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If You're Not Connecting With Customers on Facebook and Twitter, You're Missing Out

It may be true that teenagers and young adults are using Facebook and Twitter to keep in touch with their friends, but these aren't just your kids' social media any longer. Yet a new report, Social Media in Financial Services 2010, from UK-based Datamonitor reveals that financial services firms haven’t yet realized the opportunities that connecting with consumers via social media can provide.

Financial services firms that aren't yet enmeshed in an Internet strategy that includes a substantial focus on social media are missing out on myriad opportunities to reach and perhaps even influence a large percentage of Internet-savvy consumers--and more consumers are joining this group each day.

So what's the problem? Why aren't all financial services firms jumping on the social media bandwagon?

Some firms still view social media as the latest craze, and most popular with the younger set. While this may be true, turns out that online media is most popular with the 25-year-old to 34-year-old demographic, according to the Datamonitor findings.

Some financial services providers are failing to recognize the marketing and business networking value of sites like Twitter. With roughly 41 percent of consumers globally currently using online tools to make financial decisions, not getting involved with social media could be a costly mistake.

Some firms believe that while keeping in contact with – and keeping tabs on the behavior of – current and potential customers through social media is a nice idea, they're not convinced of the value it has in boosting profitability.

"In reality, social media does have the scope to drive sales, but providers have not seen a direct or measurable link. While social media can be used to build brand awareness, its real value comes through other, softer factors which build consumer trust and brand loyalty," says the Datamonitor report.

In fact, firms that use social media demonstrate to customers that banks are approaching them and communicating with them through their preferred channel. This can lead to customer recommendations, and has the potential of viral marketing to generate sales and increase the customer base.

"Banks would be naïve to believe that consumers don't listen to recommendations made online," wrote Anna Large, Datamonitor analyst and author of the report. "We don't now just rely on the say-so of our friends and family; instead we want to know about other consumers' experiences and are using digital networks to satisfy that need."

Banks that believe that any negative comments made on social media sites pose little risk to their brand are mistaken. Online product recommendations from peers for everything from restaurants to cars carry significant weight nowadays. Positive online buzz about your institution will ultimately translate into increased market share.

Datamonitor believes that at the very least, financial services firms must monitor the social media to do some product research, size up the competition and understand what today’s consumers want, even if they choose not to have a visible social media presence. But with all the opportunities social media provides, it behooves financial services firms to consider making that leap into the social media pool.