How Banks are Capitalizing on
While the banking industry today is still winding through recovery, many local banks, regional institutions and credit unions have positioned themselves to fare better in the market than their “too-big-to-fail” competitors. Two contributing factors include; a strong public backlash against “Big Banks” which has produced support for local institutions perceived by customers to be more sensitive to the needs of their community and secondly; a strong synergy that community-led banks are developing with emerging social media.
Social media marketing has become a goldmine for tapping into a growing audience of more than 600 million potential customers on social networks like Facebook, Twitter, LinkedIn, YouTube and others. These users share their opinions about products or services with others, increasing the popularity of a brand and increasing the number of loyal visitors to a company website. It also gives marketers the ability to be part of the online conversations on an individualized basis. Social media provides explosive viral marketing potential and positively impacts the ever-important website search engine rankings. Financial institutions have learned social is a way to become more transparent to customers, build trust, retain customers, increase referrals, develop relationships and provide additional services and products.
Community banks and credit unions, by their very business model are very social in nature. Smaller, locally-focused, community-driven banks have built their businesses around striving to understand their local customers’ needs and delivering high-quality, relationship-based, individualized services. They strive to engage their customers and in turn leverage those relationships to build loyalty and advocacy.
Brett King, Author of “Banking 2.0” shared with the Huffington Post his belief that “the very sense of community that binds the individuals who support such financial institutions is also a core element in the success of social media.” It is his belief that community-led institutions are enjoying success by building the same sense of community online as they do in the real world.
In a recent survey of 89,000 North American banking customers conducted by Bain & Company, a global business consulting firm, it was reported that “organic growth rooted in strong customer relationships represents the best path forward for retail banks.” Interestingly, the report demonstrated since 2009 loyalty scores for community banks and credit unions has topped those of national branch network banks by a wide margin.
The key in the banking industry is to reach consumers where they are actively spending their time; 75% of the population is researching, shopping and socializing online and this number keeps growing. Consumers spend as much time today with social media channels as they do watching television channels. They are in Facebook, participating in blogs and chatter, following twitter and other forums. Over 200 million users now access Facebook from their mobile phones. Opinions, both positive and negative are being shared online. Recent studies show peer recommendations influence decisions 78% of the time versus 14% from traditional advertising. With marketing budgets that pale in comparison to the competition’s, smaller banking firms are using social media to more effectively target key customers.
For bankers, reaching out, communicating and listening to customers to engage them as advocates creates satisfied customers and those satisfied customers become word-of-mouth advocates. They remain longer with their banks than those who are not. Equally important, they also buy more products, refer more new customers and cost less to serve. Product sales such as investments and wealth management have become increasingly profitable for banks.
American Banker says “social media is the new frontier of relationship management” and encourages financial institutions to “get in the game.” Here are a dozen ways financial institutions are using social media today:
- Cost savings
- Customer retention
- Customer service
- Ability to maintain a dialogue with consumers
- Product and services research
- Product cross-sell and promotion
- Transparency and trust building
- Marketing and promotion
- Reaching highly targeted consumers
- News and events
- Community building
- Reputation management, risk mitigation and damage control
According to the ABA Banking Journal, in an article entitled “Social Media to the Rescue? Facebook versus the Robocaller”, damage control found an unlikely supporter from United Bank of Atmore, in Atmore, Alabama. The bank had a policy of blocking Facebook access on employees’ computers. However, following a rash of scam attempts from robocallers with pre-recorded messages trying to lure unsuspecting customers into sharing their personal information, management turned to employees’ personal Facebook pages to warn customers. The response was immediate and dramatic from bank customers. Ironically, the bank immediately began developing a social media marketing program of its own.
Many banks and credit unions have cautiously approached adapting social media strategies. Concerns have centered primarily on data security and privacy as well as regulation uncertainty. In the fall of 2010, the SEC and FINRA released social media guidelines that spell out the rules for social media in terms of promotion and advertising, supervision, monitoring and record keeping. However, in joining the new frontier of relationship management, banks must have proper planning, execution, support, and monitoring in place. Developing a social media marketing strategy should not be a “try this at home” project or dumped on the IT department. It requires specific strategy, development, technology, analytics and on-going management. An experienced and reputable social media agency that is on top of the changing financial landscape should be an absolute minimum requirement to any bank or credit union seeking to direct and contribute to the online conversations.
But what does a properly executed social media strategy mean to the bottom line? Bain and Company found that the banks that are loyalty leaders enjoy a growth rate that is 10% higher and a cost of funds that is 80 basis points lower than banks that focus primarily on being price leaders. It’s not a matter of ‘if a bank will adopt social media but when’; and today agile local banks, regional institutions and credit unions are leading the charge into social media adaption.
Rick Ellis has an MBA in e-Business and is AIS Media’s Director of Business Development. AIS Media is an award winning digital and social media marketing agency. AIS Media’s clients include leading companies, governments and Fortune 500 corporations. For more, visit: http://www.aismedia.com or at http://www.Facebook.com/aismedia | http://www.LinkedIn.com/company/ais-media-inc