The SocialLife of finance: How financial services can use social media to their advantage

Frances Green, Financial Services Research Director Harris Interactive

About Frances: Frances is the Financial Services Research Director at Harris Interactive. She has provided financial research to global clients at Harris Interactive for over 15 years. Prior to this, Frances worked in senior research positions at NOP World, BJM and HSBC.

‘Sociable’ isn’t the first word that springs to mind when talking about financial services and you’d be pressed to find many people who like to broadcast their fiscal matters online. Despite this, like all businesses, financial services companies need to harness the great power of social media in order to enhance customer service, manage their reputation and obtain a competitive advantage.

Social media provides the opportunity to improve the flow of information between a company and its customers and prospects. Companies can use it to answer customers’ queries, resolve service issues, listen to feedback via forums and online chats, and respond to negative comments. Social media also can be used proactively to understand needs, educate, inspire and target groups of interest.

After a tentative start, financial services companies have begun to recognise the potential that social media offers. To use social media to its full effect, however, companies need to know who uses social media, understand their attitudes and behaviour and how they interact with brands via social media. Harris Interactive recently* examined social media usage and profiled brands including Barclays, Lloyds TSB, NatWest and the Co-operative Bank, which revealed just how vital a strong social media campaign is within the financial services sector.

Why should companies have a social media strategy?
For companies considering whether they want to include social media in their marketing communications, the research contains some important messages. Firstly, it underlines the importance of having a social media presence. The study clearly demonstrates that social media engagement has a positive impact on customer commitment. Consumers who have interacted with one of the brands monitored via social media give a higher Net Promoter Score (NPS) than all users, whilst those who do not interact via social media give a lower NPS score than all users. This in essence means that they are more likely to act on a campaign – so “retweet” or recommend the brand – if they’ve interacted with them directly.

However, it is not just about having a presence; the quality of that presence is also crucial. Respondents were asked to give a social media score to companies they interact with via social media, and the data shows a strong correlation between the quality of social media and the NPS. Across all the brands monitored, those rating a brand’s media score ten out of ten gave an NPS score of +75 and those giving a social media score of nine had an NPS of +56. At the other end of the scale, those giving a score of between 1 and 3 had an NPS of -49.

How does social media activity influence buyer behaviour?
Whilst the principal uses of social media are to keep in touch and share information, significant proportions of consumers use social media to get involved with brands and services. More than half use social media to follow and comment on brands or products, half seek out product recommendations, four in ten post recommendations on brand or company pages, and almost as many buy products and services via social media.
Most people use social media for – as the name suggests – socialising. However, a third of people also value social media as a means of researching products or making product recommendations whilst, for one in five, social media influences their purchase decision. Our study revealed that 16% of social media users have already taken out insurance products, 15% have acquired a credit card and 12% have taken out a personal loan as a consequence of using social media (via click-throughs and other advertising), which clearly demonstrates the extent to which social media is responsible for sales.

Who will you reach using social media?
SocialLife demonstrates that social media usage is not restricted to the young. Whilst it is certainly highest amongst younger consumers, usage spans all age groups with three-quarters of those aged 55 years using social media. The most used sites are Facebook, Twitter, YouTube and Google+. Most other sites target a niche or very young audience, so it is best to target these four main channels if you want to reach your audience effectively. Intensity of usage, however, is strongly linked to age with younger people signed up to more than twice as many sites as older people.

In order to target social media strategy it is essential to understand the characteristics and preferences of those you will reach using this medium. Taking into account consumer characteristics and social media behaviour, there are six distinct and targetable types of social media users, or segments, that were generated from the SocialLife data. The table below ranks the segments in terms of size, their share of social media activity and social media spend. Two of the largest segments – Barely Social and Social Observers – account for very little social media activity and spend, whilst the smallest segment, Social Pros, accounts for almost a third of activity and a quarter of spend. Together, Social Actives and Social Pros account for almost two-thirds of all social media activity and eighty per cent of spend.

The profile of those following banks on social media was very similar to the sample overall, meaning that one in three bank customers are Social Pros or Social Actives. Since the distinguishing features of both these segments includes usage of and reliance on social media when making purchase decisions, as well as a propensity to purchase via social media sites, it is clearly important to understand who they are, how to reach and influence them, along with their needs and preferences. SocialLife allows for this through its profiling of the segments.
Social media marketing will continue to be an increasingly important strand in a multichannel approach, with a need to continuously review activity across platforms as well as against the profile of customers and prospects. So while, on the face of it, financial services does not seem the type of business that naturally fits with social networks like Facebook or Twitter, it’s clear to see that a strong, targeted campaign on social media is key to gaining a competitive advantage.

*SocialLife is a quarterly survey of 5,000 online UK social media users aged 16 years and over and examines social media usage, segments users and profiles the customers of thirty companies, including financial brands, in terms of their social media usage. The financial brands included are Barclays, Lloyds TSB, NatWest and The Co-operative Bank.