Social Media at the Starting Blocks:

Transcription

1 Oracle White Paper February 2011 Social Media at the Starting Blocks: A Look at Financial Institutions in Europe and the United States

2 Impact Points... 1 Introduction... 2 Methodology... 3 Social Media in Financial Institutions... 3 Funding Social Media Initiatives... 5 Organizing for Social Media... 9 Business Objectives of Social Media Social Media Tool Deployment Measuring Social Media Conclusion Recommendations Align Social Media Investments with the Marketing Funnel Address Specific Market Segments Integrate Social Media Approaches into Online Capabilities Establish an Integrated Marketing Measurement Framework Related Aite Group Research About Aite Group About Efma... 29

3 Impact Points The following Impact Report is based on an August through October 2010 survey of 166 financial services executives in the United States and Europe, conducted by Aite Group and EFMA. It is intended for companies seeking to understand financial institutions current and planned use of social media to support their marketing efforts. Six in 10 financial institutions consider themselves to be either novices or beginners at social media. Today, 30% of firms get no specific funding or have no dedicated budget for their social media initiatives, but 90% of firms expect to have dedicated budgets for their social media efforts by 2012, with one third anticipating the creation of a new budget. By 2012, 40% of financial firms expect to invest between 2% and 10% of their overall marketing budget on social media. Engaging customers, building brand awareness, and building brand affinity top the list of business objectives driving the use of social media in financial firms today. Slightly more than half of the firms surveyed have a Facebook presence today, with two thirds of the rest planning to use the site. Twitter was the next most popular tool, used at 44% of firms, followed by YouTube, in use at 38% of FIs. Facebook is rated the most effective social media tool for marketing purposes, followed by customer review sites and blogs. Few firms rank themselves highly when asked to compare their performance against their peers along a range of social media performance measures. 1

4 Introduction With the number of people on Facebook crossing the 500 million mark, there s no doubt that social media is the hottest topic in marketing for The term social media can be applied to a wide range of technologies, tools, and techniques. Andreas Kaplan and Michael Haenlein, professors at the ESCP Europe Business school define social media as: A group of Internet based applications that build on the ideological and technological foundations of Web 2.0, which allows the creation and exchange of user generated content. 1 As Wikipedia notes, a common thread running through all definitions of social media is a blending of technology and social interaction for the co creation of value. 2 This Aite Group Impact Report analyzes financial institutions current and planned use of social media to support their marketing efforts. 1 The Challenges and Opportunities of Social Media, Business Horizons, January February

5 Methodology The following analysis is based on an Aite Group and EFMA survey of 166 financial services executives in the United States and Europe, conducted between August and October of The survey, conducted online, was designed to capture the social media strategies and tactics that financial services firms are deploying. Respondents were recruited from EFMA members in Europe and Aite Group contacts in the United States (see Figure 1). Figure 1: Geographic Region of Survey Respondents Social Media in Financial Institutions Financial services firms are in the early stages of building their competency in social media. Six in 10 firms consider themselves to be either a novice or beginner at social media (see Figure 2). There is little difference between U.S. and European firms on this matter a slightly higher percentage of U.S. than European financial institutions consider themselves novices, but the percentage of firms that consider themselves intermediate or advanced in their use of social media is virtually the same across the two regions (see Figure 3). 3

6 Figure 2: Financial Institutions Experience With Social Media, U.S. and Europe Figure 3: Financial Institutions Experience With Social Media by Region Although six in 10 financial institutions are novices or beginners at social media, there aren t a lot of strong barriers preventing them from incorporating social media into their marketing. The most frequently cited barrier is the lack of human resources or time, and that was mentioned by just one third of survey respondents (see Figure 4). Importantly, lack of funding or budget is not an issue for most firms. Novices were the most likely to cite the absence of a clear ROI and lack of senior management support as barriers to using social media (see Figure 5). 4

7 Figure 4: Barriers to Deploying Social Media Figure 5: Barriers to Deploying Social Media by Level of Experience Funding Social Media Initiatives That a lack of funding or budget is a strong barrier to just 12% of financial firms doesn t mean there is a lot of money flowing to social media efforts. Today, 30% of firms get no specific funding or have no dedicated budget for their social media initiatives in fact, less than one in ten firms have a dedicated budget. The largest segment 43% gets funding from other departments budgets. The funding picture will change dramatically over the next two years. By 2012, 90% of firms expect to have 5

