissatisfied” cusBest Practice
tomers left more than two-andSurvey members to determine which “magnet products” attracted
a-half times more often.
them to the credit union in the first place, urges McKinsey’s Kurt
Conversely, if dissatisfied cusMacAlpine. Figuring out which products are most competitive and
tomers can be expected to offer
attractive among your membership allows you to better position
the fewest number of referrals, a
the credit union and attract similar members.
similar analysis shows that this
bank’s neutral customers were
nearly twice as likely to make referrals as the malcontents. Delighted
customers were more than three times as likely to refer. In each case,
establishing a benchmark allows management to quantify the business outcomes of improving customer satisfaction.
Choosing “Good Enough”
Credit unions consistently rank at the top of any banking survey of
customer satisfaction. That’s good on its face, but it may actually
contribute to their struggles, Stone argues. For-profit and publicly
traded banks have to answer to shareholders who are much more
interested in bottom-line profits, so they have learned to settle for
“good enough” customer satisfaction, while driving aggressively for
efficiency and value.
In McKinsey’s 2008 survey, Wachovia and Washington Mutual were
among the highest-ranked national banks in overall customer satisfaction, but that obviously didn’t protect them from the downturn.
“The survivors seem to have said ‘good enough,’ and then focus[ed]
on execution, on efficiency and tightness,” Stone says.
Figure 10 provides strong evidence for the idea that customer
satisfaction isn’t always driven by personal connections or by handson service. ING Direct, the best performer after credit unions and
community banks, got its superior scores despite the fact that it
maintains virtually no person-to-person interaction with customers.
Instead, it has set clear expectations for how customers will interact
with it through its Internet channels.
The three national banks on the lowest side of the 2008 customer
satisfaction scale—Bank of America, JP Morgan Chase, and Citibank—have each passed through the financial crisis scathed (and
subsidized) but intact. Their customer philosophy is summed up
by Stone as: “ ‘It’s going to be good enough, and then we’re going
to execute like hell. And if I put a little bit less of a smile on one
person’s face than others, that’s okay.’ They tend to remain actually
stronger in areas like [overall] value.”
17
Figure 10: Top 2008 Performers by Overall CSAT
ING consistently outperforms its largest
peers across all key dimensions of
customer service/frontline behavior
9.2
9.0
90%
confidence
interval
!VERAGESCORE
Suntrust has particularly strong performance
in customer service and frontline behavior
8.8
8.6
8.4
8.2
8.0
7.8
Credit unions,
community banks,
and ING are
leading the pack
7.6
7.4
s#REDITUNIONSARECLEARLYDIFFERENTIATEDFROMBANKS
s!MONGNATIONALBANKS7ASHINGTON-UTUALAND7ACHOVIA
are clearly leading, with statistically significant, better
PERFORMANCETHAN"ANKOF!MERICA*0-ORGAN#HASE
7ELLS&ARGOAND#ITIBANK
7.2
Respondents were asked: “Overall, how satisfied are you with your primary bank?” from 1 (low) to 10 (high). Graph maps scores for primary bank only;
excludes Umpqua bank due to small sample size.
Source: 2008 McKinsey Cross-Industry Customer Experience Surveys.
The merger of Chase and Washington Mutual provides a particularly
interesting example. Chase purchased Washington Mutual, a recognized customer experience innovator, during the throes of the financial crisis, in September 2008. Part of the giant thrift’s strategy, and
its downfall, had been to make banking and consumer lending more
accessible to middle-class and low-income consumers. In pursuing
that strategy Washington Mutual made its branches and customer
experience as welcoming as possible with efforts like its innovative
“Occasio” branch designs, which eschewed traditional teller lines for
pleasing details like children’s play areas, “concierges,” and an open
floor plan. The bank also became notorious for saying “yes” to consumers, a satisfaction-inducing but dangerous strategy.2
Soon after its purchase of Washington Mutual, Chase began remodeling the Occasio branches, replacing them with standard banking designs. Chase has said that the back-to-basics remodeling will
provide greater privacy for consumers.3 It will also likely streamline
Chase’s operational costs—a trade-off between customer experience
and overall value.
18
4#&
Citibank
Capital One
&IFTH4HIRD"ANK
7ELLS&ARGO
HSBC
#HASE*0-ORGAN#HASE
"ANKOF!MERICA
Citizens Bank
0.#"ANK
US Bank
National City
Regions Bank
Key Bank
BB&T
7ACHOVIA
Suntrust Bank
7ASHINGTON-UTUAL
Commerce Bank
ING
Community banks (“Other”)
Credit unions
7.0
Large banks are garnering new customers for many reasons, not
least of which are their marketing reach and convenience for most
consumers. But they are also doing it by focusing on core functional
systems that will serve the majority of their customers with minimal
costs: cutting-edge online banking, efficient voice response systems,
mobile banking, and advanced ATMs. Each of these services requires
heavy spending up front but promises long-term cost savings compared to a staff-heavy delivery system. Such systems also convey value
to younger consumers, who prize convenience and products when
choosing a financial institution (see Figure 7).
