How financial institutions are making sense of social media

While social media can be a powerful marketing tool for financial institutions, a new report from Aite Group and the European Financial Management Association reminds these organizations to take a cautious approach.

The report, “SocialMediaattheStartingBlocks: ALookatFinancialInstitutionsinEuropeandtheUnitedStates”, surveyed 166 executives in the financial services industry and found that 60% of financial institutions consider themselves “novices” or “beginners” when it comes to social media.

A third of financial institutions have no funding dedicated to social media, but insufficient funding isn’t the reason why these organizations are hesitating: according to the report, most executives indicate that lack of time and human resources hold them back.

By 2012, 90% percent of surveyed firms intend to budget for social media initiatives. While one-third of firms will dedicate new funds, two-thirds will re-target existing print advertising and direct marketing budgets. A year from now, social media will comprise 2% to 10% of the overall marketing budgets of half of the sector’s firms.

What are financial executives trying to achieve through their social media strategies? Brand awareness was identified as a top objective, as well as increased revenue and improved customer retention.

According to report author Ron Shevlin, “these objectives are wishful thinking on the part of financial services marketers, and consistent with past delusions of marketing success.”

Shevlin recommends matching social media initiatives with business and marketing objectives such as awareness, consideration, preference, purchase and loyalty.

Financial institutions should also capitalize on the unique advantages of social media to target a key market segment rather than their general audience.

While Facebook is the most commonly used platform in the financial sector and is considered to be the most effective, Shevlin warns against the tunnel vision of winning Facebook friends at the expense of the valuable feedback that can come from consumer review sites.

Instead of using social media as a stand alone, Shevlin recommends integrating these platforms with other online capabilities to influence customer preferences and create opportunities for collaborative support. For example, offering product review and online forum functions through the corporate website is a great way to engage clients while maintaining the connection to existing online content.

Finally, Shevlin urges financial institutions to evaluate the success of their marketing strategy, including their social media initiatives. Engaging their customer/member service department to measure the impact of marketing initiatives across platforms can be a great way to gain internal buy-in and ensure successful integration of social media into existing marketing efforts.

While the realities of the social media playing field for the financial sector have yet to unfold, Shelvin is right to conclude that “banks can no longer ignore social media as a marketing tool.”