Banks exist to serve customers. Your financial products are designed to help your customers achieve their goals – saving money, earning interest, getting into a home of their own – while also compensating the bank. It should be a win-win.

If that’s the case, why are so many banks struggling to maintain membership numbers? It’s because members often aren’t all that loyal. They’re focused on their own financial health, and when a competitor can offer something at a lower rate or with a higher return, there’s a chance they will leave for greener pastures.

It’s natural. Although that doesn’t mean that it’s easy to deal with. Banks must find a way to combat this cyclical influx and outflow of customers.

You can search for new customers in a wide range of ways – traditional marketing in newspapers, magazines, and on the radio. Or you can go the digital route with social media and email marketing. The problem here is that your return is often lacking. Not to mention the fact that you’re attracting customers with the same issues as the previous ones – they’re likely to go elsewhere if they can find a better deal.

The solution? It could be creating a referral program, but you’ll need to learn how to overcome the most common hurdles banks face in this area. You might also be wondering why referrals, though?

The Truth about Referred Customers

Before we dive into how to overcome hurdles and create a successful referral program, let’s delve into the question of why you should focus on referrals in the first place. What makes this form of outreach a better choice than, say, email marketing or running a series of radio ads?

Here are some eye-opening statistics to help drive home why this is your bank’s best course of action:

  • According to Nielsen, 92% of consumers trust the recommendations of friends and family over any form of advertising.
  • 78% of people rave about their most recent stand-out experiences with brands in their lives.

Why the focus on word of mouth? What is a referral if not precisely that? When a current customer recommends your bank to a friend, family member, or coworker, that carries immense weight.

Of course, it’s not just about the value placed on the referral. It’s also the value of the person referred to your bank. Referred customers are more loyal than those who find your bank through other methods. They’re also worth more to you both immediately and over time.

So, how do you go about getting those referrals through the door (or in the email, on the website, or whatever other channel you prefer)? It all comes down to your referral program. Here’s where a lot of banks begin to encounter hurdles. Some of the most common include:

  • Members referring anyone and everyone to earn money
  • A lack of focus derails your efforts
  • Few or no eligibility criteria set
  • Not tied to the right marketing goals
  • Failure to measure campaign results
  • Not enough thought put into incentives
  • The wrong reward structure was chosen
  • Not timing it with the customer lifecycle

How do you get around these hurdles? We’ll explore that below.


Overcoming the Hurdles and Creating a Powerful Referral Program for Your Bank

With a better understanding of the challenges your bank faces when it comes to creating, implementing, and running a referral program, let’s tackle the solution to those issues.

Your Incentive

We’ll begin our discussion with what is arguably the most important part of your referral program, or at least the most visible: the incentive. What are you offering to get your banking customers to refer their friends, family members, and others to the bank? It must be powerful, valuable, and something that isn’t already glutting the market (that means you can say goodbye to the toasters, coffeemakers, and other gimmicky-giveaway items).

What has that kind of staying power? Cash is a good option. However, don’t overlook other giveaways – skip the toaster and give your referring customers access to elite checking or a year’s worth of expert financial advice to help them grow their net worth with less risk. You could even consider reward points, rebates, credit card miles, and other choices here.

Take a look at what other banks are doing, and then find something else. It doesn’t have to be money. It just has to have value to your customers.

Now, you also have to make sure that you’re incentivizing those your customers are referring. They may or may not desire the same thing you provide your current customers – do they really want a year of financial advice? Or would they appreciate an upgrade to a high interest savings account?

This is where a lot of banks get it wrong. They fail to understand their audience and what they want and value. Again, ditch the gimmicks and find offerings that really matter to your customers and that address a pain point in their life.

The Importance of Tangibility

Humans are tactile and visual creatures. We place more value on things that we can see and touch. That’s an important thing to understand when it comes to your incentives, particularly since they’re likely to be pretty intangible.

How do you get around it? Feel free to get a little creative. Almost any token can become a tangible symbol of their success – a card signed by the CEO, a bobblehead, or something similar might work. There are thousands of affordable giveaway items that you can customize with your brand and message that will provide the tactility necessary to connect your customers with their incentives.

Your Customers

If you’re concerned that your customers will start trying to refer all and sundry, you’re not alone. It’s a common fear among decision-makers and leaders in today’s banks. The good news is that this fear is probably not all that likely to pan out, at least if you take a few steps to prevent it.

