To reward members who do the bulk of their business with the credit union, Ent Federal Credit Union in Colorado Springs, CO launched a relationship-based pricing (RBP) program called “Members Choice” in 1998. After analyzing their existing member relationships, the $1.9 billion credit union established Members Choice, a three-tiered relationship pricing program, in an effort to aggregate member deposit and loan balances.
Ent’s Member Choice program rewarded members with large deposit and/or loan programs. Four plans were offered ranging from maintaining household balances of savings $2,500 to $15,000 and loans from $5,000 to $30,000. Further, to encourage the use of self-service channels, Ent offered members an additional 25 basis point on CDs or a 50 basis point discount on consumer loans if payment was made electronically.
Ent’s Member Choice program did result in the desired balance growth. However, the credit union gradually began to identify several areas for improvement in the program. The program’s complex, three-tiered structure, for example, made it difficult for staff and members to fully understand the benefits and conditions of Member’s Choice. Further, by making balance size the key determinant, the program did not reward good behavior. As a member paid down their loan, for example, their Choice level also fell as the total balance was reduced. The program inadvertently penalized members for being financially responsible.
Revisiting the Program
Three years ago Ent reevaluated its RBP program. Rather than using balance size as the key determinant of the program, Ent chose instead to reward credit union service usage. Today, member gets credit for the number of product relationships, not the balances.
Launched on July 1, 2005, the new program, “Preferred Member”, rewards members who make Ent their primary financial institution. A member qualifies to be a preferred member when they have four points. Points are earned based on a variety of different qualifications, such as loans, direct deposit, bill pay, investment services, balances, military, and membership term.
According to Jim Moore, senior vice president of corporate development and communications, “the relative stability of number of services per household reinforces our decision to realign our program to recognize breadth of membership participation, rather than simply balances. Members are now able to self-select how they want to use their credit union.”
Benefits of the Preferred Member program include periodic preferred member special offers, first-to-know member communications,one free service fee waiver and other perks.
Currently approximately 35 percent of members have achieved preferred status. Moore admits that it is hard to determine what growth and behavior changes can be directly attributed to the new program because there were so many concurrent initiatives, but the credit union is experiencing monthly growth with online banking.
Ent provides a strong example of the need to continuously reevaluate one’s RBP program. According to Moore, the key to a successful program is simplicity and an understanding of how members and staff will respond to the structure.
To learn more about other credit unions with successful relationship pricing programs, please join us for our webinar, Relationship Based Pricing: Giving More to Get More, brought to you by Callahan & Associates.