7 Functional Benefits of Social Media for the Banking Industry
The volumes of banking consumers who also happen to be on social media are too large to ignore, thereby making social media an interesting marketing platform for the banking industry. Social media offers 7 functional benefits for the banking sector.
1. Formation of an online community for consumer engagement.
Banks usually need to be very careful with regard to advertising and promotional issues because of concerns pertaining to regulatory compliance. Social media has provided banks with a method to enhance their reach and spread their wings to connect and communicate with a large number of people. Interestingly, the banking sector, which was associated with finance, money and structuring the growth and safety of this money, in dull and drab environments, can now make use of social media to show their humane side.
In contemporary times, consumers are more sociable than earlier. Hence, institutions like banks, where profitability and sustainability are long term goals, can involve homogeneous groups of consumers in an online dialogue, which can help in building relationships through participation and reciprocity. By sharing financial tips and updates on products and services, a good speed of responding to any consumer queries or comments and maintaining accuracy and sanctity of information, banks can create quality environments in the virtual arena.
2. Relationship Banking
Banks can use social media for forming 3 types of bonds with customers-
- Financial bonds intrinsically have a monetary connotation. These are the result of some transactions where the involved parties are making economic gains, like when a customer feels that he is benefitting financially from the relationship with an organisational brand, in this case a bank. Hence, when a customer makes a fixed deposit with a bank and is satisfied with the interest rate, or gets a home loan from a bank and feels that he is getting a good deal, then he has entered into a financial bond with the bank. Similarly, when a bank provides a higher return on investment to a loyal customer, for example, through higher interest rates for long-duration accounts; the customer is gaining because of the financial bond. Suitable social media campaigns showing the benefits of long term deposits will contribute to the growth of these financial bonds.
- Relational bonds are those which are based on interpersonal interactions and social relationships and their longevity depends on friendship, rapport and social support. These relationships can be built by gaining an indepth understanding of customer requirements, giving him adequate importance, interacting with him regularly, ensuring that he gets what he wants, conveniently. A well crafted social media strategy can help build a psychological attachment between bank and consumer. wherein consumers feel that their banking partner is true to them, will not act opportunistically and can be relied upon.
- Structural bonds are formed between a bank and consumer when a bank provides essential services that are not available from any other source, such as an integrated service through their business partners, innovative channels like internet banking, integrated customer databases etc. Once a structural bond is established between the two entities, there is a switching cost involved, should the customer want to move to a competing brand. This automatically results in higher consumer retention rates. Long term sustainable relationships result in greater share of the customer wallet, deeper loyalty and a stronger brand association between bank and consumer. Memberships on social media platforms is also an example of a structural bond.
3. Creating a brand identity for the banks
Social media is a great avenue for banks to reflect their personalities through their social media conversations and presence. The consistency of their messages and posts is what will generate a deep, broad, brand awareness in the consumer minds. This will define ‘who’ the bank is and will help develop brand salience-the ability of a brand to enter the choice set in the consumer mind when he thinks of making a purchase. Banks are all about money and money is all about trust. Banks which are able to create an image of a sensitive, thoughtful and caring entity, resonate best with consumers.
In addition, by highlighting the functional and psychological aspects that differentiate one brand from the other, banks can generate a loyal consumer base for themselves. For instance, a bank which claims that customer centricity is its core philosophy, can indulge in creating all its social media content from a customer perspective ie. specific benefits to the specific requirements of customers, along different life stages, through specific product attributes. This will define the brand meaning-‘what’ the bank is all about. The objective of these endeavours is to create positive judgements in the consumer minds and elicit the reactions of consumer adoption of the brand. The long-term branding objective, nevertheless is to stimulate brand resonance and formulate a long term relationship between brand and consumer.
Social media is a strategic vehicle which can be used by banks to share authentic content with their consumers. This can include, generic economic content aimed at improving the financial health of the consumer (a budgeting infographic, financial planning goals, managing multiple fixed deposits, the evolution of online banking, mobile banking tips, handy guides to personal loans etc.) or well directed campaigns pertaining to banking products (savings and current accounts, downloading mobile banking apps, business and home loans, credit card bill payment etc.) and policies. A well-defined social media content strategy can help in positioning the bank as intellectually competent and the social media marketers as subject matter experts, thereby enhancing consumer confidence in the bank and its ability to support their banking needs.
