In a new issue of the Principle 6 Newsletter, Mike Mercer considers whether co-op identity gets diluted when co-ops transition from building member value to seeking new customers.
“The pursuit of contemporary relevance leads to focus on growth and operational scale… The result is often a strategic shift from following members to chasing new customers,” he writes.
Read the full issue of Principle 6 Newsletter below to find out. And while you’re thinking about “cooperation among cooperatives,” take a moment to consider how you and your cooperative practice this principle. NCBA CLUSA is on a mission to document Principle 6 collaborations across the country so we can identify trends, document best practices and share this knowledge with you—our fellow cooperators!
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Principle 6 Newsletter – From Following Members… to Chasing Customers
Issue 21 – May 12, 2021
“As a community-owned cooperative, we will make decisions to maximize service to our owners and our community. Our vision is to be a gathering place for people and ideas as well as a place to shop.” – About, Fredericksburg Food Co-op website, 5-10-21
“You’re a member and you own a share of the credit union. On the other hand, a customer is a random person that walks in, buys a thingamajig and walks out. Yes, they may be pleased with their purchase or have accomplished their goal, but do they feel cared about or important? Probably not.” – Members vs. Customers, What’s the Diff?, Lynn Area CU Blog, 11-3-11
“…the focus of everything we’re doing is first and foremost on our customers. We’re a customer-oriented bank and as such we place the bar higher. Nearly two million customers express their involvement with Rabobank by being members. This also creates obligations for us. I think there’s scope for us to broaden and deepen the significance of membership even further.” – About Us, Rabobank website, 5-10-21
Consumer co-ops are always formed to solve a need for a definable group. That’s true for any kind of co-op, but the focus here will be on direct-to-consumer co-ops (would that be C2C in today’s vernacular?). In any case, consumer co-ops span the range of things people buy/need in their daily lives. Food, energy, housing, merchandise, financial services and the like. Usually, geographic proximity and/or shared experience are well defined in original co-op memberships. There is always some kind of promise to enrich lives.
In the early days, organizing members are calling the shots. They are directly connected with the needs of the target member group. They are them. Democracy in governance will likely never be stronger. Cooperative values and principles will serve as genuine drivers in all that takes place. For the co-op leaders, their challenge (and responsibility) is to follow the members. Not just to provide a service but to somehow enrich lives. At the newly-opened Fredericksburg Food Co-op, the aim is to be a community gathering place for people so they can discuss their ideas. Some of those ideas will lead to improved service at the co-op.
Over time, member cohesion dissipates. Some credit unions are approaching 100 years of existence. Things change over time. Members don’t stay in one place. They relocate. Some jump ship, move to competitors. Disruption can eliminate jobs at the workplace. Needs get redefined over time through technological advancements. And diversity grows within an expanding membership. Needs are no longer homogenous.
Many co-ops initially try to follow the scattering members and their more complicated needs. New distribution outlets are built. Credit unions often extended from the workplace, building branches where people live and shop. Remote service capabilities are added. For credit unions, that meant checking accounts, transaction cards, call centers, ATMs and shared branches. Service portfolios are expanded to meet changing consumer expectations. Recently, consumer co-ops of all types have been reaching out to members through online and mobile channels.
The pursuit of contemporary relevance leads to focus on growth and operational scale. The result is often a strategic shift from following members to chasing new customers.
The pursuit of contemporary relevance leads to focus on growth and operational scale. A transition happens imperceptibly, like the melting of glaciers. The result is often a strategic shift from following members to chasing new customers. Some consumer co-ops take conscious steps to distinguish customers from members. Rabobank (one of the largest and most studied cooperative banks in Europe) now considers itself to be a customer-owned bank. Food co-ops are very quickly confronted with the need to distinguish customers from members. And credit unions have created a huge “customer class” with indirect auto finance programs.
Most consumer co-ops preserve the contention that their services are extended exclusively to “members.” Their KPIs almost always include growing the membership ranks. Their messaging speaks to the benefits of being an owner. But practices and policies are designed to protect the institution from meaningful member interference or annual meeting insurrection. “Consumer gathering places” turn into “contact us” tabs on the website. Member surveys, net promoter scores and data analytics become the source of member insight.
Acknowledged or not, the following members-to-chasing customers transition should not be surprising, at least in retrospect. Diversity in the flock being served and moving to scale requires alteration in modus operandi. Notwithstanding, there is a “read-only” sequence in the co-op genetic code. Essentially, “being a member is a higher life-form than being a customer.”
Even among the large consumer co-ops that took chasing customers to an extreme, there has been a resurgence of respect for (the real) members and for cooperative identity.
Even among the large consumer co-ops that took chasing customers to an extreme, there has been a resurgence of respect for (the real) members and for cooperative identity. After years without, REI has reinserted “co-op” into its name and public facing persona. Rabobank has refocused on elevating attention to the membership value proposition. Many credit unions and rural electric co-ops are elevating cooperative identity (and behavior) as part of their external differentiation strategies and internal culture enhancement practices.
Perhaps members and customers will not be either-or in the years ahead. But, increasingly, they will not be the same—members treated like customers or customers who get the same benefits as members. Consumer co-ops will continue to find new/better ways to create value for the real (engaged) members. Member benefits can be generated from positive margins provided by customers.
The National Credit Union Association (NCUA) is presently contemplating alterations to the credit union service organization (CUSO) regulations. Enabling federally chartered credit unions to serve non-members through subsidiary entities could be a good thing. Food co-ops and others learned long ago that serving customers was essential for sustainable member value creation. In northern Spain, the Mondragon co-ops learned that owning subsidiaries that serve non-members could substantially enhance member employment opportunities.
So, is the transition from following members to chasing customers a dilution of cooperative identity, or just an evolution in technique for creating member value?
Either way, it will be important to keep the tail (chasing customers) from wagging the dog (following members). Otherwise, consumer co-ops could become what they have so successfully competed against.
Stay tuned,
Mike