All too often in the focus and rush to perform financially, business people lose sight of the value of trust. Financial institutions should be some of the most trusted businesses that exist, and yet the financial crisis was a demonstration for many consumers that the banking industry is not to be trusted to do what is best for consumers. Millennials are particularly wary of traditional financial institutions, which led to the growth in alternative financial services providers.
Yet many credit unions, the ultimate P2P lenders, are shifting to look like banks – the banks that made mortgages to people they knew couldn't afford them. You might recall the board members who were asleep while their CEO carried $2 million in cash out of Shoreline FCU in her purse for more than 13 years. So many instances of internal fraud have been reported lately that it's a tremendous reputational risk for all credit unions. The little bit of knowledge consumers do have about credit unions could be tarnished, and with that goes the trust (consumer awareness of credit unions is and has been an entirely other column).
As I mulled over this idea for my column, it was fortuitous that the opening keynoter at the CU Directors & CEOs Leadership Convention began with trust in the context of business. Don Peppers, founding partner of consulting firm Peppers & Rogers Group, pointed out that credit unions are “naturally trustable” from their business model and have a real opportunity in the current environment of consumers' rising expectations with regard to trust. But trust isn't just about acting with integrity; it's also about truly knowing your members' needs and often anticipating them.
Peppers advised that business has moved away from a product centric view and toward a consumer centric view, and that credit unions should be in search of a “share of the customer's life.” Divide the value of those needs into the actual value being provided by the credit union, and you arrive at the credit union's current share of a member's life.
Using information such as geodemographics, behavioral data and psychographics, credit unions can get a clearer picture of their members' potential needs and act on them, he said. Peppers illustrated this point with an example from a shoe store, where a salesman was consistently selling consumers on an off-brand shoe. They were just as comfortable as the name brands but the kicker was that they already had the laces in the shoes. For a busy salesman during the holidays, this saved critical time, and the shoemaker achieved higher sales by anticipating his needs.
Peppers asserted that by increasing trust, a credit union can increase the length of a member relationship. Increasing that length by even 2%, he said, will raise the value of the relationship to the credit union by 20%. That is why trust is so important and not just the latest business jargon. Trust isn't merely the soft side of business. It is real dollars to the top line.
At the root of trust is the competency to deliver a frictionless member experience, defined by these questions:
- Do the products and services work as they should?
- Is the quality on par?
- What is the response time?
- How is privacy and data security handled?
Beyond competence, to gain member trust, credit unions must demonstrate relevance, competitive pricing, an obvious value proposition and no hidden costs.
Peppers added, however, that “extreme trust comes from empathy.” Practicing the principle of reciprocity – treating others as you would like to be treated – will help your credit union achieve extreme trust. He explained that when soldiers were returning from the first Gulf War in 1991, USAA refunded them the auto insurance premiums for the time that they served. It cost USAA $10 million dollars. Amazingly, 2,500 customers returned the checks for a variety of reasons, in general because they felt USAA had their backs.
So that's it. If you earn your members' trust, they're willing to be there for you, which is beneficial to your credit union, the credit union community's reputation and the movement's power on Capitol Hill.
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