According to Ehrlich and Fanelli:
"As with most services, the most common selection factor is word-of-mouth referral. This is not surprising, since most people don't have an objective way of judging the quality of financial advice, insurance claims handling, or other types of services. when seeking the services of a stockbroker, pension adviser, private bank, or hedge fund manager, both institutional and consumer buyers seek the advice of their peers."
If Ehrlich and Fanelli are correct regarding their assessment (and I believe they are), then bank boards and CEOs should ensure that their banks have considered the need for social media within their overall marketing plan. Why? Because of the effect that social media has had on word of mouth. The Community Banker's Guide to Social Network Marketing states the following:
"Researchers have observed that social media is affecting the way people communicate, make decisions, socialize, learn, entertain themselves, interact with each other and do their shopping. Accordingly, social media has caused a significant change in the market power of consumers, taking it away from product and service providers and giving it to consumers. The vast and growing knowledge base collected and maintained by social media applications has given consumers the power to make more informed decisions, forcing product and service providers, including banks, to deal in a more honest and open manner or lose the transaction to a competitor that does. And while social media presents serious challenges to businesses, it also provides opportunities to those that embrace the change and work within the new paradigm." "
Based on the power of social media and its ability to shape consumer behavior, every bank should consider and discuss the adoption of social media. While social media may not be right for every organization, the discussion should take place rather that just assuming for or against it without a meaningful discussion.
If buying decisions relative to bank products are highly dependent on word of mouth, and if word of mouth is a significant activity taking place on social networks, banks need to ensure that they, at a minimum are monitoring the conversations taking place that involve them. For example, in my last post I noted an actual case in which AT&T proactively monitored Twitter conversations to identify and resolve potential customer service issues. At a minimum, this same approach should be used by all banks.
As noted by Erlich and Fanelli, consumer buying decisions are shaped by word-of-mouth. By monitoring and responding to conversations taking place on social media platforms (social networks, blogs, etc.), the bank has the ability to demonstrate to the community that they are interested in truly serving their customers. But more importantly, these interactions go a long way in turning negative word-of-mouth into positive word-of-mouth, resulting in improved sales.