With about six weeks left in the year, I’m betting that no one is going to come along and publish an article or blog post that will displace my current choice for favorite article/blog post of the year: The Financial Brand’s Why Social Media is a Waste of Time for Most Banks and Credit Unions.
It’s not that I agree with everything said in the article. Far from it. What I like about it is how well it crystallized the arguments against social media and how it polarized people to arguments for and against. I love me a well-argued, rationalized point of view, even if I don’t agree with all of it.
Aite Group, in partnership with EFMA (European Financial Marketing Association), surveyed 166 financial services marketers in the U.S. and Europe. The objectives of the survey was to understand: 1) what investments in SM are FIs making? 2) what are FIs hoping to get out of their SM investments? 3) how much do FIs plan to invest in SM in the next few years? 4) how are FIs organizing for SM? and 5) what are FIs measuring regarding SM?
When the Financial Brand article was published, I was in the middle of writing up the report. The Financial Brand article made me step back and reevaluate what I was writing. What I realized was that, for the purposes of the report, I don’t care if social media IS a waste of time. What I care about is how do I tell FIs what to do regarding social media so that investing in it WON’T BE a waste of time.
From the surveys and interviews we conducted for this report, I’ll share some observations:
1. If social media IS a waste of time for many banks and credit unions, it’s partially because many don’t know what they’re doing. As Dom Irrera would say “and I mean that in a good way.” Six of ten of the firms surveyed consider themselves to be novices or beginners at social media. It takes time and experience to figure out what works and what doesn’t. The implication is that while FIs might be wasting their time with SM, it doesn’t mean — necessarily — that SM is a waste of time.
2. Few FIs have a good sense for what the social media potential is. Social media is the fourth “wave” that I’ve witnessed in my career. First, it was reengineering in the late 80s/early 90s. Reengineering was going to transform the companies did business, and every firm I spoke to in 1990 had “reengineer the company” at the top of its list of strategic initiatives for 1991. The second was knowledge management in the mid-90s. You can’t sustain a company unless you’re managing the knowledge locked away in the heads of your best employees, you know. Then eCommerce. The rise of Internet banks was going to make all the brick and mortar dinosaurs extinct. Yeah, right.
And today it’s “social media is transforming marketing.” Maybe it will. But I don’t think many of the FIs we spoke with can really say WHY it will transform marketing. We heard a lot of “blah blah blah” about social this and social that, and the shift from one-way to two-way communication, and so on.
What I never heard from anyone was anything that jives with why I think social media might hold the key to transforming marketing (which means that maybe I’m completely wrong — it’s happened before, you know): Social media takes the incremental cost of customer/prospect messaging down to nearly zero.
In the past, customer/prospect messaging had a high price tag, whether the messaging was done through direct mail or mass media. Social media isn’t free — but the incremental cost of a message is very low. What this means is that — unlike in the past — marketers don’t have to obsess over the ROI of every message. In other words, it’s ok to talk to customers and prospects without measuring whether or not they converted/bought/etc. as a result of every message.
What this means is that social media can transform the purpose of marketing from persuasion to relationship-building.
Yes, I know: We’ve been talking about relationship-building for 15+ years now. But as long as persuasion (i.e., “let me tell you why you should buy from me”) is the primary purpose of marketing, relationship building isn’t.
A lot of marketers I spoke to are talking a good game when it comes to social media, but not walking the talk. They’re still stuck on persuasion, but with a twist — i.e., “let my other customers tell you why you should buy from me.”
As a business discipline, I’m simply not convinced that marketing knows how to build relationships. And therefore, they can’t possibly know how to use social media to do it.
3. Too many marketers are trapped in an “externalized” view of social media. If I hear one more marketer tell me that they have to be on Facebook or Twitter because “that’s where there customers are” I’ll scream. Nothing tells me that someone is stuck in the old persuasion paradigm then hearing that line.
When I was putting the survey for the report together, I reached out to a few people whose opinion I respect for input into the survey. I also reached out to Jaime Punishill (just joking — I really respect his opinion on this and lots of other matters), was heading up Citi’s social media efforts when I was launching the research. Jaime suggested that I include some questions to capture FI’s plans for doing SM “on-us” versus “off-us”. I had to get Jaime to explain to me what he meant by that.
