The Challenge for Every CU? It's About the Friction

You've rebranded. Invested in technology. Maybe added branches or ATMs. And yet loan and member growth is either flat or tepid. Perhaps it's because you've forgotten to do something about the "friction."

Last week CUNA Mutual hosted one of the best days of discussion I've heard since Credit Union Journal's Grow Show earlier this year when it presented the "Battle for the American Consumer: A Symposium on Member Centricity" in Tampa. "Member Centricity" may not be a term you're tossing around, but it's a concept in practice (or malpractice) at many CUs even if it's fuzzy or only thought of in broad terms.

That needs to change, according to one expert. And that's where the friction comes in. It's the friction that needs to go.

Don Peppers, who has partnered with Martha Rogers to found Peppers & Rogers Group and who has co-authored nine best selling books on business, including "The One To One Manager" and "Return On Customer," and who was called by the Times of London one of the "Top 50 Business Brains," anchored the Symposium and shared case studies, anecdotes, advice and more with credit unions about becoming much more centric with members.


Hold On To That Sign

Sometimes when similar presentations are made credit unions can leave the room after hearing what some big name, deep pockets competitors are up to with the uncomfortable feeling there's just enough time left to order some more logo golf balls before packing up the charter and putting the For Lease sign. Peppers' message was much more reassuring; he sees credit unions operating with some real, if underutilized, advantages.

"Innovation is an evolutionary thing. You're going to have to keep running just to keep up with your competitors," said Peppers. "The trial and error process means progress is collectively predictable but is locally random."

Speaking of evolution, the largest music company in the world today is Apple. The largest camera company is Nokia. Ten years ago no one would have forecast either.

"So here's the question: 10 years from today who will be the world's largest retail bank?" asked Peppers. "I'll give you a hint: it will almost certainly be someone without the word 'bank' in their name today. I would suggest it could be the credit union industry as a group. It's a mega-opportunity, because you do have some natural competitive advantages, starting with the community of common interests among your members."

Peppers posited that while allowing credit unions to branch out beyond their SEG roots may have been good for the industry, "it weakens you individually. You need to try to preserve as much of that sense of community as possible, even if you're open to the public, to maximize your competitive advantage. Add to this the unifying 'cause' of financial security. Your members have come together and their cause is to help each other survive financially. Citibank does this, too. But you can buy cookies from Nabisco or the Girl Scouts, but one has a cause."


'You Can't Un-Google Yourself'

In their new book "Extreme Trust," Peppers and Rogers suggest that in an e-world it's no longer enough simply to refrain from cheating or deceiving customers. "Now you have to proactively look out for the customers' interests. Martha and I call that 'Trustability.' Screw up today and the 'news' will be permanent. You can't 'un-Google' yourself."

Peppers said that "extreme trust" often requires reducing short-term profit to gain long-term value. As an example, he shared an experience with Amazon.com when he clicked on a book he had already bought and received an alert. "They could have let me buy it and gotten the money. But they wanted my long-term relationship; they wanted me to have confidence they are looking out for me."

Historically, competition has always been about meeting one particular consumer need at a time, which is known as being product-centric. "But because of technology and interconnectivity, companies can focus on one customer's needs at a time with all products and services," said Peppers. "And not just this customer, but others. Customer-centric competition depends on doing one important thing: treating different customers differently. Relationships are necessary to do this. You need to remember how you treated the customer the last time you interacted. You need to pick up the conversation where it was last. Customers remember these conversations. Whether you remember them doesn't matter, they remember you."

Companies are always talking about creating a "good" customer experience, but what is it? "I can sum it up in one word: frictionless," said Peppers. "Friction is what reduces loyalty and cross selling."

So how is friction reduced? Peppers said it requires four quarts of oil:

* Reliability. It's product or service that works as advertised with no flaws or failures. Problems and inquiries are handled accurately and promptly.

* Relevance. Different customers/members are treated differently and every customer appropriately. Analytics are used to differentiate customers/members by their needs, not just by their spending. Addressable, interactive channels are set up.

* Value. It's good service at a fair price. It doesn't have to be least expensive. There are no hidden charges.

* Trust. Peppers said an organization should know it's not trustworthy when it finds it uses one story for itself but another for the customer/member. Every institution, he said, should ask itself, "Do we admit mistakes and take responsibility?"


What The Member Wants

Peppers urged CUs to know who he most valuable members are as well as the most "growable." "Understanding what a member needs means taking the member's point of view," said Peppers. "Your member is not interested in your branches or your products or your people. You need to speak your member's language, not your product's message. Your member just wants his needs met."

A final factor in building member-centricity, and among the most basic, remains people. "You can't write a line of business code that requires the employee to delight the member. The employee has to want to do that. Does everyone share a common objective to delight the members? I think credit unions have the opportunity to do this."

Readers can get a far deeper dive into Pepper's remarks by going to CUJournal.com and entering "Peppers" in the search engine.

Frank J. Diekmann can be reached at frank.diekmann@sourcemedia.com.