Marketing financial services can be tough. 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.
A recent study by PwC has discovered that the majority (69%) of financial services consumers tend to trust providers they are familiar with. 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 mean 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.
Challenge #1: People Don’t Trust You
A recent survey by Mastercard has found that only 55% of modern consumers trust their banks while 39% say they are neutral. The trust score is significantly lower for fintech, with less than 40% expressing confidence in their services.
This is problematic for financial services marketing teams as 60% of consumers rank trustworthiness, along with transparency, as crucial factors to their purchasing decisions. The same PwC survey reports that 71% will unlikely do business with brands they don't trust while 73% will not recommend it to their family and friends.
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. The latest data from Statista reveal that 89% of consumers trust recommendations from people they know. PwC reports that 88% of consumers will recommend a trusted company to their family and friends. High trust scores have a huge impact on how successful the marketing of financial services proves to be.
It’s rare that someone is changing their bank or signing up for a new credit card because of the excellent marketing of financial services, from flashy display ads to slick YouTube videos. 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.
Challenge #2: 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.
Consumers are beings of habit. They tend to continue buying a product or a service from a familiar provider, even when better options are available - a big challenge in marketing financial products. But with the advent of mobile technology and the rise of enterprise apps, that human behavior is beginning to change.
The majority of financial services consumers now conduct an online search to evaluate their options. A recent financial services marketing survey has found that 61% of banking consumers, 90% of loan consumers, and 85% of check-cashing consumers go online to perform a search before converting.
This growing trend is a massive opportunity for financial services marketing professionals. Financial consumers are now exploring their options. To capitalize on this, marketing teams need to focus on increasing their brand’s visibility and score high on recognition and affinity.
The Solution: Use Social Proof for High Visibility
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.
In the context of digital marketing for financial services, social proof enables marketers to utilize the power of collective influence to attract and win over unsure customers. That's because people often find comfort in large numbers.
Social proof works in increasing your brand's visibility, which then drives recognition and affinity. The figures reflect this. Nearly 90% of digital consumers believe that social media helps them in their purchase decisions. More than 40% say they learn about new products via their social networks.
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.
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Challenge #3: 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. A recent study has found that 42% of those who are 75 and older still don't use the internet. Digital marketing for financial services can be a struggle if your intended audience is not digitally apt.
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.
The Solution: Connect With Late Adopters
Marketing financial services to baby boomers and seniors in the social media age is an uphill battle even for experienced marketers. Although a previous study showed that people over 55 were Facebook-inclined, recent statistics reveal that they only comprise less than 22% of total Facebook users in the United States.
The good news is that 90% of baby boomers are willing to adapt and embrace digital technology and social media if it makes their lives easier. 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.
Challenge #4: Fierce Competitors, Unloyal Customers
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. Financial consumers have an average of 5.3 bank accounts across different banking institutions.
Why this fickleness? Statistics show that 43% of US digital bankers change their primary financial institution because of mobile banking issues. According to S&P Global, modern bankers switch banks for better mobile banking app experience (38.7%) and better customer service (37.9%)
They’re also more likely to be swayed away by incentive programs. The same S&P Global survey says that 23.8% of consumers are willing to switch banks for a better incentive program.
As new competitors emerge and choices grow, brands need to work extra hard to attract customers and keep them.
The Solution: Drive Loyalty 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.
If you're marketing financial products to new customers, it’s critical to include referral programs in your campaigns. 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. Why? Because 80% of an enterprise's future profits are brought in from 20% of your current customers.
Referral programs are also a great way to reward loyal customers and bring in new ones. Your best customers bring in the bulk of your new customers. According to research, 81% of consumers say they will likely engage with brands that offer reward programs.
The most impressive bit? Referred customers are better customers and the following numbers prove this. The LTV of referred customers is 16% higher than non-referred customers and they exhibit 37% higher retention rate as well. They are also 4x more likely to proceed with a purchase and have 18% lower churn rate. 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.