As relationship based pricing has grown in popularity, more credit unions are planning elaborate ways to reward members for their loyalty. However, some credit unions have found that simple, uncomplicated programs yield the best results. Not only are simpler programs easier for members to understand, credit union staff find the marketing and sales process to be smoother.
For example, NorState Credit Union has seen increases in loan volumes and direct deposit penetration ever since a simplified version of their existing relationship-pricing program was introduced two years ago. Located in northern Maine, the credit union has $80 million assets and almost 11,000 members.
NorState's previous program required members to use several specific products and services in addition to direct deposit: a VISA card with auto pay, share draft account, and debit card. According to Susie Lang-Thibeault, marketing director for NorState, ''For some members, they thought that they had enough of our services already to receive the reward even if those services were not the ones we wanted them to have. We had tried to send direct mail to all those that had one or two services left to fulfill but only one had responded.''
The new program rewards direct deposit participants with a 0.25% discount off all consumer loans. Effective cross selling from loan officers has increased direct deposit participation to 70% of members, compared to 40% before the new plan was launched. Credit union membership has grown by 40%, loans have risen by 17% and members now hold an average of 2.7 accounts. ''Loans are an important part of our program. We just needed a simple program that would pull in more members'', explained Susie.
A recent Callahan & Associates survey of over 240 credit unions identified simplicity as one of the critical requirements of a successful relationship based pricing program. The complete research report, Relationship Based Pricing: The Rewards of Active Membership, presents a variety of credit union strategies and ideas for introducing a new program or modifying an existing one. Click here to find out more about how credit unions have approached this pricing strategy: