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Master's Capstone

Banks and Social Media: No Longer an Option
Timothy A. Picard
Franklin University
Professor Scott Zunic
November 3, 2009

Abstract

What began as simple, entertainment-focused social media platforms just a few years ago, have evolved into sophisticated communication tools that now play a significant role in our daily lives. The demographics of social media users is predominantly young – every business’s future market. This paper argues that once-staid financial institutions must break from their conservative marketing programs and fully embrace the current and ever-changing platforms such as social networks (i.e., Facebook), microblogs (i.e., Twitter), instant messaging (IM) and whatever is the next, fascinating, digital-based communication venue that comes along.
Keywords: Banks, social media, youth, market


A May 2006 Business Week article discussing the possible sale of the social-networking platform Facebook, described the fledgling phenomenon as “the Web site where students around the world socialize and swap information” (Rosenbush, p. 16). Four months later when Facebook dropped the requirement that users be affiliated with a high school or college, another BusinessWeek article questioned whether the reduced restrictions would dilute Facebook’s appeal (Lacy, p.8).
Searching EBSCO (Elton B. Stephens Company) for journal articles written in 2006 involving social media and Facebook turned up only six and four, respectively. In fact, two social media hits returned the titles “When will the social media bubble burst” (Gillin, B to B, p. 11) and “Is the social media party winding up?” (Morrissey, Adweek, p. 12).
According to the Facebook Web site, by the end of 2006, the platform had 12 million users – today more than 300 million (October 14, 2009). Clearly, the party is just starting.
The advent of such popular venues and their increasing popularity are reason enough for financial institutions to incorporate social media into their customer service and marketing programs; however, institutional skepticism remains high – 62 percent of banks responding to a recent poll stated they don’t currently use social media and have no immediate plans to do so (Cocheo, 2009). The nearly 40 percent of banks that do take advantage of social media, or are planning to, will be better positioned than the plodding dinosaurs who may not survive the next wave of innovation.
Purpose
The purpose of this paper is to offer substantial evidence that contemporary social media platforms (and those yet invented) must be at the top of the bank marketer’s list of target outlets. A great number of current bank customers (i.e., generations X and Y) rely heavily upon many social media platforms for communication, entertainment, news and other personal needs. This profile will increase with future generations who grow up in a society defined by instant communication and online lifestyles. Financial institutions establishing social media-footholds today will find themselves in well-grounded positions to satisfy the customers of the future.
This paper will first discuss the habits of current young bank customers and their reliance on social media. This information was gathered from national and international polls and research as well as a profile of 69 respondents to a survey created solely for this paper and distributed via e-mail. A brief interview with a JPMorgan Chase social media marketer provides insight to the hopes, obstacles and future plans of the use of social media on a global, national and local level. Two brief views of young social media users are also inserted.
Secondly, this paper will outline eight benefits to banks utilizing social media in their marketing campaigns and customer service programs. These are followed by the few, though important, criticisms of social media marketing. Because banks are following in the wake of other businesses that pursued social media early on, it is important to include some of the experiences of those that blazed the trail for financial institutions.
Where the future is now
When asked why he robbed banks, Willie Sutton allegedly replied: “That’s where the money is” (http://www.fbi.gov/libref/historic/famcases/sutton/sutton.htm). Though this paper does not advocate robbing banks, Sutton’s philosophy of focusing one’s attention on where the objective can be found warrants merit. And so it is with today’s and tomorrow’s youth who will seek checking and savings accounts, mortgages, lines of credit and all the banking services and products their parents had – but not by visiting their local branch.
The bank customer of the future is likely to discuss banking experiences with friends, research banks’ options, and sign up for his or her choices all via their laptop computer, or more likely, a cell phone or small, hand-held personal digital assistant (PDA). One bank enabled new customers to establish checking accounts without ever having stepped foot inside a branch. Prior to their merger with JPMorgan Chase, Washington Mutual developed the practice of allowing the signature on an initial check to serve that purpose (Tellervision, 2008, p. 4). No longer are the shiny, free toasters sitting by the tellers’ windows plausible rewards for opening new accounts; future incentives will have to be offered online and valued by a 20-something.
The brick and mortar banks and savings and loans, where Baby Boomers, the Silent and GI generations established Christmas clubs, sought auto loans and sat with branch managers discussing mortgages, are foreign outposts to today’s youth – and possibly unknown if not for the convenience of attached ATMs. However, even the ATM will be a banking oddity when the United States falls in line with most of the world and accepts the EMV (Europay, MasterCard, Visa) cards with embedded chips that act as cash substitutes.
Who is that next market?
This group of potential customers that banks must pursue will remain ripe for the picking for years; the U.S. Census Bureau estimated in 2008 that nearly a quarter of Americans was younger than 18 (U.S. Census Bureau). What distinguishes this market from generations before is where they gather. In the past, banks marketed products and services with respect to geography. Billboards, newspaper advertisements, television and radio spots were designed and placed where the targeted market would be exposed to the initiative. That is no longer necessary because those who will need automobile and home financing in five to 15 years make up the largest segment of online visitors (See Appendix A, Graph 1). Location, location, location may be relevant for home buyers, but banks will have to look beyond geography and establish a virtual presence convenient for the younger markets accessible not by car, but laptops, cell phones, and PDAs.
Many members of this young market visit virtual neighborhoods, a potential location for advertisers. The developers of the best-selling PC game of all time, The Sims3, recently permitted players to furnish their virtual homes with IKEA furniture (Marketing, 2008, p.2). The game’s owner, Electronic Arts, according to Advertising Age, also contemplated placing branded packaged goods such as deodorants, cologne and soaps targeting female players (Oser, 2004). Leading the pack of advertisers targeting men by integrating advertisements in video gaming was DaimlerChrystler, Burger King and Best Buy. Financial institution advertisements are logical components to the virtual Madison Avenues.
The demographics of social media users change continuously as members of all profiles jump into the digital pool. Citing research even six months old at the time of this writing may lead to inaccurate conclusions; therefore trends offer significant and reliable background. The necessity to utilize social media is not based solely on the percentage of teens and 20s, who are using Twitter, Facebook or IM today. An iStrategylab analysis of Facebook-user demographics reveals that as of May 2009 the increase of the 35- to 54-year-old user category grew more than 275 percent in the previous six months and the 55 and older group increased at a 194 percent rate (Corbet, 2009). This diffusion process suggests the younger market appears to consist of early adopters and early majority followed by older generations, who are the late majority and laggards (Franklin, 2008, p.182–183). Everyone is joining the party, but kids arrived early.
