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Banks Failed Promise of Social Media Marketing

Everywhere you read and hear about the promise of social media, the next great marketing tool designed to lead companies to the Promised Land. Banks and credit unions create a Facebook account, a Twitter account, a LinkedIn account and a Pinterest account, hoping to deliver the next social media phenomenon that streaks across the social media stratosphere.  What a bunch of garbage that has been sold to corporations around the world.

Bank and credit union executives are telling their marketing people, “We need to be in social media, engage in social media marketing, we need a social media strategy”. Why, because that is what traditional media and the social media pundits say needs to happen.  I am not saying social media does not have a place in a bank or credit union, however, I am saying that 99% of banks and credit unions are wasting their time with social media as it is currently being utilized.

We have to go back to what started the social media revolution. We have all heard the famous story about Mark Zuckerberg and his days at Harvard University. The evolution of social media is essentially an online and mobile tool that allows individuals to communicate and share information with other people or groups.  It is a “social” tool.

Along came corporations that saw millions of online users and said, “We have to find a way to take advantage of that collection of people to communicate our corporate message”.  In essence, what has happened is corporations are attempting to hijack social media to deliver their marketing message. Oh, they may dress it up, but ultimately it is designed to sell. That is simply not what social media was designed to do, and is why social media marketing by almost any measure has failed to produce tangible long-term positive financial results.

So if you are a credit union or bank executive and you believe or your marketing team believes that the effort put into social media to deliver your marketing message has a positive ROI, then you are mistaken. Social media works when delivering a person-to-person message, but not a business-to-person message.

What is your bank’s or credit union’s goal with social media? Is it to increase new business? Has it worked? I doubt you will find a true metric that shows it works. Is it to get “Likes” or “Followers”? Those are two of the most useless social media success metrics available. “Likes” and “Followers” are “one-time” engagement events. That is like sending a letter to all your members once and expecting positive benefits from that letter six months later. The only way to gauge social media success is based on “daily” interaction. Do you know the click through rate for social media messages that come from “Liked or Followed” companies? Less than a half of a percent, which is worse than direct mail. Do that math based on the number of “Likes” or “Followers” your bank or credit union has accumulated.  Does it produce a positive ROI?

I hear feedback, “but it doesn’t cost us anything to engage in social media”. Wrong! Just like everyone used to say, it doesn’t cost us to SPAM email messages to customers and prospects. There are reputation or brand costs from slow response rates or unwanted messages. The time invested in social media could produce better returns elsewhere.

The problem is banks, credit unions and companies are lazy or worse, unimaginative when it comes to social media. Let’s simply take our old marketing strategy and apply it to this new channel called “social media”. Trying to deliver a traditional marketing message through social media is like trying to drive your car down a sidewalk. There is a path, but the results will not be very successful and you will not make your neighbors happy.

So where does social media fit into a credit union or bank strategy? Unless your bank or credit union is willing to innovate and develop a “game-changing” business model, it may not fit. Remember, social media is all about person-to-person social networking and communication. If your bank or credit union is willing to use social media and commits the resources to make it successful as a tool that allows your customers to interact with each other providing advice, counsel and recommendations around financial services then social media may make sense. But it has to extend beyond that, by allowing social media to influence the operations of your bank or credit union, such as for analyzing credit risk, influencing lending or deposit rates and product introductions. Social media will only work if your bank or credit union is capable of engaging your customers, which requires providing substantial and meaningful benefits to those that participate. Business social media must move away from one-way communication to two-way dialog. That can only occur with engaged customers.       

 

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Comments: (5)

A Finextra member
A Finextra member 29 January, 2015, 16:17Be the first to give this comment the thumbs up 0 likes

Good post David. I see similar trends but banks cannot give up on social. Is the problem that social falls under marketing in most banks?  Shoudl it be under customer service and just be a way to communicate with prople that have some interest? Which banks (if any) are doing a "better" job in your opinion?

