Community banks and credit unions pride themselves on the contributions they make to their communities. This includes supporting local charities, funding scholarships, planting trees or otherwise helping their neighbors. While these great acts can certainly be their own reward, financial institutions also deserve public recognition for their great works. Other than the obvious benefits to the community, the contributions a bank or credit union makes to its community have two strong benefits for the institution itself.
The first is the influence on prospects, or non-members and non-customers. Many prospects learn about community financial institutions from advertising or from community involvement. Studies show that advertisement is generally more effective at raising awareness among prospective clients than community works alone. Indeed, this is why many institutions set aside significant budgets for traditional marketing campaigns. However, studies of consumer behavior show that while ads are better at driving awareness, community contribution can be more effective at driving consideration.
The latest results of the Q2 Massachusetts Banking Prospect Benchmark, which collects the perceptions of non-members, show that community contribution increases prospects’ consideration by an average of 116 percent for credit unions and 112 percent for banks. Not a bad side effect! And for smaller institutions with lower brand awareness, the increases are even higher.
All of the data cited in this article is based on a study from Customer Experience Solutions that gathered 47,765 responses for financial institutions from residents across the state in June 2017.
Community Contribution Increases Consideration
The second impact that community contribution has on a financial institution’s business is on its current members and customers. When current customers see their institution’s involvement in the community, it can improve the esteem they already have for the institution. Our research has shown that the positive impact can increase their loyalty, meaning they are less likely to leave and more likely to increase long-term spending. The latest Massachusetts Banking Customer Benchmark report (that gathers the input of each credit union’s own members) showed that recognition of community contribution increases members’ share of wallet significantly with their credit union and their long-term loyalty goes up by 81 percent. That figure was even higher for banks at 97 percent.
Community Contribution Increases Loyalty
While it is probably not a big surprise to some that contribution to the community has an impact on the top and bottom lines, many FIs are not actually getting the benefit they should. They spend a lot of money and effort contributing to the community, but current and potential members simply don’t know about it. This is very frustrating to the institution’s leaders and a wasted opportunity for many. It is very important to know just how much recognition you are getting for your good work, and how you can improve that ROI. The challenge for credit unions and banks is breaking through the clutter to ensure your members, customers and prospects appreciate your contribution.
For example, we found in our research two financial institutions in one specific market with equivalent amounts of community involvement in terms of gifts to charity, hours volunteered by their staff, sponsorships, etc. However, one of the two was rated 275 percent higher in terms of community contribution by their respective customers and 388 percent higher by non-customers. While each did similar levels of community outreach effort, one was using much more efficient channels and co-opting local nonprofit partners to get the word out. Not coincidentally, the financial institution with the better outreach is currently achieving stronger growth in new customers, especially among businesses.
Get The Credit You Deserve
The first step to getting the maximum credit (and business impact) from your community contribution is to understand how you currently stand with members, customers and prospects, in your specific market and in relation to your competition. Do your current members and customers see and appreciate your good work? Do your prospects?
The second step would be to make reasoned adjustments and tweaks to the programs to see what the impact is. A financial institution may need to improve its community outreach to gain greater recognition, or it may need to emphasize different types of community involvement to broaden its exposure.
The third step is to measure how much an institution’s internal changes are changing external recognition. And just as importantly is to track the impact that the recognition is having on awareness of the institution and consideration to use it in the future. Tracking your ratings over time will show you exactly how your community contribution, and all other marketing efforts, are truly impacting how your prospects and members view you. This will allow you to fine tune your programs so you get the maximum benefit for the institution while doing the maximum good for the community.
So as you look forward to 2018, consider – what are you currently doing? Are you sure you are getting the credit you deserve? What can you do differently? And most importantly, what you can you do to make sure your current and prospective members are rewarding you for your good work?
Bruce Paul is president and CEO of Connecticut-based Customer Experience Solutions.
The Banking Benchmarks cover every credit union and community bank in the state and are based on almost 100,000 unbiased consumer and business reviews in Massachusetts gathered twice per year and provided to subscribers in January and July each year. More information is available by contacting firstname.lastname@example.org.