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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Customer Engagement RIP

I’m a strong believer in the concept of customer engagement — as it relates to measuring relationship strength, that is.

But the term is no longer meaningful in today’s business world.

It was inevitable. Back in the early ’90s, the term “reengineering” devolved from a strategic approach to business process redesign to layoffs. Later in the ’90s, knowledge management devolved from an approach to capture and categorize unstructured data to…well, just about any new project that a firm embarked on.

So it shouldn’t be surprising that customer engagement has…well, jumped the shark. (I was trying real hard not to use that term, but it really does fit well).

It was first used a number of years ago, and began to gain some currency in marketing circles, especially among advertisers. Unfortunately, their definition of the term was ludicrous. Then the web analytics folks glommed onto the term, using it to describe how much time people spent on websites.

What convinced me that the term is now completely unusable was the recent issue of 1:1 magazine from Peppers & Rogers.

On page 10 of the magazine is a full page ad for a webinar sponsored by Campaigner, an email marketing firm. The ad’s headline screams “The email imperative: don’t sell — Engage!” (the improper use of capitalization is enough to tick me off).

On the facing page is an article about search engine marketing that contains a graph with the following title: “Search Engines Promote Customer Engagement.” The data contained in the chart describes “the activities of online service seekers after conducting searches for products.” The most frequent responses: Purchased product online, found store location, bought product from store.

Hmmm… so engagement has gone from “turning on a prospect to a brand idea enhanced by the surrounding context” to “time spent on a website” to “alternatives to selling in an email” to “purchasing a product.”

My take: The term is now completely meaningless.

Which is too bad, because I’ve truly believed that firms could adapt the concept to reflect their own strategies and approaches, and use a combination of attitudinal and behavioral (cross-channel) measures to quantify engagement.

I’m not optimistic that this is going to happen. On one hand, no one within marketing can agree on what the term means. And on the other hand, it’s likely that everyone in an organization outside of marketing thinks that it’s a YASMB (yet another stupid marketing buzzword) (prounounced “yazem”).

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Looking For Love (Loyalty) In All The Wrong Places (Customers)

Economist Umair Hague makes an interesting point — and raises some interesting questions — about customer and brand loyalty on his blog:

Why do Apple customers care so much (about Apple)? It’s a good question. But in fact, it’s the wrong question to start thinking strategically about consumption. The real question is the opposite: Why don’t most consumers care more about firms/products/services/brands?”

My take: One reason why consumers don’t care more about the firms/brands is that they don’t care that much about the product/service that they purchased from that firm.

This is one of the big hurdles facing financial services marketers looking to engender loyalty among their firms’ customer base.

While money is really really important to whole lot of consumers, managing money is not something that a whole lot of consumers like doing or look forward to doing. More importantly (from a loyalty building perspective), it’s not something by which they define themselves.

Apple fanatics wear their loyalty like a badge. But how many people consider themselves a “Fifth Third fellow” or a “Chase chap”? (Stop laughing).

Customers have to care enough about the product before they’ll care enough about the firm or brand. Few — if any — banks get this.

This is why a community like Wesabe is so important. It’s a community of consumers who are involved enough with the management of their financial lives to participate in a community with other like-minded consumers. They’re potentially consumers who — despite the conventional wisdom that they’re rate hoppers– might become loyal to a particular financial firm because they’re involved enough with the products and services to understand how that firm is different in its product and service delivery capabilities.

Banks have really missed the boat in developing Wesabe-like sites. On one hand, they can’t envision where the payback on the investment will come from. They know they can’t charge customers for the privilege (stop laughing) to participate. And on the other hand, they’re fearful that their customers, left unchecked, might — gasp! — recommend other banks and services to fellow community members.

What they’ve failed to grasp is that financial community members like Wesabeans (I wonder if anybody actually refers to him or herself as a Wesabean) are hand-raisers. They’re people who are demonstrating an interest in their financial lives — and therefore signaling their potential to be a more loyal customer because of their engagement with the product category.

Understanding customers’ product category engagement could have huge impact on how a financial firm executes its marketing programs (in terms of targeted offers and calls to action), segments its customer base, and calculates potential lifetime value (if they’re calculating it at all).

It’s possible to predict category engagement using behavioral data that the bank collects. For example: How many times does an online banking customer check savings rates each quarter? How often has a customer moved money between accounts each quarter? (Interestingly, a customer that frequently moves money out of the institution might be a better candidate for long-term loyalty than a customer who just parks him money there).

Until financial services marketers begin incorporating category engagement into their marketing efforts, they’ll be looking for love…in all the wrong places.

