By Ray Birch
WEST LAFAYETTE, Ind.—Consumers are becoming accustomed to instant gratification with rewards programs, which is why one credit union believes the year-end dividend model needs to change.
Purdue FCU’s My Member Perks is among a growing number of credit union rewards programs that no longer deliver the annual one-lump sum, instead providing ongoing benefits for using the credit union more often and for more services.
“We like a program that gives back to members in a meaningful way, more than just a giveback at the end of the year,” said Jackie Hofman, VP of HR and marketing. “That means rewarding members, for example, with an additional 50-basis-point discount on their loan rate. They see that discount every month when they make their payment.”
Members receive rewards based on their “status,” and My Member Perks has four categories: Bronze, Silver, Gold and Diamond. A member’s status is recalculated monthly based on points received for use of the credit union.
Hofman reminded that because members’ status is determined by the products and services they use, their status may change from month to month based on how engaged they are with the $1-billion CU.
“Point values are earned from the services that you use, deposit balances, loan balances, age of your account and transaction volume, and more,” Hofman said. “Basically, the more you use the credit union, and the deeper your relationship with us, the more we reward you as a member.”
All Life Stages
Each status level, from Bronze to Diamond, offers a variety of perks designed for members at all stages of life. My Member Perks included things like free checking, a monthly cash giveback, and much more (see chart below).
“We did a lot of research, and it took a couple years before we could launch the program,” said Hofman. “As we developed My Member Perks, we talked about consumers’ need for instant gratification. When people get rewards from a company, they immediately feel good about their experience and tend to go back to the same store. They know what they are getting for their business. They know immediately how their behavior affects their reward and that leads to them repeating their behaviors.”
Hofman emphasized that is a very different experience than when members receive a lump sum payout from the credit union at the end of the year.
“Do they really know why they got their $34, what they did to get that or how the credit union determined their reward? Does that encourage members to repeat behaviors that benefit them and the credit union? They might even wonder why they got $34 and other members got more,” said Hoffman.
Since the program was launched four years ago the credit union has given back to members over $13 million, with $6.7 million being delivered in 2016.
“The program has been very successful and we are proud of it and happy with it,” said Hofman.
The way the program is structured, with status levels that can change monthly, allows Purdue FCU to encourage members to use the credit union more. Hofman said the CU regularly sends targeted communications to members who are close to moving up one level.
“So if I am Silver status and two points away from Gold, we’ll send you an e-mail letting you know what you can do—maybe a few more transactions this month—to reach Gold and get more perks,” said Hofman.
Educate Staff
The marketing has worked, according to Hofman, who said that in 2017 of the 6,919 Bronze members, 23% increased their status. Of 6,088 Silver members, 25% increased their status. Of 2,638 Gold members, 32% increased to Diamond.
Hofman said that any credit union adopting a similar program should invest time in thoroughly educating staff on the rewards program so they can speak intelligently with members, and communicate the new program extensively to members.
She said these types of programs can seem complicated to some members, and that a lot of upfront and ongoing communication is needed so account holders understand how the program works, and use it.
“We really made sure that our employees are on board with My Member Perks,” said Hofman. “To help staff understand and appreciate the program—and therefore explain it better to members—regardless of where they are personally in My Member Perks, each employee earns perks at the highest Diamond level. This way they know all what the program has to offer and they appreciate it more.”
Hofman acknowledged that with the growing rewards programs at retailers across the country that the credit union has to pay attention to those offers and regularly review its own offering. But while it’s important to keep pace with consumers’ expectations with rewards, it’s also important to keep things the same.
“It’s a balance,” she said. “Certainly, all of the rewards programs are on our radar, and we want to stay competitive, but we are also mindful that if you make too many changes it can become a program that is hard to understand and follow.”