Should Banks Even Bother Using Social Media?

The short answer is yes, according to a recent J.D. Power special report, Achieving Excellence in Customer Service: The Brands That Deliver What U.S. Consumers Want. In fact, additional analysis conducted by J.D. Power’s social media intelligence team indicates that customers do talk extensively about people and bank processes and ignoring customer feedback represents the largest missed opportunity for banks, especially those trying to build and sustain a customer centric culture in an overregulated industry.

Most customer banking discussions on social media channels can be grouped into the following three areas:

  1. Passive positive discussion around usage and services
  2. Passionate negative discussion regarding stability, performance
  3. Avoidance of larger banks that have suffered as a result of the financial crisis

© 2011 J.D. Power and Associates Retail Banking Study, The McGraw-Hill Companies, Inc. All Rights Reserved. Values may be affected due to rounding. Pre-Boomers” = born 1900-1945. “Boomers” = born 1946-1964. “Generation X” = born 1965-1976. “Generation Y” = born 1977 through 1994

What Are Banking Customers Using Social Media For?

  • 49% report using social media outlets to read and discuss general banking and industry news and events
  • A small proportion of customers (13%) have used a social media outlet to contact their financial institution for a service-related issue
  • Of those blogging about a poor service experience, only 24% of Gen X and Gen Y customers and 16% of Pre-Boomer and Boomer customers say their financial institution actually responded to their issue
  • While the majority of customers received no answer, a large percent of the population stated that they didn’t know if they got any response

The Good News: Most conversations are transactional in nature

The positive customer behaviors exhibited in social media conversations are primarily transactional in nature with less engaged interactions. For instance, customers passively mention using an ATM and rarely mention wanting to join a bank as a result of a positive experience or message. Some negative behaviors like “avoid” largely reference customers that “avoid bank fees” while many others such as “not trust”, “take out” and “reject” reference conversations whereby people are encouraging traditional bank customers to cancel their accounts with major banks.

The Bad News: The cost of a non-response can be high for banks

  • Among those customers who received a response, 47% say that they “definitely will” reuse their financial institution in the future and declines to 27% among those customers who did not receive a response
  • Among customers who received a response, 50% say that they “definitely will” recommend their bank vs. 30% of those who didn’t receive a response, and 44% say that they “definitely will not” switch vs. 25%, for those not receiving a response
  • Nearly one in five Gen X and Gen Y customers state that they are likely to utilize social media for banking-related topics in the future, and more than one in 10 Pre-Boomer and Boomer customers are likely to do the same

The Point: Banks need to invest in servicing their customers through social media

Although the use of social media for customers to interact with their financial institution is still a bit new for some, examples of what to do and what not to do have already been witnessed across several industries. Banks that have responded to Twitter postings without considering the consequences of such actions suddenly became inundated with many requests via that channel, and found themselves under-equipped to handle the influx. The snowball effect this created had negative consequences for these companies, which found it necessary to quickly staff up to handle the volume of new Tweets they were receiving.

While simply having a Facebook page or Twitter account may have been sufficient for financial institutions in the past, customers are now beginning to utilize these channels to contact their bank. Given the public nature of these contacts, banks need to be equipped to respond quickly to questions or issues raised via these channels, while also keeping in mind the sensitive nature and regulations regarding communication for the financial services industry.

The usage of social media outlets to contact financial institutions is growing, and is likely to increase in the coming years. Of customers who say that they have used some form of social media outlet to contact their financial institution, a vast majority either did not receive a response or are not sure if they received a response.

Banks must better equip to handle what is likely to become an increasingly popular—and very public—form of contact.  Banks also need to have appropriate staff to quickly answer questions or respond to service issues if they care about growing a customer centric culture and want to keep customers happy.

 

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