Since I’ve been involved in the peer-to-peer lending industry, which is about two and a half years now, applying traditional marketing principles has always proven to be tricky. It’s a new market with huge potential, so narrowing your target audience isn’t straightforward. Plenty of people like the concept, but they’re not early adopters, so how much time should you invest in their education? Measuring the lifetime value of a customer is almost impossible too, so how much should you pay for one in marketing costs at the start? We’ve set targets – some of them have been hit, but others missed. Encouragingly, we’ve halved the cost of acquisition since we started. I’m not going to say what that is… 

One mistake we made at the start, which after speaking to my peers appears to have been commonplace, is to assume that once you have a customer who has discovered the virtuous world of alternative finance they will want to be involved in a big way, immediately. Perhaps we were blinded by the wonderful opportunity in front of us. Some do of course. As soon as they’ve had the formal checks completed, a large sum can hit our account and immediately they become an active investor. These investors are a dream, they’re confident, don’t require lots of customer service resource and when they have a suggestion, it’s usually a good one. 

The Trust Curve 

What we found to be more common was a registration out of curiosity or good intentions and then several stages for that person to either engage or disengage before depositing cash and lending to businesses. I call this stage ‘The Trust Curve’. 

When we first started rebuildingsociety we were asking individuals to lend money to businesses they had never heard of through a platform they had never heard of. So lots of hurdles to overcome. 

We found these people typically fell into three main groups: 

1)      Registered but have never been active – the reasons here tend to be that they were just checking the site out, out of interest. They hadn’t yet built enough trust in us to engage. 

2)      Became inactive after registering and engaging – the main reason for this last year was lack of opportunity on the market place, but others cited reasons like buying a house, so all cash was required. 

3)      Never completed the registration process – having a two stage registration process lead to a lot of drop off, despite prompt to complete the process. We’ve taken steps to speed up registration now. 

What were we doing to build trust? 

I would like to say we pioneered a number of ground-breaking marketing strategies to convert these registrations into active users. The answer lay in the humble letter and telephone. 

Online businesses can attract interest from people who would never have previously encountered a business, but building trust as an online business comes in several forms. Reliability, responsiveness and a human face are essential, so making contact in traditional ways gave us approachability and our events schedule encouraged people to come and meet us in person. If the platform does what it says it will do then that will be enough for some, but as a growing business, we couldn’t always guarantee a steady flow of businesses to lend to for example. A call at the right time to talk about our plans and give the person confidence that we could help them through the registration phase if necessary or give them background to rebuildingsociety to reassure them that we were genuine and not going to run off with their cash – conversations were often that clear cut at the start. 

The value of attrition 

In order for us to better understand our marketing metrics, we decided to do a cull. It was hard to do as we had clearly done something right in the first instance to win these customers, but in some cases we did not have a working phone number and with more than 6 months of inactivity despite repeated emails, sometimes without passing the first stage of ID verification, we decided to delete their account, telling them why in an email. This helped us get a clearer view of the true cost of acquisition – which went up immediately. However, it has helped us to clarify which referral channels are providing the best value leads and we have adjusted our spending and resources accordingly. 

What’s changed now? 

Things have become easier with time, which has helped. The market is more established and we’ve improved many of the processes that were previously holding people up. Our track record holds more weight too, we’ve been doing loans for two years now and have maintained a low default rate and regular contact with those that have borrowed through us. We’re regulated by the FCA, which reassures a lot of people and we have committed resource to customer service to manage issues at an early stage in a personable manner. 

From a marketing perspective, we’ve expanded the scope of our telemarketing to include catch-up calls with people that haven’t been active for a while just to see if there’s anything we can do as a business to improve their experience. We’ve sent cake in the post and bought people drinks in cafes to build important bridges. 

We’ve invested more time in developing relevant content for weekly email contact, which is driving referrals and we’re revamping educational tools like introductory videos to reflect changes that have been made to the site. Our affiliate scheme is getting a makeover and becoming a more user-friendly refer-a-friend scheme with less effort required by the end user. All this stems from greater insight into user activity that has been made clearer through our attrition work and engaging other users. 

How about the future? 

It feels like we’re moving towards a new demographic of lender, from the serial investor with a stocks and shares portfolio to the frustrated saver, largely as a result of more mainstream media coverage. This will present new challenges, particularly around education and the risks. We will have to raise our game too, these people are less forgiving of technical blips, which can happen from time to time. 

That’s a positive though – we’re emerging from a Beta industry to one that’s ready to fulfil its potential and properly challenge traditional funding channels. 

 

By Nick Moules