Editor's Note: Social media is a divisive topic among bankers; some have been quick to embrace it because of its popularity, while others are urging caution because of its limitations and risks. We take a closer look, beginning with this story from the August issue of American Banker Magazine about how much consumers rely on social media to research bank products. Next up: several bank executives who have embraced Facebook, Twitter and other services share their challenges, tips for success.
When the tips they offer on family budgeting are sandwiched between updates about the latest Kardashian baby, banks might wonder why they even bother to use social media.
But now and then, new customers come in the door because of something they have seen on Facebook or Twitter.
In fact, people who use social media to find information about bank products are the best prospects, at least in terms of a propensity to buy. They are 18% more likely to become a customer or go through with a purchase than those who use other research tactics, according to Gallup.
Gallup surveyed consumers last summer about the sources of information they used before making a financial purchase. Those who cited social media were a tiny minority — just 5% — but a larger share of them ended up buying compared to prospects who spoke to someone at a branch or on the phone.
The data suggest that banks engaged in social media can capitalize on the higher conversion rate, says David Leonard, a senior managing consultant at Gallup who specializes in financial services.
But how to do so effectively is a tricky proposition. In general, banks struggle to exploit sales opportunities wherever they arise, Leonard says. Gallup found that, of those considering a new financial product, more than half do some research first, and overall these researchers are 17% more likely to make a purchase.
But the rate at which people go from pondering to actually buying varies greatly depending on the sources of information used in the research.
Those who visit a bank's website are 9% more likely to buy, a rate about half that of those using social media. The lift in conversions is only 6% for the branch and 8% for the phone.
Still, many bankers remain skeptical about engaging in overt outreach online.
"It is something that we would really want to vet," says Ray Smith, assistant vice president for marketing at the $5.2 billion-asset Berkshire Bank in Pittsfield, Mass. A big concern involves how to address the disclosures necessary when promoting products, especially on Twitter, where messages are limited to 140 characters, he says.
"With Facebook, you have a little more flexibility," Smith says. "But right now, it's not a strategy that we'd be looking to pursue."
Most shoppers prefer traditional sales channels, making social media at best a secondary source of information. But banks have good motivation to popularize social media as a research tool.
"You're capturing so much more data, and in a cheaper and a real-time manner," Leonard says. An ability to use data to customize messages makes social media particularly powerful, he says.
Gallup is conducting additional research in an effort for gain more insight into what social media tactics work for banks. For now, even bankers who agree with Gallup that social media is an effective conversion tool rely on anecdotal confirmation, rather than measurement.
"I hear from the branch staff a lot that somebody saw us online or somebody saw us on Facebook, but I have no way to track if that's accurate," says Caitlyn Schlichting, an interactive media specialist and Web developer for the $1 billion-asset Bank of Missouri in Perryville.
Schlichting says she hopes an ability to open accounts online, expected to be made available at Bank of Missouri by the end of this year, will make it easier to track data on social media.
For now, the bank has documented several successful conversions, she says. One woman, upset by new fees at her bank, saw a Facebook post touting free debit cards at Bank of Missouri. She became a customer the next day, Schlichting says.
Another new customer opened an account after winning a contest on Facebook. The contest was part of a promoted post, an ad that can show up on the news feeds of people even if they are not customers.
Other promotions, such as an annual business-plan competition and a monthly Facebook spotlight on a selected small business, have also drawn in new commercial accounts, Schlichting says.
The ripest targets for conversion may be people sounding off on Twitter about their current banks. Banks have been reluctant to pounce, highlighting the challenges of marketing on social media.
"I think there is a very delicate etiquette to this," says Nichole Kelly, CEO of Social Media Explorer, a digital marketing agency based in Baltimore. Instead of inviting someone to switch or pitching a product, banks can simply offer to answer questions or otherwise help the person, she says.
She offers an example of a hotel that tweeted at someone complaining about the long line to check in at another hotel in the same city. "They didn't ask him to come stay at their hotel. They didn't offer anything," she says. "They simply offered sympathy." The next time he was in town, the customer stayed at the hotel that had responded to his gripe, not the one where he had stood in line.
"That's why, I think, banks struggle with it so much, because it's not advertising," Kelly says. "It's relationship-building."
Joel Berg is a freelance writer for American Banker Magazine who lives in Harrisburg, Pa.