Over the last few years, many banks have struggled with improving the financial performance of the retail banking business. The reasons are well known. Shrinking loan demand, the negligible value of deposits, and regulatory pressures on fee income have forced many banks to focus on expense reduction to achieve targeted returns. However, within this environment, pressures on marketing have increased to build positive, differentiated brands, acquire new profitable customers, deepen customer relationships, and support multi-channel distribution systems. While these demands have increased, resources have not. At the same time, the cost of traditional media has accelerated while its effectiveness has declined. Consequently, this need to do more with less has caused many banks to start to examine alternative media as a way to create more impactful messages at a lower cost.
Social media is fast becoming one of the alternatives banks of all sizes are looking to in order to address this dilemma. After all, that is where the customers are – 72% of all internet users are active on social media, 89% of internet users ages 18 to 29 are active on social media, and 93% of all marketers are now using social media to convey their messages. However, because of the variety of options and the uncontrollable nature of social media, banks are faced with a number of challenges in developing and executing a social media strategy. These include understanding the options, focusing on those with the highest potential, determining what each medium can and can’t do, establishing realistic success criteria, and creating an integrated mix across all marketing channels.
These challenges can seem daunting; however, in our view, the need to develop an effective social media approach is becoming a necessity for banks of all sizes, not just the largest institutions.