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Why Customer-Led Growth is the Future for Financial Services

Posted by on 02 August 2023
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This is a sponsored blog post by Matt Roche, CEO, Extole

Your job needs to be easier.

What you want is reasonable: acquire customers at a reasonable cost that will stick around and grow to use your broader offering. Instead, you are getting lower account retention and more difficulty opening new accounts, originating loans, or signing policies. And it gets harder every year, with higher paid media customer acquisition costs (CAC) and lower loyalty.

There is a solution, Customer-led Growth (CLG), the strategy of putting your customers and account holders at the center of your marketing, and it can deliver higher quality customers at a lower CAC.

CLG works.

Customer-led Growth is executed as a coordinated set of programs and activities that activate and engage prospects and customers along the entire customer journey to drive high-quality/low-cost acquisition, higher LTV, and higher engagement. CLG is predicated on the simple fact that your existing customer base is your most valuable and underused source of brand, awareness, and growth.

Customer-led Growth delivers the highest quality customers of any channel. Extole has worked with leading credit card, credit union, bank, brokerage, insurance, mortgage, and fintech companies. In nearly every case, the newly acquired customers from CLG programs are more profitable than any other channel.

  • For a brokerage, 24% more customers adopted higher-value trading products
  • For a credit card company, 22% more customers made their card first out of wallet
  • For a credit union, customers executed 15% to 20% more debit card transactions

In addition, existing customers that participated in programs were more likely to be among the most valuable to the firms we served. Simply engaging in programs, whether referral, nominations, gifting, cross-sell, or otherwise led to customers that were stickier and more profitable.

If a marketing approach can deliver higher-quality customers in this economic environment, why wouldn’t you do everything possible to adopt it?

The elements of Customer-led Growth

CLG is based on a simple mechanism: offer incentives to targeted audiences along the customer journey to drive high-value engagement. The key elements of a successful strategy include:

  1. Evergreen referral and advocacy – Make referral an essential part of being a customer or account holder, providing codes, links, and tools for sharing that promote and reward natural advocacy.
  2. Challenges – Looking to increase app downloads or get customers to set up direct deposit? Test different incentives to drive higher uptake.
  3. Journey-based engagement – Introduce customers to programs at different stages, from onboarding to more mature, to keep them engaged and grow product usage.
  4. Targeted offers – Target incentivized programs to audiences, like new customers, partners, agents, or specific segments to make certain that incentives are going only to those individuals that will take action.
  5. Dynamic incentives – Allow rewarding using a huge range of incentives, including account credits, gift cards, charitable donations, privileges, and vouchers with rules crafted to make certain you are rewarding what creates value for you.

What to expect from Customer-led Growth

Most marketers will begin their Customer-led Growth journey with referral (or refer-a-friend) because it provides the fastest, most reliable return on investment and the highest quality new customers. Even firms with existing programs find that adopting purpose-built and modern technology results in significantly higher results because the experience is more seamless for customers, eliminating fraud and manual processing that prevent rapid satisfaction.

The next stage is optimization, tuning the incentive and experience and expanding the marketing of the program to ensure the widest possible participation. For an ordinary credit union, this could mean delivering 10% of new accounts with a basic program.

Driving new customer acquisition

In my experience, the best programs have delivered 30% to 40% of new accounts, a staggering result for a channel that delivers consistently high-quality accounts. In order to achieve this level, marketing teams must drive participation, usually through three techniques:

  1. Expand marketing – The number of new accounts created is a function of customer awareness of the programs and ultimately of customers taking action. Driving higher program awareness drives end volume.
  2. Segment participants – Behavioral patterns will emerge as customers engage. You will be able to distinguish simple advocates from ambassadors and superadvocates/ affiliates. Target programs to each audience to maximize yield.
  3. Vary terms and incentives – Different participants will respond to different incentives, and rapidly refreshing program structures can drive higher participation and yield.

Driving customer base revenue

Once you have established acquisition programs that are effective, then you can expand to broader programs to drive customers to higher-value segments through targeted challenge programs.

For example, for almost all firms, a customer who downloads a mobile app will have a meaningfully higher lifetime value. Create a challenge program targeted to customers in their first 90 days offering an account credit for downloading and installing the app. Other important milestones include connecting accounts, executing trades, or adopting new products, all of which can be promoted at different stages using incentives that are only available to customers that are at that point in their journey.

You can also adopt “surprise and delight” style programs that offer incentives for having done something, as a thank you for a behavior that has created value. While these are more subtle, they can have a profound effect on tenure.

The long-term benefits of Customer-led Growth

A mature Customer-led Growth approach will provide a healthier, longer-term customer base that is connected with you in a more meaningful, less transactional way. As you evolve in this strategy, you will find yourselves spending less time talking about “last click” attribution, and more time talking about customer quality by channel, rates of participation, and how incentives relate to your brand. Higher quality questions reflect higher quality marketing organizations.

Extole created CLG, and is the leading platform. Connect with us September 11-13, 2023 at FinovateFall in booth 210.

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