8 dedicated budgets for their social media efforts, with one third anticipating the creation of new budget, one third expecting the money to come from existing budgets, and onefourth foreseeing the combination of new funding and existing budget shifts (see Figure 6). Figure 6: Funding Sources for Social Media Efforts Today, the percentage of U.S. and European firms that have no dedicated budget or funding for social media is nearly identical. In two years, very few European financial services firms will be without a dedicated social media budget (see Figure 7). Figure 7: Lack of Funding Sources for Social Media Efforts by Geographic Region For firms that are funding social media by shifting money from other budgets, the money is coming from a variety of sources. At the top of the list are direct marketing and print advertising. Two years 6

9 from now, more firms plan to hit up print advertising s budget to fund social media than any other source. In fact, financial firms plan to pull funds from a broader variety of sources in two years than they do today (see Figure 8). Figure 8: Budget Sources for Social Media Initiatives The most prominent changes in budget shifts will come from European firms that plan to pull even more from TV advertising and promotional budgets than they do today (see Figure 9). Figure 9: Budget Sources for Social Media Initiatives for European Financial Firms For now, the owners of the direct marketing and advertising budgets have little to worry about the amount of funds that are shifting out of those areas is pretty small. Overall, more than half of the firms 7

10 surveyed said that, as a percentage of their total marketing spending, investments in social media are too small to measure. This will change dramatically over the next five years. By 2012, 40% of financial firms expect to invest between 2% and 10% of their overall marketing budget on social media. And by 2015, nearly one in five expects that percentage to be greater than 10%. There s plenty of uncertainty, however, as nearly three in 10 firms don t know what their social media spending will look like in five years (see Table A). The differences between U.S. and European firms are not significant. Table A: Percentage of Marketing Spending on Social Media Q. WHAT PERCENTAGE OF YOUR FIRM'S MARKETING SPEND DOES (WILL) SOCIAL MEDIA REPRESENT? TODAY IN 2 YEARS IN 5 YEARS Too small to measure 53% 10% 6% 1% to 2% 10% 22% 5% 3% to 5% 9% 20% 20% 6% to 10% 4% 20% 21% 11% to 25% 1% 5% 14% 26% to 50% 1% 2% 4% Greater than 50% 0% 1% 1% Don t know 5% 15% 29% No separate budget 18% 6% 0%. Significant differences are found by comparing the social media beginners to those firms that categorize themselves as intermediate or advanced in their use of social media. Among the beginners, 63% are spending so little on social media that it isn t measurable. Among the intermediate and advanced firms, however, roughly one in four already invests at least 2% of their marketing budget in social media related efforts (see Figure 10). 8

11 Figure 10: Percentage of Marketing Spending on Social Media by Experience Level Organizing for Social Media Significant differences are found by comparing the social media beginners to those firms that categorize themselves as intermediate or advanced in their use of social media. Among the beginners, 63% are spending so little on social media that it isn t measurable. Among the intermediate and advanced firms, however, roughly one in four already invests at least 2% of their marketing budget in social media related efforts (see Figure 10). Figure 11: Organizational Approach to Social Media 9

12 Not surprisingly considering that survey respondents came predominantly from marketing departments marketing was the most frequently cited department involved in the management of financial firms social media efforts. The public relations and online channel groups also participate in social media management in many financial firms (see Figure 12). By firm experience level, beginners differ from intermediate/advanced firms regarding the involvement of the customer service group, which is involved in just 20% of beginner firms, but in 36% of intermediate/advanced firms. Figure 12: Organizational Participants in the Management of Social Media Business Objectives of Social Media Engaging customers, building brand awareness, and building brand affinity top the list of business objectives driving the use of social media among financial firms today. To a lesser extent, financial firms are turning to social media to improve customer retention, though few firms expect social media to generate revenue or help reduce customer service or marketing costs (see Figure 13). 10

13 Figure 13: Business Objectives of Social Media With one exception managing crises more U.S. firms consider the range of business objectives that the survey asked about to be important than did their European counterparts (see Figure 14). This may reflect a cultural difference in responding to surveys or an indication that European financial firms social media objectives are not as clear or explicit as the objectives of U.S. firms. Aite Group also believes that the term customer engagement is less popular outside the United States, accounting for the lower percentage of European firms that considered it a strong objective of their social media initiatives. Figure 14: Business Objectives of Social Media by Region 11

