Financial referral programs are critical to your firm's short- and long-term bottom line. Unlike other industries, financial customers cannot always appeal to customers strictly on price point. Take something as simple as interest rates. A savvy customer can shop around, but ultimately, they'll find at least a handful of financial firms with equally low rates. Firms need something else to help tip the scales, turn the lead into a customer, and most importantly, keep them as a customer. Which brings us to financial referral programs.
The core benefit of a financial referral program is that it allows existing customers to refer friends and get something in return. Sounds simple enough, right? Well, on the surface, yes, the underlying premise is basic; rather, it's the mechanics of actually implementing the program that can get complicated. For example, big banks have highly sophisticated programs that rely on software packages to automate the process. From our vantage point, this level of complexity is unnecessary for smaller brands just rolling out a referral program.
In fact, a smaller bank with a handful of branches can roll out a program by using simple Web forms, manual in-store forms, and good ol' in-person customer service. Here's how.
* Establish the reward. First and foremost, determine what the referring customer will get, while realizing the more you ask of the customer, the more you'll have to give in return. Also throw in a reward for the new customer. Not surprisingly, monetary rewards elicit the highest participation. But before you determine a reward amount, calculate the return on investment. For example, a new checking customer will generate X in revenue (including cost-of-acquisition into your calculations); your bank, therefore, can afford to pay the existing customer Y for the referral.
As a side note: industry analysts estimate that referral programs that generate new deposit accounts usually pay $50 to the referrer and $50 to the new customer.
* Promote across multiple channels. Where can you most effectively reach existing customers? Facebook? eBlasts? In-store? Identify these channels and promote your program accordingly, thereby maximizing your reach.
* Keep it simple. Make it easy and quick for the new customer to sign up or for the existing customer to refer a friend. The more complicated the process, the more likely they'll abandon it.
* Keep it open-ended. A two-week promotion may add some urgency to the program, but it could reduce the amount of referrals. After all, if an existing customer refers a friend and sees how easy the process is, he'll be more inclined to refer others. By keeping the offer open-ended, you'll net more referrals.
What do you think? Has your firm rolled out a customer referral program? What's the most important element of such a program? What key ingredients did we neglect to mention?
Need more help in setting up a referral program? Contact us for a free consultation.
