Credit union suppliers use different criteria to define
their target markets. Some suppliers look regionally,
while others look for specific size indicators, like
assets or membership. One set of criteria that should
not be overlooked is member loyalty.
Member loyalty is important to a credit union supplier
for two reasons. The first reason is the overall business
opportunity at a credit union. In some cases, there
is a direct correlation between membership participation
and business opportunity. For instance, if my business
is check printing, the number of share draft accounts
will lead directly to more check printing for my firm.
In almost all cases, high membership participation will
have an indirect effect on my business. If I sell ATMs,
a credit union where members average 2 or 3 accounts
each, will be much more in need of multiple ATMs as
they try to serve all of their members' accounts.
The graph below demonstrates how member loyalty can
be an indicator for other business development. This
scatter plot graph demonstrates a correlation between
share draft penetration (the percentage of their members
with checking accounts) and non-share draft accounts
per member. Each diamond represents a credit union over
$250 million in assets. Generally speaking, credit unions
with a higher share draft penetration also seem to have
more non-share draft accounts per member. These accounts
include other savings accounts, like Savings Certificates
or IRA accounts, as well as any loan the member may
have. Where members have a lot of share draft accounts,
they are also more likely to have an auto loan, a credit
card, a savings account, etc.
The other reason member loyalty is an important factor
in determining your target market is what it says about
credit union management. When analyzing other financial
institutions, the major strength indicators revolve
around financial performance, most importantly, the
strength of their bottom line. Credit unions, because
of their cooperative nature, are different. With credit
unions, you look to financial performance measures to
determine their safety and soundness, but the managerial
success is best gauged by member satisfaction. Nothing
indicates satisfaction like increased business.
To determine the loyalty of a credit union's membership
you want to look towards a few factors. Share draft
penetration and total loans and savings accounts per
member are generally good starting places. The average
credit union has 50% share draft penetration, and 2.4
accounts per member. Numbers higher than these probably
indicate quality product and service offerings and overall
member satisfaction with the institution.
Some other indicators of member satisfaction and loyalty
include the percent of potential members that are members.
This can mean positive word-of-mouth from members to
non-members, especially in instances where field of
membership is defined by employment or some other close-knit
Consider also, if a credit union has a transactional
website, what percentage of their members use it? The
more contact members initiate with their financial institution,
the more exposed they are to product and service offerings,
including your product and service offering.