People might be willing to risk trying a new toothpaste or a new pair of sneakers, but a new mortgage provider? That’s a much harder sell. A disappointing toothpaste’s downsides are nothing compared to the potentially life-ruining consequences of a significant financial mistake. Most people tend to stick with the financial services they know, even if it’s not the best option in reality.And COVID-19 and a recession, according to Bain & Company, have only amplified consumer’s conservatism.
This risk aversion puts financial marketers, particularly those who don’t yet have name brand recognition, at a considerable disadvantage. Getting consumers to trust you with their money is a hard sell. Money represents hopes and dreams to consumers – and that’s something people don’t part with easily. Suspicions are high, competitors are numerous, and the products you’re selling are intangible and often kind of confusing. Marketing financial services means working extra hard to get on a potential customer’s radar and to earn their confidence.
Behavioral economics can help. With behavioral economics, you can leverage your existing customers to create personal connections and build trust in your products for new customers. Use proven psychological tactics to earn consumers’ confidence and turn them into ambassadors for your brand.
The Challenge: People Don’t Trust You
According to the Edelman Trust Barometer, financial services are among the least trusted industries, making potential customers suspicious—particularly of brands they don’t recognize.
While the Edelman Trust Barometer finds that trust in the financial industry is growing, it’s still the least trusted sector they measure. Only 57% of people reported having confidence in financial institutions. Much of this distrust stems from a lack of understanding of money and financial matters. Consumers don’t understand how to manage their money, and they worry about being taken advantage of.
Distrust is a massive problem for marketers. Risk-averse consumers aren’t willing to take a chance on new services or unfamiliar brands. Traditional advertising methods only increase suspicions because many people don’t really trust ads either.
THE SOLUTION: THE NETWORK EFFECT
Build trust with potential customers by using the network effect. The network effect posits that the more people who use a service, the more valuable it becomes. In marketing terms: The more people who use your product, the more desirable and trustworthy it looks to consumers.
People don’t trust banks, but they do trust their friends. A lot. Nielsen found that 83% of people trust their friends’ and family’s opinions, while only 48% trust paid online ads. Nobody is changing their bank or signing up for a new credit card because of a flashy display ad or slick YouTube video. But a heartfelt recommendation from a friend might win them over.
Leverage your existing customer base by encouraging them to share their affiliation with your company on their personal platforms. Offer discounts or other incentives to customers that share information about you on their social networks. Make sharing super simple by offering up pre-written posts they can use. Ask users to personally invite their friends to join through a refer-a-friend program that offers rewards for new sign-ups.
Canadian bank Tangerine encourages its clients to share their bank affiliation with friends by offering a $50 bonus to both the referrer and referee for new bank accounts.
The Challenge: Your Product Is Intangible
Unlike most consumer goods, financial products are mostly invisible. This abstraction makes it difficult for consumers to evaluate potential services because they can’t see or understand the features and selling points. Instead, they get overwhelmed and do nothing. According to Harry Beckwith’s book, Selling the Invisible, the biggest competitor for most financial products isn’t other services; it’s just inertia.
How do consumers make a decision if not by weighing the pros and cons of each option? Beckwith again says that most consumers use their gut, or their feeling of connection to a product, to decide—not facts.
THE SOLUTION: USE SOCIAL PROOF TO BRING VISIBILITY TO INTANGIBLE PRODUCTS
Social proof is the idea that customers are heavily influenced by watching what other people do. If you tie the concepts behind your product to real-life success stories, it’s easier for consumers to make the connection between your financial services and the success they want in their own lives.
Marketing financial services frequently involves selling intangible ideas like “security,” “financial freedom,” and “growth.” Bring these concepts back down to earth by showcasing real customer success stories: Feature testimonials and positive reviews on your website. Use social media to highlight real customer stories and services that illustrate your brand message. Connecting the dots between your product and customer happiness will help your potential customers make an emotional connection with your brand.
Vantage Credit Union did a great job of this with their 2020 Dream Big Contest. They asked young customers aged 11–17 to create artwork that illustrated their dreams. Two winners received $1,000 toward a new computer. The contest tied Vantage’s checking and savings accounts to customers’ ability to achieve their goals.
