Service Isn’t the Panacea, Value Matters as Well
Ask just about any financial institution how they are different and you will inevitably be told it is through “WOW service.” Service is the most commonly quoted differentiator, because many banks and credit unions believe there is little room left to differentiate through products and services. While the people factor certainly plays a huge role, standing apart from the pack these days means creating real value.
It is important to understand the credit union philosophy in order to grasp why they are driven to provide real value to their members. The difference can be seen in how they define people that do business with them and as a “member”, you essentially own the credit union.
Traditionally the value offered for being an owner has come in the form of better-than-market interest rates. However, lately credit unions have been looking to extend that value by increasing the types of rewards programs they offer.
Rewards Come in a Variety of Shapes and Sizes
The struggle for credit unions is competing with the type of rewards programs that the large nationwide banks offer. Take Capital One® for example. Their card programs offer up to 1.5% cash back or 2x travel rewards. And their Purchase EraserSM program allows you to literally erase any travel related expense. From personal experience, it truly is a no hassle feature. This is not a pace that most credit unions can keep stride with. Institutions like PenFed Credit Union® are coming close, with 5x rewards on airfare and 1x rewards on all other purchases. “Close, but no cigar” as the saying goes.
In order to be more competitive, credit unions are continuing to be creative with what they offer. Here are some examples:
- Loyalty rewards – Community Choice Credit Union rewards its members for the number of products and services they use. In 2015, they returned a staggering 40% of their earnings, or about $1.8M, to members that used multiple products and services with the credit union
- A member holiday bonus – Charter Oak Federal Credit Union has a Gold rewards program that includes a $100 holiday bonus paid out to every member. It also includes ATM rebates and loan discounts. How much money in total are we talking about? Over $2 million since inception
- Buying local – credit union members tend to be very community focused. What better way to support your community then by buying local. Members at Maine Savings Federal Credit Union get discounts for shopping at local merchants by utilizing a white label, location-based app on their smartphones.
The Key to Rewards is ”Usage”
One key to any reward program is creating a habit with the member, so that they begin to think of the credit union as their primary financial institution. When members are making a purchase, it is the credit union’s credit or debit card that they want pulled out first. You create that habit through early usage. Thus the reason for bonus rewards that most card reward programs offer at the beginning of a relationship. I saw this in my own credit card rewards experience. For years my family had used a Chase Disney rewards program in order to build up points for use at Disney locations. Then a Capital One rewards offer showed up with an offer of enough rewards points (a few hundred dollars’ worth) that I couldn’t refuse. My original plan had been to just use the Capital One card enough to get the rewards. But we ended up sticking with it. The early usage created a habit that held over.
Deciding What to Offer
What reward program a credit union offers should be entirely based upon their existing membership and target market. A rewards program built entirely around mobile app usage makes little sense for a credit union whose membership is not mobile focused. So, it is important to understand the market and what credit union members are looking for in a rewards program.
The best part of a process like this is that good usage is almost assured. After all, the end user helped build the program.
To Reward or Not to Reward
For our credit union partners the decision isn’t about whether or not to offer a rewards program. It’s more about deciding what program to offer. Unless credit union members contribute to the loyalty program design process, the members aren’t receiving the full value of being an owner.