Problem Resolution as a Differentiator
No matter how much leaders want consumers to engage with their
companies and their brands, most customers spend little time thinking about them. Problem resolution is different. When dealing with
a problem, consumers are engaged and the resolution—positive or
negative—is amplified.
Institutions that adopt a “good enough” service philosophy recognize
that they won’t please all the customers all the time, so handling
exceptions becomes a key competency. “Problem resolution is arguably the most important area you can win on,” McKinsey’s Kurt
MacAlpine says.
Consumers care less about the speed of resolution than about having
their expectations met, Stone says. For example, a problem that is
supposed to be resolved tomorrow but
Figure 11: Problem Resolution and Customer
takes three days to resolve will be less satBehavior
isfying than a resolution promised within
a week and delivered in four days.
Question: “Since the last issue, which of the following are true?”
% of respondents
Customers who
experienced negative
moment of truth
39
Customers who
experienced positive
moment of truth
80
Increased balance
Decreased balance
53
5
Opened new accounts*
9
Closed accounts
15
10
2
* Includes opening a new account (e.g., checking, CD, investment account) and taking out a new
loan (including refinancing)
Problem resolution is just one instance of
a broader set McKinsey calls “moments
of truth.” Moments of truth are the key
points in a relationship when an institution is more likely than normal to
strengthen or weaken customer perception and satisfaction (see Figure 11).
Credit unions can differentiate themselves
by empowering frontline staff to resolve
a majority of the complaint types they
encounter. In situations where frontline
staff are not authorized to resolve the
problem, the credit union should formally track the complaints and respond as
quickly as possible. This is especially true
for credit unions, which have a hard time
Source: 2008 McKinsey Cross-Industry Customer Experience Surveys.
19
improving across the board on already good customer satisfaction
surveys.
Summary
Garner better management insights, not just by polling members,
but by tracking customer satisfaction responses to new initiatives.
The specific type of customer satisfaction metric used is less important than consistent tracking and identifying what causes satisfaction
to move.
National banks seem to choose “good enough” customer service for
the majority of interactions while heavily investing in problem resolution and exception handling. Rather than striving for ever-better
member satisfaction as a goal unto itself, credit unions should seek
to maintain satisfaction while introducing functional improvements
that make them more competitive.
20
CHAPTER 3
Frontline Performance and
Customer Experience
Frontline employees are the face of the credit
union. Their own engagement hinges on intangible factors, but it can make or break the
member experience.
Nowhere is the connection between customer experience and the
credit union more tangible than when an employee interacts with a
member, whether in a branch, on the phone, through e-mail, or in
an office. Yet credit unions don’t always hire who they should and are
slow to fire those they should.
Employee engagement is one
Best Practice
of the strongest drivers of
Consider making individual employee performance metrics
good customer satisfaction.
public for all employees. Doing so can encourage best practice
And credit unions together
sharing from top to bottom and is a cheap way to recognize top
with community banks clearly
performers.
outperform larger regional
and national banks. Employee
engagement at the smaller institutions is better—3.88 out of 5 as
opposed to 3.73 (regional banks) and 3.76 (national banks).
The engagement differences play out clearly when customers are
asked to rate employees on specific attitudes and perceptions. In each
case, size seems to play a decisive role, with the smaller credit unions
and community banks performing better than regional banks and
regional banks performing better than national banks (though to a
lesser degree).
• On “Employees go out of their way to help me,” credit unions
and community banks are rated 9.7% higher than their closest
competitors.
• On “Employees are being honest when they speak with me,”
credit unions and community banks are rated 8.8% higher than
their closest competitors.
• On “I feel that employees act on my behalf with the rest of the
company,” credit unions and community banks are rated 11.0%
higher than their closest competitors.
Banks in general struggle to sustain high levels of engagement at the
front line, according to McKinsey. Attrition in the banking sector
22
Figure 12: Frontline Behaviors Have a Direct Impact on Quality of Customer Experience
Question for customers:
“How strongly do you agree with the following?”
On a scale of 1–10
National banks
Regional banks
Overall employee
engagement
On a scale of 0–5
Employees go
out of their way
to help me
3.76
7.49
Community banks/
credit unions
Industry
average
7.79
3.79
7.86
7.40
8.61
8.36
3.88
I feel that
employees act on
my behalf with the
rest of the company
7.33
7.89
7.55
3.73
Employees are
being honest
when they
speak with me
8.14
8.25
7.71
Source: 2008 McKinsey Cross-Industry Customer Experience Surveys.
is much worse than in other industries, averaging 30%–60% per
year compared to just 10%–20% for top retailers. The average teller
tenure hovers between 6 and 12 months.
One reason for the high turnover may be that fully 40% of employees in the overall workforce are temperamentally ill-matched for
serving customers. The numbers are even worse at banks, where up
to 62% of hires are placed in jobs for which they’re ill-suited. These
are workers who are motivated mainly by either stability or a paycheck (see Figure 13). They may be valuable in back-office roles, but
they generally detract from the quality of customer experience.
