Credit unions don’t just want members, they want activity and relationships. But how can credit unions turn inactive members into ones who use an array of products and services? Relationship-based pricing is one way to encourage and reward members that expand their financial relationships with the institution.
In the past, FORUM Credit Union ($717.2M; Indianapolis, IN) offered members with larger balances different pricing on products and services. It was a traditional program, according to COO Andy Mattingly, that offered perks and free fringe benefits based on balances and depth of relationship. But in 2010, FORUM changed its approach. Taking inspiration from the seven cooperative principles, the credit union developed a better way to serve members and deepen relationships. It consolidated its various checking accounts into the YOUR Checking account and offers the same features and benefits for all members with different rates depending on credit risk. Members now have a single choice: Do they want to participate in FORUM’s rewards program?
CU QUICK FACTS
FORUM Credit Union
Data as of 12.31.13
HQ: Indianapolis, IN
12-MO SHARE GROWTH: 2.6%
12-MO LOAN GROWTH: 5.9%
The checking account defines if you are truly an active member of the credit union because you are using us to do everything, Mattingly says. Based on what you do with us, we’re going to give you rewards back.
YOUR Checking gives members monthly credits they can redeem for rewards. Members earn credits based on loan and savings balances, account longevity, and monthly transactions 10 or more transactions per month indicate an active member. Members may then select rewards in the form of dividend rate payouts, cash deposits, or bankable credits that offset fees or pay out one lump dividend at the end of the year. These types of rewards, according to Mattingly, recognize members who do more business with the credit union. ContentMiddleAd
Market Like A Cooperative
Rewards programs like this can deepen relationships with current members while attracting new ones and differentiate the credit union from competitors.
One of the questions we get is, I don’t understand why you reward so much?’ Mattingly says. We’re a credit union. We’re a financial cooperative. The more you do with us, the more you get rewarded both in the cost of services and financially.
The credit union uses YOUR Checking to demonstrate to members and non-members alike how using more products and services benefits the user and the institution. It divides members into 10 niche groups based on the relationships they have with and what they desire from the credit union. For example, Simple Sam, one of the groups, is indifferent to rewards and other benefits of the credit union. Instead, this group looks solely for basic loan and deposit products. The breakdown helps FORUM tailor its marketing messages depending on which niche it is trying to reach and markets YOUR Checking differently depending on what Simple Sam or Grandma Gertie wants. The credit union has struggled at times to convince hesitant members to switch their checking accounts because of the associated transaction friction, so FORUM strives to show members how the benefits of a YOUR Checking account outweigh any perceived hardships.
FORUM markets the account through traditional media such as billboards and TV ads as well as through new media such as organic search and website banner ads. It’s not an insignificant marketing expense; however, the credit union makes up for costs with positive returns on investment.
It’s YOUR Checking
FORUM increased share balances by more than 31% between September 2011 and December 2013, according to CreditUnions.com’s Search Analyze data. But FORUM does not simply track account balances or account openings. It also tracks those active checking accounts, ones with 10 or more transactions during a one-month period. It’s an arbitrary figure the credit union believes accurately represents the difference between active and sedentary members. Prior to launching YOUR Checking, FORUM’s yearly growth rate of active accounts was 4-6%; now that figure is nearly 10%, Mattingly says. Seven in 10 new accounts are active within the first six months of being open, up from six in 10 a year ago. All this activity indicates more members are now using FORUM as their primary financial institution.
We are getting an increase in [ROI] that we are not sure we would have seen had we not moved to YOUR Checking, Mattingly says.
Outside of the financial investment, FORUM has also seen an increase in word-of-mouth referrals. The credit union does not yet track referrals directly related to the YOUR Checking account, but based on member survey data, new members cite their friends and family as reasons for joining the credit union.
If our current members like what we are doing, then they are going to tell other people, Mattingly says. And our survey data shows that they are.
For those members who find it difficult to believe YOUR Checking rewards are as good as they appear, the credit union stresses that the account comes with no hidden fees or unwanted financial surprises.
[Members] are always looking for the small print that says you have to do this or this to actually get the reward,’ Mattingly says, adding that YOUR Checking is really based on the member’s relationship. There is not some catch fee that says if you don’t do these things, then you are going to be hit with more fees.’