For financial services companies, customer acquisition and maximizing customer lifetime value are becoming more challenging than ever. Many banks, insurance providers, and other financial companies are turning to partnerships to acquire customers more cost-effectively. This blog post explores five ways investing in the partnership marketing channel can drive immense value for banks.
Today’s finance industry is seeing a massive shakeup. In addition to changes in the conventional ways people bank, there are a litany of additional forces such as peer-to-peer lending, the BNPL (Buy Now, Pay Later) revolution, instant money transfers, and, of course, the cryptocurrency boom. These are all indicative of increased competition and technological proliferation in the financial space.
Trends aside, financial product decisions also have extended consideration phases, one of the highest average new customer acquisition costs across industries, and are subject to significant regulatory restrictions, particularly in the years since the global financial crisis/Great Recession. All of these factors have encouraged banks to embrace innovation, not just in terms of the products/services they provide, but also around how they can cost-effectively reach their target audience.
One key way to address this is by establishing scalable business partnerships. This means leveraging the audience of a partner entity and committing marketing budget only when a particular desired event has occurred. Such partnerships have two salient, overarching benefits:
1. Banks can reduce spend on costly, above the line marketing activities, and instead reach a more relevant and engaged audience with pre-determined intent
2. Partnership commercial agreements can be structured in such a way that expenditure is correlated to specific stages in the customer journey and their relative value, meaning banks can commit affiliate marketing spend proportionally to events that achieve different objectives (for example, submitted applications/leads and approved applications.)
Here Are 5 Ways the Affiliate Partnerships Channel Can Drive Value for Brands in the Banking Vertical:
1. Deliver on Customer Acquisition Goals
Certain affiliate partners, from comparison sites to content partners, may have databases of registered users. Depending on their terms of services and the privacy laws in their operating region, they might track certain characteristics, demographics or propensities (for example, browsing mortgage options on a rate comparison partner website indicates that a customer has a degree of pre-determined intent to purchase a mortgage product). This gives you the opportunity to tailor your messaging and offer to your desired audience based on these traits.
When your brand is promoted through the partner, the existing trust with the customer base can be leveraged. This credibility can save both expenditure attracting new prospects and further time/money moving them through the funnel. The big four banks in Australia have recognized this historically and have allocated more of their budget to the partnership marketing channel.
2. More Effective Commission Strategies
According to the US Federal Reserve in 2018, acceptance rates for credit card applications have been declining. This meant that large amounts of customer acquisition spend ultimately drive no revenue. Given that the banking and finance industry has a complex multi-step purchase process for its products, this means it is important to understand where the drop-off is occurring within the customer journey is important. Additionally, it is important to have the flexibility to determine the budget you are willing to commit based on the purchase journey touchpoint that a customer reaches.
By creating different commission rates and structures for partners that truly align with your objectives, you can thereby steer them to achieve more desirable outcomes. For example, by providing a commission per lead (CPL, a single flat commission per credit card application (CPA) and a subsequent higher commission when the application is approved (CPAA), you provide affiliate marketers with two opportunities to earn commission from the same transaction if they can drive higher quality traffic.
3. Achieve More Granular Key performance indicators
In today’s marketing world, brands who may not necessarily be from the same or even a related vertical have a broader opportunity to work together through strategic partnerships.
Because financial providers are usually involved in any sales transaction, banks are optimally placed for such partnerships. These partnerships can serve multiple, overarching objectives, for example:
· Build loyalty: Exclusive access to special retail deals with the use of a specific debit/credit card
· Incentivize customer acquisition for the institution: Travel/experience coupon provided with the opening of a new savings account
· Incentivize customer acquisition for the partner brand: Offer a credit card/personal loan product to pre-pay a telco contract in exchange for a discount
· Cross-sell in another brand’s active purchase journey: Offer travel insurance or an international transaction/credit card during the travel booking process
The fluidity of such partnerships allows brands to clearly define relevant and specific KPIs which ensure these alliances are profitable, such as product type or minimum transaction spend/saving transfers/balance transfers.
4. Balance ROI with Compliance
Compliance has become a key theme in the banking industry, and failure to conform to regulations not only attracts the attention of regulatory bodies themselves, but can also pose a significant public relations risk.
In the partnership channel, financial services providers need to ensure they have visibility into whether partners have the relevant licensing, make the necessary disclosures, and don’t include misleading content that breach regulations. It becomes all the more imperative that financial companies have full discretion over which partner brands and types are permitted to refer traffic to them in return for compensation. The ability to vet these partnership opportunities from the outset removes the risk of a compliance breach due to a partner with the incorrect licensing requirements. This means they can focus heavily on their approved partner set optimizing activity to improve overall ROI.
5. Optimize for Loyalty with Downstream Data
It is important to define events which are commensurate with objectives (for example, a ‘yearly tenure’ event which identifies loan facilities that have been in place for a year) and having a centralized tracking technology to report through. This gives the financial services company as well as the partner the ability to assess the effectiveness of the partner’s marketing efforts to deliver loyal customers. Additionally, banks can use a tracked event as a lever to reward partners with a commission contingent upon these goals, again providing them an incentive to adjust their own marketing efforts to target the desired customer profile. Partners may even share a portion of these bonuses with their customers which can also be emphasized in their content (for example, a monetary cashback amount after one year of holding a credit card facility elapses).