Recommendations, referrals, word of mouth marketing, social referrals; read any marketing publication and you are likely to find these phrases in abundance. In the age of social media and websites that host peer reviews such as Yelp, consumer to consumer, or C2C recommendations and reviews, are the new reality for businesses. Exposure to this phenomenon is beyond your control; however, capitalizing on the trend is not. If you haven’t considered a formal referral program for membership acquisition, read on. If you have a program already, pat yourself on the back for being ahead of the curve, but read on anyway, because you might be able to improve your program.
Credit unions, by nature of how they do business, are highly referable. They are for the people, by the people, and generally have heavy community involvement. Credit unions have some of the highest net promoter scores of any industry, which evaluates businesses on how referable their product or service is. Great customer service is a benchmark of credit unions, but the value goes beyond loyalty and retention. Recommendations are happening right now, the question is, are you tracking them and facilitating more of them through a formal program and reward system?
When you think about a referral program, reference any loyalty program you participate in. Major brands figured out they could better understand customer behavior and facilitate greater loyalty and more purchases by motivating their customers to identify themselves when they make purchases. How did they motivate customers to sign up, carry a card and present it at purchase? Through brand-specific rewards, of course. A referral program is virtually identical in nature. Referrals are channeled through a program that you setup, and members are motivated to do so through a reward offering. Speaking from experience, you will be quite surprised at the results.
What surprises most brands when first introduced to the concept of a formal referral program are the conversion percentages. Marketers are used to seeing numbers like 2% to 4% response rates with outreach efforts such as direct mail or e-mail. With referrals, it is not unheard of to see 50% to 60% response rates. Why is there such a jump? There are a few contributing factors that provide such positive results. To start, referrals are targeted, meaning the person referring has an idea that the person they are sending it to has a need for your service. The person being referred receives a personal recommendation from someone they trust, for something they want or need. Lastly, they are motivated to take action and sign up because there is a reward offering attached to the referral. An identified need, a recommendation from a trusted relationship and an incentive to take immediate action is the secret sauce to successful referral marketing program.
How successful a referral program will be depends on a variety of factors. How many members participate in making referrals, what the reward offering is and how easy the experience is to both make referrals as well as act on them are the top three considerations when designing a program. Technology plays a key role, because if you have a back-end system that can support it, you can give your members the opportunity make referrals via e-mail, web mail and social channels, which amplify their reach dramatically. Lastly, the process must be tied together by a simple, user-friendly design that motivates your members to follow through and make more referrals over time.
Regardless of the design, scope, or complexity, a referral marketing program is something every credit union should be exploring for new member acquisition.
Brent Wilker is senior director of sales and marketing for Reward Stream. He can be contacted at 778-383-1397 or email@example.com.