Designing a Referral Program for Credit Unions That Works

“We’re stronger together”. That’s the entire concept on which credit unions are predicated. However, that in itself implies a challenge – getting more members to help strengthen the organization and create greater engagement. A wealth of recruiting tools can be used today, but new members are not all cut from the same cloth.

Increasingly, referrals are the ideal source for credit unions seeking new members, and referral programs are the funnels through which those members join. Why are referrals preferable to other types of members, though? And what goes into creating a robust referral program for credit unions that actually works?

Why Choose Referrals?

Members can join your credit union in many different ways. They might be exposed to your marketing materials. They could be familiar with the benefits of credit unions and intentionally seek yours out (particularly if yours is the only credit union serving a specific geographic area). Word of mouth and indirect loans are other channels through which members may find their way to your organization.

However, when it comes to economic participation and engagement, referrals tend to be more active. Individuals referred to your organization often much more active than those who find you via other channels. There’s also the fact that you’re in control of the criteria required for referrals, meaning that you know off the bat what they bring to the table in terms of accounts, debit card usage, and more.

Finally, referrals are often more loyal than members who come through other channels. A member who finds you looking for the best rate on a particular financial product is likely to jump ship when another credit union or bank can offer something more competitive, for instance. Referrals, on the other hand, value strong relationships with a known entity and the benefits that come from those types of relationships.

The Benefits of a Referral Program for Your Credit Union

We’ve touched on some of the benefits of referrals – greater loyalty, more engagement, higher participation levels – but what about the benefits of a referral program? Why go this route rather than embarking on a slick marketing campaign or something similar? Here are a few of the most important benefits to starting a credit union referral program:

  • Cost of Acquisition: How much does it cost you to acquire a new member through social media marketing? What about through print marketing? Many credit unions have little more than a nebulous idea of what each new member costs through any channel, but most of them are very expensive. With traditional methods, you might be paying $400 per member. With referrals, you can reduce that cost by an incredible amount (hint: you set the amount you pay for each successful referral, so it could be as little as $75).
  • Lead Quality: We hinted at this already, but let’s spell it out for you. Leads generated through traditional marketing and digital marketing methods are pretty low-quality. Referral leads are high-quality. They’re vetted, already interested in what you have to offer, and even know about your credit union thanks to the referrer.
  • Revenue and Retention: Again, we’ve touched on this but let’s explore it a bit further. Referrals generate more revenue than members who come to your credit union through other methods, retain a higher lifetime value through improved engagement and more activity, and have a higher retention rate (referrals are 20% more likely to stay), which drives lifetime value even higher.

Creating a Credit Union Referral Program That Works

Now that we’ve established that referrals are to be sought out and the value they can offer your credit union over time, we need to explore how to create a referral program that actually works for you.

Create a Refer-A-Friend Policy

Where do referrals come from? Your existing members. It follows that those members are the single best way to find and attract new members. A refer-a-friend policy allows you to incentivize your members and encourage them to recommend your credit union to friends, family members, and coworkers who might be looking for a new financial home.

Of course, creating such a policy is harder than it sounds. It requires knowing what offers value to your current members and then finding ways to offer similar value to those who are referred to your credit union.

For instance, suppose you offer $50 for each person referred who opens a checking account with an attached debit card and then stays for six months. Is that enough to make your current members want to evangelize on your behalf? Would $75 be a better option? What about other perks – an upgrade to a designer debit card, perhaps?

Now, what would be an equitable reward for referrals? For most credit unions, an equal financial incentive and non-financial reward for those referred to the organization makes the sense and offers the most traction. So, in this situation, each referral would cost you $150 plus the costs of the designer debit card. That’s far less than what you would be spending on traditional marketing with a much higher ROI.

Make It Easy to Refer Others

In addition to your official referral policy, you need to take the pain out of referring people to your credit union. You also need to remind your members that they can (and should) share how satisfied they are with your organization with others. How can you do that? There’s a host of different ways, including:

  • Encourage your followers on social media to refer friends, family, and coworkers. Share details about your refer-a-friend policy and the rewards offered.
  • Allow members to share referral links from your website.
  • Encourage members to share links/referral pages through your mobile application.
  • Encourage parents to open accounts for their children (more on this below).
  • Encourage family members to refer other family members – siblings, parents, aunts, uncles, cousins, etc. who would benefit from saving money with your credit union.

