LATHRUP VILLAGE, Mich. -
The $475-million credit union in January launched MoneyPerks, a relationship pricing strategy that operates much like the airline industry's frequent flyer programs. Instead of mileage, First Michigan members earn 1 point for every dollar in interest paid on loan balances or earned on savings account balances. Members can also earn points monthly for using online bill pay (25 points), e-statements (25 points) and direct deposits (50 points based on a minimum of $500 in monthly deposits.)
As points accumulate, they can be used to lower loan rates or increase certificate of deposit rates up to .5%. Points also can be used to waive fees on everything from account history requests, stop payments notifications or NSF fees.
According to First Michigan CEO Michael Poulos, waiving fees is by far the most popular use for MoneyPerks points. Members who complain about assessed fees can satisfy them immediately with points, he says.
"It's taken the guesswork out of the refund process," Poulos says. "We've decreased the amount of courtesy refunds we've had to give, but at the same time increased our service to members through the use of points."
Since the program's inception, those waived fees have averaged between $10,000 and $20,000 per month, Poulos said. "Percentage-wise, that's not a lot for us but it is for the members," he adds.
Michigan First's MoneyPerks is based on the PoinTracs software developed by AlphaPk, based in Boring, Ore., and used by 23 other credit unions nationwide, including Howmet Credit Union in White Hall, Mich., which went live with the program in April. Michigan First purchased the software for between $50,000 to $75,000 in order to manage its program from their institution. Members are reminded at every transaction point how many MoneyPerks points they've accumulated and may redeem them immediately for use during those transactions.
"This operates like the old [S&H] Green Stamp idea," Poulos said. "This needs to be perceived as valuable to the member."
MoneyPerks also is one of those rare credit union programs designed to benefit current members with existing account activity, rather than simply reward new members, Poulos said. In fact, the credit union CEO isn't sure that the program has attracted many, if any new members since its January introduction.
"It's another arrow in the quiver for business development officers," he said. "It's really designed to address the 'stickiness' concept. Will members stay because they earn points? I think that's true, but so far it's been hard to measure."
However, response from the institution 75,000 members, all of whom were automatically enrolled, has been positive. Michigan First awarded its members MoneyPerks points for all activity conducted in 2006 to make sure as many of those members as possible had point balances when the program began.
"This has gone over well with the members," Poulos said, "I know that because they keep telling us so."
In addition to being able to reward the credit union's most active customers, MoneyPerks provided an unanticipated benefit for use during difficult member situations. In one instance, a member complained about the way her checking account was handled, even though it wasn't the credit union's fault. Poulos satisfied the member by awarding her an additional 1,000 MoneyPerks points.
"She was happy and it didn't really cost us anything," Poulos said.
