The boon of Bank Transfer Day might have subsided, but credit unions are still attracting new converts to the cooperative cause. According to Callahan & Associates’ Peer-to-Peer analytics, third quarter 2013 membership growth among the nation’s credit unions was up more than 2% year-over-year.
Many institutions are attributing a good portion of this growth to member referrals, including organic, word-of-mouth promotion as well as more formalized, incentivized campaigns. But as it turns out, getting members to talk about their credit union to others is often the easy part. The challenge is in creating a comprehensive game plan that captures, funnels, and generates the maximum benefit from these conversations. Here are some of the biggest pitfalls that can unhinge any credit union’s referral efforts and prevent it from growing its roster, attracting the right members, and forming connections for the institution.
Mistake 1 — Failing To Establish Requirements
Although they can be effective, paid referral promotions require institutions to prove they are getting real value in return for that investment. Offering a big upfront reward without securing buy in from a new member can result in inactive or shell accounts or even faked behaviors for a certain amount of time just to get that reward. And because like attracts like, referrals from members who themselves are not fully engaged with the institution might prove less financially valuable than recommendations from individuals who are.
To prevent these risks, credit unions should look not only at how they are rewarding but also whom they are rewarding.
Educators Credit Union ($1.5B, Racine, WI) offers tiered rewards for both the referrer and the referred based on their respective levels of engagement. Members that have three to four credit union products earn $10 per referral, those with five or six earn $15, and those with seven or more products earn $20 per referral. And new members can earn extra cash by signing up for text messaging or by liking/following/subscribing to the credit union’s social media channels.
Taking a slightly different route, Seattle Metropolitan Credit Union ($590M, Seattle, WA) pays a base amount of $20 per referral to members who have only a checking account. But that doubles for those with a consumer loan and rises to $50 for those with a mortgage. And if a referred individual opens a loan, their referrer gets a $50 bonus on top of the regular payout regardless of their relationship level.
Mistake 2 — Making It Hard To Refer
This is a digital world, so asking members to manually fill out and turn in referral slips at the branch is a step back into the dark ages … or the mid-’90s. Online referral templates take the work out of the process for the member and provide better reporting for the credit union. Summit Credit Union’s ($1.95B, Madison, WI) Pass The Cash promotion uses a simple online form that asks for the name and email of both parties plus a short description of why the referrer likes the credit union. Members can check a box to allow the credit union to share their descriptions with others, which helps boost the impact of one-to-one testimonials across a much wider audience. As of third quarter 2013, membership at Summit was up 4.4%.
In the same vein, some cooperatives have turned to social media and microsites as another way to quickly and effectively capture member referrals while accommodating different submission preferences. University of Iowa Community Credit Union ($2.1B, Iowa City, IA) allows members to refer friends through its microsite, email, or Facebook and Twitter accounts, and rewards members with $50 for every referral that results in an active checking account.
6 Credit Union Strategies
Check out the referral strategies of these credit unions.
Whatever delivery channel the credit union chooses, however, it should beware of asking for too much personal information, setting down too many rules (triple and quadruple asterisks are a bad sign), or creating loopholes that allow it to avoid paying out the incentive. These unnecessary headaches won’t just cost referrals, they’ll damage the credit union’s brand among existing members as well.
Mistake 3 — Limiting Referral Activity To Membership
Members aren’t the only ones who can play the part of cheerleader for the credit union. Employee referral programs are commonplace at many institutions, and for a good reason — they work. According to a 2013 whitepaper from Oracle, referral hires perform 3-15% better than their non-referred counterparts and have a 25% higher retention rate.
For these reasons, referrals also have strong implications for vision-driven, leadership-type roles such as the executive team and the board. According to respective data from the Society For Human Resource Management and the C-level recruitment and networking organization ExecuNet, executive level positions take approximately 4.4 months to fill versus just 34 days for the average job vacancy. Likewise, many credit unions report difficulty in replacing board members when they retire or hit their term limits.
Although payouts and other incentives are best left to member referrals in order to prevent a conflict of interest, requiring executive participation in outside boards and networks — such as Heritage Federal Credit Union ($454M, Newburgh, IN) does — helps the credit union build a pipeline of peer-verified individuals. And once established, it can tap these networks to fill important leadership roles as they become available.