Have a Welcome Package Created

The refer-a-friend policy is just one part of a multi-pronged referral strategy for your credit union. You also need to be prepared to offer new members (referrals) the right experience from the very beginning. The cash bonus and upgraded debit card are nice, but they don’t necessarily engender loyalty in and of themselves. A welcome package can do the trick here.

Of course, chances are good that you already have a new member package, but you should go above and beyond that. For instance, in addition to the how-to information and glossy pamphlets, why not include a gift card to a local restaurant in your welcome package? It may even be possible to obtain these cards free of charge or at a discount if you can work with local restaurants to create a joint program (and they might be able to refer others to you, as well).

Don’t limit yourself to restaurants, either. Movie tickets, tickets to local festivals and fairs, attraction tickets – the sky’s the limit. Not only does this help you attract and retain referrals, but it helps you support local businesses (and reinforce your brand as another local business, of course, which can further drive both increased loyalty for current members and attract new members).

Parents Count

We mentioned parents and children in the previous section, but now it’s time to explore that a bit more. As a credit union, you are uniquely positioned to work with parents and help them instill financial savvy in their children. You can do this in several different ways. For instance, offer a fee-free teen checking account to help them learn how to balance a checkbook and work with a budget.

A low or no-fee student checking account can serve a similar purpose. Both can be paired with debit cards to help educate children on their use and how important it is to keep track of spending that doesn’t involve physical cash. Don’t forget to incentivize these plans – offer to match parents’ deposits into the account up to $100.

Tips to Ensure Your Program Is a Success

Creating a referral program is all well and good, and the structure discussed previously will help ensure that you at least have a strong foundation for success. However, there are other things that you can and should do to help maximize the program’s value to your credit union, as well as to your customers.

Ease of Use: Too often, good things become worse through complications. It’s natural, too. Different departments want their hand in the process, leaders want to put their personal stamp on projects, and so much more. The problem is that as the project grows, so does its complexity. Eventually, no one really understands how it works, much less your members and the people they want to refer. Make sure that you keep your program streamlined and easy to use.

Ensure Value: The referral program should offer value to your credit union, but don’t lose sight of the fact that it should also deliver value to your members and the people whom they refer. You don’t necessarily have to spend a fortune, and you may be surprised at the non-monetary rewards that work well as incentives. However, delivering value to your audience should be the primary purpose of the program.

Have Multiple Referral Channels: Don’t rest your hopes of success on a single referral channel. Create multiple channels so that referrals can flow through naturally – through social media, in person, by phone, via your website, or by email. The more referral channels you have, the wider the net you can cast with a single, overarching program.

Keep Steps to a Minimum: How many hoops must members jump through to refer someone? What steps must those referrals go through to sign up? The more steps required, the greater the likelihood that your referrals will stop mid-process or that your members won’t bother referring anyone at all. Keep things simple.

Know Your Eligibility Requirements: Make sure you have your eligibility requirements figured out well ahead of time. Who can become a new member? Will you accept returning members as new? Are there requirements on what type(s) of account they can open or that they must open to qualify? How long must they remain a member in good standing to qualify for any incentives?

How the Incentive Will Be Paid: Ambiguity is a huge problem for referral programs. The more ambiguous your terms and conditions, the greater the chance for misunderstanding and hard feelings, as well as referrals opting out of the program completely. One of the most common sticking points is how your incentives will be paid. Do you offer a credit to their account? Will it be by pre-paid gift card? Does the incentive have to remain in the account for a specific amount of time beyond the date on which it’s deposited?

Integrate and Track: Don’t leave your referral program in the analog world. Connect it to your digital tools. Track members who refer you via social media, who click links to the referral program in emails, or tap referral buttons in mobile apps. Accurate tracking allows you to measure your success and see which members are doing the bulk of the referral work.

Set Timelines: Chances are good that you’ll only want to use referral programs at certain times. Define when those times are. Is there a member threshold that triggers your referral program? Do you want to run it during spring and fall or summer and winter? Is back to school a good time for a program focused on student accounts?

Connecting the Dots

By now, you should have the blueprint for putting together a referral program that will work for your credit union. Remember – every organization’s needs and goals are different. It makes sense then that your referral program will not look much like another credit union’s.

Take the time necessary to create a customized program that works for your local area, your members, and your organization. Use both analog and digital tools, keep the program as simple as possible, and, above all, make sure that your program delivers value to those who matter most – your members and the people they refer.

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