Capgemini and Efma’s World Retail Banking Report was recently issued, and the news for world banks was anything but bullish. Drawing on responses from over 16,000 customers across 32 countries, as well as in-depth executive interviews—the 2015 WRBR reports on critical performance metrics for the banking industry.

A simplified summary of the most salient challenges for banks in the US and worldwide according to the 2015 study, looks something like this:

  • Banks are experiencing measurable deterioration of profitable customer behaviors
  • “Switch kits” make moving from one bank to another easy and fast, resulting in an increase in customers in every region of the world who report that they are likely to leave their current bank within 6 months
  • The numbers of high customer experience ratings are exponentially decreasing in large part because of banks’ inability to digitize, relying instead on inflexible legacy systems
  • Across the globe there was a sharp increase in customers who said that they would not be likely to refer a friend or colleague to their current bank

It is a certainty that banks must innovate and drive their business into the 21st century. And those banks that do not begin putting systems and programs in place to counteract some of the damage already done, will not stay competitive. Consumers are far too empowered and educated to stay with a bank that does not meet their standards or needs.

One solution to bank’s lack of referrals is…a referral program
You heard correctly! If a growing number of a bank’s customers report an unwillingness to refer people they know to their bank, then one rapid and highly effective solution that creates demand generation is through a referral program. While that may seem counter-intuitive at first, consider this:

  1. Even if 40% of a bank’s customers are unwilling to make a referral, that still leaves the 60% who either are willing to make a referral today, or who would consider making one or more if asked in the future.
  2. Referred customers are highly desirable for multiple reasons, but as the report mentions, referred customers require fewer marketing resources, which causes them to generate more revenue at a lower cost.
  3. It has been proven in many recent studies that customers acquired through a referral are more loyal and stay with a brand longer than customers acquired through other channels.

In fact, the often-cited longitudinal study, “Why Customer Referrals Can Drive Stunning Profits,” conducted by Harvard Business Review, found that customers obtained through referrals are more loyal and more valuable. HBR calculated that referred customers are nearly 20% more likely to stay with a bank, and generate over 15% more profits than other non-referred customers.

Amplifinity understands a bank’s need for demand generation
Amplifinity’s own clients in the financial and banking industries have reaped tremendous value from their customer referral programs. One of our large banking clients launched a referral program that actively engaged almost half of their registered customers. Each of these customers made an average of 1.7 referrals, and some have made as many as 3 referrals (to date). Even more impressive is the fact that just over 80% of those referrals resulted in a new customer for our client.Enterprise-level referral software quickly contributes to building and retaining relationships with the loyal customers banks do have, by leveraging them to drive higher quality customer acquisition. And because an automated referral program does the heavy lifting for bank marketers – with the demand generation, tracking, monitoring and fulfillment of rewards taken care of, this allows banks to focus on solving other challenges.

Banks are clearly at a crossroads as the WRBR makes alarmingly clear, and they must quickly make radical, organization-wide business decisions to address these challenges. But as Amplifinity’s banking clients are well aware, customer referral programs are a strategic, highly effective strategy for mitigating some of the damage, and building a stronger and more loyal customer base.

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