Despite the dramatic increase, the iStrategylab analysis shows that the total numbers of users of the two older groups was about one-third of users younger than 25: approximately 7.8 million to 22.8 million, respectively. Segmentation will be necessary to appropriately touch each market. More importantly is that the 20 million potential customers, who will be more sophisticated (and wealthier) social media users in the future, are reachable now.
Scarborough takes the issue a step further arguing that banks establish a social media presence because women, who are more likely to control family finances, outnumber men as MySpace and Facebook users. Research by iStrategylabs found that 56 percent of Facebook users as of May 2009 were female, numbering more than 22 million (October, 2009).
Doing it now
Capturing the youth market now via social media is crucial for two reasons:
1) The field is relatively wide open as conservative bank marketers slowly dip their toes in the social media stream, but remain wary of diving in. Whoever performs the cannonball will be the company to make waves. As previously stated, with six of 10 banks not using or not considering using social media, a leader has not emerged. The inviting pool is wide open.
Secondly and more importantly, studies show that generations X and Y are easily lured from their current banks and, those companies with social media options are held in high regard by social media users. A Maritz study found that 61 percent of Generation Y and more than 53 percent of Generation X have considered, or have changed banks, in part because their market has been ignored (Tellervision, 2008). Thad Peterson, division vice president of Maritz’s financial services sector suggests this is because, in part, current bank marketing is based around the branch offices: “For the most part, the current customer experience model at banks caters to the Silent Generation and Boomers, who more frequently bank in-person at branches.”
The study shows, according to Peterson (and perhaps no surprise to parents and teachers), that younger generations are less patient and tolerant than their elders. Having grown up with microwaves, cordless phones and espresso on every street corner, this large market and the waves to follow want what they want now, how they want it and where they want it. Social media platforms such as Twitter and IM allow for immediate communication, satisfying what Peterson describes as the generations’ “just get it done” attitude.
Social media also enhances a company’s image according to research. Consider this: How would the public view a bank that did not offer a Web site? Would that bank lose customers seeking links to options, products and e-mail address for various contacts? Would the absence of an Internet presence suggest the company is reticent to change, dubious of what its market enjoys and blind to current opportunities? The answer is a resounding YES. Will this scenario, expanded to include social media options, be as unthinkable in five years? Three? Next year? The answer remains the same.
A Trendstream poll found that 36 percent of 16- to 24-year-olds and even 20 percent of 55- to 64-year-olds said their views of brands that used forms of social media improved by nearly 30 percent (McEleny, 2009, p.5). The UK-based study, which adds credence to the global impact of social media, offered that the appreciation was based on the market’s perception that the social media initiatives allowed the companies to “listen.” Respondents were, however, less interested in sites such as blogs and wikis that lacked substance; social media must provide a return to the market.
A warning to advertisers: Those polled preferred that social media platforms not be proactive or initiate user-relationships, or appear to track their behavior. Doing so was interpreted as infringing on one’s personal space.
Perhaps the most fascinating aspect of youths’ interest in, and ability to use, social media is the proposal that today’s youth hold an almost intuitive ability to exploit social media because they are immersed in it as soon as they can manipulate a mouse (Point for Credit Union Research and Advice, 2009, p.7). A brief look at a few social media entrepreneurs who admit being engrossed with technology at an early age backs this up:
• Mark Zuckerberg was 20 when he launched Facebook from his Harvard dorm room
• Tom Anderson was 33 when he launched MySpace
• Evan Williams, who allegedly coined the term “blog,” was 35 when he founded Twitter
This trio and their cohorts likely fall into the “Net-Generation,” who DeGennaro suggests:
Have a novel ability to read multiple “texts” (e.g., words, images, and video) … have a facility and a comfort with navigating complex “information spaces” (and therefore) access, absorb, interpret, process, and use information fundamentally differently than previous generations. (2008, p.2)
She argues that the Net-Generation is only different from previous generations because of access to social media at an early age. This and proceeding generations just happen to have come along during the maturation of the digital age. It is this distinction that separates the teens and 20s using social media and the Boomers and others who are slowly jumping on the bandwagon. Elders can navigate a Web site, design Facebook pages, and send photos via e-mail – even from their phones, but the Net-Generation will be breaking ground with new technology with deeper impact on their behavior, including shopping. Steve Wolgemuth, president of Pennsylvania-based Internet marketing firm YDOP, boiled it down to this: “Participating in social media is a lifestyle” (Blair, 2009, p.3). Today’s youth were and are being born into the social media lifestyle, while their elders – including reticent bank marketers - are struggling to adapt.
The returns
Financial institutions must incorporate social media in their attempt to communicate with the burgeoning current and future markets in order to benefit in the eight following areas:
External environment.
• Marketing and promotion
• Customer service
• Product research
• Community building
• Transparency
Internal environment
• Cost
• Flexibility
• Immediacy
External benefits are those areas of business that banks capitalize on by engaging with social media users somewhere in the digital world. Banks will have to remain passive in some respects and active in others, all the while accepting the fact that social media must be more than a fresh poster, logo or catchline. Marketers must realize that social media should become the foundation for a holistic campaign to capture market share.
While external benefits are the foundation, the internal factors are the backbone of programs. The internal benefits will impact, and be utilized by company departments and staff. Simple as they may appear, they are vital factors in how a company launches and maintains social media programs. The internal factors are entwined with cutting-edge technology and can only bear fruit if upper management welcomes the consistent updating of hardware, software and personnel.
Each benefit description will conclude with its impact on an example of a bank’s fictitious launching of a new checking account program geared to youth. Doing so will highlight how the benefits are related and useful in the same initiative. The reader should consider that although the concluding scenarios are banking-based, the same or similar results could be achieved in countless other businesses – a fact that should further embolden those considering social media as part of a marketing plan.
Marketing and promotion
The opportunities to design marketing and promotional projects using social media are many and varied, just as with contemporary outlets such as print, television and radio. An important difference between the traditional and future social media outlets is what Stoessel suggests is the most important aspect of marketing – word-of-mouth transmission of information (Lodging Hospitality, 2009, p.37). Social media allows users/customers to engage in conversations with each other and their bank to discuss their experiences -likes and dislikes.
Sausner relates this experience to Twitter benefits: If one person has a positive experience with a bank’s program, they can let 9,000 other people know immediately (2009, p.22). Perhaps more crucial, one person can inform 9,000 of a bad experience. What marketers must realize is that the above is already happening, and if the bank is not monitoring the communication, they are unable to learn of the problem, participate in the conversation and worst of all, fail to attempt to rectify the problem.
