In 2008, as the FDIC began its roll Call of failed banks, consumers became panicked and concerned. Fears increased as the FDIC and the media announced the potential for hundreds of bank failures over the coming year. In an effort to ease concerns and learn where their money could be safely placed, consumers began reaching out to the Internet for information on who to bank with and who to trust. But rather than rely on the word of finance professionals, consumers increasingly visited peer-to-peer and social networking sites where bank failure was a key topic of conversation. Bankers need to become part of the conversation on social networks, or risk losing this audience to competitors that do.
As early as 2005, BusinessWeek magazine addressed the generation of consumers growing up online and spending a considerable amount of their time socializing on the Internet. As the trend continued, social networks evolved into a major source of information for individuals that have significantly abandoned traditional information sources and become more dependent on information provided by peers.
A 2008 survey conducted by TNS Cymfony found that nearly 50 percent of senior marketing executives believed that social media, of which social networks are a sub-segment, is a vital component of corporate communications that should be monitored at the executive level and allocated appropriate resources.
Researchers predict that nearly half of all U.S. Internet users will visit at least one social networking site on a monthly basis by 2011. Further, researchers suggest the user base will shift towards women, older users and mothers-though teens and young adults will continue to represent a large portion of the user base.
A blending of the Internet with social marketing efforts gave rise to today's social media. This has resulted in a form of social marketing that favors Internet-based tools such as videos, blogs and online reviews for sharing and discussing information.
Researchers have observed that social networking has affected the way people communicate, make decisions, socialize, learn, entertain themselves and interact with each other. This has caused significant changes in market power, taking it away from businesses and giving it to consumers. The vast and growing knowledge base collected and maintained by social media applications has given consumers the power to make more informed decisions, forcing businesses-including banks - to deal in a more honest and open manner or lose the transaction to a competitor that does.
Retailers have learned that customer-generated content, specifically ratings and reviews, help drive sales, increase customer satisfaction and can be used to make advertising more effective. Banks can benefit from adopting a similar marketing strategy. According to a survey conducted by Forrester Research and Shop.org, 96 percent of retailers surveyed ranked customer ratings and reviews as an effective or very effective tactic at driving conversion.
While social networks differ from each other, the major applications maintained within most social networks operate similarly, as the goal of social networks is largely identical - to create, maintain and nurture conversations.
The most important lesson bankers should learn about social networks is how to be part of the conversation rather than to attempt to shape the conversation. Given that bank success is based on understanding the needs of the local market, banks are well positioned to incorporate a social networking strategy. For the last century marketing messages have been pushed out to consumers. But now banks have the ability to create and maintain ongoing conversations with consumers.
Banks are realizing the need to implement a social media solution in order to differentiate themselves from the competition and to take an early stake in winning over the hearts and minds of the social network generation. However, if banks fail to understand the nuances of marketing on social networks, they will quickly find themselves abandoned by users. For this reason it is essential that bankers understand the finer points of navigating the world of online social networks in order to maximize the resources invested in developing a strategy that incorporates this attractive but finicky segment of the online world.
Unfortunately, social networking is a misunderstood concept. Rather than focus on the "social" element, businesses often focus on the "technical" aspect as being most important. Bankers must understand that by enabling consumers to share and interact with each other, social media enables "content" to become more democratized than ever before. The user, not the bank, is the most important element in this world as it is the user that provides and consumes the content.
A Yahoo! Northern Europe executive summed it up, stating, "whereas marketing with traditional media like newspapers, television and news Websites was about delivering a message; marketing with social media is about building a relationship and conversation with your audience. Marketing is no longer one dimensional; it is now a two-way process engaging a brand and an audience. Marketing within social media is not just about telling and giving a message, rather it is about receiving and exchanging perceptions and ideas."
Jesse Torres is President and Chief Operating Officer of Security Savings Bank in Henderson, Nevada.
