By Mary Wanjiru Ndung’u
Savings and Credit Co-operative Society’s (Saccos) membership recruitment is an ongoing process that requires planning and a well thought out strategy.
The reasons as to why Saccos need to constantly recruit is so as to grow their membership base, maintain their relevance and strengthen their financial muscle. Recruiting is the lifeblood of membership organizations.
Many studies have proven that referral marketing is one of the best forms of marketing when it comes to sales and conversion.
Referral marketing revolves around the shared relationship between your members, their friends or associates and your Sacco brand.
It can take various forms such as word of mouth, social media and other internet based strategies. An ideal referral programmes is built on reward schemes, characterized by the allocation of the monetary incentives to the recommender.
With 73 per cent of Kenya’s population under the age of 30 and 43 per cent under the age of 15, the youth factor is an important socio-political and economic factor for Sacco’s to consider.
According to statistics by the World Council of Credit Union, the percentage of youth represented in Sacco membership stands at about 29 per cent.
This does not reflect the demographic situation in Kenya. Other studies conducted as mentioned in the background give a strong indication that even in Youth Saccos, it is still a challenge to attract members in huge numbers, that are needed to ensure sustainability.
For a Sacco that is keen on attracting young members to join, it is even more relevant to note that millennials who are essentially young people rank word of mouth as the number one influencer in financials products.
Studies have shown that people feel more comfortable when a product or service is recommended by someone they know and trust.
Referrals do not involve direct selling; instead a satisfied customer sells the products and services on behalf of the organization. Applying this studies to Saccos would mean that potential members of a Sacco would be more comfortable joining based on introduction from existing members who are know to them..
The main steps involved in referral marketing programme strategies include the initial research, planning of the referral marketing programme procedures, publicly marketing the program and monitoring and tracking of the referral marketing programme.
The initial research into the best forms of referral programme to be used can be done either through collection of the habits of the member by the marketing personnel or through conducting member surveys.
Planning is an important step as it critically examines the procedures to be used for crediting referrals, the number of referrals needed to claim the incentive as well as the tools for proving that referrals actually happen. Publicizing the referral programmes by the Sacco could be done in various ways.
These include placing signs in Sacco premises, creating brochures for distribution, email marketing website campaigns or use of social media.
Most referral programmes in competitive sectors such as the banking industries are built on reward schemes, characterized by not only the value and the nature of the rewards but also by the allocation of the monetary incentive between the recommender and the recipient.
A study conducted by the Goethe University Frankfurt and the University of Pennsylvania, on referral programmes and customer value which followed the customer referral programme of a German bank that paid customers 25 Euros for bringing in a new customer, was released in July 2010.
According to Professor Van den Bulte, this is the first ever study published on the financial evaluation of customer referral programmes.
The study found that referred customers were both more profitable and loyal than normal customers.
Referred customers had a higher contribution margin, a higher retention rate and were more valuable in both the short and long run.
On whether customer referral programmes are worth the cost, the study says that it records “a positive value differential, both in the short term and long term, between customers acquired through a referral programme and other customers”. Importantly, this value differential is larger than the referral fee. Hence, referral programmes can indeed pay off.
We have seen a number of Saccos apply membership referral programmes in their marketing strategies.
It certainly is something worth considering; especially bearing in mind that the costs associated with it are not too prohibitive yet the positive effect on membership growth is quite high.
Ndung’u is a business development specialist and research consultant working within the Sacco Sector.