Pay-for-Referral: Putting Your Money Where Your Word-of-Mouth Is

by Ron Daly 

I was over at CU Water Cooler's website, looking at the links of the day for July 6. Quick note to other CU pros: why aren't you over there reading these great stories and links? Get with it. 

One that jumped out at me was the story from MoveYourMoney.org about NetPromoter Scores for CUs, Big Banks, Community Banks and Online banks. I think the title/intended message is a little misleading (35% say they'd leave their banks "if it were easier"...switch kit vendors, take note!). But there IS something to talk about in this article - that awesome NPS for credit unions! 64% said they would refer a friend or family member to their credit union.

We know that the big reason people don't switch from a big bank to a CU or community bank is because they're under the impression that a switch is inconvenient or even difficult. We know that more than half of CU members would encourage friends to switch. What's the missing piece of this puzzle? 

I say incentives. We work with credit unions all the time that offer "$10 for every family member referred" and similar promotions, but is there any way to spice up the offer a little? What about a MAJOR giveaway for most friends-turned-members? 

I ask because I recently watched this interesting (if a little daunting) video about game design in real life. Apparently, the concept of "experience points" is enticing to people. "Leveling up" turns a promotion for "bring in the most members" from a contest into a game. Everyone talks about their being no practical use for social media in finance, let's find a way to make it work. 

A contest idea for everyone:

Give current members points for every new referral, and set up social media "leader boards" that shout out the results day-to-day for each of the promoters. You don't have to make it video game themed, per se, but you should make your grand prize (for your first person to ~10,000 points or whatever) worth the time it takes to send out the information. 

An idea just for promoters:

If 64% of your member base is willing to tell non-members how much they love you, why not pay them for their time? If you have a smart survey program, you can sort out who's a promoter and who's a detractor at your CU - so, why not give only those promoters a special "put up or shut up" offer that rewards their referrals? Maybe it's the above contest and you give some bonus points to those members. You have so much data available to you, if you're willing to work for it and work with it. 

Some possible drawbacks:

Is there a sticking point when it comes to ages? The older you are, the harder it is to convince you to move your money. I'm basing that on no other research than my own opinion, because I've had the same accounts at the same credit union for thirty-seven years. I'd have to be really peeved to move my checking. It affects direct deposits, ACH, bill pay - yes, you can go change all that if you've only had a banking relationship for a few months to a few years, but nearly four decades? I'm one of those people that actually cares about my credit union. You couldn't drag me away, no matter the prize. 

So, where's the "fix"? How do you truly reward members for bringing in profitable new members? How do you REALLY sweeten the deal for those people who have had a relationship with their prior bank for ages? 

Your thoughts and comments are always welcome. 

Comments

[Matt Davis]

First off, thanks for reading the CU Water Cooler! We're proud of what we've created, and hope that the public continues to find value in the stories our editors bubble up to the surface.

Now to your post. Incentives aren't always necessary, but they usually are. Firms like Zappos have found ways to get people to sing their praises for free. I hope that credit unions can eventually get to the point where that is the expected (and deserved) behavior.

Until then, you are so right. "What's in it for me?" is the question consumers seemingly always ask (whether they voice it or not). If you want people to refer you to others, ask them to. Want to make sure they do it? Reward them for it.