Stop The Banking SMadness

The “logic” behind the justification of social media as some new emerging “power” channel in banking is so twisted and misguided, that it just HAS TO STOP.

In an article titled Mobile and social to emerge as power channels for banking, Finextra recently wrote:

“Social networking is becoming more popular, with 57% of adult Internet users [in the UK] using online social networks in 2011, up from 43% in 2010. The UK data is in line with international trends. A just-published survey of 12,000+ Canadian consumers issued by JD Power & Associates finds social media emerging as an increasingly important alternative to traditional retail banking channels. More than 60% of retail banking customers responding to the poll say they use social media. Among customers who use social media for banking purposes, 24% indicate they use it to discuss their banking experience or inform their bank of a customer service issue.”

First off, the last sentence is completely misleading. Sixty percent may be using social media, but that doesn’t mean that all use if for banking purposes. So when the last sentence says that “among those who use SM for banking purposes,” we have no idea how many that actually is.

If it’s 10% of the 60%, then 24% of that means that only 1.5% of Canadians use social media to discuss their banking experiences or for service issues. Ooooh….1.5%!

More importantly, however, is the false logic behind the claims. Just because a large percentage of people use a technology doesn’t make that technology relevant to all applications. 

Using the logic from Finextra (yes, I’m singling them out, but let’s get real — they’re hardly the only ones singing this tune), the following would be true:

McDonald’s to become “power” channel for banking!

Everyday, 27 million Americans — nearly 10% of the total population — visit a McDonald’s location. And that number is growing by 1 million every year. Over the course of the year, on average, Americans visit McDonald’s 33 times! Among Americans who visit McDonald’s, 99.9% make a payment (some just use the restroom) while they’re there. 

But wait, you say, the two examples aren’t analogous. After all, banks can’t take a customer service question at a McDonald’s.

True enough, but they can leverage McDonald’s to influence consumers’ choice of payment mechanisms (and you better believe that, as a result of the recent interchange regulations, this is going to happen a lot more frequently).  And with 27 million Americans visiting McDonald’s every day (and making a payment there every day) which channel — social media or McDonald’s — is more likely to emerge as “an increasingly important alternative to traditional [marketing] channels”?

I’m not arguing that social media isn’t important. Just trying to bring a little perspective to the situation. And trying — probably in vain — to turn down the volume a notch or two on the social media hype.

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15 thoughts on “Stop The Banking SMadness

  1. You’re right Ron. The logic frequently used to substantiate social media marketing seldom holds up to scrutiny. You often hear social media enthusiasts say things like, “You need social media because that’s where people are.” The fact that Facebook has 750 million users is not an effective or persuasive argument. It is merely a fact. But when CEOs ask “Why should we jump into social media?”, you’ll hear someone invoke that statistic: “Because 750 million people are on Facebook.” And???

    Heck, billions of people go to the bathroom every day. Using social media logic, why not run ads in bathrooms?

    How many millions of people click on banner ads every day? Why would a financial institution bypass an established, proven marketing channel like online ads and head straight for social media? Simply because it’s “free??”

    How many people watch TV everyday? Isn’t TV a “powerful communications channel?” And yet plenty of banks and credit unions have never run a single TV commercial. The fact that millions now use social media should have no relevance if it never impacted the decision to run television spots?

    Millions of people go to bars and pubs every evening to “get social” and “engage.” Some may even be discussing banking. Why not target those conversations?

  2. Banks see poor results in the social media realm in large part due to the fact that their effort has been of little or no value to the consumer. A recent unscientific survey of Bank (and Credit Union) social media channels identified that more than 90% of the content has NOTHING to do with financial services, personal finance or anything that might be perceived by the consumer as value-added. More often, the content relates to the Bank’s civic activities and/or their operating hours. Not very fulfilling for a consumer or a small business who assumes that their Bank is a valued financial advisor…

    Having said this, Social Media as a channel, is no worse and maybe substantially better, than Advertising in the newspaper, online marketing, email marketing, newsletter marketing, and other traditional advertising tactics. So, why so much animosity toward Social Media and so little criticism levied at traditional marketing?

  3. I agree, one of the most frustrating parts of social media is all the so called experts who spout off about how many people are using social media. They usually go on and on about how fast Facebook is growing and how your missing the boat by not partaking in the madness.

    These “experts” need to get a clue! Social Media if used the right way can be a really powerful tool, but until banks realize that it’s not about millions of facebook or twitter followers most will struggle with the medium just like they struggle with marketing in general.

  4. Serge: I’m an equal opportunity critic.:) And I’m not demonstrating animosity toward SM. I’m displaying displeasure with the line of reasoning that is frequently used. to justify SM. I’m equally critical of the people who spout off about how direct mail or email is dead.

  5. MkitgBanks: Yep. And if I hear one more person say that the ROI of social media is “you’re still in business” I’m going to cyberbarf all over them.