Best Practice
One way to boost employee engagement is with “walk in my shoes” programs, says Lisa Ginter of
CommunityAmerica Credit Union. The process informally connects front and back office staff so
each can see the implications of their actions on the rest of the credit union. CommunityAmerica
is now considering the program as a formal step for new hires. “For many years, we’ve just always
had this disconnect. Whether you’re in IT, marketing, accounting, wherever, your job is to serve
your member. So we’re trying to bridge some of those barriers.”
The well-matched 60% is composed of three distinct segments, each
of which has strengths to offer a customer-focused financial institution. These three segments are those with a leader mindset (25%
23
Figure 13: Five Workforce Segments
Leader
mindset
Enthusiasts
Customeroriented
Followers
Indifferent
hired hands
25%
9%
25%
14%
26%
Leading/
developing others,
career prospects
Sales goals,
compensation,
recognition
Serving customers,
learning
Stability
Salary
Motivated by
8PSLJOH
QSFGFSFODFT
t1SFGFS
autonomy
t&OKPZ
responsibility
t6MUJNBUFDPBDI
t%SJWFOCZ
results and
overcoming
challenges
t-PWFTFSWJOH
customers
t(PBCPWFBOE
beyond in
service
t&OFSHJ[FECZ
DPXPSLFST
t8BOUFYQMJDJU
directions
t(FUUIFKPC
done
t1SFGFSCFJOH
iCBDLTUBHFw
t"QBUIFUJD
t$VTUPNFSTBSF
a burden
t1SFGFSUPXPSL
alone
ti+PCTB
QBZDIFDLw
PG
XPSLGPSDF
t4FFLGSFFEPN
and
independence
t1SFGFSUPXPSL
XJUIDVTUPNFST
generating
sales
Sources: McKinsey Frontline Survey 2008; team analysis.
of the workforce), enthusiasts (9%), and those who are primarily
customer-oriented (25%), according to a 2008 McKinsey workforce
survey.
Leader mindset: These employees are interested in career prospects, in taking on a variety of roles, and in leading (or eventually leading) others. In customer-facing environments, leader
mindset employees are best positioned as branch managers.
Enthusiasts: These employees are motivated by
compensation and goals
and want to have good IT
and institutional support.
They are best positioned
as midlevel specialists,
e.g., financial advisors,
loan officers, and account
specialists.
Best Practice
One Los Angeles roundtable participant shared how her credit
union used a new outbound call center. After reviewing Experian credit files, callers contacted members for whom the credit
union could save $50 or more per month on a car loan. “We
make that kind of intelligent call. [We’ve] had really great success with recapturing the auto loans.”
Customer-oriented: These
employees thrive on positive interaction with customers. They
want a positive work environment and professional development. Like enthusiasts, they are motivated by compensation,
but are better team players. Customer-oriented employees work
well in teller and call center roles.
24
Figure 14: Segmenting Tools for Job Placement
What is the best alignment of segments vs. jobs?
Industry
% wrong
segments
Frontline jobs
Product
specialist
28%
Customer
38%
service/teller
Account
manager
33%
Supervisory
53%
Other noncustomerfacing roles
50%
Leaders
Enthusiasts
Customeroriented
Followers
Indifferent
hired hands
Role well matched 38% Moderate match 19% Job mismatch 43%
Sources: McKinsey Frontline Survey 2008; team analysis.
Best Practice
Investing in transactional technology such as cash-handling
machines can improve customer experience. The technology
mitigates the need for detail-driven tellers and allows a credit
union to hire primarily customer-oriented and enthusiast
employees (see Figures 13 and 14). “We’ve gone with all these
[cash dispensing] machines, so they don’t have to worry about
balancing,” says one New York roundtable participant. “We
went to the whole sales philosophy. Now we’re hiring people
that are bilingual and don’t have to worry about balancing their
drawer.”
Sales: Not a FourLetter Word
“I have never found a specific
industry so averse to selling,” says McKinsey’s Kurt
MacAlpine. “You’re not selling
tobacco. You’re selling financial
solutions for people and making
their financial lives better. Don’t
shy away from sales.”
One prevalent credit union barrier to building a frontline sales
culture is staff fears that selling
will detract from member service and member relationships. Yet,
McKinsey analysis shows that selling does not materially affect customers’ perceptions of their financial institutions, McKinsey’s Dorian
Stone says. “People actually appreciated what was perceived as aggressive selling,” he says. Customers are, of course, welcome to decline
products, but when they accept the offered product, their satisfaction
improves because the bank offered a product the consumer didn’t
know he or she needed.
25
Credit union “sales” shouldn’t be the kind of high-pressure interaction that easily comes to mind. In addition to matching the correct
employees to sales roles, credit unions should emphasize advisory
conversations over transactional conversations. “Customers are
not looking for product advice. In fact, customers are very wary of
product advice, because that feels like a sale,” says McKinsey’s Joshua
Kanter. “What customers are looking for is financial advice and
counseling and someone that they can trust.”
