CASE STUDY: Advanced
Interest Certificate of Deposit
OBJECTIVE:
Generate CD balances by attracting new
members and utilizing consumer segments to market to existing members.
Product
Profile:
The Advance Interest CD pays the
member/customer in advance for a full years’
interest. The interest can be paid by check or
deposited into another account at the institution.
This product should be marketed with the intent of
putting the member’s/customer’s earnings to work by
depositing their upfront interest into an interest
bearing checking, money market or savings account
while the institution enjoys increased cross-sales
and balances.
Product Structure for Case Study:
Term:
12
Months
Date of Initial Offering:
2/15/06 - This product continues to be offered
Pricing:
5% (At the time of the initial offering this
product was priced approximately 50 basis points
higher than market. This was done knowing the
Fed was to adjust rates upward two weeks from
the date of initial offering. After the Fed
raised rates, this product at 5% was priced 50
to 25 basis points below market)
Min/Max Balance Restrictions:
$10,000-$250,000 New Money Only
Penalty:
Forfeiture of dividends paid upfront. This
would be taken from the principle
Upfront Interest Distribution:
Paid to members’ share accounts 20 days after
Certificate of Deposit was opened
Marketing Efforts:
Ads
in the local community newspapers
Member Newsletter
Letters sent to members falling into one of the
following criteria:
Upscale
Three or more
existing CDs
$35,000 or
more in deposit balances
Members that
deposited funds into their last aggressive CD
promotion
Product Deployment:
A kickoff party was held with staff to ensure
product knowledge and comfort level. This
included role playing and emphasis on the “New
Money” restriction.
Results:
Number of new CDs opened 2/15/06-5/4/06:
361
Number of new Members opening these CDs:
85
Total deposit dollars in this product from
2/15/06-5/4/06:
$14,890,000.00
Percentage of new money in this product:
95%
The
credit union and their members are very happy with
this product. In 79 days they were able to achieve
74.5% of their annual deposit goal while pricing
25-50 basis points lower than their market.
At RFG we take pride in
providing research-based solutions that are
effective and easily implemented. We are dedicated
to exceeding our client’s expectations and ensuring
that they receive value from their relationship with
RFG.
For more than 20 years,
Raddon Financial Group (RFG) has provided primary
research and marketing solutions to the financial
services industry. Headquartered in Lombard, IL, RFG provides research solutions to over
1,000 financial institutions nationwide.
