Feedback Loops - Part of a Balanced Budget

by Ron Daly 

No, it's not a sugary breakfast cereal - a feedback loop has to do with information and systems. A real life example: 

1. We got a Wii® Fit™ for our home
2. We got on and tested our balance and posture
3. We went through a series of crazy games involving hula-hoops and yoga poses
4. We re-tested our posture to see how it had improved

But there's a fifth step, one that happens from the moment we turn the game on until the moment we quit and go get a sandwich - it's self-correction. 

As you play, your character is being challenged to walk a tight rope, dance, and stand very still. The game gives you feedback about your posture and stance, evaluating your performance and telling you when you do whatever you're doing the wrong way. You try to get better, little by little, as you move through levels and exercises. Steven Levy of Wired has an article about being beaten down by these workout video games. His reason? He was TOO focused on his workout, as opposed to usual gym distractions. 

An article from Harvard Business Review, "The Cost of Being Omniscient", talks about feedback loops in business and how they change the behavior of a buyer/user. From their article:

Anyone who doubts the power of feedback to influence action hasn't stepped on a scale before dinner. Customers under pay-as-you-drive plans almost invariably start using their cars less and buckling up more. Enel, an electrical utility in Italy, saw the same effect. After it installed "smart meters" in homes, its newly aware customers collectively spent 500 million euros less per year on electricity.

We have come to a point where "Information Age" doesn't quite describe where we are as a society. I think "Feedback Age" is a better fit. The more social the Internet gets,  If you're interested in bettering yourself, there's info everywhere on how to get it done. Your iPod isn't just a music player, it's a pedometer and a calorie counter. Your car is telling you when you're not driving safely. Your house tells you to shut off your lights. As a result, you jog faster, you drive better, you live greener. Why? 

It's got a lot to do with the Hawthorne Effect. When someone's taking an interest in what you're doing, you tend to do it a little better. Remember when the principal would sit in the class in school and conduct a performance evaluation on your class? Remember how much better you behaved when he was there, and how much more thorough your teacher was about notes and boardwork? That was the Hawthorne Effect in action.

Now, let's start applying this to money...

The question: How are you using feedback when it comes to members? How about internally? How about when it comes to marketing? How can feedback loops help tighten up a budget?

Feedback for Members: 

We've been over PFM apps online. They're getting smarter and users are figuring out how to save and budget thanks to colorful graphs, walk-throughs of spending habits, and goal-setting features. Members can sign up independently, or credit unions can partner with one of the online PFM app providers to provide these services to everyone. Such personal finance services don't have to be chock-full of complex graphs and data, they can be simple. How about alerts for low balances? Maybe it's time you looked into emailing a member when they miss a payment. Helping with reminders and personalized financial advice could create "the perfect member", one that relies on the credit union for all their financial needs. 

Feedback for Employees:

Sure, you're evaluating employees annually, maybe even quarterly. But what about up-selling and cross-selling at the window? Have you taken the time to "secret shop"? A lot of services offer this, and you might have mixed feelings about it, but you might be surprised how informative it is to have an unknown "member" come in with an issue and have it handled. 

Employees aside, think about your branches, too, and take a page out of Enel electricity's book - how can you cut costs at your branches? What's being wasted? Start "greening up" little by little and watch your costs go down.

Feedback for Marketing: 

Let's face it, a lack of refinement and an unwillingness to adapt in marketing is poison for a business. Lately, marketing folks around the web have been going crazy over the amount some companies are still spending on phonebook ads as opposed to investing their marketing dollar in the web. Just as the unexamined life isn't worth living, the unexamined marketing buys aren't worth buying. Stop slamming members with blast-style messages in their email and start creating a targeted list. Quit wasting space in your online banking portals and start advertising with needs-based banners and offers. You KNOW your members, you HAVE their data. As a recent CU Journal article titled "What's Working in Marketing" said:

What's working best today-and is most cost effective, remind many, is using the MCIF to make sure promotions reach the right members...

You see, you have the information to make that feedback loop start working for you. Don't just ignore how much you know about members' histories, spending behaviors, and financial goals. Start completing that loop. It'll help your members, your employees, and your credit union stay "healthy" and strong.