BEST PRACTICE
The Chicago roundtable group agreed on
•
the need for structured (but not scripted)
What are your financial goals, both
short-term and long-term?
cross-sell conversations. Part of making
that work is hiring for people and sales
•
What are your financial questions?
•
What is your current financial situation?
•
How do you want to manage your
skills in the first place. Another part of it is
putting together a good package for front-
accounts?
line employees to use. Consider needsdriven questions around the themes of:
Figure 15: Sales-Driven vs. Needs-Driven Frontline Scripts
Basic/sales-driven conversations
Bank 1
s!REYOUINTERESTEDINANOVERDRAFTFACILITY
s$OYOUNEEDACREDITCARD
s!REYOUBUYINGAHOMESOON
s!REYOUINTERESTEDINHAVINGYOUREMPLOYER
DIRECTLYDEPOSITYOURPAYINTOTHISACCOUNT
Bank 2
s(OWMUCHWILLYOUMAINTAININYOURACCOUNT
s7ILLYOUBEWRITINGALOTOFCHECKS
s!REYOUCOMFORTABLEWITH!4-ONLINEBANKING
ANDTELEPHONEBANKINGTRANSACTIONS
Bank 3
s$OYOUHAVEANYACCOUNTSWITHOTHERBANKS
s$OYOUHAVECARINSURANCE7ITHWHOM
7HENDOESYOURINSURANCEEXPIRE
s7HATAREYOURSOURCESOFINCOME
Source: McKinsey Retail Banking Practice analysis of Wells Fargo.
26
Needs-driven conversation
!T7ELLS&ARGOOURFIRSTSTEPISTOUNDERSTANDYOURGOALSVALUESANDVISION
s7HATAREYOURFINANCIALGOALSBOTHSHORTTERMANDLONGTERM
3AVEFORAHOUSE
3AVEFORCHILDRENSEDUCATION
0AYDOWNDEBT
$EVELOPARETIREMENTPLAN
3TARTANEWBUSINESS
4RANSFERWEALTHTOFUTUREGENERATIONS
%STABLISHALEGACY
s7HATAREYOURFINANCIALQUESTIONS
!M)INVESTEDAPPROPRIATELYTOMEETMYGOALS
(OWCAN)BETTERMANAGEALLOFMYINVESTMENTACCOUNTS
(OWCAN)CONSOLIDATEKPLANSTHATARESTILLWITHFORMEREMPLOYERS
)STHEREABETTERTAXMANAGEMENTSTRATEGYFORME
s7HATISYOURCURRENTFINANCIALSITUATION
7HATAREYOURCURRENTASSETS
7HATAREYOURCURRENTLIABILITIES
7HATAREYOURFUTUREEXPENSESANDINCOMECOLLEGETUITIONPARENTALCARE
INHERITANCEETC
7HATISYOURRISKTOLERANCE
s(OWDOYOUWANTTOMANAGEYOURACCOUNTS
(OWMUCHDOYOUWANTTOBEINVOLVEDINDEVELOPINGYOURFINANCIALSTRATEGY
ANDMONITORINGYOURPORTFOLIO
$OYOULIKETOMAKEINVESTMENTDECISIONSONYOUROWNANDVALIDATEYOUR
CHOICESWITHA&INANCIAL#ONSULTANTORDOYOUPREFERTOHAVEMOREGUIDANCE
Figure 16: Smaller Banks Have Taken Tactical Actions to Deliver on Intangible Benefits
How customers like to be served
VS
Examples of how small banks are delivering
s3TAFFKNOWSCUSTOMERSBYNAME
s-ANAGEMENTAVAILABLETO
ASSISTCUSTOMERS
s&REQUENTCUSTOMERSNOTASKEDFOR)$
s#USTOMERSCANCONTACTTHEREGIONALMANAGERBYNAME
DIRECTLYFROMBANKS7EBSITE
Minimize
transitions
s(IGHFRONTLINECOMPETENCYTOSERVE
MULTIPLENEEDS
s%MPLOYEESPLAYHYBRIDROLESCOVERINGMULTIPLENEEDS
s3PECIALISTSCOMETOCUSTOMERRATHERTHANHANDINGOFF
s7ARMHANDOFFWHENNECESSARY
Problem
resolution
s%MPLOYEESEMPOWEREDTOFIX
PROBLEMSATONEMENTPRIVILEGES
s0ROBLEMSRESOLVEDINBRANCH
s)FANEMPLOYEEMAKESAMISTAKETHEYWILLINSTANTLYCORRECT
THEERRORANDDEPOSITnINTHECUSTOMERSACCOUNT
s0ROBLEMSARECAPTUREDON#2-TOOLANDMONITORED
New account
opening
s%ASYANDENJOYABLEACCOUNTOPENING
PROCESS
s%MPLOYEESHELPWITHPAPERWORK
s0ROVIDECOFFEEANDSNACKSOFFERTOYSGAMESFOR
CUSTOMERSCHILDREN
Financial
advice
s"ANKOFFERSSPECIFICADVICEATKEYLIFE
TRANSITIONPERIODS
s"ANKPROACTIVELYCALLSCUSTOMERS
WITHAPPROPRIATEPRODUCTOFFERINGS
s2EPRESENTATIVESCALLCUSTOMERSWHENNEWPRODUCTSARE
INTRODUCEDTHATMEETTHEIRINVESTMENTANDRISKPROFILE
s(ELPNAVIGATETHECUSTOMERTHROUGHTHEOPTIONS
Lending
transactions
s#LEAREXPECTATIONSONRESPONSE
TIMEBANKDELIVERSONPROMISES
s"ANKPROACTIVELYCALLSEXISTING
CUSTOMERSTOALERTTHEMTONEWOFFERS
s-OSTAPPROVALSARESAMEDAY
s#USTOMERSCALLEDPRIORTORATECHANGESANDINFORMEDOF
NEWPRODUCTSSERVICESTHATMAYBEMORESUITABLE
Experiential
shopping
s)NFORMATIONANDCHOICESINA
LOWPRESSUREENVIRONMENT
s7ORKSTATIONSINBRANCHESWITHPHONEACCESSTOLIVEPERSON
AT5MPQUA
Personalized
service
Source: McKinsey interviews with customers and executives of high-performing customer experience community banks and credit unions.
