Credit Unions Thwack the Banks in U of M Consumer Satisfaction Survey

Credit unions debuted in the latest University of Michigan American Consumer Satisfaction Index by thumping banks, achieving an 84 on the index’s 100-point scorecard compared to 75 for banks.In fact, Navy Federal Credit Union’s overall ACSI score was 88, higher than any other individually measured bank or credit union.Putting those scores in perspective, Nordstrom department stores-famed for customer service-earned an 80, and Publix topped supermarkets with a score of 82, the 15th year the chain has led the category.That 75 score for banks marked a four-point retreat from last year. The study noted customer satisfaction for banks fell “as they cut costs across their entirerange of services in order to offset large financial losses from the subprimemortgage crisis.”Bad move, researchers indicated.“Cost-cutting that adversely impacts customer satisfaction isn’t a cure. It may provide short-term earnings relief, but having dissatisfied customers take their business elsewhere is making the problem worse,” the survey pointed out.Claes Fornell, professor of business administration and head of the ACSI study, added that “branch closings and staff reductions often have adverse effects on customer satisfaction and customer relationships. In addition, mergers and acquisitions have returned-something that often bodes trouble for customer service.”As for credit unions, researchers observed they are “typically smaller than most banks, and their higher customer satisfaction follows a pattern in many industries where smaller companies tend to offer better and more individualized service.”Overall, the index showed consumer satisfaction with goods and services improved in the fourth quarter of 2008, climbing to 75.7, up 0.9 of a point from the previous quarter.In the context of the current economy, Fornell said, “For consumer spending to rebound, two conditions must be met: consumers must be favorably disposed to spend and have the means to spend. The good news from ACSI is that the first condition has been met: satisfaction is looking up. But it remains to be seen to what extent the government stimulus plan will help translate stronger satisfaction into increased consumer demand.”David VanAmburg, ACSI managing director, told Credit Union Times there has been increased interest in comparing not only smaller banks but credit unions to banking giants. The fact that credit unions led their category wasn’t surprising.“Over many years, we have found the results we get for smaller banks, measured in one aggregated group we have called ‘all others,’ typically show scores that lead the industry,” VanAmburg said.“Smaller banks traditionally do a much better job of satisfying consumers than the giant banks. A lot of that has to do with more emphasis on customer service, more of a community feel. So we would have been surprised had credit unions scored lower.”Similarly, he isn’t amazed at all to see credit unions growing as nervous consumers scan headlines about problems at large banks and look for what they consider safer institutions. As more consumers try out and like credit unions, he would expect to see not only membership but the number of products and services used grow.At the same time, VanAmburg cautioned, the more a firm grows the easier it is to lose touch with consumers.“It’s almost like a Grimm’s fairy tale. The little guy starts out and runs a home business. It’s a bakery or something like that, and it’s all about customer service. The idea is to grow and grow and grow, but the more you grow the more you can actually lose touch. The trick is, how can you become a large company that everybody still thinks of as a small company? That’s hard to pull off,” he said.In addition, VanAmburg continued, consumer satisfaction is strongly linked to employee satisfaction. He believes corporate culture does exist, and he suggested looking at companies such as Nordstrom and Publix for models of exceptional service by large firms. Both also boast high levels of employee satisfaction.Consumer satisfaction has become more important than ever, he suggested.“Customers are harder to please. Customer satisfaction can actually suffer for companies that are leaning on price, are all about discounting,” VanAmberg said.“Over the holiday season business may have been down at Nordstrom and up at Walmart. But customers shopping at Nordstrom were actually having a very good experience. There were more customer service personnel available per shopper. The converse was true at Walmart. Staff pays off. If you cut staff, you’re inviting a lower quality experience that will drive consumers to competitors who are doing a better job.”But isn’t there a great deal of sensitivity to price, which in the case of financial institutions can mean fees and charges?Yes, VanAmburg answered. It doesn’t matter how satisfied consumers are if they don’t have the means to spend or they are too nervous to spend. On the other hand, consumers unhappy with their experience aren’t likely to spend money at your business no matter how much cash they have.“In financial services, high quality isn’t just about customer service. It’s also about creating the kind of products and services consumers want. That means all kinds of things from options on how to pay their bills, options on how to look at their financial health, and so on. It means giving people tools to customize their relationship with their credit union to best fit their needs,” he said.Satisfied members will be loyal and spread positive word of mouth. Companies perceived to be doing well now, he added, will be in a good position when consumers do open their wallets.–[email protected]