Banks’ Social Media Challenges

I had the chance to participate on a SMB Boston panel last week on Driving Business Value Through Social within Financial and Regulated Environments, which I think was just a fancy way of saying “social media in financial services.”

The main message of my presentation:

Financial institutions should integrate social media approaches into their marketing and customer service processes.

As I see it, banks (and credit unions) are wrestling with — or perhaps, simply failing to address — challenges regarding social media. And you don’t even need to be a journalist to know where these challenges came from:

  1. What: Banks don’t know what to say in social media.
  2. When: Banks don’t know when to say it.
  3. How: Banks don’t know how to say it.

There are, of course, a couple of other potential challenges, but I think that “Who to say it to” is less of a challenge, and that “Why they’re saying it” is better understood. Regarding “why”, the research that Aite Group has done on social media in banking, bears this out: Most FIs are fairly clear that engaging customers, building brand awareness, and building brand affinity are why they’re involved with social media.

Engagement may be the objective, but I’m not sure, based on what I’ve seen FIs tweet and post, that they know how to achieve that objective.

I saw one FI recently tweet:

Have a new business that needs to grow quickly? Add credit card processing to increase revenues and cash flow. #smallbiz

Here’s another from a credit union:

We are listening. We are not like the BIG Banks. Check us out!

Do people really turn to Twitter or Facebook to see shameless marketing messages, re-purposed from other marketing channels? Are these tweets effectively engaging customers/members/prospects? I don’t know. But I bet the FIs that tweeted those messages don’t know either.

Another thing that struck me reading those tweets, was thinking about why the FIs chose to tweet those messages when they did. Was some marketing person sitting around with nothing to do, and suddenly realize that ts was 30 minutes since the last tweet, so s/he might as well tweet something else? Did something trigger the need for a credit card processing tweet at that particular time? I can tell you this: The credit union’s tweet came 11 days after Bank Transfer Day, so I doubt there was some pressing need to send out that tweet when it was sent.

The tone of these tweets doesn’t sit well with me, either. How many times have you heard the phrase “join the conversation?” Look again at those tweets above — do you know anybody who talks like that in the course of a normal conversation? (If you do, I bet you don’t engage in too many conversations with that person).

This gets at a big issue that marketers (not just in financial services) have to face: They don’t know how to have (or start) a conversation with consumers. Here’s the problem:

Marketing has, to date, been driven by the need and desire to persuade consumers.

But “engagement” isn’t accomplished through persuasion. (Well, persuasion can be a part of it, but it can’t be the only part of it).

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So what should FIs do to address these challenges? There’s a tactical response and a strategic response.

The tactical response: Categorize and test.

A couple of months ago, Michael Pace from Constant Contact wrote an interesting blog post, advocating that Twitter users should periodically do a self-analysis of their tweets. Honestly, I thought that was a pretty self-indulgent thing for an individual to do. But at the company level, the idea has a lot of merit.

A high-level analysis of your company’s Twitter stream can help you understand how well you’re balancing various types of tweets. And the same could be done with Facebook posts. The challenge, of course, is understanding what impact those messages are having, and if shaking up the mix would improve the impact (i.e., engagement).

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But even if you do this, I doubt that you’ll make more than just a minor impact on your firm’s bottom line. To have a more meaningful impact, you need the strategic response:  Integrate social media approaches into marketing and customer service processes.

In my presentation at the breakfast, I highlighted three ways to do this:

1. Influence preferences. I like what America First Credit Union does on its site (as does @itsjustbrent,  since he either borrowed this example from me, or I stole it from him). The CU incorporates members’ product reviews on the product pages. By doing this, the CU accomplishes:

  • Customer advocacy. Not just in the net promoter sense of the word — but in the more important sense of the word: Doing what’s right for the customer and not just your own bottom line. Helping consumers make better choices — that are right for them — by enabling them to access other customers’ opinions is a demonstration of customer advocacy.
  • Active engagement. I guess that, if a customer follows you on Twitter and reads your tweets, or likes you on Facebook in order to enter a contest to win a prize, you could call that engagement. But I would call it passive engagement. Customers who take the time to post a review are more actively engaged, in my book.
  • Continuous market research. I doubt many firms could capture the richness of information America First is capturing through satisfaction or net promoter surveys. And I know that they can’t capture it in as timely a basis as America First does.