Bielski argues that social media allows banks to turn mistakes into marketing and customer service positives. As an example, if a customer complains about overdraft charges on a blog, microblog or other social media platform, a bank representative monitoring conversations can intercede by offering a one-time waiver of the charge and then explain how a new overdraft protection option can help avoid future problems.
Banks would be well-advised to administer sites such as high school-related blogs, chat rooms or other platforms where youths’ on-line conversations can take place. However, as McEleny suggested, the platforms cannot be perceived as having an agenda (New Media Age, 2009, p.5), which would negate participants’ freedom for sincere dialogue.
Social media allows banks to selectively expand their marketing territory. An obvious result is to maintain relationships with customers who have moved from the area or even out of state. Younger customers going off to college, in the armed services or simply moving away from home can continue banking without interruption. Distance is mitigated with social media.
Niche marketing is a good example of the difference between contemporary marketing and social media opportunities. Potential customers are currently sought out by traditional segmentation methods; meta-filtering such as demographics, and micro-filtering through residency zip codes, and where they shop and what they purchase. Social media allows marketers to delve deeper into the lives of potential customers. From a broad perspective, banks’ Facebook or MySpace pages or microblogs can give current and potential customers information about general products and services designed for specific targets. Banks can take social media further and participate in forums, blogs and Web sites that are designed for niche markets. As an example, there are Web sites established exclusively from collectors of fine automobiles to online knitting circles to high school sports chat rooms; any customer profile can be reached via social media.
The ability to connect with specific customer profiles is crucial to large banks, but also the small lender whose reduced footprint limits market exposure. Often, a limited footprint reflects a limited marketing budget. Social media allows the specialized financial institution to gain some ground on large companies. A bank specializing in niche market lending can participate in the struggle for market share with limited investment, just as niche businesses whose budget requires frugality can reach out to firms offering unique financing. Social media can be the intersection where products and services meet potential customers.
Younger markets need financial services and products but will not expend the effort or take the time to satisfy their needs as their elders had. No longer should marketers avoid diluting their efforts by spreading their efforts across various outlets. Lontos and Ramirez suggest all social media marketing outlets must be utilized:
The more places you can get your message to appear simultaneously, the more effective your message will be. Think of it as constructing a funnel. You want to lay several trails of information, all of which lead to your main site. No matter how someone stumbles upon you, as long as they “follow the trail,” they’ll eventually find you. (2009, p.7)
Application of benefit 1
JPMorgan Chase’s new “Savings for Seniors” (S4S) targets students of selected (urban/suburban/rural) high schools pursuing post-graduate education or training. Presenting documentation of acceptance to accredited programs earns the student free checking with a one-time overdraft fee waiver; a $50 certificate of deposit; and 1% added interest to a savings account. Certain requirements must be met for the benefits to continue after the first year.
JPMorgan Chase could offer the schools Web-site design and assistance; the Web site would include the offer, as well as bank logo and related links. Students choosing the link would receive IMs regarding the offer and their account information; the branch in the schools’ areas would maintain Facebook pages with information; photos of students; and brief interviews of participating students would be posted on YouTube along with seminar videos describing the fundamentals of checking and savings accounts.
Social media marketing efforts targeting high school students who seek to improve their lives through education or training are valuable future customers. As Mills Financial Marketing founder Becki Drahota said, businesses must “sell products to targets via the channels they (customers) choose.”
How may we serve you?
So a bank delves into the social media world and is successful in reaching its target market of those 24 and younger. The company has launched an interactive Web site; developed various Facebook pages for different customer profiles; visitors are welcome to follow Twitter sites that focus on diverse products and services; support departments are established to respond to customer problem via IM.
A success? Not yet. Achieving the above was the easy part. Satisfying the external customer’s need will be paramount for banks’ social media efforts. If the customer perceives no return on their investment of time and trouble, no social media project, regardless of how advanced the technology and expansive the program, will succeed in the long term. Visitors to social media platforms are there because they expect to receive what they desire, immediately.
Mars Inc., maker of Skittles, launched a week-long, coordinated effort in March 2009 to gain a presence on Facebook, Wikipedia, Flickr and YouTube (McKay, 2009, p.18). Each day of the week, Skittles’ Web site drew immense traffic as the company’s new program was unveiled on each of the platforms. A Web-traffic analyst determined Skittles’ Web site traffic jumped 1,332 percent on the first day. Such buzz is impossible to sustain, may be overblown, and in the end, could be without value. One critic of the innovative campaign stated that visitors reach social media sites with a goal in mind and if the content of the site is less than valuable, the result is frustration and reduced brand value – a net loss.
Clearly social media must offer more than a pretty face – and it can, especially for younger markets. First and foremost, the attraction of social media is the pace of communication. Younger markets do not want to navigate a phone tree and end up on hold for minutes, nor be tied to a computer and wait 24 hours or more to receive an e-mailed response to an inquiry. Coordinating the resources necessary to respond to instant messaging and Tweets or Web-based queries will be burdensome on the banks, but as will be discussed later, the reasonable cost of the technology may lighten this load.
Social media offers banks the opportunity to utilize the knowledge and experience of customers to assist in answering Web-posted queries. Over a short period of time, wikis could evolve focusing on certain topics, frequently-asked-question blogs could include invaluable insight. Problems customers face or questions they have could be answered by other customers with detailed responses. Doing so could divert countless phone calls, letters and e-mails away from company call centers saving money that could be invested in social media.
A study focusing on six libraries that established a “customer service community” on a social media platform experienced a 100 percent return on investment after three years (Kaser, 2009, p.2). Customers who had problems were helped by customers who had answers.
There are now commercial online support communities such as getsatisfaction.com (http://getsatisfaction.com) that coordinate groups and individuals seeking and providing information about specific products. This option may be too informal and less controllable than necessary for large institutions, but small lenders and other businesses may value the results in the short run. Regardless, the idea is one of promise with proven success.
Social media is nothing if not based on communication and information. Banks must distinguish between customer service and marketing and promotion. Current bank customers seeking assistance with a problem or information about a service or product will not tolerate their inquiries handled by a marketing representative. Young customers are sophisticated enough to understand a sales pitch compared to a product/service problem description and explanation.


