With the number of people on Facebook crossing the 500 million mark, there’s no doubt that social media is one of the hottest topics in marketing today. The term ‘social media’ can be applied to a wide range of technologies, tools, and techniques. Andreas Kaplan and Michael Haenlein, professors at the ESCP Europe Business School, define social media as: “a group of internet-based applications that build on the ideological and technological foundations of Web 2.0, which allows the creation and exchange of user-generated content.”
As Wikipedia notes, “a common thread running through all definitions of social media is a blending of technology and social interaction for the co-creation of value.” Aite Group acknowledges that there is marketing value to be found through social media, but firms – and financial services firms in particular – are still finding their footing in this new medium, and are scrambling to identify the most effective strategies and social media tools to support their marketing efforts.
Based on an Aite Group and European Financial Marketing Association (EFMA) survey of 166 financial services executives in the US and Europe, conducted between August and October of 2010, Aite Group has captured insight into the social media strategies and tactics that financial services firms are deploying, and plan to deploy. It reveals what tools these firms view as effective, and how they measure that effectiveness.
Just Getting Started
Financial services firms are in the early stages of building their competency in social media. Six in 10 firms consider themselves to be either a ‘novice’ or ‘beginner’ at social media. There is little difference between US and European firms on this matter – a slightly higher percentage of US financial institutions consider themselves novices, but the percentage of firms that consider themselves ‘intermediate’ or ‘advanced’ in their use of social media is virtually the same across the two regions.
Q. Which statement best describes your firm’s experiance regarding social media?
Source: Aite Group
Although six in 10 financial institutions are novices or beginners at social media, there aren’t a lot of strong barriers preventing them from incorporating social media into their marketing. The most frequently cited barrier is the lack of human resources or time, and that was mentioned by just a third of survey respondents. Importantly, lack of funding or budget is not an issue for most firms. Novices were the most likely to cite the absence of a clear return on investment (ROI) and lack of senior management support as barriers to using social media.
Significant differences are found by comparing the social media beginners to those firms that categorise themselves as intermediate or advanced in their use of social media. Among the beginners, 63% are spending so little on social media that it isn’t measurable. Among the intermediate and advanced firms, however, roughly one in four already invests at least 2% of their marketing budget in social media-related efforts.
Engaging customers, building brand awareness, and building brand affinity top the list of business objectives driving the use of social media among financial firms today. To a lesser extent, financial firms are turning to social media to improve customer retention, although few firms expect social media to generate revenue or help reduce customer service or marketing costs.
Looking ahead a couple of years, financial firms’ list of business objectives for social media will expand dramatically. In just two years, social media investments will have to produce tangible benefits for financial firms; that is, a significantly higher percentage of firms will look to social media to retain customers, generate revenue, and reduce marketing costs.
Social Media Tool Deployment
Slightly more than half of the firms surveyed have a Facebook presence today, with two-thirds of the rest planning to use the site. Twitter was the next most popular tool, used by 44% of firms, followed by YouTube, in use at 38% of financial institutions. Firms that don’t currently blog or use Twitter are evenly split between those that plan to use these tools and those that don’t plan to.
Intermediate/advanced firms are, not surprisingly, more likely than beginners to use a range of social media tools, although relatively few use customer review sites like Yelp or financial services social networking sites like Zecco.
Many firms use third party sites or tools such as Facebook and Twitter, as well as on-site tools, such as blogs and user-generated content. Today, the social media efforts of 30% of the firms surveyed are limited to just on-site efforts, while another nearly four in 10 firms’ efforts are mostly on-site, with some off-site initiatives. The picture will be very different by 2012, when only one in 10 firms will be strictly using on-site tools.
With so many financial firms turning to social media (Facebook, Twitter, blogs and YouTube, in particular) to engage customer and build brand awareness, the question to be answered is: are these tools effective at achieving these objectives? Unfortunately, there’s little consensus among financial services executives on which tools are truly effective.
Facebook is considered to ‘very effective’ for engaging customers by 39% of respondents, with another 48% rating the site ‘somewhat effective’ for accomplishing the objective. User-generated content garners the second highest number of ‘very effective’ votes, with 34% of the sample. Only about one in 10 respondents flat-out consider Facebook, user-generated content, or customer review sites to be ‘ineffective’ at increasing customer engagement. It’s important to note, however, that a meaningful percentage of financial executives don’t know how effective many tools are for increasing engagement.
For generating consumer awareness, 43% of survey respondents consider Facebook ‘very effective’, with another 44% rating it as ‘somewhat effective’. Blogs are rated as ‘very effective’ by 32% of financial executives, although nearly one in five says that blogs are ‘not effective’. For influencing consumer preference, 46% of respondents deem customer review sites to be very effective, although 20% don’t know how effective these sites are for accomplishing this objective. Financial institutions don’t consider Facebook to be as effective for influencing consumer preferences as they do for engaging customers or generating consumer awareness.
Measurement is Key
To understand what performance metrics financial firms are using to gauge the success of their social media efforts, Aite Group adapted a measurement framework developed by Web Analytics Demystified and the Altimeter Group, published as open research in a report titled ‘Social Marketing Analytics: A New Framework for Measuring Results in Social Media’. The framework defines 12 performance metrics that correspond with four different business objectives: fostering dialogue, promoting advocacy, facilitating support, and fostering innovation. Of the four business objectives in the measurement framework, metrics relating to facilitating support are rated as most important by survey respondents.
Source: Analytics Demystified and the Altimeter Group
Just because a firm believes a social media metric is important doesn’t mean it measures that metric, however. In fact, none of the 12 metrics tracked are currently measured by more than 30% of the firms surveyed. This creates a measurement gap – the difference between the percentage of respondents that consider a metric to be very important and those that are currently measuring the metric.
Intermediate and advanced firms have different views of which metrics are ‘very important’, however. Compared to beginners, they’re more likely to consider metrics like active advocates, resolution time, resolution rate, and share of voice to be very important.
Social media in financial services is still in the early stages of its evolution. While it’s true that six in 10 financial institutions believe that they’re either novices or beginners at social media, other signs serve as signals that social media within financial services firms is immature, including the lack of consensus regarding the effectiveness of various tools and the absence of a social media measurement infrastructure in most firms.
In order to ensure and improve the success of social media investments and initiatives, financial institutions should:
- Align social media investments with the marketing funnel.
- Target specific market segments.
- Integrate social media approaches into online capabilities.
- Establish an integrated marketing measurement framework that incorporates social media-specific measures.
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