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Value Creation through Social Media in the Banking sector (1/2)

The recent boom of Social Media has reshaped consumers' lives and behavior. To adapt to this new environment, most banks have already started to implement Social Media into their organization in order to analyze and predict the behaviors of their customers as well as to increase customer engagement.

The recent boom of Social Media has reshaped consumers' lives and behavior. To adapt to this new environment, most banks have already started to implement Social Media into their organization in order to analyze and predict the behaviors of their customers as well as to increase customer engagement.
For decades, new technology has provided banks with opportunities to innovate. Call Centers, ATM, Online Banking or Mobile Banking are all examples of technologies that enhanced banks operations and provided new ways to interact and serve banks clients better.
Social Media regroups the activities that integrate social interactions, technology and content creation all together. Facebook, Twitter and LinkedIn are probably among the best-known existing Social Media platforms but many others exist. What they all have in common is the possibility given to individuals to create, modify and comment content within communities. Therefore these platforms depend almost solely on the content created by users.

Social Media has changed the environment we live in as it has had a considerable impact on human interactions. Indeed, people are able to connect to their peers from all over the world and from any background and have consequently more relationships than ever before. The manner they interact with each other is also different: They're updated about friends' life via Facebook news feed, they learn about the breaking news via Twitter, they share videos and photos with their friends on Instagram and YouTube.

For companies in the banking sector, this is also a totally new environment. The biggest change for them is that they are no more in control of the conversations, customers are. Indeed, traditional media were based on companies delivering messages to consumers. Social Media allows consumers to express themselves and what people see on social media about brands and companies is directly created by the users and no more the other way around. Though risks involved in Social Media are big, the rewards can be even bigger. Several sources of value creation have been observed in the banking sector:

  • Customer intelligence: Social Media enables to increase knowledge of customers in order to develop and improve banking products and services
  • Sales & Marketing: Attract new customers via social media channel and turn current customers into brand advocates
  • Customer Support: Respond to customer complaints and use social media for crisis management purpose
  • Internal collaboration: Increase collaboration and communication and perform HR activities

Customer Intelligence

Social Media is an amazing source of information for banks. A few decades ago, banks were primarily relying on demographic data such as gender or location in order to differentiate their customers' behavior and create products and services that fit their needs. However these data do not always provide a clear insight into customers' minds. With the advent of CRM solutions, banks started to collect transactional data (e.g. frequency of purchase, date of last visit). While transactional data can prove to be useful, they may also lead to the misunderstanding of customers. Let's take the example of a frustrated customer: this customer keeps investing via a bank's investment scheme because she is locked into a contract or is too invested in the scheme that it would be inconvenient to leave. Transactional data would suggest that this customer is a loyal one while in fact she would switch any time as the opportunity arises. This shows how transactional data do not always depict the reality. Social Media offers an additional layer of relevant information to banks:

  • Social media transactional data: Number of visitors on the company fan page, number of customers that interacted with the customer service, etc.
  • Personal data: Location, relationship status, interests and hobbies, job, etc.
  • User-generated content: Reviews, ratings, comments, blogs

This information coupled with more traditional information give a very precise picture of customers. User-generated content is likely to give the most valuable information to banks. Indeed, Social media platforms provides insights into customers' feelings about brands, products, companies which is information that banks have been trying to get for years. If banks are able to collect and analyze the relevant information available on social media, this could give a significant competitive advantage to the banks that are able to react quickly and make smart decisions with the goal of improving customer experience and satisfaction.

The biggest challenge has been to extract useful information from unstructured data (comments, blog reviews, videos, tweets). How to determine if content is positive or negative? Is it an opinion, an objective statement? Several solutions already exist and help banks identify and analyze conversations. For instance, Citi has implemented an integrated software solution able to run sentiment analysis, measure buzz around its brand and products as well as to create diverse analyses about its customers. It also monitors social media activities of their competitors.

Besides this listening activity, some banks also adopted a proactive approach by asking directly their clients for feedbacks about potential improvements or new products. Indeed, new product ideas are generally generated from a very small group of people within a company. Using customer voices gives a new perspective and probably helps develop products that customers actually desire to purchase. Social Media is the perfect place where people feel comfortable sharing their thoughts about how a bank can improve its products and services. Barclays recently launched a website called "Your Bank" which encourages customers to share their ideas about how the bank can improve its banking products and services. All the ideas are listed on the website and people are invited to vote for the best ideas. Over 10 customer generated ideas have been brought to life since the launch of the website in September 2013. The initiative was welcomed by the public as it shows the attention paid by the banks to its customers.

Sia Partners

Banks Mining Social Networks with Analytics Tools - BankTech

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