That perspective is bolstered by an anecdote from one CEO at the
Los Angeles roundtable: “I actually had a [member service representative] who came, sat in my office and cried, and said, ‘Take away
$2 an hour just so I don’t have to sell. I don’t want to sell. I can’t
sell,’ ” the CEO recounts. “She absolutely is our top producer, and
BEST PRACTICE
Push organization-wide goals down to the
seeing them call marketing because they
branch and individual levels. Cathy Rios of
want to do an event. That never happened.
Travis Credit Union in Vacaville, California,
We were pushing the event to them. Now
shares how her credit union operations
they’re calling us.”
team visits each branch and specifies its
expected contribution to the overall credit
union goals. From there, branch managers
are allowed to decide how to pursue their
goals. The message to branch managers:
“You’re the captain of your ship, and we
expect you to drive business. And we’re
here to help you,” Rios says. “Now [we’re]
Consider cascading branch targets to
balances and numbers of accounts per
individual teller, McKinsey’s Kurt MacAlpine
suggests. It allows every employee and
manager to track tangible individual performance and, correspondingly, to identify
individual ways to improve.
27
we talked about, ‘What is your definition of selling? I’m not asking
you to sell a car; I’m asking you to prevent this person from going
to Wells [Fargo] and getting charged 29% on their credit card.’ And
immediately it clicked.” The takeaway: “If you hire people who like
to be liked, you can’t call it selling, because they don’t like that
Best Practice
word.”
Develop a factually correct explanation of why each of your
One way to encourage a
products is better than (or competitive with) that of your nearmindset shift on the front
est competitor. And it shouldn’t be “Because you’re a member,
line, MacAlpine argues, is to
and you own the credit union,” says McKinsey’s Dorian Stone.
move customer satisfaction
“That’s nice to have, but it misses the foundation of what you
down to a secondary metric for
are there for.” Formulating the comparison will force managers
frontline employees. Instead
to define the benefits of the credit union’s product set and give
prioritize metrics like cross-sells
frontline staff effective sales tools.
or increased balances. High
customer satisfaction will usually get customers to the consideration stage, but sales-oriented staff
matched with sales targets bring them through to purchase.
“To the extent that you can get customer experience to bring them
in the door, to help set them up for a better financial future, don’t
shy away from the sales,” MacAlpine says.
Hiring for Results
Forget training for passion, urges one Chicago roundtable participant; it’s too expensive. Even the best training will probably not turn
a hired hand into an enthusiast. And doing so will cost much more
over the life of the employee than the cost of hiring correctly in the
first place.
“What we find across financial institutions is the branch manager is
the single biggest leverage point for performance,” Stone says. “This
doesn’t necessarily mean that to make sure our branch manager is
doing well, let’s go give them all raises. What it does mean is let’s
work really hard to find that good branch manager. They’re the biggest swing vote in terms of sales performance.”
One downside of credit unions’ historical focus on service over sales
is that that approach limits the possibility of hiring top sales talent,
Stone says. “We did a major piece of work on recruiting talent for a
mutual insurance company. In the spirit of trying to be fair and give
people one more chance, they were holding onto [poor] performers,
and the highest performers in the company, and the ones that they
28
were trying to attract from outside the company, they just didn’t have
respect for the system,” he adds.
Employees who are excellent on the front line of a credit union are
also attractive to other employers, so retaining them is important.
Contrary to popular belief,
compensation is not the priBest Practice
mary thing that keeps performPush important member feedback to the front line, suggests
ers in place (see Figure 17). In
Michelle Bloedorn of Member Loyalty Group. She tells of
fact, relying first on compensaclients who create biweekly reports with all the comments they
tion for retention is an expenget from members. “If [tellers are] getting one-off, anecdotal
sive proposition that may fail
stuff just periodically, they tend to blow it off,” she says. “So
when an employee spots a more
having that stuff at their fingertips all the time has really been
interesting opportunity.
an effective tool.”