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Customer Engagement: The Agency/Client Perception Gap

cScape recently released the results of its second annual Customer Engagement (CE) survey. They gave me an opportunity to see the data from the study, and I’d like to comment on something I don’t believe the report they published touched on: The gap in perceptions between agency and client-side respondents. These differences in perception show up in questions about:

  • The importance of customer engagement. Only 35% of agency respondents said that online customer engagement is essential to their clients, in contrast to half of client-side respondents. Both groups were aligned, though, in their perception of increasing importance of the concept: About 75% of both groups said that customer engagement had increased in importance to clients over the past 12 months.
  • The impact of customer engagement initiatives. Compared to client-side respondents, agency respondents were more likely to say that CE initiatives improved their clients’ customer loyalty and increased revenue. In fact, twice as many agency respondents said that CE initiatives increased profits than client-side respondents did.
  • What clients use to increase online customer engagement. Forty-one percent of agency respondents think that their clients use blogging sites to increase engagement, but just 19% of clients said that they use these sites. This discrepancy carried over to the use of social networks, video-sharing sites, and image-sharing sites (e.g., Flickr).
  • The future role of the mobile channel. Almost one-third of the agency respondents said that the mobile channel will be essential for customer engagement in the next three years. Just 20% of client-side respondents shared that view, though.
  • The description of an engaged customer. Both groups agree that an engaged customer recommends the product, service, or brand. But the two groups differ in their view to the extent that an engaged customer purchases regularly. Clients were more likely to believe this than agency respondents.
  • How customer engagement is measured. Nearly one-half (49% to be exact) of client-side respondents said that their firm has dedicated metrics for measuring online customer engagement. But just 30% of the agency respondents said that their clients have dedicated metrics.
  • The barriers to cultivating better online engagement. Client-side respondents were half as likely as agency respondents to believe that their own lack of skills and experience are a barrier to better CE. The two groups’ views also diverged regarding the extent to which getting senior management buy-in, dealing with technology problems, and finding supporting agencies were a barrier.

It’s highly unlikely, of course, that the client-side respondents were clients of the agency respondents. But the discrepancies in responses can’t help but make me wonder if many agency people aren’t on the same page with their clients when it comes to customer engagement. A number of factors are driving this discrepancy, specifically the agencies’:

1) Tendency to overstate impact. Often, the agencies aren’t the ones measuring the results, so I’m not sure why they’d think that customer engagement efforts are having such a great impact. Or why any of the branding campaigns they’re involved are having such a great impact, for that matter. But, hey, they’re not going to say that their efforts didn’t pay off, are they?

2) Over-fascination with the new. The client-side people are in the trenches fighting daily battles and fires. Few have time to explore video- and image-sharing sites or to read (and write) blogs. The agency-side, however, with a broader perspective, is out there looking for the next new big thing. So they attribute the involvement they do see out there to a wider range of client-side firms than are actually participating in these sites.

3) Mismatch of definition. A lot of the agency-side discussion of customer engagement has revolved around the concept as a measure of media effectiveness. A lot of marketers on the client-side don’t care about that. They’re looking at customer engagement as a potential way to help them make smarter decisions about investing their marketing dollars, and for helping them gauge their success.

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Guest Post: The Value Of Customer Engagement

cScape recently released the results of its annual Online Customer Engagement Survey. One of its contributors is Theo Papadakis who wrote the following:

Writing in ClickZ, Neil Mason denigrates the value of the concept of customer engagement on the ground that it is impossible to define and therefore useless. Neil proposes an alternative concept with which he seeks to capture what he thinks the proponents of engagement find useful in that concept. I wish to argue that Neil is wrong in thinking that customer engagement is an elusive concept and that his proposed alternative fails to do the task a properly defined concept of customer engagement can carry out.

A bit on the definition of customer engagement

Engagement is a bipartite relation, i.e., X is engaged with Y. Indeed, it denotes the very fact of the relation. Any relation is an engagement and vice versa. The concept of customer engagement however only deals with a particular kind of relationship:

  • Object: A customer’s relationship with a brand, company, product, or consumption topic.
  • Character: A customer’s emotional relationship with the object.
  • Kind: Positive or negative.
  • Content: Engagement is not itself a psychological state but involves psychological states, such as — in the case of positive engagement — sympathy, love, pleasure, pride, happiness, gratitude, empathy, affection etc.
  • Degree: The degree of engagement lies on a continuum that ranges from low engagement, namely, the psychological state of apathy, to high engagement. An engaged customer is a customer with an above average psychological investment/involvement with his or her object of relatedness.

However, given that psychological states are very difficult to measure and, above all, to relate to marketing objectives, publicly observable behaviours that reveal a customer’s object, kind, content and degree of engagement are measured instead.

As there is no simple measurement of emotion, a love or gratitude metric for example, customer engagement needs to be a synthetic concept and metric in order to provide a holistic understanding of a customer’s emotional involvement with an object.

Customer engagement can involve any number of the following token behaviours: word-of-mouth advocacy, provision of feedback, reduced focus on price, increased tolerance of mistakes, willingness to participate in new product development or redevelopment, create fan or anti-fan clubs etc. With the advent of the Internet, the engagement of customers with brands has intensified beyond all expectations and has taken many forms.