14 Looking ahead a couple of years, financial firms list of business objectives for social media will expand dramatically. In just two years, social media investments will have to produce tangible benefits for financial firms; that is, a significantly higher percentage of firms will look to social media to retain customers, generate revenue, and reduce marketing costs (see Figure 15). Figure 15: Business Objectives of Social Media in Two Years Social Media Tool Deployment Slightly more than half of the firms surveyed have a Facebook presence today, with two thirds of the rest planning to use the site. Twitter was the next most popular tool, used by 44% of firms, followed by YouTube, in use at 38% of financial institutions. Firms that don t currently blog or use Twitter are evenly split between those that plan to use these tools and those that don t plan to (see Table B). Table B: Social Media Tool Deployment Q. WHICH STATEMENT BEST DESCRIBES YOUR FIRM'S USE OF THESE SOCIAL MEDIA TOOLS? (N=166) USE THIS TODAY DON'T USE, BUT PLAN TO DON'T USE, DON'T PLAN TO Facebook 53% 30% 16% Twitter 44% 28% 27% YouTube 38% 28% 34% LinkedIn 36% 17% 47% Blog 32% 34% 34% 12

15 User generated content 17% 35% 48% Customer review sites 12% 27% 61% Flickr or other photo sharing site 11% 15% 73% Financial services social networking sites 7% 28% 65% Table B: Social Media Tool Deployment U.S. financial firms are more likely than European financial institutions to use Facebook and Twitter today, but European firms plan to close that gap in the future. On the other hand, more European firms use YouTube today, but more than half of the U.S. firms that don t use it today plan to in the future (see Table C and Table D). Table C: Social Media Tool Deployment Among U.S. Financial Firms Q. WHICH STATEMENT BEST DESCRIBES YOUR FIRM'S USE OF THESE SOCIAL MEDIA TOOLS? (N=71) USE THIS TODAY DON'T USE, BUT PLAN TO DON'T USE, DON'T PLAN TO Facebook 63% 25% 12% Twitter 49% 26% 25% Blog 32% 36% 32% YouTube 33% 36% 30% LinkedIn 44% 17% 39% Flickr or other photo sharing site 17% 20% 64% User generated content 21% 36% 42% Customer review sites 15% 33% 52% Financial services social networking sites 7% 30% 63% 13

16 Table D: Social Media Tool Deployment Among European Financial Firms Q. WHICH STATEMENT BEST DESCRIBES YOUR FIRM'S USE OF THESE SOCIAL MEDIA TOOLS? (N=95) USE THIS TODAY DON'T USE, BUT PLAN TO DON'T USE, DON'T PLAN TO Facebook 46% 34% 19% Twitter 41% 30% 29% Blog 32% 32% 36% YouTube 42% 22% 36% LinkedIn 30% 17% 52% Photo sharing site (e.g., Flickr) 8% 12% 80% User generated content 13% 34% 53% Customer review sites 10% 23% 68% Financial services social networking sites 6% 27% 67% Intermediate/advanced firms are, not surprisingly, more likely than beginners to use a range of social media tools, although relatively few use customer review sites like Yelp or financial services social networking sites like Zecco (see Figure 16). Figure 16: Social Media Tool Deployment by Level of Experience 14

17 Many firms use third party sites ( off us ) or tools like Facebook and Twitter as well as on site ( on us ) tools, like blogs and user generated content. Today, the social media efforts of 30% of the firms surveyed are limited to just on us efforts, while another nearly four in 10 firms efforts are mostly on us, with some off us initiatives. The picture will be very different by 2012, with only one in 10 firms will be strictly using on us tools (see Figure 17). Figure 17: On Us vs. Off Us Social Media Tool Deployment With so many financial firms turning to social media (Facebook, Twitter, blogs, and YouTube, in particular)to engage customer and build brand awareness, the question to be answered is, Are these tools effective at achieving these objectives? Unfortunately, there s little consensus among financial services executives on which tools are truly effective. Facebook is considered to very effective for engaging customers by 39% of respondents, with another 48% rating the site somewhat effective for accomplishing the objective. Usergenerated content garners the second highest number of very effective votes, with 34% of the sample. Only about one in 10 respondents flat out consider Facebook, user generated content, or customer review sites to be ineffective at increasing customer engagement. It s important to note, however, that a meaningful percentage of financial executives don t know how effective many tools are for increasing engagement (see Figure 18). 15

