Few would question that members view their relationship with their credit union as a long term affair. Even those who don’t see themselves as members do…because to them it is less about the membership and more about the convenience of having a relationship in place with a financial institution that serves their needs.
Think about it. The very nature of the relationship between a member and a credit union (or a customer and a bank) makes it sticky and difficult to change. There are forms to be filled out, checks to be replaced, new PIN numbers to be remembered…it is all quite messy and inconvenient to consider changing.
And that is one of the reasons that understanding the lifetime value of the member is so important to your credit union. Because at each touch point, during each and every transaction, the member is evaluating the relationship and deciding if they want to remain in it, and you are benefiting from their continued use of your products and services…that’s where the lifetime value comes in.
The lifetime value of a customer (or a credit union member) is defined simply as the total value of the business they bring you over the life of the relationship.
Consider, for example, a corner deli where you eat once a week. If you live in the area for the average 7 years that people tend to live in the same location and visit once each week for all but the two weeks of the year when you go out of town on vacation, and you spend $10 each time you visit, your lifetime value to that corner deli is 50 times 7 times $10, for a total of $3500.
And it only takes one or two bad experiences to lead you to take your business somewhere else…potentially costing that business as much as $3500, likely more since chances are you will at least occasionally bring someone in with you who will also spend approximately the same amount.
What does this all mean to your credit union?
First, train everyone to understand the lifetime value concept.
Second, calculate the member contribution per year and do the math…help everyone understand just how much each member is actually worth to your credit union.
Third, find ways to go a step above and beyond expectations during every interaction to strengthen your relationship with each member for the long term, and to encourage them to bring a friend so you can secure the lifetime value of another member.
Simply stated: The key to long-term growth lies in understanding and respecting the lifetime value of each and every member, every time!