First, consider not offering cash as an incentive. That ensures that anyone referring someone else is doing it because they love your bank, they know you’re a good fit for the person being referred, and they value what you have to offer in terms of an incentive, in that order. That doesn’t mean cash isn’t a worthwhile incentive, though. You just need to have some eligibility requirements in place, which we’ll address below.

Eligibility and Account Requirements

With the right eligibility requirements, you can take care of two challenges at one time. That is, you can ensure that your members aren’t referring low-value customers just to rack up on cash rewards and you help ensure that you get new customers who will be of the highest value to the bank. What sort of eligibility requirements might you set, though? Here are a few examples:

  • Referred customers cannot have closed an account with your bank in the previous six months.
  • Referring individuals must have had their account open and in good standing for at least 30 days before referring anyone else.
  • Accounts opened must meet minimum requirements (account type, debit card attached, direct deposit, etc.)
  • Both referrer and referred must have accounts open and in good standing when the incentive is due.
  • The referred individual must deposit at least $X within 30/60/90 days of opening the new account.

Customer Lifecycle

One huge hurdle that many banks fail to clear is understanding their customer lifecycle and the referral program’s place within it. Every bank has a customer lifecycle – customers discover the bank, learn about its offerings, use them, and sometimes leave for greener pastures. Customers’ needs also change over time, which means that a very valuable client now might be less valuable (or even more valuable) in the future.

The point is that churn (the constant ebb and flow of customers within the bank) means that your customer base is never stable. The influx and outflow of customers may be seasonal, too. Implementing your referral program correctly within that lifecycle is important.

When correctly implemented, your referral program should provide a steady stream of new customers. This should augment the flow of customers from your other channels, and ideally will more than offset those you lose over time. Some banks choose to run their referral program only during peak churn periods. However, it might be a savvier decision to create an ongoing program, instead.

Why is that? It’s due to a couple of different reasons. First, it takes new customers time to learn how your tools work and the value they offer. Only when they do that can they connect the dots to people in their lives who will benefit from your bank. Switching your program on and off can stymie that organic rhythm.

With an ongoing program, on the other hand, the natural process is supported. You also make it more likely that your customers will refer multiple people over time while being able to track data related to word of mouth and its value to your bank.

Finally, it’s important to understand (and follow) individual customers and their journey with the bank. When is someone most likely to recommend your bank? When they’ve just had a good experience involving a major financial transaction or process.

Maybe they closed on a home mortgage with you. Perhaps they were able to easily take out a loan to pay for their child’s college education. Whatever the case, have your referral program ready to go when your customers are ready to recommend you.

Make It Digital

There’s a tendency to handle referrals via physical business cards, pamphlets, or flyers. That’s understandable and should certainly play a role in your strategy. However, don’t neglect the digital aspect of it all.

Today’s consumers expect your bank to both be online and provide them with digital interactivity. In a time when you can buy things all day long over the Internet without ever picking up the phone, much less seeing someone face-to-face, they’re conditioned to expect digital connectivity from you.
That’s actually good news. The digital world makes tracking your referral efforts much simpler. Tagging a browser with a string of code based on a referrer’s unique identifier can tell you exactly who sent someone to your site to sign up for that new account without hassles or challenges.

Digital tools also make it easier to connect the dots and even entire campaigns. Imagine the possibilities when you connect the information from your referral campaign with your digital marketing campaigns! What could you do with access to that much real-time data?

Don’t Assume People Know about It

Let’s be clear about one thing. Your referral program is not a “set it and forget it” process. Yes, once in place, it will run well with minimal supervision. However, that doesn’t mean that your customers are aware it exists. For that to occur, you have to promote it.

How can you build awareness and focus for your program? There are so many ways! Physical signage in your building is a great start. Regular posts on social media and email reminders to your members can also help. Highlight it on your website, add links to your footer menu, create a landing page specifically for it, add it to your customer portal, mention it regularly in your newsletter, and make it part of your customer surveys.

You get the idea. This isn’t Field of Dreams. Just because you build a referral program, it doesn’t automatically mean that your customers will flock to it. Make them aware of the program and its value to them.

With Persistence, You Can Overcome

Building a strong referral program requires understanding the challenges your bank will face and finding ways to work around or get over them. We’ve covered many of the most common here, and you should be well-positioned to move forward. Make your referral program a central part of your business and you might be surprised at how much traction you gain.

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