Attn: Entrepreneurs and Visionary Innovators
By Michael A. Edberg, MBA, CFA
Remember local bookstores before Amazon.com? Clothing retailers before Zappos?
Now think about “brick and mortar” banks.
Reality is that banking is a commoditized business and in a world of abundant consumer choices banks will need to be active and relevant on social media to build brand equity and meet their long-term strategic goals.
Increasingly, what we call “social resonance” is crucial for commercial success and the creation of shareholder value.
The key to winning the hearts and minds of today’s consumer is to make them feel appreciated and provide them with an authentic sense of connectedness. Appreciation involves a feeling of empathy and deep understanding of potential consumers, while connectedness is the result of an honest (real) and authentic relationship and a sense that the consumer is part of an important group with a larger purpose.
In their book Firms of Endearment, Raj Sisodia, Jag Seth and David B. Wolfe write: “Firms of Endearment have bought into a different idea; they strive for a share of heart. Earn a share of the customer’s heart and she will gladly offer a bigger share of her wallet.”
To gain competitive advantage, banks must use social media strategically and tactically, develop a story, and build community around that story.
Brand is an intangible asset that for many companies is its greatest source of shareholder value, as demonstrated by the increasing gap between market value and book value.
This is best demonstrated by Amazon.com, which has a market value of $179 billion, or 16x book value, despite regularly recording losses (about $6,000,000 cumulative losses 2012-2014).
Banks that do not understand and appreciate their customers will have higher customer turnover and lower employee morale. That can only rebound on them with a negative brand image, declining profitability and market value.
At Verifeed, we believe that the banks best positioned to outperform in today’s economy are those that operate with a sense of authenticity, transparency, empathy and societal purpose.
Banks that develop ‘Social Capital’ by creating strong emotional, less transactional relationships with customers will outperform those that do not embrace this approach. Simply put, a bank’s social media presence highlights and emphasizes its worth. To do nothing puts a bank at a social and economic disadvantage.
Social intelligence – that is, business and market intelligence unearthed from patterns in social conversations – is crucial at a time when every bank customer expects a personal connection. Everyone needs to know, and get to know, who they are talking with. The better you know your customers true needs and circumstances, the more relevant you are to them. And the more loyal they are to you.
Listening, learning and leveraging social conversations on Twitter, Facebook, Instagram, YouTube and beyond to build “Social Capital” is a powerful differentiator for any bank – whether a small community bank or a ‘too big to fail’ – to build brand loyalty, protect its reputation, and grow market share.
Michael A. Edberg, MBA, CFA is an investment manager and banker with 18 years experience in social impact, real estate, banks, financial services and artificial intelligence.
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