Friday, January 25, 2008

Prize Based Savings

It's not Gambling because there is nothing to lose

The Filene i3 group has an innovative idea that Credit Unions can encourage non-traditional savers to do just that SAVE. Well we are going to appeal to motives that usually cost someone money, not teach them to save it. The idea of a Prize Based Savings appeals to people who gamble or play the lottery, but it has absolutely nothing do with that.

A 2005 survey commissioned by the Consumer Federation of America (CFA) and the Financial Planning Association® (FPA) discovered that nearly 40% of low-income earners think it is more practical for them to accumulate significant savings by winning the lottery than by actually following a systematic plan for saving. Seriously if this isn’t an opportunity then I don’t know what is.

The Prize Based Savings can be developed many different ways, but the basics of it, is for every (insert amount of $) deposit a member makes they will get an entry for a monthly, quarterly, and/or yearly prize. This will encourage them to save because they have a much better chance to win at this than they do to win the lottery. But the key is that it teaches them to save money. Something that they likely were unable to do before.

There are a few different versions currently on the market: FORUM CU’s Weekly 5 Club, Neighborhood CU’s Prize Savings Account, and Centra CU’s Super Savings. All of which are tweeked differently to work best for their memberships.

As Credit Unions our job is to provide the best products and services to our members at the lowest cost. We do a great job. People all over the world find it impossible to save, as a Credit Union we need to do what we can to encourage and teach our members to save so that they are prepared for life’s challenges. This is a way that CU’s can do just that.


C Andrew Mattingly said...

Following is more detailed explanation of FORUM's prized based savings account...the weekly five club. When designing the account we wanted to focus on an account that would encourage systematic savings to get our members to save regularly instead of just putting in one deposit and not adding to the balance. This is the reason for our weekly, monthly, quarterly and annual prizes. We also use a certficate account on our system to lock members into a committment of at least 3 months up to 12 months. Our experienceis that 100% of the weekly five club accounts that come up for renewal are renewing to play again. The rate we are paying is not a premium rate, about 150 to 200 basis points less than our best certificate rate. Almost 90% of our accounts have automatice deposits setup for the account.

We have found the best way to promote the account is using a game type promotion. We started with an instant win scratch off card promotion, gave away a playstation package in another promotion and are currently doing a tax refund spending spree that started in February. Staff education is extremely important in selling this product because it is best sold person to person versus direct mail or email marketing. Understanding of the benefits and potential prizes are very important to the success of this program.

We post the winning numbers on our website, in the branches on video monitors and even have a special 800 hotline number for the winning numbers. The announcement of the winning numbers is a marketing message in itself in that it keeps the visibility of the account in the forefront. We are looking forward to additional enhancements in the next few months to bundle this product with other products or services to create a "save to play" bundle of services. After 9 months into the program we think that just getting members to start the account is the biggest challenge. Once past that we have found that members are reallying enjoying the experience.

Kent Sugg said...

Thanks Andy for sharing with everyone what FORUM went through to get the Weekly 5 Club out to the membership.

One of the great things about the Prize Based Savings is that it can be adapted to meet the needs of the Credit Union membership. In this case, FORUM, used multiple small prizes on a more frequent weekly basis, then what the original idea was. The original thoughts was monthly prizes with just a few small ones and bigger one. The Weekly 5 meets the needs of immediate satisfaction as all as the possibility of getting that larger prize.

I also want to second another thing that you touched on. With a product such as this internal word of mouth marketing is key. The ability to train the frontline is a big difference between quick success and a very slow start. Prize-based savings accounts provide an exciting product that employee's will be excited to tell their members about.

Thanks for the input Andy, I love seeing the example that FORUM is setting with their track record and implementing new and innovative products.

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