2. Provide collaborative support. I’ve been holding up Mint.com as an example of a firm with collaborative support, but it recently discontinued its Mint Answers page. No worries, Summit Credit Union is doing the same thing, and hopefully, they can become my poster child for this. Collaborative support is giving customers the opportunity to answer other customers’ questions. Dell has been doing it for years. Why provide collaborative support?

  • Reduced call volume. I’m not going to say that you’re going to see a huge volume of deflected calls, but over time, if you market the collaborative capability, it can help.
  • Expanded knowledge base. This is where the bigger value comes in. Customer service reps leverage internal knowledge bases to answer customer questions. Collaborative support helps grow that knowledge base, and helps figure out which answers and responses are more valuable than others. This expanded knowledge base will also prove valuable in training new employees.
  • Active engagement. Similar to the product reviews, customers who participate in collaborative support sites are demonstrating active engagement.

3. Instill financial discipline. This is about using social concepts to get people to change the way they manage their financial lives. Take a look at the research that Peter Tufano has done regarding what motivates people to save.  There are some good examples of this in practice — see Members Credit Union’s What Are You Saving For?. I recently chatted with the CEO of Bobber Interactive, and like what they’re doing about bringing social gamification to how people manage their finances.

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Bottom line: Your firm can putz around with Facebook and Twitter until you’re blue in the face. For financial institutions, this is probably not going to have much of an immediate impact on the bottom line. It will likely take years of experimentation to figure out what to say, when to say it, and how to say it on social media channels.

If you want to engage customers, you have to give them a reason to engage. Mindless, idle chatter on Twitter and Facebook isn’t sustainable.

The path to making social media an important contributor to bottom line improvement — and sooner rather than later — will come from integration social media concepts and approaches into everyday marketing and customer service processes.

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Boozos On Banking

Let me be direct and get straight to the point: This blog post is about the absolutely worst presentation about the changing world of banking that I have ever seen.

And I’ve seen (and possibly created) some real losers.

Booz & Co. (a very reputable consulting firm) published a PDF called Next Generation Retail Banking: The Rise of Social Apponomics. Some of the lowlights from this deck include claims regarding:

  • The end of all things. According to the authors, as a result of the financial crisis, corporate cultures have been torn apart, and good and evil have been blurred. The report states that “Arisen from chaos have new views of the world, beliefs, and behaviors that pose significant new challenges to banks.”
  • Digitization of human culture, the key to growth and profitability. The authors believe that a “fundamental paradigm change towards offering a holistic customer experience is required, implying transforming a bank from its core to its periphery.”
  • Customized banking through coordinated networks. To quote the report: “The result of the digital transformation are coordinated banking networks organized by concentrators that work to offer the individually most relevant experience and solutions that maximize value-to-customer across the entire lifecycle.”

And that’s just slide 1.

The second slide attempts to elaborate on the “required paradigm change” and discusses something referred to as “nevolution” — broaden one’s horizon, creating options, preparing for change.

The third slide informs us that the Internet changes everything, and in case we didn’t quite understand that, goes on to mention that Broadband changes everything. And for good measure, the final bullet on the slide lets us know that Mobile changes everything. A little clip picture on the slide contains the label: “Customer expectations are evolving.”

Slide 4 is a word tag chart.

The fifth slide talks about how the “key capabilities” in retail banking  have evolved from technology (the past) to value (the present), and how they will evolve to engagement (emerging).

There are a couple more slides, and if you have a strong constitution and high tolerance for pain, you can read them for yourself.

My take: I’m serious about this: Booz should remove the deck from its website, apologize for publishing crap, and call a do-over.

In addition to being just a bunch of buzzword bingo, what’s really mind-boggingly annoying here is that Booz is trying to create some new term to describe the new environment (social apponomics), but no where — I repeat, NO WHERE — in the deck is there any definition or even further mention of the term past the title slide.

Really, Booz?

[h/t to The Financial Brand for alerting me to this one. Although, maybe I shouldn’t be thanking him :)]

Word-Of-Mouth Recommendations

Recent research from professors at Nanyang Technological University and the University of British Columbia about word-of-mouth recommendations should be of interest to bank marketers. According to the study:

Consumers are more likely to provide WOM for products that are relevant to self-concept than for more utilitarian products. There was some indication that…consumers exaggerated the benefits of self-relevant products compared to utilitarian products.”

