Some industries are notoriously slow to catch on to new technologies for a variety of reasons. In the financial services sector, marketers have long been stymied by concerns about security and reputation on public pages, poorly-executed strategies and missed opportunities.
That's changing fast in the relationship era of marketing. Overall, the banking industry's presence on social networks rose 31 percent in 2012 from the prior year, according to a recent Marketo blog post.
The industry's social media play — part of broader strategy aimed at engaging customers — is fundamentally reshaping the way financial services companies market themselves, and how effectively they do it. A 170-page report from the McKinsey Global Institute, "The Social Economy: Unlocking and Productivity Through Social Technologies," found that social technology not only boosts productivity in marketing departments, but also adds 5.2 percent to companies' top-line revenues. That makes social technology one of the biggest-drivers of value generation in marketing departments today.
The McKinsey report details other ways in which social media is reinventing sales and marketing for financial services:
1. Tapping into customer data
Many cost-saving strategies employed by financial firms, such as mass direct-mailings, studies show, can actually have a negative impact on marketing effectiveness as a whole. McKinsey says that, by using social media-generated data instead, banks can move away from mass-marketing and target consumers based on their specific needs. Financial firms can leverage social technologies to target consumers based on the major life events — like marriage, the birth of a child, the purchase of a car, the start of new job — that many consumers broadcast to their networks.
2. Increasing customer loyalty
Research shows that customers who interact with companies on Twitter and other social media are likely to buy up to 40 percent more products and services from those companies. While financial companies have been slow to adopt social media, consumer acceptance of connecting with their banks over social media has increased over the years. In 2012, a survey done on 400 Facebook users showed that 24 percent were willing to connect with their banks on a social platform, nearly twice the number in 2008.
As more consumers prefer to do their banking online (nearly 60 percent of U.S. Internet users visit at least one of the top 20 financial institutions online, McKinsey says), integrating social features with online banking services could increase customer loyalty over time and lengthen the amount of time consumers bank online.
3. Lowering customer acquisition costs
Customer acquisition is a huge cost for financial institutions, according to the McKinsey report. On average, banks and other financial companies spend between $70 and $300 to acquire each new customer. However, McKinsey’s research shows that across banking and insurance, social technologies can actually reduce the cost of customer acquisition by as much as 30 percent.
Common Wealth Credit Union, based in Canada, acquired approximately 2,300 new accounts (resulting in $3.9 million in new deposits) by launching a social media contest to find an under-25 spokesperson for their banking products. To apply, applicants submitted videos through social media and competed for the most votes. According to McKinsey research, “Leveraging social technologies in these ways to improve marketing activities amounts to value creation of up to 20 percent of the cost of a marketing campaign," states the report.