Application of benefit 2
A great majority of the students taking advantage of JPMorgan Chase’s S4S never had experience with checking and savings accounts. Many take advantage of the program’s instant messaging and Twitter options to seek information to specific problems. An S4S program blog offers advice for increasing savings and appropriate usage of checking accounts. When an account reaches a certain dollar level, customers are informed via IM/e-mail/Twitter, but not of interest rates or bank products. YouTube videos offer the customer clear, simple explanations of the basics of investing.
Those students completing their first year of study or training without banking “incidents” qualify for a Chase credit card with reduced fees but restricted spending limits. Twitter accounts warn users as account levels reach pre-described levels. Local branch Facebook pages highlight those students’ achievements. A formal, annual celebration marking the participants’ achievements is posted on YouTube.
The S4S students are part of the 86 percent of college students who rely on federal and private loans for college tuition or post-high school training (finaid.org, 2009). A simple Chase-driven blog offering insights into private student loans accompanied by tweets when rates change or a new loan product is offered provides important information to a ripe market. This is a customer service – not marketing.
Are you satisfied?
One factor of customer service is product research: Is what a bank provides the customer what he or she wants and is it working as well as it should at a cost the customer is satisfied with? This function is less complex in the social media world than traditional marketing and customer research, but just as valuable.
Determining the metrics necessary to establish product performance value is an issue left for corporate executives and researchers, yet, social media is fertile ground from which to harvest such material. Surveys, interviews and other relatively time-consuming, subjective but detailed-oriented methods will always be valuable tools, and social media provides the logistics to utilize them. Blogs, microblogs, chat rooms, and social network pages are communities where product-users express opinions daily – good and bad. Twitter offers a search tool (search.twitter.com) that can be applied to any term. A product’s name can be tracked in tweets and determined how often it was used and in what context.
The enormity of sifting through countless social media platforms can be sobering for large financial institutions and impossible for smaller entities. An alternative is to be proactive and seek customers’ criticisms and problems by creating and coordinating platforms dedicated to user-input.
Current Web-based technology allows researchers to easily monitor company-maintained platforms, looking for various aspects of a product’s status, including frequency of search, purchase, return, replacement and repurchase, and this technology will continue to evolve. Not so simple is the evaluation of some aspects of a product’s use and services rendered. A home equity loan program may be popular because of the streamlined steps necessary to apply, but customers may also dislike the product because statements are confusing and assistance with balance errors is ineffective. This is an example why text-based social media is a valuable tool for product research.
Monitoring what users express about products and services allows companies to react accordingly. No product testing can stand up to real-world use and abuse; therefore, companies should look at the potential feedback from users as an extension of research and testing. Users’ frank opinions, especially when they include criticism, are invaluable.
Application of benefit 3
The launch of JPMorgan Chase’s S4S program was successful and continued smoothly until eight months into the initiative; applications dropped, customers closed accounts, those who maintained accounts reduced savings and limited the use of their Chase credit card.
Once the company instituted a small staff to monitor social media for program references, management discovered a string of critical tweets and blog references revealing that customers felt ignored after they established accounts. One post ridiculed the plastic checkbook cover that cracked at the seam after two months.
Comments such as these are difficult for youth to relay to bank representatives, especially when the provider, the bank, is doing so for philanthropic reasons. If not for social media, Chase may not have discovered the S4S program failures and reacted. Incurring negative feedback and responding to it confirmed customers’ views that Chase was dedicated to “the highest quality of customer service.” To be unaware of the criticism would likely have led to an emigration of customers who would be difficult to recapture.
Community building and transparency
Minor benefits of social media but worthy of mention are community building and transparency. Distinct but related, community refers to social media as a virtual gathering place for individuals with similar interests and needs; transparency suggests an honesty, a sincerity of purpose. One cannot become a respected member of a community if their motives and agenda are not similar in purpose and action.
Social media platforms, like community coffee shops and taverns, offer members an intersection where they can be active or passive, give and/or take, or just stop by to see what the conversation is about. As platforms mature and users grow more discerning, those conversations will become more topic-specific. Already, chat rooms dedicated to certain topics include additional side rooms where more specific aspects of the general topic occur.
Banks will be challenged to actively participate in community building without having their motives scrutinized. Perhaps a local Habitat for Humanity blog or Web site under the administration of a bank without mention of any products or services would be accepted by the community. A company-controlled Web site dedicated to corporate philanthropic activities could offer links to local branches’ Web sites, blogs and wikis featuring the local community’s activities. To increase the likelihood of participation, any social media platform facilitated by a bank must be available for members of the community to add comments, photos, alter design – just as if it were the community room of the local YMCA. Restrictions on content would apply prohibiting offensive speech and photos.
The absence of product and service marketing will be a requirement to establish transparency, which Llorens defines as “part of a new contract with the public- one of building relationships, listening to feedback, and keeping two-way communication alive to whatever degree possible” (2009, p.80).
One should not confuse transparency with disclosure. As customers’ worries over account and other personal information security increase, traditional company restrictions would have to be maintained. Management must adopt corporate policies limiting what and how employees post information on social media - on and off the job.
Such policies are the exception, not the norm, according to an August 2009 article posted on complianceweek.com. Writer Melissa Klein Aguilar cites poll results showing only 22 percent of 500 business executive say their company has formal polices regarding employee use of social media (p.58). Lax security will be discussed below.
Application of benefit 4
S4S students have goals achievable through hard word and education. Leaving home, friends, and family in pursuit of that training, they long for support and encouragement. Regular updates regarding their checking, savings and credit card accounts sent by a bank representative whose avatar they recognize is comforting. The periodic, albeit generic, life-skills tweets (with URLs to company Web sites) are insightful. The student understands and appreciates the S4S tagline: “Chase is always there.” S4S students are members of many communities: Home, school, place of worship, friends and JPMorgan Chase.
The students, bombarded with advertisements and promotions since birth, recognize that the financial “tutoring” Chase offers never mentions company-specific products. A “More information” link is tucked in the lower left-hand corner of company Web sites and blogs, but products and services are not mentioned. The absence of overt selling blunts the skepticism and criticism students glean from media reports as the nation’s banking system weathers the current storm.
Cost, flexibility and immediacy
Cost, flexibility and immediacy are aspects of social media that directly affect the company’s employees who conceive, design, implement, update and supervise the relevant platforms; and indirectly impact consumers. These factors are also distinct, but related, and will be collectively outlined in this section. Although the outside market benefits indirectly from these three factors, the direct and greatest impact is on the internal user.
Cost
Costs for digital technology remain in reach of many businesses’ budgets as Web 2.0 advancements evolve, and related costs slowly decline. This facilitates the (currently) free social media platforms to reach the marketplace. At the same time, advertisers are leaving traditional advertising outlets such as newspaper, television and radio in droves – print ad revenues dropped 30 percent in the second quarter of 2009 alone (Langeveld, September 2009). These factors add credence to Wilson’s five tactics for “frugal CMO’s” (B to B, 2009):
• Invest in content quality to drive cost out of production
• Communicate with your audience using free social networking sites
• Encourage employees to add posts to company and other blogs
• Interactive web casts, video conferencing and blogs assist internal communication
• Design Web pages to improve “search-engine marketing”