What I discovered from talking to firms was that many are focused on the “off-us” — Facebook, Twitter, YouTube, etc. Stuck on that “how can I find yet one more way to hit prospects and customers upside the head with my message, only it won’t be ‘my’ message, it will be the message generated by other customers.”
What I go into in some lengths in the report — and won’t do here — is how firms will integrate social media tools, technologies, and — importantly — concepts into their existing marketing, sales, and service processes. As far as I’m concerned, when firms are integrating SM into their business processes, then SM won’t be a waste of time.
Bottom line: It’s simply too early in the social media wave to determine if it’s a waste of time, or the “thing” that truly transforms marketing. Social media is still in the starting blocks. Check out the press release for the report.
Great post, Ron. Love point number one.
I absolutely agree. Right now were in the ‘dot com’ phase of social media where lots of people are experimenting, some huge revenues are coming in for platforms, but we are still trying to articulate business models. Because we don’t know ultimately how we’re going to leverage social media, does not mean it doesn’t work.
People said that about Amazon, Google, Yahoo, eBay, PayPal, etc. The fact is, if you look at social media purely as a marketing channel, you may come to the conclusion it is a waste of money – that’s likely because you don’t understand how to engage customers on this medium as yet. However, if you look more broadly at the opportunities to build community, to lift the quality of discussions with customers, to understand the buzz around specific trends, etc, etc. no one should even contemplate dismissing it as a tool.
Your point about understanding is critical. I believe if someone says it is a waste of time it is because they’re not looking big picture, or long-term, they are looking for CPM or marketing ROI. Which is simply one small aspect of SM today.
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Re: Point #1
At least 5 years have gone by. That’s a long time to be stuck in the starting blocks.
Lots of people bring up the Web 1.0 argument. They say things like, “Remember when the internet came along and people said ‘we don’t need a website.’ It’s just a fad?” That’s what some people were saying in 1995. But 5 years late in 2000 nearly every bank and CU had a website. Why? Because in those 5 years, financial institutions could see a clear and relevant connection to their business goals.
Why is it taking longer for social media to find its footing than the internet? You can’t tell me it’s from a lack of effort, especially when banking ranks #3 among the most-active industries in the SM space.
JP: 5 years? No way. Most FIs have nowhere near 5 years of experience with SM. I said in point #1 that “If social media IS a waste of time for many banks and credit unions, it’s partially because many don’t know what they’re doing.” Pretty much anything marketing-related could be substituted for social media in that sentence. Marketing is so far from a science that it should be a censurable (see the House of Reps, Rangel) offense to use the words marketing and science back to back.
5 years? I think that’s a bit too much. If you take twitter, most banks have only joined recently (to quote you: http://thefinancialbrand.com/4247/bank-of-america-twitter/ )
I agree with Ron, that most FIs don’t know what they are doing, as most major cos. The same goes for Facebook.
The difficulty also is that Social Media is changing rapidly too. Facebook instant personalization is recent and it could change a lot from investing on Facebook pages to using Facebook on an FI’s website. Tools to monitor efficiently Twitter are more recent than the platform. Being agile enough in a big structure such as an FI is a real challenge, but it has nothing to do with Social Media itself.
Tekfin: Thanks for backing me up on this one. I would add that not only are Twitter monitoring tools just emerging, we still don’t know if there’s any real value to monitoring the Twitter stream in the first place.
Yeah, okay guys… Twitter isn’t 5 years old. True. But I’ve been going to conferences hearing people talking about social media since 2005. Are you guys forgetting all the hype about blogs and MySpace? Yes, Twitter and Facebook are the current trendy tools to talk about, but they aren’t the only social media platforms out there, and they aren’t the only things FIs have been doing.
Financial institutions don’t have aren’t social media experts. Right. We agree. But after 5 years of Web 1.0, people — many who didn’t have any experience — figured out how it could be productive, which in turn led to rapid widespread adoption.
ATMs, phone banking, websites, online banking, mobile banking. These things all caught on because they solved a direct and immediate consumer need. What does a bank’s Facebook page do for the consumer? What problem does it solve? Social media struggles because its connection to basic banking services and consumer needs is weak. Exception: BofA’s twitter service model.
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