The Challenge: Low Technology Adoption
Many financial service companies are leaning heavily into the convenience of online services. You can manage your portfolio, buy a car, or refinance your home loan without leaving your kitchen. The ease of online use is very appealing to younger demographics, but it can frighten older consumers who don’t fully trust new technology.
Baby boomers are the most affluent age group and a prime market for a vast range of financial services, from investment tools to estate planning services to real estate apps. Two-thirds of seniors use the internet regularly, and most already bank online, so the market’s potential is strong.
But seniors, on the whole, are much slower to adapt to new technology. Privacy concerns, fears about the unknown, and a general lack of understanding of the services available prevent many financial services providers from getting a foothold with this age bracket.
SOLUTION: CONNECT WITH LATE ADOPTERS USING THE FAMILIARITY EFFECT
Luckily, there’s one area of the internet that baby boomers have taken to like ducks to water: Facebook. The over-55 age group is the second-largest demographic for the social networking site. Research has shown that seniors are very responsive to Facebook marketing. This is a golden opportunity to reach out to seniors in their natural environment.
Social media is an excellent avenue for building trust and brand recognition with seniors using the familiarity effect. The familiarity effect, or mere-exposure effect, refers to the fact that people tend to develop positive associations or preferences for things only by being exposed to them. For example, the more a consumer hears about the benefits of online estate planning, the more favorable they will feel toward the concept.
You could post a bunch of Facebook ads, but word-of-mouth marketing is a far more reliable method. Social media campaigns that feature brand ambassadors or user-created content and reviews are great ways to get your brand in front of seniors’ eyes. Shareable content is another way to increase your brand’s visibility.
Everplans, a service for end-of-life planning, does an excellent job of using their Facebook page this way. They create servicey, shareable videos on a variety of end-of-life issues. These videos put a literal face to their brand, building trust and increasing brand exposure among seniors.
The Challenge: Competition Is Fierce, and Customers Aren’t Loyal
While people used to be loyal to the same bank their entire lives, an influx of new choices and offers makes it much easier for consumers to shop around, reducing brand loyalty.
Millennial consumers, in particular, demonstrate very little brand loyalty when it comes to financial services. One study found that one in three millennials are open to switching banks in the next 90 days and that millennials are two to three times more likely to close all accounts with their primary banking institution.
What drives them away? Excess fees, poor service, and inconveniences. They’re also more likely to be swayed away by incentive programs. Eight in ten millennials report that they’re willing to switch banks for a better rewards program.
As new competitors emerge and choices grow, brands need to work extra hard to attract customers and keep them.
SOLUTION: KEEP CUSTOMERS LOYAL WITH SOCIAL RECIPROCITY
Social reciprocity is defined by the maxim, “You scratch my back, and I’ll scratch yours.” Offer millennials a deal they can’t refuse, and they will not only stay loyal, but they’ll also invite their friends.
Robust rewards programs that offer incentives, deals, and special perks to loyal users are a significant selling point for money-conscious millennials. Structure your program to reward long-term customers, and hype these perks in your branding materials.
Referral programs are also a great way to reward loyal customers and bring in new ones. Our data shows that referred customers are better customers. Referred customers have a 25% higher lifetime value, are 18% less likely to churn, and are four to five times more likely to bring in more referrals. They are a gift that keeps on giving.
Bolster your referral program with cash incentives and rewards for both the referrer and the referee. A dual-sided program makes the referral more than just a self-serving act for the referrer; it’s a gift they’re giving their friends and family.
American Express is famous for its referral program. Credit card users who sign up friends receive points that they can redeem on goods and services. The person they refer also gets a special friends-and-family-only sign-up deal. It’s a win-win that grows their customer base and keeps users loyal.
Marketing Financial Services Is About Connecting With People
These challenges boil down to the same central issue: creating a lasting connection with customers built on trust. That trust is essential, not just for convincing customers to take a chance on your service but also to turn them into ambassadors for your brand.
Social marketing can help you cultivate that relationship much faster, cheaper, and more effectively than traditional advertising. Extole’s referral programs and loyalty solutions can make it easier than ever to leverage word of mouth and build valuable trust.