“Marketing can never beat the endorsement of a friend or a family member,” says Jim Kelly, senior vice president of marketing at University of Iowa Community Credit Union ($2.07B; Iowa City, Iowa). That’s a sentiment shared by many credit unions, but it gets tricky when it when it comes to its execution.
Financial institutions experiment with referral rewards — whether cash, raffles, or prizes — but it can be difficult to find the right program. After nearly two years of running its Refer UICCU microsite, the credit union seems to have found its own member referral sweet spot by upholding Kelly’s two paramount points: cash is king and keep it simple. Its referral system garners an average of 59 referred accounts per month, representing approximately 7% of all new non-indirect members.
CU QUICK FACTS
UNIVERSITY OF IOWA COMMUNITY CREDIT UNION
data as of 09.30.13
HQ: Iowa City, IA
12-MO SHARE GROWTH: 23.49%
12-MO LOAN GROWTH: 28.10%
So what’s the credit union’s strategy? UICCU rewards the referring member as well as the referred; each get $50. But it doesn’t pay the bonus until it confirms the new account is active, meaning there is a minimum number of transaction, direct deposit, and a positive balance after a 45- to 60-day period. If the account passes review, the credit union mails the $50 checks to both members.
So far, only 3% of accounts are closed after receiving the bonus, according to UICCU. Plus, referred members consistently use more products. The 2013 referred members averaged 2.92 products per household compared to the typical new member that averaged 1.90.
The beauty of the program is in its simplicity. A UICCU member visits the microsite, then makes referrals by email, Facebook, or Twitter. The credit union pays the member $50 for every referral that results in an active checking account.
“The impetus behind the whole program is really to keep it simple,” Kelly says. “Everybody has shrinking attention spans, so if you can keep their attention just for a little bit and whip through the site, then the job’s done.”
The referral program isn’t new to UICCU; however it was a paper-based process before the credit union launched the microsite in March 2012. Before that, credit union staff handed the member a form, the member took the form to a friend, and the friend brought back the form to the credit union.
“There were just too many ways in which the whole thing could get lost in the shuffle,” Kelly says.
Now the process is simple, automated, and straightforward. The credit union has kept the member-facing side of the program consistent since its roll out two years ago, but during this time it has improved efficiencies and processes on the backend.
“It’s still a little bit labor intensive on the backend, in terms of making sure we log the referred member’s account and then making sure we track it to make sure their account’s active before we pay them,” Kelly says. “We really used that two-year period to create reports and automate a lot of that stuff on the back end.”
As the program becomes more efficient each year, Kelly and the team at UICCU look toward the future. How can they expand the referral bonuses outside checking accounts?
“Maybe paying a higher incentive to members who refer a checking account and an auto loan or a checking account and a mortgage,” he says. “Maybe there are ways we can make this go beyond just nailing that checking account.”
According to UICCU, 20% of referred members took out a car loan and 31% opened a credit card in 2013.
But for now, opening checking accounts is useful business. Collectively, members have balances of $4.93 million in deposits and $8.46 million in loans. For its entire membership, the credit union has experienced 23.5% annual share growth and 28.1% annual loan growth, according to Search & Analyze data on CreditUnions.com.
“We calculate the profitability of a checking account to be approximately $400 a year, taking into consideration the member’s full relationship,” Kelly says. “So $100 is really nothing in terms of a payout. We’ve even discussed raising our referral bonus to $100 to each person.”
After spending a few thousand dollars to get the microsite running — which the credit union partnered with Villing & Company to create — the ROI has been positive, and Villing & Company is now branding and selling the microsite to other institutions.
UICCU Referrals By Numbers
Average referred accounts per month in 2013: 59
Average age of referred members: 35
Percent of referrals with active accounts: 80
Accounts that close after receiving the $50 bonus: 3%
Referred members who took out an auto loan: 20
Referred members who opened a credit card: 31
Services per household of 2013 referrals: 2.92 (versus 1.9 for a typical new member)