Gauging the Effectiveness of Social Media in Financial Services

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Gauging the Effectiveness of

Social Media in Financial Services

By Eveline Letawe


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www.vrl-financial-news.comGauging the Effectiveness of Social Media in Financial Services

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Executive summary xi

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Chapter 1: Introduction The rise of social media 1

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Chapter 2: 7

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Chapter 3: Estimation of ROI 24

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Chapter 4: Are social media platforms 6

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Chapter 5: The new customer of social media 53

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Chapter 6: Uses of social media 6

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Chapter 7: 5

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Social media strategy 91

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Chapter 9: Suggested road map 10

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Chapter 10: Trends to come 114 5

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C life without these social media platforms and the internets second

generation, Web 2.0, nowadays at least two of these are an integral partof a consumers life.

Web 2.0 provides consumers with new technology that its original ver-

lives that consumers lead nowadays, social media and Web 2.0 enable and past is only a mouse-click away and we can expect quick responsesfrom those we communicate with. And no longer do customers need acomputer a smartphone or a tablet is enough to access the web andrespond to emails, catch up with friends on Facebook or watch the latestmusic video online on-the-go.

-tive resources. As banks push customers towards direct channels, such as

ATMs and online banking, social media too provides a valuable resourceto not just provide cost-effective banking services, but also regain the

-sis.

Get it right, and social media can make customers feel closer to their

There are issues, however. Unlike the traditional push marketing meth-ods of banks, social media is a two-way communication. Engaging withsocial media means banks have to accept and encourage a dialogue

with customers, assigning more power to customers and so decreasing theinstitutions authority. Many banks shy away from this approach.


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Another issue is compliance and regulation any engagement withsocial media must of course comply with regulation, but meeting thoseregulations cannot always translate to compelling and entertaining mediacontent.

This report argues that social media can be a valuable tool for customer-tiveness of social media.

potential to enhance customer engagement, and details the key successfactors in deploying these tools, the challenges for implementing them in

Several case studies, many of them exclusively conducted, serve asprime examples of how market leaders worldwide are using social mediato increase their customers brand loyalty.

-use social media to their advantage.

Case studies and examples include National Australia Bank, Ford andPayPal.

Financial services and the broader business environment are facing anumber of hurdles:

not transactional relationships.

media context.

-cial services companies.

that must gather talents and resources across the whole organisation

-

more

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The new customer can be described as someone who:

The rise of smart devices and app phones

-munication-, and other tools (context aware computing).

services industry? -

grated to peoples lifeMore than 100 million users access Facebook through mobile de-

vicesThey tend to be twice more active on Facebook through mobile de-

vices than online.By 2015, the single most interacted channel for retail banking will bethe mobile channel

-ing competitors. (Zopa, the P2P lending company, only accounts for1.5% of loans provided in the UK)

and legal compliance

very high (just 7% of UK customers have switched current accountsbetween 2008 and 2010).

However, this situation is being eroded by several factors such as

threats because the latter create a better customer experience

competitors in terms of access to potential clients (Google is used by


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costs for themselves and attractive terms for their clients.

if the loyalty of consumers stays low, they could soon become a serious

up 37% of all apps purchased for the iPhone), eBay (PayPals integrationto the formers platform means it is now used for 50-75% of payments),and Facebook (with Facebook Spare Change), are companies that, afterproposing platforms (whether they were communication devices or com-munity platforms), can focus more and more on the applications pro-clout, the network, or technological skills and occupy a highly relevant

intermediary position, in turn proving themselves very dangerous poten-tial competitors.

Social media was not built to facilitate business. Seeking out revenues-generating opportunities is still proving to be a challenge. But if aptlyleveraged, social media may save costs and be an effective investment,depending on the nature of services and products a company proposesand the amount of investments it is ready to undertake.

Exclusively focusing on direct sales by using social media is bound to

fail because it comes across the personal context and code. But somegains can be realised, mainly by saving on non-sales activities like:

The following characteristics justify this approach:

technologically possible:

be high

displayed online by users

Social media, and globally, a digital presence, matter in terms of productselection and constitute an essential complement to any sales effort.

Other interesting low cost initiatives from different natures have alsoemerged via social media (such as SmartyPig). These tend to proposemodel has often been created from the consumerss perspective rather


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than that of the provider. The successes the latter have enjoyed raises the

been the cause for the creation of such innovative products. Switchingover to the other side of the fence will require drastic changes.


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Gauging the Effectiveness of Social Media in Financial Services