I was in Wachovia today and found they were running a referral program where I would receive $25 automatically deposited into my account each time I sent them a new customer. The person who opened the new account would also get $25.
Is this really a good promotion for Wachovia? Are the kinds of people who open an account to get a $25 incentive really the types of banking clients that will ultimately make Wachovia money?
In some instances, cash incentives work great but I’m not sure banking is one of them. Don’t get me wrong, I love free money, but you have to ask yourself — was this really a good promotion for Wachovia? Does the offer of $25 make me any more likely to refer a friend or business associate? And what’s the ROI on that $25 promotion for the bank?
The problem here is that Wachovia is essentially paying for referrals and that’s not part of their normal business model. Referral fees and commissions are a common part of the compensation model for commercial printers and pharmaceutical companies. Banks market their business with services and rates. Any promotion they select to run needs to be complementary to their business.
What Wachovia should have done was to offer me and/or my referral some complimentary services OR access to a new product OR better rates. Any of those would have encouraged me to become more invested as their customer — essentially creating the loyalty they want and need from their customers and referral sources.
Be careful when constructing a a referral promotion. Avoid promotions which encourage you or your customer to do something that is unnatural for your business or business relationship. When you construct a program that provides value for both you and your customer, everybody wins.