Estimating the costs of yet-to-surface technology and platforms is impossible, but the trend has been that high entry costs drop quickly. However, businesses can enter social media now at whatever expense they decide and increase participation while social media develops and costs stabilize.
From the customer’s standpoint, free platforms allow them to seek and experiment with new social media communities without investing in anything more than a cell phone or computer. Because libraries and schools have computers available – with appropriate filters – for students, no-charge access to the Web-based communities is available. Time will tell whether future costs will force suppliers and users to pony up to take advantage of the Internet and its many platforms, but it is safe to assume that some versions of free access will remain far into the future. This is all the more likely as the digital divide motivates lawmakers to ensure access for all.
Flexibility
The above factors provide social media marketers with information reflecting the degree of effectiveness of programs. This information coupled with the ease with which social media initiatives can be updated make for a marketer’s dream. In company-controlled platforms such as Web sites, blogs and wikis, errors or outdated information can be quickly updated. This aspect is especially important to financial institutions whose products and services involve financial market rates, some of which change continuously.
Flexible marketing campaigns are assets, but also anomalies for bank marketers accustomed to programs taking many months to put into practice. If a Web site-based initiative was successful, it could quickly be added to a Facebook page. A bank employee is recognized for a community action – put his or her photo on the Web site and send a tweet. A specific interest rate increases- IM those who request that form of notice, tweet Twitter users and e-mail others.
Immediacy
Reacting immediately to an issue will be a high priority for marketers because “slow response times can doom a social media communications campaign because events and perceptions change very quickly online” (Johnmar, 2007, p. 138.)
Communicating in real-time with an individual across the country or across the globe - including transmitting data, text or photographs - continues to be the greatest benefit of the digital age. Banks instantly update interest rates, debit and credit accounts, transfer funds. Social media platforms rely upon immediate communication because the market expects it. The marriage of bank marketing and social media should not be difficult with so much in common.
Internal users also rely on various forms of Intranet-based IM, tweets, blogs, wikis and Web sites. Not long ago, internal e-mails were cited as increasing the pace of the workplace. Today that isn’t fast enough; where would we be today without IM?
Application of benefit 5
S4S students are participating in the program because tight family budgets force them to utilize all resources available to receive an education and training. They don’t realize the expense of the research and technology that went into their cell phones or laptops. The fact that they can receive updated interest rate changes within seconds via JPMorgan Chase IMs for the reasonable cost of a cell phone is lost on them – but it remains an advantage. If that IM informs a student customer they have six hours to deposit funds in a checking account before being billed for insufficient funds, they save that charge, and the possibility of the check-bouncing domino effect.
This action relates to marketing and promotion, customer service, community building and transparency. Both parties benefit at some, but minimal, cost.
The students participating in S4S have diverse interest and needs. Surfing the web, checking out wikis, and posting to blogs are relaxing and conducive to some students’ learning. Others don’t have or want to take the time cruising the web and therefore, they depend upon IM and microblogs for their social media use. The flexibility of social media allows JPMorgan Chase the opportunity to provide the information the students need via the platform they feel most at ease with.
As students develop specific needs and interests during their education and training, the bank will offer more topic-specific social media to parallel those needs and interests. All of a sudden the bank is a partner supporting the students in their many fields of endeavor because of the variety and flexibility of social media.
The students are of the generation that were born into the digital age and expect immediate communication - otherwise doesn’t exist.
What JPMorgan Chase has done by taking advantage of social media platforms and by underwriting S4S, is to become a partner in the students’ struggle to improve their situation. Early investment of resources provides the bank with committed customers for the next few generations – all because JPMorgan Chase met the market where, how and when the market expected.
But on the other hand …
As with any progressive aspect of our lives, there are those who are wisely skeptical of its benefits, wary of its costs, doubtful of its longevity and suspicious of its impact on society; social media falls into all categories. Whether those questioning the value of social media do so because they are knowledgeable, experienced business professionals or simply because they are nearer to 50 than 20 is unknown. Regardless, tens of millions are flocking to social media while the number of those calling for caution is dwindling. This minority does raise many vital concerns that remain unanswered, and may only be so after a sufficient social media track record has been compiled.
The most prominent issue being raised is whether there will be reasonable return on a bank’s investment in hardware, software, time, research and labor. Sisk relayed as recently as May 2009 the thoughts of analysts who said that social media is “at best experimental marketing, but not a viable business strategy” (p.20).
Sisk pokes holes in some research citing impressive numbers of social media users, including a claim by Washington Mutual that up to 300 “friends” joined the bank’s Facebook page within 24 hours of its launch. An independent analyst found that at least 2/3 of those friends were somehow related to the company’s Web design team.
The general sense that social media is all dressed up with no place to go is echoed by Sausner who argues that platforms such as Twitter can be useless and potentially counter-productive if not utilized efficiently (2009, p.22). At the same time, she quotes a bank executive who was unable to quantify or qualify the current value of microblogs and other platforms, but admitted his bank would prefer to be in the game, even if unaware of the rules or the object of the game.
Paul Gillin points out ROI is an equation, by stating that “The perception that ROI on social media is good, if only because the ‘I’ part is so small” (Maddox, 2009, p.1).
A coherent campaign with social media as a basis or even a secondary element will be difficult if not impossible to implement until marketers can balance their need to reach out to potential customers and the current passive state of social media. As young Molly Johnson pointed out in her comments above, unnecessary and/or unrequested information is considered spam. Reaching out to the market without being intrusive or irrelevant will be difficult.
Another factor to consider is that the social media population behaves like a herd of cats – a big herd. If a platform’s design and message is popular, how do you limit visitors? Corralling a reasonable number of social media users, in the range of 400, would result in an audience able to interact on an individual basis, otherwise too large a community and intimacy is negated (Point for Credit Union Research and Advice, March 2008).
Personal banking security is a most-threatening issue users and administrators will have to deal with. Just as it took the public time to experience the pioneering e-mail frauds and phishers who reared their heads in the 1990s from Nigeria, China and elsewhere, too many social media users will be coerced into providing confidential information. A similar learning curve can be expected. Jaser states that outside threats from phishers is just as real as that of the social media-conscious employee who unwittingly, or worse, uncaringly, reveals customer or corporate information through social networks or microblogs (2009, p.17).
The unknowns of social media are many and justified. What the future holds for the specific platforms and how marketers take advantage of them cannot be foretold, but there will be a future, and social media will be an integral component of communication, entertainment, education and politics. In other words, social media will be a factor in all business strategies.
Survey analysis
The survey created to discover the current - as current as today’s technology allows such snapshot profiles – habits and preferences of the general public is included in its entirety in the appendix (D) of this paper. With 69 respondents collected over a 20-day span, the results are not presented as anything more than an informal review of how people of all ages view social media in general and in regards to their banking specifically.
The 10-question survey utilizing SurveyMonkey.com’s free version was e-mailed to approximately 40 people the author knows directly or indirectly. Those people were asked to forward to their friends and associates. Therefore, no specific characteristics were considered besides having access to e-mail and the survey.
• Nearly a third of the respondents were aged 21 to 30, and about 20 percent were represented in each of the following age groups: 31 to 40; 41 to 50; and 51 to 60.

