Top tips to drive new referrals in the banking industry
Referrals from customers are both complementary and rewarding to the bottom line. As we’ve shared in a previous post, customers who refer their friends and family are so confident in your financial institution they are willing to put their own reputation behind your brand. These referred customers are 5 times more likely to refer their friends and family using the same referral program, generate more profits, and are more loyal.
Companies that have a formalized referral program experience 86% more revenue growth than those without over a two-year period. Yet, simply having a referral program will not bring your financial institution introductions. Here are some top tips to drive referrals in the banking industry:
Focus on the customer experience
Banks have largely focused resources on compliance and cost-cutting instead of the customer experience. While meeting regulatory demands and contributing to the bottom line are important, compliance and cost-cutting measures in isolation of customer experience programs can have a negative impact on the overall experience.
To earn referrals, existing customers need to believe in your financial institution, it’s value, and enjoyed positive service experiences. Banks need to invest in understanding what it takes to create an exceptional customer experience, for each target demographic, along with each interaction point the customer has with the institution.
As banks continue to transform in the digital arena, it is increasingly important to embed programs and processes that result in positive customer experience. While over 91% of banking executives rate improving the customer experience as a guiding principle for their digital strategy, they rate their effectiveness at 38%. In comparison, regulatory compliance rated 42% as a guiding principle with 62% effectiveness. The World Banking Report recommends that digital transformations should be seen as a journey rather than a destination. No longer is change about moving from one point to another. Rather, it is about moving to a test and learn model that enables continuous improvement. This model incorporates and adapts to customer feedback enabling positive customer experiences.
Ease of use, fast service, and better customer experience = superior, referable user experience
According to Capgemini & EFMA’s World Banking Report, people are more likely to refer their fintech provider (55%) to a friend than their primary bank (38%). When you look at the reasons, 82% of customers said that a primary value proposition of fintech products is that they are easy to use, 81% said faster service, and 80% said good customer experiences. The high rankings across the propositions indicate the importance of providing a superior user experience which exceeds expectations across multiple variables, rather than being the leader in a single category.
One opportunity for banks to compete is by collaborating with fintechs. In the same report, 46% of banks plan to collaborate with fintechs, but many expressed concerns given their own legacy system and perceived technical demands. There are multiple paths to collaboration and, according to EY, it begins with developing a framework that starts with innovation at its core, rather than being defined by limitations.
Build trust by delivering as promised, consistently
A Nielsen survey on trust and advertising found that referrals led as the most trusted form of advertising across every demographic, out-doing editorial content, all forms of ads, and brand sponsorship. However, in order to be referred by your customers, you first need to earn their trust.
According to the Capgemini & EFMA’s World Banking Report, 67% of customers in North America have complete trust and confidence in their bank, the highest of any region. While this lead is great news there is an opportunity to further improve and differentiate.
According to the Journal of Marketing, trust in an organization is acquired by observing the party or learning of previous interactions. As it is directly linked to meeting expectations, satisfaction over time reinforces the perceived reliability and contributes to trust.
As such, banking institutions need to do more than focus on customer service and satisfaction at single points in time. Rather, they need to focus their capabilities to deliver these experiences by delivering as promised, consistently.
Banks should seek to identify and replicate positive experiences, in addition to identifying, rectifying, and learning from negative experiences. Social media listening offers one such opportunity to do so proactively.
Focusing on customer experience will drive trust, loyalty, and satisfaction which are prerequisites for referrals. Research by Texas Tech University confirms that 83% of satisfied customers are willing to refer others. However, we’d be remiss to not mention (again) that only 29% actually do, primarily because they were never asked.
How is your financial institution planning to drive referrals in 2019? We’d like to understand your challenges and opportunities. Share with us by getting in touch at firstname.lastname@example.org.