How Credit Unions and Banks Could Use Social Networking More Effectively

By Jason Sherrill
Posted on Jan 11, 2010

The CEO of a mid-sized credit union in Michigan called me to ask advice on how best to use Facebook as part of his credit union's marketing strategy. He wanted to know the benefit of having a Facebook page and how it would actually benefit his bottom line. He was skeptical of the value that social media offered his organization and wondered if I thought his skepticism was justified. He said my answer was helpful to his decision whether to move forward, so I thought the information might also help other bank and credit union executives in evaluating whether to use social media.

Individual financial institutions have been slow to adopt social networking as a tool to connect with new and existing customers. Based on what my clients tell me, the reason is twofold:

1. Concerns over regulations and compliance
2. Uncertainty of how to effectively use social marketing and how to measure ROI

Concerns over compliance are justified, especially if financial institutions use the social sites in the casual nature that most users are accustomed to. Banks, unfortunately, have to keep a tight reign on what employees post to the internet on officially sanctioned outlets.

In my research, larger institutions such as Wells Fargo and Bank of America are primarily using social sites, such as Twitter, for only the most basic customer service interactions. For obvious security reasons, the help they're able to provide in these mediums is of a very general nature and usually involves guiding customers toward other online resources or providing telephone numbers and names of people or departments to contact for help.

Other institutions, such as Fairwinds Credit Union that has garnered more than 3,000 Facebook fans, is using its Facebook page primarily to promote its products through relatively basic educational videos, announcements and financial tips. Similar to Wells Fargo and B of A, the information most financial institutions are posting on Facebook is fairly homogenous. This reduces regulatory risk, of course, but also makes the information less valuable since there is already an abundance of generic financial information available on the Internet.

Measuring ROI is an even more complex challenge. For those institutions using social sites as a customer service tool, some objective costs and benefits can be measured for these customer interactions. If a user's question is one that cannot be answered via Twitter, for example, then the cost could actually be higher since two interactions may now be necessary with a customer to solve an issue rather than a single interaction had the customer called or securely emailed first.

Subjective ROI measurements are more interesting, such as building goodwill with existing and potential customers, or mending strained relationships. But due to the conservative, corporate culture of most financial institutions, I saw few organizations in my research that were doing either effectively. A perfect example of failure to adequately (in my opinion) address member complaints can be seen in these Facebook posts at Fairwinds:

In this situation, I would have liked my client to have responded, preferably before any other members started to pile on, and then continued to respond to other members' comments. While it may be true that this member has terrible money management skills, an acknowledgement of his frustration and an offer to meet with the member to review and investigate the charges could go a long way toward damage control. What is the goodwill value of this damage control? I do not have a firm answer, but I can say for certain that it is greater than the negative ROI of no response, which some third-party observers may infer is an admission of guilt.

Many other banks and credit unions are using their Facebook, Twitter and similar accounts to simply post promotional materials to the internet. While this is a low cost method to reach customers, unless very carefully targeted, many customers are likely to feel this is intrusive advertising. Internet savvy customers are quick to abandon, or "unfan", an organization that abuses its permission to connect with clients by pushing poorly targeted marketing materials to their accounts. This type of marketing is also known as "interruption marketing."

While I believe this is a shortsighted strategy with negative long-term impact on ROI, the truth is that given the low cost to distribute the promotions, I've worked with many organizations that have seen a positive short-term ROI on these types of activities; however, I've not seen any organizations measuring what I call fan churn. In other words, how many customers become fans, but then unfan the organization forever?

Some banks and credit unions are aggressively promoting attractive products, such as high-yield interest checking accounts, higher than average yielding CDs and extremely competitive auto and home loans. These organizations are using a combination of pay-per-click Facebook advertising and organic social networking to attract new customers at a relatively low cost. This type of use is easier to more objectively measure ROI since the efforts often result in a transaction that has a definite value. Unfortunately, many of the financial institutions we work with tell me that it is difficult for them to be competitive in the current market.

It may be clear to you now that there is no silver bullet in the social networking arena for financial institutions. Your ROI measurement of participating in social networking, such as Facebook, is going to depend largely on your ability to place a value on subjective criteria, such as goodwill and customer relations. If you're one of the fortunate few who can consistently offer exceptional value to customers above what your competition can, then you'll likely find social networking a more valuable, measurable instrument in your overall marketing and communications tool belt.