18 Figure 18: Social Media Tool Effectiveness at Increasing Customer Engagement For generating consumer awareness, 43% of survey respondents consider Facebook very effective, with another 44% rating it as somewhat effective. Blogs are rated as very effective by 32% of financial executives, although nearly one in five says that blogs are not effective (see Figure 19). Figure 19: Social Media Tool Effectiveness at Generating Consumer Awareness For influencing consumer preference, 46% of respondents deem customer review sites to be very effective, although 20% don t know how effective these sites are for accomplishing this objective. Financial institutions don t consider Facebook to be as effective for influencing consumer preferences as they do for engaging customers or generating consumer awareness (see Figure 20). 16

19 Figure 20: Social Media Tool Effectiveness at Influencing Consumer Preference So which is the most effective social media tool? We assigned 10 points for each very effective rating a tool received, and five points for a somewhat effective rating. When we tallied the results, Facebook came out on top, followed by customer review sites and blogs (see Table E). Table E: Social Media Tool Effectiveness Scores by Marketing Objective INCREASING CUSTOMER GENERATING INFLUENCING TOTAL ENGAGEMENT CONSUMER CONSUMER AWARENESS PREFERENCE Facebook Customer review site Blog User generated content Twitter YouTube FS social networking site LinkedIn Photo sharing site

20 Averaging the scores across the three objectives shows that European financial firms have a more optimistic view of the marketing effectiveness of social media tools than do U.S. firms, with the exception of photo sharing sites (see Figure 21). Figure 21: Social Media Tool Effectiveness at Influencing Consumer Preference Measuring Social Media To understand what performance metrics financial firms are using to gauge the success of their social media efforts, the study adapted a measurement framework developed by Web Analytics Demystified and the Altimeter Group, published as open research in a report titled Social Marketing Analytics: A New Framework for Measuring Results in Social Media, and used with permission from the two firms. The framework defines 12 performance metrics that correspond with four different business objectives (see Table F). Table F: Social Media Measurement Framework BUSINESS OBJECTIVE METRIC DEFINITION Foster dialogue Share of voice % of brand mentions in social channels Audience engagement % of visitors who contribute comments or links Conversation reach # of visitors who participate in topic conversations Promote advocacy Active advocates # of individuals generating positive sentiment over a given time frame 18

21 Advocate influence % of influence for an individual advocate in social media channels Advocacy impact Direct or indirect contributions of advocacy on conversions Facilitate support Resolution rate % of customer service inquiries resolved satisfactorily using social media channels Resolution time Time required to produce a human response to customer service issues posed in social media channels Satisfaction score Indexed score indicating the relative satisfaction of customers Spur innovation Topic trends Brand/product/service topics identified by monitoring social media conversations Sentiment ratio Ratio of positive to neutral to negative brand mentions Idea impact Rate of interaction engagement and positive sentiment generated from a new product or service idea Source: Web Analytics Demystified and Altimeter Group While respondents perspectives are mixed between which metrics they see as very important and those they see as somewhat important, few believe that these are not important (see Figure 22).Of the four business objectives in the measurement framework, metrics relating to facilitating support are rated as most important. Figure 22: Social Media Metric Importance Just because a firm believes a social media metric is important doesn t mean it measures that metric, however. In fact, none of the 12 metrics tracked are currently measured by more than 30% of the firms surveyed (see Figure 23). This creates a measurement gap the difference between the percentage of 19

22 respondents that consider a metric to be very important and those that are currently measuring the metric (see Figure 24). Figure 23: Social Media Metric Measurement Figure 24: Social Media Metric Measurement Gap Intermediate and advanced firms have different views of which metrics are very important, however. Compared to beginners, they re more likely to consider metrics like active advocates, resolution time, resolution rate, and share of voice to be very important (see Figure 25). 20

23 Figure 25: Social Media Metric Importance by Experience Regardless of whether or not they currently measure the metrics in the framework, few firms rank themselves highly when asked to compare their performance for each metric against that of their peers (see Figure 26). Figure 26: Social Media Metrics Ratings 21

