In the midst of the ongoing challenge of marketing under the shadow of COVID-19, financial marketers continue to face longstanding questions:
- “How do we grow new high-quality accounts?”
- “How do we create a more engaged customer in a younger demographic?”
In dialog with over 30 leading financial marketers, frequent responses included “We should be investing in digital” and “We should run more targeted direct marketing campaigns with an offer.” Those strategies have driven results in the past, but today’s environment demands fresh ideas.
Referrals Remain a Key Source of Fresh Banking Relationships
What financial institutions need to consider is a blend of a longstanding, bedrock sources of advice with outreach made via today’s methods.
Increasingly word-of-mouth digital referral marketing is becoming an absolutely vital component to successful growth strategies.
“Always on”, “multi-channel” and “digital-centric” are the hallmarks of the best-performing campaigns in the current environment.
Digital referrals owe this increased urgency to the continuing remote operation of many, many Americans. In spite of this isolation, people seeking new financial providers need input from family, friends and peers more than ever. This applies both for small business banking needs as well as the financial needs of consumers.
Think a small business owner isn’t interested in hearing from fellow entrepreneurs when deciding who to bank with? Think again: A banker told me that one of their institution’s standard survey questions for all new business accountholders is: “What are your top three go-to-resources when making important business decisions?
The answer, the banker said, isn’t Google, but instead, “by a long shot,” the number one answer is always “trusted peers, family, friends.”
Further, a joint study by Ogilvy and Google/TNS found that up to 74% of consumers depend on a referral as the primary influence in a purchase decision. Additional studies show that referral marketing is more trusted by the average consumer than traditional marketing tactics.
Why? Because referrers believe in the authenticity of the referral. The factor of trust makes the financial institution’s current customer the perfect middleman to help cultivate new, high-quality relationships.
Once trust is earned with your account-holders, it is critical to encourage them to refer their friends and family to open an account with your institution. Making it worth their time by providing an incentive both for the referred customer and the referrer is a best practice.
Indeed, it pays ongoing dividends: The Harvard Business Review found that referred customers are 20% more likely to stay with a bank. In addition, the study found that they generate 15% more profits.
Providing a fully automated 100% digital referral program with an incentive and a means of measuring performance has success.
Read More: 17 Essential Features Your Financial Institution’s Website Must Have
Three Key Issues that Digital Referral Programs Can Solve
Finally, consider the data from a recent case study. We compiled this data over a 12-month period and included a comparison versus a control group. The intent was to answer the three questions that come up when financial marketers discuss digital marketing strategy.
The three questions are:
1. How do digital referral programs affect account quality?
Financial institutions measure account quality in many ways. For purposes of our study we chose to isolate average account balances, account attrition rate and number of cross-sold accounts. We view these collectively as a proxy for quality, because taken on the whole they indicate the account holder views the institution as their primary financial institution.
Referred account balances were slightly favorable versus the control group. In addition, the referred group’s attrition was slightly higher than the control group.
However, we saw a significant improvement (28.9% lift versus the control group) in the number of cross-sold accounts (4.06 versus 3.15), including a much higher adoption rate of mobile banking activation.
2. How do digital referral programs affect Cost Per Account (CPA)?
Simply put, the CPA of the referral group far outperformed the control group. The CPA on the initial DDA was less than half of the control group, and when factoring in the increase in cross-sold accounts, the CPA for all accounts in the referral program was one third the CPA of the control group.
3. How can a digital referral program affect demographics?
In a word: Millennials.
Digital referral marketing proves to be a great way to reach a younger audience, with 64% of opened referral accounts being under 35.
Interestingly, the referrals which were made were also made by a younger demographic, with 56% being under 44 and 34% under 32.
This result highlights the importance of digital referral as an important tool for financial institutions seeking to engage a younger audience because the majority of traditional modeled data programs to acquire new accounts will bring you more of what you already have, demographically speaking.
With digital media becoming so prevalent in today’s society, the authenticity of referrals means more and allows new customers to feel a greater connection to the brand. A financial brand that grows from a foundation of trusted relationships is a brand built to last.