• Just barely more than a third spend between four and 10 hours a week visiting Web sites; 21 respondents (32.8 percent) spend more than 10 hours a week; 14.3 percent spend between four and 10 hours a week on social platforms such as Facebook and MySpace; Great majorities stated they spend zero hours a week on other social media platforms such as Twitter, blogs, and gamesharing.

• When asked which of their bank’s social media platforms they use, 78.5 percent utilize Web sites; 18.5 percent said “none”; and 4.6 percent (three people) take advantage of instant messaging.

• Hypothetical social media programs were uninteresting to the majority (most rejected by about 70 percent); although the remaining respondents were willing to engage in some of the programs, especially the opportunity to receive e-mail messages when account balances approached a predetermined level.

• Few respondents stated they would change from a bank that offered no social media platforms besides a Web site to a bank that offered numerous social media platforms. Approximately 10 percent would consider a change, leaving the 90 percent who would not.

• More than 30 percent continue to visit their bank branch two or three times a month even with Web site access. Another 35.4 percent stated they visit their bank’s Web site once or twice a week; similar numbers appeared in the “three or more times a week” and “two or three times a month” categories.

• A great majority, 83 percent, stated banks’ social media platforms besides Web sites would be helpful, although 66.2 percent do not believe that social media platforms in general are “fads.”

• Given the opportunity to express how banks could utilize social media to serve the respondents’ needs, 35 offered written input. Many expressed some concern about security; others were interested in more than Web site visits, such as e-mail notifications and IM warnings. The written responses ran the gamut from one respondent stating: “The more options the better. Technology is changing every day and every business, including banks, need to take advantage of different types of media to obtain customers,” to “I would strongly disagree with this and consider it another marketing/ advertising tool that is a waste of the bank’s resources.”



Conclusion
In the dark ages of social media, about 15 years ago, corporate Web sites were the exception rather than the norm, e-mail was more an oddity than necessity and the only thing that twittered was a bird. It was a time when senior executives focused on traditional marketing outlets. Corporate IT specialists were permitted to experiment with cutting edge technology to placate their “new toy” desires. It was as recently in 1995 when the National Football League’s launch of a Web site warranted a story in Brandweek (Lefton, 1995) – the site was referred to as an “Internet outpost.”
Establishing “Internet outposts” is so prevalent today; tens of millions of individuals now maintain similar “outposts” in the form of social network pages and blogs. What once was unknown and feared is now expected, nay, required, especially for businesses.
Acknowledging that most children grow up into adults with the need for financial services and products, marketers must seek the future market not only where they are now, but more importantly, where they will be in another 15 years, 10 years, even next year. Social media platforms are evolving and others are bound to spring up. Marketers can and should question ROI in regards to social media, but it is fair to require they also consider the revenue lost if social media is not embraced.
Social media sites are designed for gradual, inexpensive forays into the unknown that will be known soon. A bank can delay its entry into this new, fascinating world, waiting for many of the unknowns to be discovered. But doing so also will delay establishing close relationships with tomorrow’s markets. Utilizing social media now is more about reaching that mortgage holder today, before they need the mortgage, than simply experimenting with new technology. Incorporating social media in a business strategy today allows participants to have a hand in the building of tomorrow’s digital community.
Social media allows users the opportunity to communicate and gather information as the world has never seen before. Just as the introduction of computers and subsequent applications of tools such as the Internet, data processing and storage proved invaluable to society, so too will social media be seen as providing the necessary communities in which individuals, families, groups and businesses meet.
Financial institutions, traditionally conservative in their acceptance of change, must synthesize social media into business strategies. We are no longer at the dawning of social media’s entry into our daily lives. Digital platforms will continue to mature and prove efficient and effective in their many forms.
Extensive research clearly shows that the typical social media user is young and willing to engage new technology unlike their elders. This substantial market is only the predecessor of countless other potential customers who inevitably will seek financial services and products. How best to exploit social media is yet, unknown. What is known is that banks must incorporate social media in their marketing and customer service programs; it is no longer an option.




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Appendix A

Graph 1. The age of social media network users of MySpace and Facebook dramatically spikes in the late teens early 20s, but the substantial use of those online doesn’t drop to near zero until the age of 60. Source: RapLeaf.



Appendix B

Table 1: The demographics as produced by Facebook shows fascinating aspects of the platforms users: The majority are women, an overwhelming number of those 24 and younger are members; but baby boomers is one of the fastest growing age-groups. Source iStrategylabs.


