PORTLAND, Ore. – Some current and former credit union leaders are behind a new Web-based relationship pricing product that they believe can do for credit unions what frequent flier programs did for airlines. The product is known as PoinTracs, and the company offering it is Portland, Oregon-based AlphaPk, LLC. Most of the principals of AlphaPk have a credit union background, including Denise Wymore, former marketing exec with First Tech CU; Mark Sadowski, currently the CFO of Group Health CU in Seattle; Suzette Palanuk, who served as the West Coast credit union sales rep for EDS for 13 years; and Joe Palanuk, who ran his own credit union insurance firm and has done a lot of credit union consulting. It rewards members with things such as better rates on loans and deposit accounts and breaks on fees. Members earn these rewards based on a point system. Point West CU, Portland, Oregon, launched the program a few months ago and is surprised by the member interest. "We're loving it. The main thing we were looking for was finding a way to give incentives to our current members, and finding ways to bring in new members," said Mike Fletcher, Business Development Officer for Point West. At Point West members earn points on length of membership (100 points a year), and they earn one point for every dollar they spend on a loan's finance charge or each dollar they earn in interest from a deposit account. Once members earn 2,500 points they can get a 25BP decrease or increase on a loan or deposit product. It goes to 50BP after 5,000 points. Members can also use points to avoid certain fees. New members can earn points just for opening accounts and taking out new loans. Fletcher said PoinTracs can be used to control member behavior. For example, Point West runs promotions such as 200 points for anyone who signs up for e-statements. The CU saves money with e-statements, so that's a member behavior they want to encourage, he said. Last month alone, 185 of its members elected to redeem some 80,000 points. The most popular reward among members so far is a lower rate on a loan. It's important to note, said Fletcher, that the rate buy down is only for new loans, not existing loans. The goal is to bring in new money, he said. The CU is also using the program to bring in more commercial business through point incentives geared to business accounts. Members Earn Their Keep Wymore, who is VP of sales for AlphaPk, said one of the keys to the program is that it focuses on the positives. "The way you're earning points is if you have a loan or deposits earning interest. You are a member who is paying his way. If you're the $5 check casher who does nothing but complain about fees, you're not earning points," she said. She said rewarding length of membership with points is great PR. "If a member has been there for 25 years and expects great service, it acknowledges that with a big fat thank you in points," she said. Wymore had this rewards/points theory in the back of her mind for some time, but knew technology would be the key to making it work. "We wanted to stay away from the core. Suzette (Palunek) said if you go to the core you become a slave to it," she said. Each month participating CUs send AlphaPk a simple comma delimited flat file of the month's transactions so AlphaPk can calculate the points. Credit union employees then can access a secure Web site to see how many points members have. Employees can cross-sell products by pulling up members' point files at the teller line or in the call center. The way it's set up now, members can not go online to see their point total. This keeps the credit union in control of the initial contact, allowing them to call members who have earned a certain number of points. But Fletcher said in Point West's case the members have initiated much of the contact. "They'll read about it in the newsletter and call in to learn about their points and see what they can redeem them for. We know it's working because members are even planning out how to use points. We offered one member a fee reduction, and she said she didn't want to waste points on that, she would save them for a new loan," said Fletcher. Relationship pricing is nothing new, but so far most programs are tier based, putting members into groups such as Platinum, Gold, Silver based on their relationships. The problem, said Wymore, is those tiers tell members what they earn, there's no flexibility on the member's end. Wymore said it also changes the marketing philosophy. "You don't have to push rate specials any more, you can do point specials. The more members do, the more they can be rewarded," she said. There has to be caps, however, said Wymore. Most credit unions aren't going to want to give away more than 50BPs off a loan rate in any one transaction. AlphaPk makes its money mainly on licensing fees. It has an upfront licensing fee of $1 per member up to 50,000 members and 50 cents for anything over 50,000. It charges the CU five cents a month per member for the monthly maintenance to do the processing of the data and get it back to the credit union to disseminate. Other than the principals already mentioned, Creative Abandon, a marketing/advertising firm in Portland, Ore. is an owner, and AlphaPK's CEO is Jim Mullaney, who has an accounting and technology background. [email protected]

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