By sharing basic information like how basic savings accounts do not require individuals to maintain any average monthly balance or how bank credit card purchases can be paid in easy equated instalments with nil processing or foreclosure charges, banks can enter into the social media feed of the consumers on a daily basis. Additionally, by sharing information pertaining to consumer convenience, banks can appear as attractive options to consumers. App install posts allow banks to promote their mobile banking applications and with a specific targeting effort like tagging some users, banks can motivate its consumer base to download the app from the Apple or Android store, on to their device.
5. Segmentation and Targeting
Social media can be used by the banking sector as a marketing tool-firstly for customer segmentation and targeting and then for customer acquisition.
As content is hosted on social media, conversations start taking place, between the bank and the prospective or current consumers. These conversations or consumer generated media are in the form of textual content. This textual content can be analysed to gain insight into the consumer cognitive space and generate marketplace intelligence. The information received through this analysis can be used for consumer segmentation.
Consumers can be divided into homogeneous groups and separate targeting strategies can be employed for each group. Groups of senior citizens can be subjected to content pertaining to investing their lifetime savings and get maximum returns. Groups of youngsters can be subjected to content pertaining to getting good deals for their entertainment agendas, using bank credit cards etc. Similarly, customers looking for home loans can be subjected to content pertaining to home loans with reduced monthly instalments/fixed monthly principal repayment etc.
Well planned targeting strategies can help organisations identify the needs of each consumer segment and help the banking industry to reach out to specific consumer groups with specific information, tailored to their needs. This level of personalisation in the marketing effort results in a higher consumer conversion rate and consumers adopt the banking products faster.
6. Customer acquisition through advertising
Customer acquisition is the process of gaining new consumers by persuading them to purchase a company’s products or services. This can be done by showing the positive attributes of the brand, or the product or service in question. Consumers adopt or buy a product or service when they are convinced that they need the same or when they feel that the offer is better than what they are already using. Hence banks need to find ways to show themselves in a good light so that prospective customers open their accounts with them. This can be done by formulating a good advertising strategy.
Banks usually acquire new customers when a person who has never held a bank account opens one or when a customer who has been banking with a particular bank brand, switches to another bank, because of three reasons-
- Influence of Marketing messages
- Negative experiences with the previous bank
- Significant life events.
Research has shown that consumers spend not more than 2-3 months, pondering over their decision when they are planning to switch to a competing brand and peer recommendations play a very important role in consumer decision making.
Banks can use social media to attract new customers and the following section discusses how they can do so.
- By monitoring the content created by competing entities, banks can create relevant differentiation for themselves and can find ways to generate greater appeal for the target audience.
- They can create suitable content to advertise products and services, investment services and wealth management services.
- Banks can host customer testimonials. This will give a significant positivity to a bank’s image and build credibility for the bank. This will make the bank very attractive to anyone who has had a negative experience with his previous bank.
- Additionally, by hosting promotional content that will be attractive to the consumers, banks can get more account holders to open accounts with them or utilize additional banking products.
- When certain banks promote specialized, personalized and customized schemes for retired people or senior citizens, they become attractive to that specific segment. Banks can find ways to build content around special life events. This will make them appear empathetic and they will become attractive to people who are going through that life situation.
7. Customer interaction, co-creation and retention
The banking sector has been able to accomplish something which some of the other sectors are still struggling with-use social media effectively for customer interaction, co-creation and retention.
- Banks need to interact with their customers to get them to behave in a particular fashion or use a particular service.
- They can use their customers as their partners and solicit their ideas to generate value in the banking ecosystem. This is the process of co-creation. This usually results in more personalized experiences for the customer because of an improvement in the banking processes or unique experiences for the customers. Simultaneously, the process of co-creation results in improved revenue, enhanced learning and greater market performance drivers for the firm.
- Banks need to focus on consumer retention. It costs 5 times more to acquire a new consumer as compared to retaining a pre-existing one. Banks should focus on retaining their customers by ensuring their satisfaction, preventing churn and enhancing customer life time value. Banks have large databases pertaining to the transactions of their customers and other data which helps them identify ways to increase their business from a single customer.
- For instance, if an individual has a savings bank account with a bank, the relationship marketing executive from the bank can find ways to ensure that this customer applies for a home loan or an insurance policy from the bank. Usage of multiple products from the same bank, prevents a customer from switching. In addition to this, by creating loyalty programs and popularizing them on social media, banks can create consumer evangelists who are consumer advocates and recommend the bank’s services to their peers.
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