Appendix C

Below are responses by Bill Herrmann, JPMorgan Chase Marketing Director, Retail Financial Services (October 28, 2009, via e-mail) to the following questions:

What is your speculation of the future of social media in bank marketing?
Was/is social media marketing antithetical to traditional bank marketing?
If so, has it been difficult to overcome that tradition?

I'll start with the fact that we're not actively using social media in our marketing today outside of some small steps. Though we're highly organized around preparing for entry.
We've posted TV spots to YouTube. We've begun monitoring blogs for customer sentiment.
Bank traditional marketing to the public falls into two broad categories: branding and direct response acquisition marketing.
We expect social media's first impact will be to help the customer as we listen to conversations (i.e., blogs) and adjust based on what we're hearing. This should help improve customer favorability of the brand. Next we can start interacting with customers and help answer their questions/solve their problems. This should help reduce attrition. Also provides a way to generate ideas for product innovation, customer research. Too early to know what kind of scale this brings. Banks today are doing this one customer at a time with very few resources. Marketing is very interested in understanding the lift this provides to baseline (i.e., what true impact did we have on the bottom line and is it profitable). Since it's very difficult to create a control group and the volume today is so low that it's likely not something that can be proved conclusively for a few years.
Social media provides the avenue for consumers to market to consumers. So very quickly with the right implementation marketing campaigns can be distributed widely at no incremental cost by consumers to their "friends" and to their friends and so on. Since people tend to associate with people who are like themselves the targeting is built in if we start with our target customer, and since network studies have shown that you can be influenced by a friend of a friend of a friend even if you don't directly interact with them, this can be a powerful resource. Since the social networks are now massive and growing this can be a powerful tool to help shape consumer sentiment about the brand, for consumers to provide feedback on products and services, and for acquisition marketers like me to find low cost per acquisition tactics. Also technology exists today that enables me to target display ads on third-party sites to Facebook friends of yours without you or them knowing it. Again, the birds of a feather approach… if you're a good customer your friends are likely to be good prospects. Privacy legislation may change this, but for now that can be a powerful tactic for any retailer, depending on the cost/benefit realized.
Banks are very conservative by nature and we take a lot of public criticism. The inability to control consumer messaging in some aspects of social media is a barrier. I wouldn't say antithetical, since it fits with the objective of providing great customer service, acquiring customers, creating innovations and competitive differentiation, and strengthening the brand.

Social media will only grow and become ubiquitous as time passes for all the reasons you already know. Banks have to play since that's where the customers are. They will take small steps, test, learn, improve, broaden/deepen. A centralized social media department will develop for service and sales and all lines of business will leverage. Has to be hub and spoke since the customer sees card and checking as Chase not as two businesses, for example.
Beyond that, my belief is that Facebook will be the demise of Yahoo! unless Y! buys them. The primary reason you go to Y! is for email. Email is no longer used for personal communications like it once was with the advent of FB. When FB bakes in editorial content and search, Y! will be in big trouble. Rarely do I use Y! e-mail for anything more than merchant relations, and FB can take that over as well. So your banking may get baked in as well. I can envision a Chase dashboard built into your FB page (private of course) where you can view accounts, balances, and even transact.
So I think bank entry will follow this path: listen, converse (servicing), promote (campaign distribution/participation/opt-in, campaign destination, branding tactics), interact (idea sharing), transact.

Appendix D

Survey questions

Question 1
How old are you?
Answer Options Response Percent Response Count
20 or younger 1.5% 1
21 to 30 28.4% 19
31 to 40 17.9% 12
41 to 50 22.4% 15
51 to 60 20.9% 14
61 to 70 6.0% 4
Older than 70 3.0% 2
answered question 67
skipped question 1

Question 2
How many hours a week do you spend using these social media tools?
Answer Options 0 Less than 1 Between 1 and 4 Between 4 and 10 More than 10 Response Count
Web sites 1 3 17 22 24 67
Twitter or other microblogs 42 11 5 2 3 63
Instant messaging 30 17 11 3 4 65
Blogs 29 16 11 4 3 63
Virtual realities, such as The Sims 60 3 0 0 0 63
Game sharing 59 1 3 0 0 63
Social networks such as Facebook, MySpace 22 12 18 9 5 66
Photosharing such as Flickr, Photobucket 46 12 6 0 0 64
Videosharing such as YouTube 22 30 6 6 1 65
Other (please specify) 1
answered question 68
skipped question 0



Question 3
Which of your bank's social media tools, if available, do you use?
Answer Options Response Percent Response Count
Web site 79.4% 54
Twitter or other microblogs 1.5% 1
Instant messaging 4.4% 3
Blogs 0.0% 0
Social networks such as Facebook, MySpace 0.0% 0
Videosharing such as YouTube 1.5% 1
None 17.6% 12
Other (please specify) 3
answered question 68
skipped question 0

Question 4
In an attempt to reach prospective customers, banks are trying to capitalize on the various social media tools that are becoming an increasing part of our daily lives. Rate how helpful or attractive the following options would be to your banking needs.
Answer Options 1 (Not at all) 2 3 4 5 (Very) Response Count
Twitter accounts would receive tweets when checking account balance falls below a certain dollar amount. 50 3 6 3 6 68
Instant messages offering updated interest rates and special offers. 54 9 4 0 1 68
Facebook page maintained by local branch; "friends" earn reduced fees and charges. 39 13 7 4 3 66
E-mail sent when debit or credit is made on credit card. 23 15 15 9 6 68
Local branch's Web site includes games, such as "Chase the Morgan" (a breed of horse) and "JP's Adventure." Players earn points leading to discounts. 49 9 6 3 0 67
Local branch hosts YouTube video contest: most-viewed video wins $100 certificate of deposit and free one-year checking account. 53 4 6 4 0 67
answered question 68
skipped question 0


Question 5
How likely would you be to switch FROM a bank that offers only a Web site TO a bank that utilizes numerous social media tools and offers options such as those described above?
Answer Options Response Percent Response Count
1 (Not likely) 73.1% 49
2 14.9% 10
3 6.0% 4
4 4.5% 3
5 (Very likely) 1.5% 1
answered question 67
skipped question 1

Question 6
How often do you visit your "bricks and mortar" bank branch (excluding ATM visits to deposit or withdraw money)?
Answer Options Response Percent Response Count
Three or more times a week 3.0% 2
Once or twice a week 11.9% 8
Two or three times a month 31.3% 21
Once a month 14.9% 10
Once a quarter 14.9% 10
Less than once a quarter 14.9% 10
Once a year 7.5% 5
Never 1.5% 1
answered question 67
skipped question 1

