Financial Firms Should Get Out and Socialize

“Sooo, Chase Bank sucks and cancelled my savings account without telling me because I had a 0 balance….” Rants like this actual blog post could induce headaches for financial services firms that don’t have a handle on what a new Forrester Research report calls Social Computing. As usage of comparison tools, social networking sites, blogs, consumer review sites and other CGM-centric corners of the Web increases, financial companies will have to get a grip or risk brand erosion, the report contends.

“Most consumers aren’t interested in financial services,” observed Forrester Research Analyst Benjamin Ensor, noting that brands in the travel, auto and CPG categories have felt the power of CGM for a lot longer than financial brands. This is changing now that more people are conducting financial transactions online, researching products and sharing opinions about their experiences with financial brands. Financial firms are “only just beginning to understand the reality of what’s happening,” he continued.

The recently-released “Social Computing’s Impact on Financial Services” report notes, “As consumers use the Net to share information, financial brands risk being undermined as marketers lose control of the message….Smart firms will use the same emerging technologies to communicate with consumers, gather customer insights, and develop stronger customer relationships.”

According to the report, banking services, mutual fund companies, and insurance firms’ products could be reduced to mere commodities as a result of consumer price comparison shopping on the Web. And an onslaught of information could make it more difficult to reach consumers and control brand messaging.

Current trends have led to a paradox for financial services companies, explained Ensor. “The transparency of the Net undermines brands,” he noted. “On the other hand, it makes brands more important because…consumers are looking for brands they can trust” among a multitude of accessible options.

“It’s very easy to find criticisms about big banks,” commented Ensor. There’s no question that user review sites, blog search sites, search engines and forums readily connect consumers to commentary, both negative and positive. Blogs like Boing Boing and The Consumerist helped spread the news about an alleged Citibank fraud. Reviews of Bank of America on Epinions.com are littered with negative comments, some more mundane (“Poor Customer Service”) than others (“I can’t use the words ‘Bank of America’ without getting a surcharge.”).

On the upside, Ensor cited USAA, a financial services firm serving members of the U.S. military and their families, as one that gets rave reviews online from customers. Though the company doesn’t necessarily engage in social computing, Ensor believes that “What’s interesting is the Internet, in a sense, amplifies those customer experiences.”

Because people use social media to discuss personal finance, “financial brands have an opportunity to interact closely with consumers, provide them with advice, answer questions, serve up important information, and generally add value to the social media space,” noted Jonathan Carson, CEO of Nielsen BuzzMetrics, a firm that tracks CGM for companies including several financial services firms. “Brands that are able to do this successfully will demonstrate that the value their customers receive adds up to more than free checking and their APR,” he asserted.

Some companies are actively employing social computing in their marketing efforts. Income management firm PIMCO produces a podcast called “Investment Outlook,” and financial services company Wells Fargo provides investment professionals with a “PodPack” featuring audio podcasts along with fund fact sheets, prospectuses, and other information. Banking firm ING Direct allows customers to rate its performance based on criteria such as simplicity and “giving you products you want,” and posts their grades to its Web site. These are examples of companies with strong brands sharing information and making things more transparent, noted Ensor.

Another Forrester report from May called “Make the Most of Your Financial Services Brand on the Web” evaluated “Brand Action” and Brand Image,” or how well company sites support goals of target users and how well they support brand positioning, respectively. Fidelity’s site was the only one of 16 found to differentiate its brand based on both brand action and image. The Geico, Progressive and Edward Jones sites also passed based on brand image scores. The remainder, including Vanguard, Wachovia, Smith Barney, Allstate, and Morgan Stanley failed both the action and image tests.

Social computing, said Ensor, provides new ways for financial firms to build and track brand discussions beyond their Web sites. His report recommends several techniques firms can employ to engage in social computing. It suggests communicating through blogs and podcasts on topics that interest consumers, such as stock market investing and housing prices. It also recommends acknowledging the competition and promoting brand value and product characteristics beyond price comparisons. Companies might also work with review sites to enable smooth transitions to appropriate company site pages. The report also suggests tracking user commentary online and using RSS feeds to distribute marketing information instead of email which is subject to phishing attempts.

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