David Gibbard
David Gibbard - OmniChannel & Digital Banking - Suwanee 29 January, 2015, 17:25Be the first to give this comment the thumbs up 0 likes

Fidor has changed the way social is used and the community it creates. Social media has a place, but not simply as another channel pushing a one-way bank marketing message.

Social media represents an "opportunity" to change a banking business model and connect deeply with its customers.    

A Finextra member
A Finextra member 30 January, 2015, 22:06Be the first to give this comment the thumbs up 0 likes

First of all, thanks to Rachele Zinzocchi for sharing this post!

David Gibbard I loved this post of yours: you'll be probably surprised to learn that what you propose here is now reality.
I'm talking about Widiba (www.widiba.it) the newest Italian Nationa bank.

The original concept was to "redesign" the mechanism that usually governs the relationship between a bank and its customers and so it had been made.

Extra case has been put in carefully planning - even before becoming a bank - to build a radically innovative business model, though remaining focused on the fact TO BE a Bank.

What you state here "social media is all about person-to-person social networking and communication" is simply undisputable.

That's why not only Widiba's name, but also its main features and basic services "came out" from a Community Blog named Say&Play.
Here enthusiasts like me posted (and later saw them approved) bottom-up proposals like "Account number free choice" or "online Bank terms vocabulary" (and MANY more!)

The result is NOT a new Bank, but a NEW way to interact with the OLD idea of a Bank ... that can't be anything else but a Bank! 

Guys at Widiba's HQ in Milan not only gave to early adopters a set of tools for a engaging "preliminary interaction"... but later on (364 days after its launch) once become a "real bank", they allowed, encouraged its customers to -quoting- "interact with each other providing advice, counsel and recommendations around financial services..."

I'm happy that we share this very same approach, I totally agree with you "... then social media may make sense!" (quote).

What's more, the unprecedented Twitter and Facebook initiative #alziamoiltasso ("let's raise the rate") since mid January is engaging more than 40.000 followers, raising it from 2,0 to 2,40 the rate (so far: the goal is 2,50% realtime update -> http://tinyurl.com/alziamoiltasso.

Surprisingly, Widiba seems like had read you words, here "... But it has to extend beyond that, by allowing social media to influence the operations of your bank or credit union, such as for analyzing credit risk, influencing lending or deposit rates and product introductions".

Please, feel free to contact me (or other members of Widiba's #CustomerTeam) and we'll share our thoughts with you and listen to your proposals.

Shine on!
Michael Forni
Widiba's users elected #CustomerTeam member

Abhishek Chatterjee
Abhishek Chatterjee - Gartner Inc. - London 01 February, 2015, 12:57Be the first to give this comment the thumbs up 0 likes

banks have started to use Social media for customer services area. specially complaint management. Contributing to customer satisfaction to protect its revenue.. And 2ndly its using for inbound marketing to generate leads.. contributing to top line.. of course it will not be mainstream contributor like web, Mobile or direct branch.. but.. if you think.. in the past we used to have market.. where people used tom do transaction.. but they used to go to market to also socialize and gossip etc.. and the intelligence they used to get from that was driver for next decision making.. And I see use of social media role is exactly same.. fundamentals don’t change so much.. its a new way of looking at it.. 

 

A Finextra member
A Finextra member 02 February, 2015, 19:571 like 1 like

David: I agree with your premise of the "failed promise of SM marketing" but there are some points I would quibble with.

You wrote: "Bank and credit union executives are telling their marketing people, “We need to be in social media, engage in social media marketing, we need a social media strategy”."

I think it's the other way around. Marketing people are saying "we need to be on SM because that's where our customers are." Non-marketing senior execs react by thinking "ok, whatever. just show me some results."

You also wrote: "Unless your bank or credit union is willing to innovate and develop a “game-changing” business model, it may not fit."

I wouldn't agree with that. I don't think there's anything wrong, or misguided, with trying to use social media to better engage customers and prospects--within the existing and traditional business models. I just don't think there are many banks that do this effectively.

One point of strong agreement, however, is your spot-on counter to the "but it doesn’t cost us anything to engage in social media” claim.