  6. You should retweet your Social Media video, Jeffry. If you don’t, I will. That was fantastic content on the state of SM. It really backs up what Ron discusses in his post. Social media is a complementary marketing tool — not the end all, be all solution. We shouldn’t be swayed by the masses “engaging” on these networks. I mean how many of the 750 million Facebook accounts are even active.

  7. Mike: One more question to ask: How many of the 750 million Facebook account are even PEOPLE? My understanding is that there are a few million FB IDs that are animals (people’s pets).

  8. Yeah, I’m with Ron. It’s not animosity. It’s irritation and frustration with the social media zealots who *believe*. It’s largely a faith-based religion right now. Does it hold promise and opportunity? Sure. But does it deserve the obnoxious level of attention it gets today? No. The arguments in favor of social media are a muddled mess of hyperbole and tangential facts. It’s much more speculative than consultants, vendors and the trade media make it sound. I believe Ron is trying to provide a voice of reason in what (to me) seems like irrational exuberance.

  9. It is without question that the topic of ‘The value of marketing spend’ for Banks (and Credit Unions) should be revisited. It goes without question that there are many “experts” who are eager to sell their services by hyping social media.

    Banks (and Credit Unions) spend substantial amounts of money on marketing — nearly all of it on traditional marketing. I haven’t seen too many posts and discussions lamenting the fact that Banks are throwing their money down the drain with every campaign utilizing email marketing, various snail mail campaigns, statement inserts, newspaper and magazine ads, online ads and other such mediums (not too mention various re-branding efforts and turning bank branches into coffee houses / lounges).

    The reality is that most Banks – especially true for Community and smaller Regional Banks – are not good marketers. I submit Aite’s Group study showing a rather miserable ROA (Return on Advertising) by the largest Banks (read: http://www.aitegroup.com/Reports/ReportDetail.aspx?recordItemID=536) which shows Deposit and Loan Volume production per Ad dollar. The following graph restates these findings in terms of COF (Cost of Funds) (see: http://bankblog.optirate.com/wp-content/uploads/2011/09/Return-on-Advertising-Aite-Group-2009.jpg). The numbers speak for themselves…

    Needless to say, Banks have much work to do to improve the effectiveness and efficiency of their marketing dollars! Slamming social media does not help; but I have not issue with slamming social media “experts”. The distinction is important but is often obfuscated.

  10. Serge: I think you and I are in violent agreement. First, I’m not slamming SM. Second, when I think more clearly about it, I’m not even slamming SM experts. What I AM slamming is the argument that some people use to create a case for why their firm (or any firm) should invest (time and/or money) in SM.

    There’s another thing that ticks me off (not something you said, just about the environment, in general): Instead of improving the effectiveness of existing marketing tools/tactics/channels, there seems to be a lot of people whose reaction is: Let’s go find something new to invest in.

    As you correctly point, the vast vast majority of financial firms’ current marketing efforts is in traditional channels.

    But instead of improving the effectiveness of that spend, there are many people who say “traditional channels are dead”, and want the focus on social media.

    So you know what…I AM slamming those people, I guess.

    Gonna stop here before I start slamming social media.

  11. I don’t think Ron slammed social media at all. He is dissecting a common case that many make for social media. That’s a far cry from saying “social media is B.S.”

    The reason you don’t see folks like Ron and myself picking on TV advertising and such is because there aren’t tens of thousands of “experts” haranguing every company on earth to jump on board… because there aren’t thousands of banks and credit unions flocking to TV right now like it is the wave of the future… because you don’t see an article about the awesome and amazing power of TV ads in every single issue of every trade publication related to banking.

    That banks and credit unions are generally lousy marketers is definitely a broader issue worth discussing, but probably beyond the scope of this post.

  12. I may be way off base here but, are the experts hawking social media any different than what the communications industry did in the 80’s and 90’s with cell phones and fiber bandwidth? The cell phone was touted as an emerging social necessity and those without it would become ridiculed social pariahs to be pitied. Hundreds of thousands of miles of extreme high bandwidth fiber was plowed into the ground throughout the country and the Verizon’s and the AT&T’s of the world told us that it was indispensable and kept telling us. Now, low and behold, if you don’t have a cell phone with a data plan, you are a social pariah and god forbid that you don’t have a minimum of 10 Meg upload and download capability. So, are the social media experts attempting to do the same thing here? The old saying, “build it and they will come” may be better stated as, “hawk it repeatedly as necessity and they will come”.

  13. No Kenny, you are right on track. Every time a new innovation comes along, there are hoards of people who run around telling everyone that “the paradigm has shifted,” that the new technology is “a total game changer,” and that “everything as we know it has been completely revolutionized.” They will tell you that the new idea will “kill” X, Y and Z. It’s pure hyperbole.

  14. Kenny: I’m w/ Financial Brand 100% — you’re not off base. Here’s what I think is different this time around, though. In the past, the folks who have heralded the “transformational” nature of whatever they’re hawking has tended to be business people. In this social media phase, the participation is a lot broader.

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