The power of the referral
With 92% of people trusting referrals from the people they know, having a referral marketing strategy can be an effective way to gain new and loyal customers. From small credit unions to large scale banks, referral programs can be an effective marketing strategy when it aligns with your finance brands’ messaging and audience. They can be as simple or as complex as required and often benefit both parties, providing extra incentive to participate and use the product or service. In fact, referral leads have a 30% higher conversion rate than any other channel, making them a highly effective marketing alternative for many financial services.
Refer a friend
Referral leads have a 30% higher conversion rate than any other channel.
In its simplest form, a referral marketing strategy is when somebody refers a friend or family member to try out a finance brand’s product or service for a benefit in return. While in the past referral programs weren’t as widely available, in recent years they have made a resurgence with new fintech apps such as Robinhood and neobanks such as Up bank utilising this marketing scheme to gain a large and loyal customer base, quickly.
At its core, referrals are successful because real people that are trusted are tasked with advertising the product or service. Nowadays, It’s difficult for consumers to trust what is advertised online or on television with only 33% of customers believing online ads. By creating a targeted referral marketing program finance brands can harness the power of word-of-mouth and improve consumer trust and loyalty.
The dos and don’ts of referral marketing
A strong referral marketing scheme is one that aligns with a finance brands’ target audience and has been built with the user experience at the forefront. There should be minimal barriers for users to refer people and should be a rewards-based model. Here are the dos and don’ts for finance brands creating a referral marketing program:
- Do: Make it easy. Customers won’t refer friends and family members if it’s too complicated. In the same vein, it should be easy for the invitee to do what’s required to gain the reward.
- Don’t: Make it a limited time promotion. Referral marketing should be an ongoing program as this will ensure finance brands are exposed to more customers year-round, rather than those needing a financial service in-the-moment.
- Do: Promote it across a number of social channels. Finance brands should integrate their referral program as an aspect of their overall marketing strategy with the end goal being to train current and future customers to consistently refer people.
- Don’t: Give nothing in return. People are rewards-focused and want to gain value for their referral efforts. Make sure the reward aligns with what your finance brand gains from the referral. If someone opens an account with $10,000 for example, the reward should be bigger than for a person opening a new account with $1,000.
The key to referral program is ensuring they’re advertised consistently across a number of platforms and there’s a high-quality Call To Action (CTA) attached. In fact, when a CTA is integrated into the customer journey, consumers are four times more likely to refer someone.
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Brands nailing referral marketing
Referral marketing programs are beginning to become popular within the financial services sector meaning it’s a great time for finance brands to capture an interested audience. Here are two finance brands nailing the customer referral program.
Canadian neo bank Tangerine has employed a referral marketing program from the beginning to gain valuable and loyal customers. Tangerine offers new clients $50 when they open an account and deposit $250 using an existing customer’s ‘orange key’. This is a well-conducted strategy as it forces referred clients to open an account and deposit money before they can gain the reward, therefore gaining Tangerine a new customer immediately.
The UK online pension provider PensionBee is another financial service offering a great referral program to new customers. Similar to Tangerine, PensionBee offers new customers and the existing customer who referred them £50 once the invitee opens an account. This is a great strategy as it entices the person who refers to make the invitee follow-through on opening an account, as they also gain a reward.
Give rewards to gain rewards
Enabling your current customers to become brand ambassadors is a great method of gaining a loyal and trusting customer base. Aligning your finance brands’ customer referral program to your target audience is critical in ensuring it’s an effective marketing strategy. Word-of-mouth still remains one of the most effective advertising strategies today, with it having the ability to increase sales by 500% compared to a paid advertising impression. It’s time finance brands began to employ their customers to advertise for them with referral marketing programs.