McKinsey analysis of frontline
employee motivations shows
that employees are much more interested in the intangible factors
of their job. Employee satisfaction is most heavily weighted by how
interesting the job is (22%), the example of and relationship with
managers (15%), and the quality of the physical environment (13%).
Compensation, at 10%, is the fourth most important component of
employee satisfaction—not negligible, but certainly not dominant.
Figure 17: Top Drivers of Employee Satisfaction (ESAT)
% of impact on overall ESAT
22
My job is interesting
Managers in this company provide helpful coaching/
are role models
15
13
My job surroundings are pleasant
Pay in this company is competitive with pay in
other companies
10
9
The company provides good job security
Employees in this company are fairly compensated
for what they do
There are good opportunities for employees in this
company to work in different roles
The right systems are in place to make me more
effective in my job
“What excites me about
going to work is
new challenges, and
helping customers with
financial products”
Supervisor, National Bank
“My best manager was in
the trenches with me. He
really got his hands dirty
and I looked up to him”
Manager, Regional Bank
9
8
5
“What keeps me working at my
bank for so long? It’s just a good
work environment. People have
a good work ethic, we all respect
each other and have fun together”
Teller, National Bank
Sources: McKinsey Frontline Survey 2008; Frontline interviews; team analysis.
29
McKinsey details two methods for placing and engaging employees
in the best ways (Figure 18):
• “Hiring and placement” assumes the organization is growing
quickly or has a high tolerance for staff turnover and involves
actively looking for the right
people to fill key roles. It can
Best Practice
include a painful reshapEmbrace large gaps in performance pay between your highing of the credit union’s
est and lowest performers, urges McKinsey’s Kurt MacAlpine.
employee value proposition.
“A lot of times you’ll see there’s a 5% or 10% gap between the
• “Driving employee engageabsolute bottom performer and the absolute top performer,”
ment” prioritizes a less
he says. At a best-practice organization, the bottom performradical shift by helping
ers make far less than anybody else in the industry, and the top
existing employees stay close
performers make far more. That way, the pressure is always on
to their roles while trying to
low performers, and top performers will have little incentive to
disseminate best practices,
look for other work.
useful metrics, and creature
comforts throughout the
employee base.
Figure 18: Attracting, Placing, and Engaging the Right People in the Right Roles
A
Hiring and
placement
Apply best
retailer practices
to put the right
people in the
right roles
B
Driving Employee
Engagement
Achieve the
highest
performance
from (and
satisfaction for)
that workforce
1
Reshape value proposition to attract the most favorable segments
2
Source and screen better candidates through attitudinal segmentation
3
Make the most of the team you have, by deploying people to the best roles that fit
their profiles
4
Use turnover to your advantage to shape and reshape frontline and manage
labor costs
5
Develop measurements and metrics that capture the full picture of frontline
behavior and hold leaders to account (i.e., direct link to compensation)
6
Scale the “art” of your best managers (who do most of this naturally) to the rest of
the management ranks
7
Strike the right balance in role generalization, advancement, and empowerment to
achieve economic, customer experience, risk, and engagement objectives
8
Leverage the social network; frontline peers influence one another as much
as managers
9
Invest in “creature comforts” that cost little but mean a lot
Sources: McKinsey Frontline Survey 2008; team analysis.
30
Moments of
Truth and Staff
Outreach
Best Practice
Cash incentives are best aimed above the teller level, according
to consensus at the Los Angeles roundtable. Cash tends to be
more effective for loan officers and branch managers, because
they are most likely to sell revenue-producing products. “The
members don’t perceive the tellers as being as credible as a
trusted advisor,” according to one participant. It’s also more
appropriate to tie cash incentives to cross-sells rather than customer satisfaction, for the same revenue-generating reasons.
Moments of truth are the key
points in a relationship when
an institution is more likely
than normal to strengthen or
weaken customer perception
and satisfaction. Identifying
and consistently delivering at
moments of truth drives value,
because high customer experience scores are most heavily weighted
by these moments.
Moments of truth will be different for different customer segments.
Some that are common to all segments include:
• Account opening.
• Problem resolution.
• Home loan processing.
Figure 19: Needs-Based Selling and Moments of Truth (MoTs)
Positive moments of truth
Negative moments of truth
% of customers experiencing positive MoTs
% of customers experiencing negative MoTs
1
Received good
financial advice
2
Received proactive proposal
appropriate to my needs
3
Frontline staff actively caring,
referring to my needs/history
4
33
1 Received financial advice
not appropriate to needs
14
2 Bank front line itself had no
troubleshooting skills/was inflexible
12
11
3 Proactive proposal to buy
products not appropriate to needs
11
Frontline staff had good troubleshooting and was flexible on rules
10
4 Frontline staff unfriendly
and did not pay attention to needs
11
5
Account opening was
an easy process
9
5 Unexplained price change
11
6
Negotiated mortgage loan
with acceptable conditions
7
Bank was conveniently accessible
4
7 Bank made a mistake and
took too long to solve
8
Bank gave good level of
information of changes at bank
4
8
13
6
6
No acceptable
mortgage conditions
Bank was not
conveniently accessible
10
8
5
Needs-based selling
Source: McKinsey customer experience research.
