As financial institutions continue to use technology to improve efficiencies, they have found that member adoption of new technology is rarely ubiquitous; therefore, it needs to be supplemented with target market segmentation in order to gain and retain members.
Marshall McLuhan, a the Canadian media theorist, best explained this supplemental need in the early 1960s in "Understanding Media: The Extensions of Man." McLuhan suggested that television, as well as future technologies, have the ability to re-tribalize, or re-create the sensory unification characteristic of tribal society. New technologies affect social organization, which in turn affects social interactions.
As McLuchan put it, "The medium is the message," meaning that the form of a medium embeds itself in the message, creating a symbiotic relationship by which the medium influences how the message is perceived. Social media is quickly becoming today's message medium of choice; therefore, credit unions must look at the financial behaviors of these groups to develop successful marketing strategies to gain and retain members.
Financial Behaviors of Social Network Users
With nearly 77 million of the U.S. population deriving from Generation X (approximately ages 27 to 49) and Generation Y (approximately ages 12 to 29), these tech-savvy consumer groups are quickly developing into the majority of banking consumers. To understand how to leverage social network sites to attract and gain Gen Y and Gen X members, you must first understand the social network site user.
According to a report by Raddon Financial Group (RFG), a provider of research-based solutions to financial institutions, the financial behaviors of different social network populations vary. Deposit balances held by social network site users in checking, savings, money market accounts and CDs range from a low of $11,891 for MySpace users to a high of $29,794 for LinkedIn users. Classmates users are not far behind LinkedIn savers, holding $28,007 of insured deposits, followed by Twitter users averaging $20,562. For Facebook users, the average varies based on the amount of time spent on the site. The average user holds $19,339, but daily Facebook visitors hold less at $16,856.
For social network users, Internet searches are more common than mail, television or newspapers, but the use of traditional media for financial product information is similar to the total population. Users of most sites are more likely than average to have shopped for and opened a checking or savings account. Internet CD shopping is above average with users of Classmates and LinkedIn. Users of all sites, however, show higher than average interest in opening an Internet-only bank account, and LinkedIn users are more than twice as likely than average to already have an Internet bank account.
There is no significant difference in lobby or drive-up usage between social network site users and the general population. Lobby and drive-up channel usage, however, did see a large decline from Fall 2008 to Fall 2009. As might be expected, this segment is most likely to be users of online banking and online bill pay.
Though consumers show to be increasingly active on social networking sites, RFG found that only 2% of consumers have read or interacted with their financial institution(s) while on a social networking site. This is consistent across all segments. Additionally, there are no statistically significant differences between the site users in their likelihood to have read about or interacted with one of their financial institutions while visiting a social networking site. Those who use Facebook on a daily basis may be the first segment to show any significant level of interaction in the future.
Meet Social Network Users on Their Own Turf
Furthermore, 4% of consumers indicated they have solicited financial advice from a social networking site, and 3% of respondents indicate they would be extremely, very or somewhat likely to solicit financial advice from a social networking site or a blog. Social network site users are increasingly looking to members of their online communities to inform them of what products are worthwhile, and which brands are not living up to their promises, versus taking the word of advertisers. This can be a great way to market products and services, but this can also be deadly.
CUs need to look at their specific demographics and exploit those preferences to determine if social media is one strategy to employ. Understanding the changing market dynamics is important to determine how a credit union will navigate the future.
Given their comfort level of and preference for social media, it should be clear CUs must meet these generations on their own turf. Specifically, having a well-developed Web 2.0 strategy is critical to your success in both attracting and retaining these members. But beware! Just because social networking sites and blogs are free does not necessarily mean they will be easy to establish or maintain. To be successful, credit unions need to commit adequate time and resources, as well as map out an organized plan.
"Creating an effective social media strategy that delivers consistent, engaging content and encourages member participation requires a meaningful time commitment," said Scott Mills, president of William Mills Agency. "Often, we see credit unions begin to engage online, then back off because they are not willing to make the time commitment to create, edit and post content, reach out to current and potential members and monitor how the brand is being portrayed on the web. The end-result is blogs, Twitter feeds and other social media that are not frequently updated. This actually hurts the credit union."
To attract new business, credit unions should spend time identifying potential leads rather than waiting for the leads to come to them. Some institutions have had success in generating new account openings by regularly monitoring keyword traffic on popular social networking sites. For instance, a post such as "does anyone know of a bank in the area offering a good rate on a mortgage?," is an obvious opening for a reply from your institution to at least let the individual know that you're there. This grassroots approach will take additional effort, so it's important to monitor whether or not the work is justified by the results.
Better at Gaining, Retaining Members
As consumers quickly become accustomed to using social networking for information, credit unions must look beyond traditional communication and marketing methods and leverage the Internet to more appropriately and successfully reach these market segments. By doing so, credit unions will better achieve their goals of gaining and retaining members, or as McLuhan calls them, members of our "global village."
Louis Hernandez, Jr. is chairman and CEO of Open Solutions, Inc., Glastonbury, Conn.'s Inc.