Why is this important to banks? Because financial service products don’t fit neatly into either the “self-concept” or “utilitarian” categories.

Some consumers are highly involved in managing their financial lives and making financial decisions, and are more likely to consider financial services products (like checking accounts, brokerage accounts, mutual funds owned) as relevant to their self-concept. For other consumers, these products may be utilitarian (“my checking account is nothing more than a place to stick my money before paying it out to everybody I have to pay”).

Smart banks know that customer referrals are an important source of new business. This research should lead them to address a few questions:

  • Can we convert customers from “utilitarian” to “self-concept”? A bank that successfully does this may not only drive up referrals, but increase the level of engagement that the customer has with the bank, leading to increased purchases from that customer.
  • What does our customer base look like? Do the majority of our customers take a utilitarian view versus a self-concept one? Why? Are we better at attracting one type of customer than another?
  • What should we measure? As banks (as well as many other firms) adopt the Net Promoter Score methodology, this WOM research begs the question: Is the NPS more a reflection of the underlying demographics of the customer base than the performance of the bank?

My bet is that some other metric — like customer engagement or customer lifetime value — does a better job of capturing the self-concept/utilitarian dichotomy and is a better metric to guide decision making.

Update: Good discussion of WOM measurement on Marketing Measurement Today.

Engagement Myopia

In an article on Chief Marketer‘s web site, Robert Passikoff, President of Brand Keys, called [customer] engagement 2006’s “holy grail and favorite buzzword”. In a previous article, Bob predicted that engagement would:

Continue to insert itself between traditional marketing activities and an increasing demand for return-on-investment assessments, and will occupy a good deal of marketers’ and advertisers’ attentions.”

He was right. It’s a shame, though, engagement won’t occupy the attention of a wide enough range of marketers.

In a number of presentations I’ve made to marketers over the past few months, I’ve said that customer engagement is a hot topic within the marketing community, and I’ve received some blank stares. It’s a hot topic with advertisers — not necessarily marketers.

This needs to change. One issue preventing many marketers from embracing the idea of engagement is the definition that the Advertising Research Foundation put forth last year: “Turning on a prospect to a brand idea enhanced by the surrounding context.”

That’s too narrow a definition (I’m being way too kind here). As a result, it turns off many marketers involved with other aspects of the marketing mix beyond advertising. I prefer to think of customer engagment as:

Repeated — and satisfying — interactions that strengthen the emotional connection a consumer has with a brand (or product, or company).”

More important than agreeing to a definition, however, is understanding why engagement is so important to measure. It’s because engagement is a measure for the strength of relationship a company has with its customers. The stronger the relationship, the more likely the customer is to: 1) remain a customer; 2) do more business in the future; and 3) often, be less costly to serve.

The ARF (and others) may offer a standard definition of engagement, but how to measure engagement is something that firms must figure out for themselves.

Using consumer research from Forrester Research, I set out to define engagement from the perspective of a bank. Using the data available, I used five survey questions that I believed would provide clues to the extent to which a customer was “engaged” with his or her bank:

1) How often did you move money between different accounts in the past six months?
2) How often did you check your savings rate in the past six months?
3) Have you viewed educational material on your bank’s Web site in the past six months?
4) Do you bank or pay bills online at your bank’s Web site?
5) How likely are you to recommend the bank to your family and/or friends?

Using a scale of 0 to 2 for a range of answers, I was able to score the database and arrive at a measure of their “engagement.” Why is this something banks (and other firms) would want to do? Because consumers who scored higher on the engagement measure were more likely to be more satisfied with the bank, and even more importantly, more likely to buy more products from the bank over the next 12 months.

Broadly measuring engagement (beyond the adverstising purview) helps marketers address some important questions:

  • Which customers aren’t very engaged? Marketers may uncover demographic trends when evaluating engagement. For example, a firm may find that it is engaging younger consumers more effectively than older consumers (who may represent a more affluent set of prospects).
  • Which customers are becoming less engaged? These customers may represent attrition risks, requiring the firm to take preventive measures.
  • Which customers are most engaged? Firms can improve campaign response rates by targeting more of these customers based on their greater likelihood to do more business in the future.

Marketers: Don’t let the advertisers keep customer engagement to themselves.