Amid the ongoing challenge of marketing in the shadow of COVID-19, financial marketers continue to face long-standing questions:
- “How do we build new high quality accounts?”
- “How do we create a more engaged customer in a younger population?”
In dialogues with over 30 leading financial marketers, the answers “We should invest in digital media” and “We should carry out more targeted direct marketing campaigns with an offer” were often answered. These strategies have produced results in the past, but today’s environment calls for new ideas.
Recommendations remain an important source for new banking relationships
What financial institutions have to take into account is a mixture of long-standing, fundamental sources of advice and contacts that are established using today’s methods.
Digital recommendation marketing through word of mouth is increasingly becoming an indispensable part of 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 continued remote operation of many, many Americans. Despite this isolation, people looking for new financial services providers need input from family, friends and colleagues more than ever. This applies to both the banking needs of small businesses and the financial needs of consumers.
Do you think a small business owner is not interested in hearing from fellow entrepreneurs when deciding who to bank with? Think again: One banker told me that one of his institution’s standard survey questions for all new business account holders is, “What are your three most important resources as you make important business decisions?
The answer, said the banker, is not Google, but “by far” the number one answer is always “trustworthy colleagues, family, friends”.
A joint study by Ogilvy and Google / TNS also found that up to 74% of consumers rely on a referral as the primary factor influencing 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 transfer. The trust factor makes the current clients of the financial institution the perfect intermediary to build new, high quality relationships.
Once your account holders have established their trust, it is important to encourage them to refer their friends and family to open an account with your institution. It is a best practice to make the time worthwhile by creating an incentive for both the referring client and the referrer.
In fact, it is paying off: The Harvard Business Review found that referred customers were 20% more likely to stay with a bank. In addition, the study found that they generate 15% more profit.
It is successful in providing a fully automated 100% digital referral program with an incentive and means of performance measurement.
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Three main problems digital referral programs can solve
Finally, consider the data from a recent case study. We compiled this data over a period of 12 months and made a comparison with a control group. The aim was to answer the three questions that arise when financial marketers discuss the digital marketing strategy.
The three questions are:
1. How do digital referral programs affect account quality?
Financial institutions measure account quality in a variety of ways. For the purposes of our study, we chose to isolate average account balance, attrition rate, and number of cross-sell accounts. We collectively view these as proxy for quality because, by and large, they mean that the account holder considers the institution to be their primary financial institution.
The transferred account balances were slightly cheap compared to the control group. In addition, the abrasion of the group concerned was slightly higher than that of the control group.
However, we saw a significant improvement (28.9% versus the control group) in the number of cross-selling accounts (4.06 versus 3.15), including a much higher adoption rate of enabling mobile banking.
2. How do digital referral programs affect cost per account (CPA)?
Simply put, the referral group’s CPA far outperformed the control group. The CPA for the initial DDA was less than half of the control group, and taking into account the increase in cross-sell accounts, the CPA for all accounts in the referral program was one third of the control group’s CPA.
3. How can a digital referral program affect demographics?
In a word: millennials.
Digital referral marketing is a great way to reach a younger audience. 64% of the referral accounts opened are under 35 years of age.
Interestingly, the transfers were also made by a younger population, with 56% under 44 and 34% under 32.
This result underscores the importance of digital remittance as a vital tool for financial institutions looking to target younger audiences, as the majority of traditionally modeled data programs for acquiring new accounts will demographically deliver more of what you already have.
With the proliferation of digital media in today’s society, the authenticity of referrals means more and enables new customers to feel more connected to the brand. A financial brand that grows based on trusted relationships is one that is built to last.