31
CREDIT UNION OPPORTUNITIES
Despite the near-term challenges of a
bias means young and middle-aged work-
frightening housing market, regulatory
ers will be looking for secure landing spots
assessments, and uncertain loan losses,
for their money—spots like insured shares,
the strategic opportunities for credit unions
IRAs, and certificates.
are strong.
In a March 2009 survey asking consumers
Consumer confidence in the markets has
where they would place their investments
been pulverized by the financial crisis,
over the next six months, savings, CDs,
especially among younger consum-
and online savings accounts were the big
ers. Among 36- to 45-year-olds earning
winners. Even as consumer sentiments
between $25,000 and $50,000 per year,
shift, it’s likely that insured accounts will
only 15% expected market returns to beat
be much more attractive in 2010 than they
inflation over the next 30 years, according
were in 2006. A sustained downturn would
to a 2009 McKinsey survey. That recency
make them more attractive still.
Figure 20: Mass Market Consumer Expectations of Stock Market Returns
Mass Market segment only
What do you expect returns on the stock market to be over the next 30 years?
Percent of Mass Market segment respondents*
60
43
38
31
26
25
34
28
15
36–45 years old
Negative (<0%)
46–55 years old
Neutral (0–5%)
56–64 years old
Positive (>5%)
* 198 total respondents in Mass Market segment (age: 36–64, income: $25K–$50K); 65 respondents aged 36–45 years,
72 respondents aged 46–55, 61 respondents aged 56–64
Source: McKinsey Consumer Survey, March 2009 (survey of 600 consumers in three demographic segments: Mass Market (age: 36–64, income: $25K–$50K), Middle Core (46–65,
$50K–$100K), and Middle Affluent (46–65, $100K+); responses weighted according to census data).
32
CREDIT UNION OPPORTUNITIES (CONTINUED)
Consumers are increasingly looking at
•
traditional products for their savings, and
Emphasize their history of trust and
personal service.
they are more skeptical than ever of large
•
institutions. They are putting more empha-
Call out their strengths in and focus on
core banking products.
sis on personal trust, where credit unions
•
historically score high, in their financial
Focus tactically on improving share of
wallet among existing members.
decisions.
Credit unions that want to capitalize on
these trends should:
Figure 21: Consumers Lean Toward “Less Risky” Products, Which Are Credit Unions’ Specialties
What are you likely to do with your investments over the next 6 months?
Percent of respondents*
Product
Increase/
decrease
Product
+17
Money
markets
24
Savings**
Increase/
decrease
Product
+7
Stocks
Increase/
decrease
12
14
+6
5
7
9
15
CDs
8
+12
Bonds
3
13
+4
Mutual
funds
+9
4
5
14
Online
savings
+11
3
Open/increase
Close/decrease
* Balance indicated “no change” intended
** Checking not included given normally not considered an investment vehicle
Source: McKinsey Consumer Survey, March 2009 (survey of 600 consumers in three demographic segments: Mass Market (age: 36–64, income: $25K–$50K), Middle Core (46–65,
$50K–$100K), and Middle Affluent (46–65, $100K+); responses weighted according to census data).
33
For mass-market consumers (those in households that earn less than
$100,000 per year), salient moments of truth include:
• Deposit holds.
• Overdraft.
• Debt-management advice.
For affluent households (those earning more than $100,000 per
year), some moments of truth are:
• Welcome calls.
• Personalized service.
• Follow-up on questions.
• Needs-based financial advice.
• Teller transactions.
Managers should concentrate on moments of truth because—unlike
in pricing or product offering—they are the instances when institutions can de-commoditize their
products. Similarly, institutions
Best Practice
that concentrate resources and
To keep incentive costs down, Ken Landis of Pasadena Service
management time on moments
FCU offers the week’s two best employees a “reach jar” incenof truth rather than trying to
tive. Winnable prizes to be drawn include things like $20 gift
improve every single interaccards, two hours off, and even half-day passes.
tion can manage costs more
efficiently over time. Marginal
returns on moments of truth are much higher than they are for other
member interactions.
Not every life event will be a moment of truth for the financial institution, but there are a few for which the credit union should reach
out proactively to members, MacAlpine says. He suggests credit
unions focus their attention on three life events:
• First job: The member may not be profitable for years, but it’s
an important moment of flux for the member. She will need a
host of financial products and advice, and she’s likely to remain
loyal to the financial institution that is the most valuable at this
moment.
• First home: Usually a consumer’s largest-ever borrowing need,
this may also be associated with other life transitions like a move
or a marriage. There is clear opportunity to capture a profitable
relationship.
• Retirement: A good opportunity to capture and keep large
deposit and asset-management relationships.
34
A regular cadence of contact around these life events will help credit
unions win consideration from members in each of these cases. A
strong sales culture will help the credit union actually cement the
product relationships.