24 Conclusion From our study of social media strategies among financial institutions in the United States and Europe, Aite Group concludes that: Social media in financial services is still in the early stages of its evolution. While it s true that six in 10 financial institutions believe that they re either novices or beginners at social media, other signs serve as signals that social media within financial services firms is immature, including the lack of consensus regarding the effectiveness of various tools and the absence of a social media measurement infrastructure in most firms. Financial institutions social media objectives are unrealistic. By 2012, two thirds of financial institutions will look to social media to increase customer retention, and nearly half will expect to generate revenue from their social media efforts. These objectives are wishful thinking on the part of financial services marketers, and consistent with past delusions of marketing success. Marketers have expected increases in retention and cross selling as a result of adoption in online banking, online bill pay, and more recently e bills and personal financial management PFM. Aite Group believes that, because the industry is still so early in the evolution of social media, no one can be quite sure exactly which marketing objectives are the best fit for social media efforts. Financial institutions are failing to use social media throughout the marketing funnel. Though financial executives consider customer review sites to be the most effective tools for influencing customer preferences, just one third of financial institutions will host or use customer review sites, compared with the 80% of financial firms that have or will have a presence on Facebook. As a result, it seems that financial institutions are deploying social media to support the early stages of the marketing funnel (awareness) and the later stages of the funnel (engagement/loyalty), but not the middle of the funnel (interest and preference). The lack of broad organizational participation is a warning sign. Less than one in four financial firms involves their customer service department in the management of social media efforts, yet more than half of survey respondents say that supportrelated metrics resolution rate, resolution time, and satisfaction rate are very important. With two thirds of firms considering the reduction of customer service costs to be at least somewhat of a social media objective, the absence of customer service in the management of social media will be a barrier to reaching these goals. Financial firms should expect marketing budgets to decline. In five years, nearly one in five firms expects social media to account for more than 10% of its marketing budget. With nearly 30% of respondents unable to forecast out that far, the percentage spending more than 10% might even be higher. Many firms realize that their social media budget will come from other marketing sources, and are unlikely to be replenished. But we foresee another factor driving the marketing budget down: If chief marketing officers are successful in arguing that social media marketing efforts are more effective and less expensive than other channels, then chief financial officers will argue that CMOs should be able to do more with less. 22

25 Recommendations To ensure and improve the success of social media investments and initiatives, Aite Group recommends that financial institutions: 1) Align social media investments with the marketing funnel; 2) Target specific market segments; 3) Integrate social media approaches into online capabilities; and 4) Establish an integrated marketing measurement framework that incorporates social media specific measures. Align Social Media Investments with the Marketing Funnel Financial institutions should track and categorize their social media investments and efforts not just by business objectives (like building brand affinity, retaining customers, etc.), but by components of the marketing funnel (awareness, consideration, preference, purchase, loyalty). Marketers that do this will be in a better position to ensure that their social media efforts span the spectrum of marketing objectives, and will be better able to determine if they re under or over investing in any particular element of the funnel. Address Specific Market Segments Many financial firms that have ventured into the social media space with blogs, Twitter accounts, or Facebook do so by establishing general, all purpose pages or sites designed to appeal to the general public. The success stories we heard from financial institutions, however, had a common thread: Their efforts were focused on a particular market segment. Two campaigns stand out: Young & Free Alberta: In 2007, Commonwealth Credit Union in Alberta, Canada recognized the need to lower the average age of its member base, and to capture a larger percentage of the Gen Y market, which represented a disproportionately high percentage of the demand for banking products in Canada. A social media campaign called Young & Free Alberta was created building upon an idea to run a contest to find a spokesperson from the Gen Y community to run the program for a year, which would include blogging and making public appearances at events where Gen Yers were likely to gather. The program launched in October 2007 with a two month search to find a dedicated Young & Free Alberta Spokesperson. The winner became a paid employee of the credit union, working full time with the job description talk, type, and tell good stories. In addition, the effort involved the creation of a new checking account with no monthly fees to be marketed to young consumers. In the first year of the program, the microsite received more than 63,000 site visits; visitors averaged more than three minutes per visit and left more than 900 comments. The campaign also generated C$179,000 in unpaid media and more than two million impressions. Overall, in its first year alone, Young & Free Alberta generated 2,316 new accounts, totaling C$3,587,000 in new funds. New account openings grew by 960% over the same period one year prior among 19 to 25 year olds. 23