Question 7
How often do you visit your bank's Web site or other bank-related social media platforms?
Answer Options Response Percent Response Count
Three or more times a week 29.4% 20
Once or twice a week 36.8% 25
Two or three times a month 22.1% 15
Once a month 4.4% 3
Once a quarter 4.4% 3
Less than once a quarter 1.5% 1
Never 1.5% 1
Not applicable 0.0% 0
answered question 68
skipped question 0



Question 8
How helpful would it be if your bank offered social media sites in addition to a company Web site?
Answer Options Response Percent Response Count
1 (Not helpful) 61.8% 42
2 20.6% 14
3 14.7% 10
4 2.9% 2
5 (Very helpful) 0.0% 0
answered question 68
skipped question 0

Question 10 Note: For spatial purposes, questions 9 and 10 are transposed.
Do you think social media tools such as Twitter, Facebook and instant messaging are fads?
Answer Options Response Percent Response Count
Yes 35.3% 24
No 64.7% 44
answered question 68
skipped question 0

Question 9
Response Count
37
37
31

Number Response Text
1 I would be interested in more alerts to phones, and DM's on twitter or facebook. As well I use a lot of twitter/facebook accounts to get deals at places, having ads on them would be helpful.
2 I keep banking separate from facebook. Going to the bank website is enough for me. However, others may appreciate only going to one website for multiple purposes.
3 I would not expect my bank to use social media - I want them to protect my funds
4 I am older and not on the social media bandwagon, so I find the Web site to be enough for my needs. Also, for security reasons, I would be concerned if my bank used social media....I don't completely trust the security of the social media options that I am familiar with.
5 Tweets or e-mails for maturing IRA's CD's would be helpful so rates could be reviewed.
6 I don't use the social media very often, so I don't think it would be helpful to me.
7 I doubt I'd ever opt into more interaction with a bank than is absolutely necessary. Online transfers and payments are all I want out of a bank's Web presence.
8 Alerts for usage of credit cards would be helpful against someone else using my credit card.
9 Create opportunities for a conversation to develop enhancements to programs that are currently offered.
10 I don’t know
11 At my age (64) I only need a bank for financially related issues, i.e. checking, savings, CD's, credit cards, mortgages, and loans. I certainly don't look to financial institutions for social needs.
12 web sites and an occasional email are all I need
13 I am not a fan of all these social media tools therefore do not find any need for them.
14 We are retired folks and do not use all those bells and whistle's that modern technologies have available.
15 Quicker, easier contact. Direct contact.
16 I am leery of using social media for banking: There are so many ways for people to take advantage of customers on-line that I prefer to avoid using anything except the banks own web site just to be on the safe side. I think younger clientele are most likely to take advantage of social media--and that it's going to continue to change with newer and better things coming along. Also, hopefully the banks will figure out more ways to ensure safety and security.
17 No interest in mixing social media with financial info.
18 It would not serve my needs. My needs are met with their website.
19 I would strongly disagree with this and consider it another marketing/ advertising tool that is a waste of the banks resources.
20 I don't think that any use of social media by a financial institution would serve my needs better than they are able to currently.
21 Banks needs web sites that are accessible with full functionality via mobile devices. Also, email notifications of balance alerts, etc, are very helpful.
22 I would only use their web site for balance inquires. No other media interests me at this time.
23 Aside from being able to use their website there are no other social media programs that would help me.
24 Other than notifying when an account is being used illegally or is about to run out of funds, I can't imagine any use. In response to # 10 below: I certainly hope so!
25 I guess it could be good for the exposure of the bank, but I do not consider social media a tool to help me either choose a bank, or receive any type of updates. I prefer to minimize my financial access to only what is necessary.
26 I like the idea of using Twitter or text messaging to send me a message if my account drops below a certain dollar amount.
27 I have no need for social-media-based banking. Due to the public nature of social media, I do not need others knowing anything about my banking habits. I certainly don't need my twitter followers knowing that I've overdrawn my bank account. I do not have a problem with others knowing that I like certain entertainers, restaurants or cars.
28 I don't actually use social media other than the bank's own respective website. I prefer to have all my information in one location rather to hunt down what I'm looking for. If I can't find what I need in one place and readily available, I would actually think about switching banks. I don't feel that utilizing all the social media tools out there would benefit me in any way.
29 The more options the better. Technology is changing every day and every business, including banks, need to take advantage of different types of media to obtain customers.
30 I see the option to be updated instantly via twitter, AIM, text message etc. to be very appealing. I am bad about keeping up with a checkbook, and don't keep particularly good records, so having my bank update me if my balance is below a certain point, or there were promotions I should be aware of would be very helpful.
31 I don't really see the need for banks to use social media. While SM is great for customer service , it is a public forum. I feel that banking should be kept private.
32 mainly for updates (IMPORTANT ONLY) maybe defined by user. Which areas and thresholds produce a alert notification and which channels that alert travels through. As well as updates that could effect my rates/banking behavior (i.e. my bank gets bought by another bank and I can use their ATMs, etc.) The one feature I can think of that nobody does would be helpful "geo-tips." This would be bank related info based on your geographical location over time. For instance, if my purchase history has been in New York for the past three days in a row, you can assume I am in New York and maybe send an email with all the local branches/atms or if there are none (like my bank) which bank's ATMs will have the lowest sur-charge.
33 Mainly notifications of balance, since I'm personally moving away from a balance book and using a website in conjunction with something that showed all purchases (since some are logged for a while after they're actually made, which can give you a false overall balance on websites), possibly through social networks as mentioned above.
34 The email one sounds good, though I also recently had my identity stolen, so that's fun times. Otherwise I don't use most social networking things. What little upkeep they have is too much for me. Also, to the fads thing, all I can really say is "I don't know."
35 Personally, I do not want my bank to "Friend" or twitter me. I think most of these are fads for young people and of no use to me.
36 Rather than for marketing, use the social media to provide information on existing accounts.
37 Its a bank, not my best friend, the moment it starts posting twitter updates is the moment I stop using it.

I finally finished that pesky little master's degree - maybe the twitch in my neck will subside ...

Yup - been a while. Grad school has been keeping all of us in the program especially busy. For me, my new job at JPMorgan Chase has reduced some of the stress I felt at the newspaper. Chase is quite an improvement over Brown Publishing on so many levels. Details to come ...