Based on analysis of 70 million blog and discussion board posts examined during the past two months, the volume of online discussion regarding financial institutions has increased by four times since May 2008 with the tone of discussions being increasingly negative, according to the J.D. Power and Associates Consumer Attitude Monitor Report.
The inaugural report analyzes posts from blogs and discussion boards related to 22 different financial institutions that took place between September and October 2008 and compares them to conversation volumes and sentiment of financial-related discussions from May 2008. The report is designed to provide executives in the financial services industry with ongoing measures of consumer attitudes regarding changes that have taken place with financial institutions and how those changes are influencing the saving and borrowing habits of their customers and other consumers within their targeted demographics.
The study finds that nearly one-fourth of online conversations about the financial services industry center around the current financial crisis, with topics such as the government bailout plan and bank failures featuring prominently in online discussions. In September 2008, daily posts regarding the government bailout plan reached a peak after the initial plan was rejected by the House of Representatives.
Increases in negative online commentary reflect consumer resentment toward financial institutions due to their perceived role in creating the current volatile and uncertain economic environment. In particular, consumers are expressing concerns about the following:
- Their personal situations, arising from dramatic declines in investment values
- Loss of choice and control to "mega banks" created by recent high profile mergers
- Continued tight credit conditions and slow loan approvals
- Lack of trust of financial institutions, with accusations that banks are hoarding bailout funds to prop up stock prices
- Provisions of "golden parachutes" for executives of failed institutions
"Many consumers are angry and afraid, and they hold big banks and other financial institutions responsible for the dire straits they believe the economy is in," said Rockwell Clancy, executive director of financial services at J.D. Power and Associates. "That said, online discussions suggest these consumers are still gathering and sharing information and taking a 'wait-and-see' attitude before taking action. The key for financial companies is to reach out to these customers before they reach the 'I'm-mad-and-I'm-not-going-to-take-it-anymore' stage."
Financial Institution Brand Comparison
The report details discussions about the financial crisis in general and also classifies brands based on both volume (measured by the number of new mentions per week, on average) and percentage of positive mentions. Brands that are discussed are then categorized into one of four quadrants: pacesetters, contenders, challenged and pressured.
Brands classified as pacesetters have both higher-than-average volumes of mentions and high positive sentiment and include financial institutions such as Wachovia, JP Morgan Chase, Morgan Stanley and Wells Fargo.
"Pacesetters differentiate themselves from other brands by effectively communicating their relative strengths to their customers and other consumers in their targeted demographic," said Clancy. "However, these financial institutions cannot afford to take their good images for granted and should continue to take a proactive stance in promoting their positive messages."
Brands that receive lower-than-average volume and higher positive sentiment are classified as contenders and include E-Trade and Share Building/ING, among others.
"Contenders are poised to emerge as pacesetters, provided that they are diligent about keeping abreast of consumer needs and remain flexible enough to respond quickly as those needs are expressed," said Clancy. "These brands may also benefit from reaching out to customers of recently acquired banks, who may feel displaced and disenfranchised."
Those brands that receive higher-than-average volume but lower positive sentiment are considered challenged and include WaMu, Bank of America and Merrill Lynch.
"As their classification suggests, challenged brands are in peril of losing existing customers and failing to gain new ones," said Clancy. "These challenged brands, including two that have recently been acquired, need to develop strategies to mitigate their low proportions of positive sentiment and over-communicate positive messages about their unique programs and services."
Brands that are classified as pressured receive lower-than-average volume and low positive sentiment and include Capital One, Citi and HSBC, among others.
"The fact that consumers are taking a 'wait-and-see' approach to the financial market works in favor of brands that are pressured," said Clancy. "However, delaying outreach to customers and not acting in a decisive manner to establish clear brand messaging can result in a shift from being pressured to being challenged."
Other Report Findings
The report also finds that, in light of recent acquisitions that have taken place between some major financial institutions, consumers are gauging how well banks are succeeding at assimilating newly acquired customers, managing conversions and implementing new policies. In addition, consumers are increasingly citing local and regional banks as preferred alternatives to certain major banks that some consumers perceive as having contributed to the collapse of other institutions in the financial service industry.
The J.D. Power and Associates Web Intelligence Division is unique in its ability to assess both what is being said and who is doing the speaking in the online world. Its patent-pending technology enables the classification of posts and ability to estimate gender and age of the speaker, as well as rapid identification and elimination of spam posts. The Web Intelligence Division analyzes voices of the online community by using proprietary Natural Language Processing and machine learning algorithms to dissect the who, what and why of online opinion, offering in-depth insights for some of the world's leading brands.