Best Practice
One Chicago roundtable participant shared an inexpensive communication idea that garnered
surprising employee and member results: “We just started sending out surveys via e-mail to our
members, and it’s made a big impact on the focus of the frontline staff. But the e-mails have my
name and number. This was actually an accident. And it’s been very powerful, because I’ll get comments directly back, phone calls. And one of the things that we’ve heard is that ‘You guys are a lot
more accessible and that’s very important right now.’ It gets back to the trust and value.”
The mishap also put the frontline staff on notice: They’re saying, “Man, I don’t do a good job, they
have access to anyone in this credit union to say, ‘Hey, I didn’t get what I needed.’ That’s created a
whole other level of accountability.”
Summary
Credit union and small-bank employees receive high marks from
customers, who say they are honest and go out of their way to help.
Credit unions in general can better leverage their history of strong
member satisfaction by hiring and promoting sales professionals with
credit union values.
Engaged employees, especially branch managers, are the key link
to positive customer experience and to increased cross-sales. Credit
unions should pay close attention to the types of employees who
interact with members. Encourage and promote leaders, enthusiasts,
and customer-oriented types on the front line, while limiting member interaction with followers and “hired hands.”
Moments of truth—especially account opening, problem resolution,
and loan processing—are critical drivers of customer satisfaction
and positive customer experience. Life events, like a first job, graduation, moving, and retirement, can be significant moments of truth
and deserve extra attention. A regular cadence of contact around
moments of truth and life events will lead to higher marginal returns.
35
CHAPTER 4
Conclusion and Recommendations
Credit unions should capitalize on the pain
of large banks by concentrating on functional
value, building needs-based sales cultures,
and hiring employees who will bridge the gap
between the historical and the desired culture.
Remember Tom? In the executive summary we argued that Tom, like
credit unions, was the young man all the girls liked but who struggled to forge long-term relationships. This report has shown not just
that Tom needs to be more assertive, but how. Let’s review.
Tom is looking better because the other guys are looking bad. Credit
unions have a clear opportunity to differentiate themselves from
banks. At a time when members’ trust is high and customer confidence in banks is low, this research shows clear opportunities for
credit unions that seek to build aggressively on their status as trusted
partners. But the trust is not distributed evenly across age groups.
Credit unions lag banks among younger consumers and will need to
work doubly hard to win their trust. Better overall member satisfaction scores would be hard to win, so credit unions should consider
investing in functional value (e.g., Web tools, convenient delivery)
and building a friendly but assertive sales culture.
Tom has lots of friends because he’s accessible, but he needs to ask
for more dates. Member satisfaction tends to improve as the asset size
of the institution goes down, but that doesn’t mean more people are
joining credit unions or community banks. To attract that growth,
credit unions should focus on ROI-informed initiatives that improve
the customer experience. Efforts that aim to improve member satisfaction may get members to consider credit union products, but they
do not convince members to buy. Only when credit unions align
the consideration advantages of high satisfaction with the closing
skills of a sales culture will they realize the potential of their market
advantages.
Tom will continue to have competition from the other guys. Banks
came into the financial crisis with much better operational efficiency
than credit unions. Although delinquencies and charge-offs have
forced expense ratios up, even the smallest surviving banks are likely
to come out of the downturn much leaner and well-positioned for
growth. Credit unions that simply hold the expense line without
seeking to economize may suffer for it as the economy improves. In
addition to economizing, healthy credit unions should look to attract
38
high-performing sales and management staff at a discount while the
employment market is depressed.
Tom should ask for dates at the right times. All financial institutions,
not just credit unions, will find their highest satisfaction gains by
focusing on moments of truth and key life events, because it’s less
expensive and more impactful than trying to improve every single
interaction.
Tom needs to update his image. The financial downturn may be the
best chance credit unions have to revamp their member-facing structures. Credit unions should proactively identify the right employee
types (leaders, enthusiasts, and customer-oriented) and place them
at the front line. Conversely, credit unions should move or find ways
to eliminate employees who
detract from the desired image.
The McKinsey research used as the basis of this report is availTom doesn’t just want more
able to registered members of the Filene Research Institute. To
friends; he wants long-term sigview the data, please visit www.filene.org/publications/detail/
nificant relationships. And if the
mckinsey.
goal of credit unions is merely
great member satisfaction, they
have already arrived. However, getting from satisfaction to growing
market share requires that Tom abandon his past habits and change.
39
Endnotes
1. Jinkook Lee, Attracting Young Adults: What Do We Know About
Their Use of Financial Institutions and Payment Behaviors? (Madison, WI: Filene Research Institute, 2008), 4.
2. Peter S. Goodman and Gretchen Morgensen, “Saying Yes,
WaMu Built Empire on Shaky Loans,” New York Times, December 27, 2008. www.nytimes.com/2008/12/28/business/28wamu.
html.
3. Bill Virgin, “JPMorgan Chase to Change Look of WaMu
Branches,” Seattle P-I, December 4, 2008. www.seattlepi.com/
business/390728_occasio05.html.
40
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