26 The campaign is still active a new contest to find new spokespeople is conducted each year. Traffic and sales have been steady even though all supporting traditional media targeted at reaching Gen Yers stopped shortly after the program was launched. Verity Mom. From an analysis of consumers money management habits, Verity Credit Union, in Seattle, Washington, discovered that moms the female heads of households made the financial decisions in 83% of U.S. households. Verity believed that this segment of the market had been overlooked by most of the financial services industry, but also believed that moms influenced where their children banked, as well. In conjunction with a social media campaign, which centers around a blog written and managed by a mom from the community (who, similar to the Young & Free campaign, had to audition for the job), Verity phased out its existing checking account and introduced a new, high yield checking account designed to appeal to moms. In addition to the microsite, there is a YouTube account, a Twitter account, and a Facebook page, each with content provided by the Verity Mom. The average age of new members opening up the credit union s new account is about 37 years old, well below the average age of the overall membership base. In addition, monthly account openings are running about 100% higher than the comparable month from the prior year, when the credit union was selling its old account. In addition to these campaigns, statistics compiled by VisibleBanking.com (a Europe based site dedicated to social media in financial services) suggest that the financial institutions with the most Facebook users focus those pages on specific market segments. JPMorgan Chase s Community Giving page on Facebook leads all financial institutions, with more than 2.5 million fans as of October The site with the largest monthly growth in October 2010 was U.K. based Barclay Bank s site, which is focused on attracting football (i.e., soccer) fans. And the site with the most monthly users in October 2010 was Geico s Pet Photos site, serving pet owners. 3 Integrate Social Media Approaches into Online Capabilities While Facebook pages, Twitter IDs, and blogs will continue to be popular with financial firms over the next few years, these tools will help firms that are primarily in the early stages of the marketing funnel, namely in brand awareness. To focus on the latter aspects of the funnel, firms should integrate social media tools and techniques by focusing on 1) influencing customer preferences, and 2) providing collaborative support. Influencing Customer Preferences With the exception of customer review sites, financial firms see few social media tools as being particularly effective at influencing consumer preferences. But few of the popular review sites (like Yelp, for example) provide much financial services content. 3 banking.com/2010/10/top 10 most liked financial institutions on facebook inoctobe r pages groups apps in 67 cou.html 24

27 As a result, financial firms need to integrate product reviews into their own sites. America First Credit Union, based in Salt Lake City, Utah, accomplishes a number of objectives with user reviews integrated into its site (see Figure 27): Supporting prospects decision process: Rate and fee information is only a part of the information that consumers need to make account decisions. User reviews help them understand what it s like to interact with and be a member of the credit union. Demonstrating member advocacy: Advocacy the perception that the credit union is doing what s best for the member and not just its own bottom line is a key contributor to member loyalty. By enabling site visitors to see the low ratings as well as the high ones, America First is helping establish itself as being transparent and truly concerned with helping prospects and members make the right decisions for them. Gathering market intelligence: If America First wanted to know how its members felt about its products, it could hire a market research firm to survey members. This would likely carry a high price tag, and would only capture member sentiment at a point in time. By enabling member reviews on its site instead, America First continuously monitors member perceptions, gains valuable feedback about product perceptions, and gauges whether or not their product improvement efforts are paying off. Engaging members: Everyone likes to have their opinions heard and valued. Rather than providing feedback through anonymous surveys, America First members see their reviews posted on the site, and can potentially become a top contributor. Responding to negative reviews helps it demonstrate advocacy to its members. 25

28 Figure 27: Member Reviews on America First Credit Union s Site Source: savings/checking/checking.cfm Why are customer reviews effective at influencing preferences? Because consumers have come to mistrust the recommendations of financial firms (and marketers, in general), they look toward peers for recommendations; if a product or provider has been chosen by another person, it might be good for them, as well. It s important to give prospects the opportunity to see both sides of the coin, however. Negative reviews helps foster a belief that the credit union is transparent, and isn t hiding something or trying to game the system. Providing Collaborative Support Although a few financial firms have turned to social media to provide customer support most notably Bank of America, with its BofA_Help Twitter handle these efforts are more akin to creating a new channel for providing traditional means of support than they are providing customer support in a new way. In the financial services arena, Thomas Cook UK is an early adopter of providing collaborative, community driven customer support, doing so on its Facebook page (see Figure 28). 26