As a result, a number of online customer engagement behaviours should be added to the previous list: customers blogging about you, talking about you in forums and social networking sites, writing product reviews on your products on your own and other websites, creating online fan or anti-fan clubs, participating more directly in new product development or redevelopment, creating a wiki customer service or FAQ, creating a product hacking or troubleshooting site, etc.

The reason why frequency and recency of purchase is not in the list, however, is that even a combination of high frequency and recency of purchase is not a telltale sign of customer engagement. Repeat buying might be the result of other factors such as location, lack of competitors, or low price etc. A repeat customer may even be unsatisfied and anxious to defect.

Given the range of all these activities and the value they offer to the organisation, it is indeed very useful to talk about, measure, and try to influence the degree and kind of your target customer’s engagement with your brand.

Secondary value: economy of communication

Of course, we don’t have to use the term ‘customer engagement’. Just like the concept of a ‘car’ is utterly superfluous. We can refer to a car as a human-steered, mechanical-engine-powered, four-wheeled vehicle, but for reasons of economy we call it a car. Is it a car if it has three wheels? Is it a car if the dream of computer-automated steering becomes a reality?

It is important to understand that answering these questions does not require us to identify what the essence of the “car” is. Answering these questions, the business of concept-creation, is based on pragmatist considerations human speakers make in everyday life.

Similarly we don’t have to talk about engagement. We can talk about number of blog posts, forum posts, customer reviews, WOM advocacy, etc. instead, and when your manager asks you about the success of one of your actions in terms of outcomes other than immediate financial impact, you could answer in around as many words as it took to write this post.

Primary value: conceptual value

At this point I can imagine Neil arguing that he agrees with most of the above but objects to calling or, rather, in his own words, ‘dressing up’ these valuable behaviours as ‘customer engagement’. In his article he says:

If we believe there are sets of valuable behaviour that lead to beneficial outcomes, why dress it up and call it ‘engagement’? Why not just have a valuable behaviour index (VBI) instead of an engagement index? At least then we’d know what it is and what it means”.

 

As I hope I have showed that engagement is not an elusive concept as Neil seems to think, the rest of my argument will focus on why I think that:

  1. Using the ‘valuable behaviour index’ to refer to the aforementioned set of behaviours is problematic to say the least.
  2. Aggregating the aforementioned types of behaviour under a single umbrella term is useful.

I will use the same arguments to prove both points:

  • Neil’s concept of a valuable behaviour index is in some cases too general, while in others too restrictive and therefore fails to capture the dimension we seek to capture regarding the phenomenon of customer engagement. We are looking for a very particular kind of valuable or, in the case of negative engagement, damaging behaviour — behaviour that has a strong emotional as opposed to any other dimension. According to Neil’s notion of ‘valuable behaviour index’, for example, repeat purchase or frequent purchase must definitely be admitted as valuable behaviours. This is not so with the definition of ‘customer engagement’ cScape proposes. Our definition filters out this kind of certainly valuable behaviour. At the same time Neil’s notion is restrictive enough to be unable to capture negative engagement.
  • Emphasising the behavioural outcomes of customer engagement is actually potentially dangerous. The danger lies in that by giving it such a name we are prone to fetishise the behaviours. Although the ultimate objective of marketing efforts that aim at influencing, stimulating or facilitating customer engagement is to influence behaviour, it is not behaviour that is the immediate target of these efforts. These target behaviours are the indirect outcomes of marketing efforts to engage customers. It is psychological states that are the primary target of customer engagement marketing. Although facilitating the target behaviours is important, merely doing so, say by sticking ‘a recommend to a friend’ option, is utterly useless.
  • The repercussions of the argument from economy reach a lot further. Imagine you ran two campaigns, each of which effected an increase in each of the aforementioned behavioural components of engagement in your target customers. How would you decide which campaign was more successful? As soon as you start weighting each behaviour differentially you are on your way to create a synthetic and holistic engagement metric. In short: if you want to be able to compare the outcomes of your marketing efforts along the aforementioned dimensions you immediately need an umbrella-concept (and metric) of customer engagement. This is not to say that it is possible to standardise the components that constitute a customer’s engagement with an object. They will, of course, vary along the dimensions of object, kind, content and their behavioural manifestations. The possibility of having a concept with different components — another frequently encountered criticism of customer engagement — has been discussed elsewhere.

I hope I have dispelled two arguments commonly leveled against the concept of customer engagement, proven its conceptual value, and supported my dual conclusions that:

1) Customer engagement is not elusive, and therefore does not have to be a nebulous concept.

2) Customer engagement is a useful concept for marketers’ ability to: achieve economy of communication; capture a customer’s emotional relation with a company, brand, etc.; and compare.