Catalyst News

The Cost of Losing a Member

by Mark Arnold, On the Mark Strategies | May 10, 2019

We often talk in credit union circles about membership acquisition costs. Over the years, that number was estimated at around $150 to $200 per member. The latest reports from the “dark side” indicate that banks are spending approximately $300 per new account. No matter what number or ratio you use, every credit union CEO and CFO knows that member acquisition is an expensive proposition and has a significant impact on the bottom line.

But what if rather than focusing on member acquisition (a huge expense), your credit union focused on member retention?  In other words, what if you never lost a member again?

Many credit unions have a “back door” problem: for every one new member they bring in the front door, they lose a member out the back door. In Never Lose a Customer Again, Joey Coleman notes that 32 percent of new customers who join a bank will leave that bank before their one-year anniversary. The numbers probably are not that much different for credit unions as well.

If your credit union did not add one single new member this year, BUT got all of your existing members to add one additional product or service, your ROA numbers would soar.

How do you close that back door and focus on retention? Here are three quick tips:

  1. Analyze your numbers – Every credit union is unique. While knowing general guidelines is helpful, make sure you pull your own reports. Data you should know include your credit union’s member acquisition cost (marketing dollars spent on new member promotions divided by number of new members opened in a year), average services per household, average membership longevity, household profitability and your most profitable products.

  2. Make retention a strategic priority – Member retention does not happen by osmosis. As you conduct your strategic planning session, retention should occupy some of your discussion time. What is not focused on is not accomplished. A great planning question to address is “How are we going to improve member retention this year?” In your plan, set goals regarding this key priority.

  3. Focus on member experience not service – Today, member service is more than being nice. Think of it this way: member service is reactive, while member experience is proactive. According to Bain and Company, when asked, 80 percent of companies say they deliver “superior” service, yet only eight percent of customers felt companies delivered “superior” service. Today, members want an experience, not just service. Give them that, and they will stay with your credit union.

Losing members is costing your credit union’s bottom line. If you want to increase your ROA, improve profitability and gain efficiencies, you can start with a focus on keeping your current members.