29 Figure 28: Thomas Cook UK provides community driven support on Facebook Source: Cook UK/ #!/pages/Thomas Cook UK/ ?v=app_ The benefits of a collaborative, community driven support capability are five fold: Reduced call volume: Reducing call center volume depends on: 1) how effective a firm is at driving awareness and usage of the site, and 2) the demographics of a firm s customer base. A few months after the launch of its community site, Mint.com has seen 3% of its users enroll in the support site. With effective marketing of the online capability, a firm with 500,000 customers could deflect US$2 million in call center costs over five years (see Figure 29). Expanded knowledge base: Many financial firms have an FAQ section on their site in an attempt to address site users most common questions about the firm. These pages often contain sparse, outdated information. Likewise, many call centers maintain or try to maintain knowledge bases to help reps answer incoming questions. Community driven sites help increase the pool of knowledge to fuel both online FAQ and call center efforts. Better employee training: An actively used community support site provides a mechanism to train employees on the types of questions that customers frequently ask, as well as to provide them with the best responses to those questions. 27

30 Enhanced customer segmentation: Aite Group research has found that the customers that are most engaged with their financial institutions are also the most loyal customers. 4 Participation in a community support site is a signal that a customer is engaged and likely to expand his or her relationship with the firm and refer it to friends and family members. Increased member engagement: As with customer review pages, a community support site lets customers engage with the financial institution and other customers. Number of customers 500,000 Number of support calls/yr/customer 4 Total number of calls 2,000,000 Cost/call $5 Total support cost $10,000,000 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 Community support penetration 3% 6% 9% 12% 15% Reduced calls/customer/year Savings $75,000 $150,000 $450,000 $600,000 $750,000 Source: Aite Group Total: $2,025,000 Establish an Integrated Marketing Measurement Framework There s a wide discrepancy between the number of social media metrics that survey respondents find important and the number of metrics that are being measured today. Recommending that firms close that gap between the two would be an easy recommendation to make, but would be a bad recommendation. The cost of developing an infrastructure to measure social media investments is not insignificant. Considering that many firms total investment in social media might only represent 1% to 2% of their marketing spend, building a measurement capability might cost as much as their entire social media budget. The challenge that many financial firms have isn t simply determining how well their social media investments are paying off, but determining how well all of their marketing investments are doing. Financial institutions effort to measure marketing results should focus on building a framework that enables marketers to determine how all of their investments are performing, and how well social media is doing relative to other channels and methods. 4 See Aite Group s report, Measuring Customer Engagement: Making the Metric Matter, June

31 Related Aite Group Research Personal Financial Management: A Platform for Customer Engagement, February Top 10 Banking Trends for 2010, February Credit Unions Online Channel Priorities 2010, February Financial Services Rewards Programs: The Quest for Profitability, December Engaging Gen Y: Cultivating a New Generation of Banking Customers, September The Next Generation of CRM in Retail Banking: Sense and Respond Marketing, June Measuring Customer Engagement: Making the Metric Matter, June How to (Re)Build Consumer Trust in Banks, April Banks New ROA: Return on Advertising, March The Hallmarks of High Performing Integrated Marketers in Retail Financial Services, June About Aite Group Aite Group is an independent research and advisory firm focused on business, technology, and regulatory issues and their impact on the financial services industry. With expertise in banking, payments, securities & investments, and insurance, Aite Group s analysts deliver comprehensive, actionable advice to key market participants in financial services. Headquartered in Boston with a presence in Chicago, New York, San Francisco, London, and Milan, Aite Group works with its clients as a partner, advisor, and catalyst, challenging their basic assumptions and ensuring they remain at the forefront of industry trends. About Efma Efma promotes innovation in retail finance by fostering debate and discussion among peers supported by a robust array of information services and numerous opportunities for direct encounters. Efma was formed in 1971 by bankers and insurers to encourage their colleagues to share experiences, promote the best practices of their institution, and collaborate through alliances and partnerships. Through events, publications, and its comprehensive website, the association provides members with answers to their questions about developing financial products, successfully selling them, rebuilding the distribution network, managing customer relationships, and improving performance and profitability. 29

32 Social Media at the Starting Blocks: A Look at Financial Institutions in Europe and the United States February 2011 Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores, CA U.S.A. Worldwide Inquiries: Phone: Fax: Copyright 2011, Oracle and/or its affiliates. All rights reserved. This document is provided for information purposes only and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission. Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners. AMD, Opteron, the AMD logo, and the AMD Opteron logo are trademarks or registered trademarks of Advanced Micro Devices. Intel and Intel Xeon are trademarks or registered trademarks of Intel Corporation. All SPARC trademarks are used under license and are trademarks or registered trademarks of SPARC International, Inc. UNIX is a registered trademark licensed through X/Open Company, Ltd oracle.com