By Lon S. Cohen
Today's preteens and teens are tomorrow's customers. How do you reach the kids who grew up with the Internet – the iPhone, YouTube and Facebook generation? Youth culture has been ratcheted up to light speed, but the banking industry is slow to adopt new marketing strategies.
One reason is risk. While early adopters gain a head start against competitors in customer retention and acquisition, the return on investment must be evaluated versus waiting for the technology to mature and become commonplace.
“The financial service industry is up against a ‘commodification’ of products and services,” said Michael Seaton, vice president of Digital Marketing at Thornley Fallis Communications, an agency integrating social media with public relations. “New media – meaning social media tools and platforms – provides a range of choices to directly reach out and humanize the banking experience. Transparency and authenticity are front and center and brands must differentiate themselves around their actions, not slogans.”
“The demographics and psychographics of our customers are dynamic,” said Steve Coen, a consultant in the financial industry and retired CIO of Buffalo-w based M&T Bank. “Product and delivery demands are changing, and we must serve our customers on their terms; how, when and where they demand services.”
Banks have already tried to supplement traditional financial service points through supermarkets, kiosks, Internet and mobile banking devices. “As IM, social networking and SMS [short message service] become mainstream forms of communication, financial institutions must secure the technology and find ways of incorporating it into products and services,” Coen said. “In the past, processes like open IM have been viewed as insecure, or at best risky, by major financial institutions and their regulators.”
When each new electronic protocol technology becomes secure, banks spend time and money adopting the trappings of Web-based architecture, offering practically every traditional service in an online banking version. They have convinced some customers to trade paper bank statements for electronic versions that can be downloaded and archived on their personal computers.
But the question still remains: Are banks really reaching out to customers the way they actually live in the real (or virtual) world? The desired demographic always changes its habits, and Generation Y – pre-teens to age 25 – is the newest one. New marketing channels will increase banks’ reach to both the younger market and the increasingly mobile work force.
As these customers come into their own they will demand the seamless integration of social networking into products and services. It’s now easier than ever to reach out to your customers on a one-to-one basis. If you’re not adopting a strategy of online marketing to consumers then you might find yourself cut right out of the equation.
The Digital Native Nation
"The next generation hitting the workforce was born into a digital world; they are digital natives,” said Thornley-Fallis’ Michael Seaton. “They can't relate to an existence without three-screens: TV, PC and mobile device. They live and breathe multi-media, multi-tasking and have never known anything but broadband wireless access. The rest of us are digital immigrants. We remember life before the PC and the Internet. We grew up with one screen. It was called TV.”
Kids tend to be great multi-taskers, layering communication forms and activities over one another. On their computers they use multiple IM screens to hold several quick conversations at once, while fielding cell phone calls and watching both television and YouTube videos and listening to music on MP3, all of which deliver information in bite-sized format that can be processed and responded to with ease.
To them, e-mail is a mode of long-form communication. “E-mail, no. I use AIM to talk to my friends,” said my teenage son, who reacted as if I just asked him if he still used Morse code. He uses YouTube, PhotoBucket and MySpace for file-sharing. His social network text-messages on cell phones or posts comments to their MySpace and Facebook pages.
By the time he’s old enough to have to share files like memos, letters, charts and other documents, spreadsheets and presentations, a service like Google Docs will likely have taken over the document creation world. Google Docs allows you to work on, save and share any document type online, never having to save a version to your desktop (Google hosts the file on their server) unless you want to work offline. And the file is available remotely from anywhere you have an Internet connection or to anyone invited to collaborate.
So, short messaging as a real-time medium is not going to disappear as teens grow up. Migrating to some other instant message service might be a good idea. Text messages, lightly stylized communications and links to online messages are all the craze with young people, as are online postings that alert peers with up-to-the-second status on mood or activity.
Does this mean that you have to go out and hire a couple of 14-year olds to craft your marketing message? No, but the banking industry does have to start engaging the Internet Generation on their turf.
What’s In It for Me?
So, what are the opportunities – and the challenges – for your bank?
Let’s start at the top. As e-mail matures as a technology, smart phones such as the Apple iPhone and similar devices are morphing into mobile computer workstations, as their software becomes more powerful (see Sidebar).
Younger bank customers are disinclined to log onto a Web site to review an account balance. Already, banks are providing SMS Account Balance Messaging. The customer sends a text message to a special number, and the bank will retrieve the information and then text back the requested account or loan balances, right to the phone. This power computing on mobile devices will allow banks to narrow down consumer communication to a one-to-one level.
Blogs open the door for two-way communication, but that’s a two-edged sword. Banks, understandably concerned about regulatory and privacy issues, worry about the potential liability due to the loss of control over the communication. We’ve read recent news reports about bank employees or interns who blog about work in postings unauthorized by their banks. The reaction from experts in the field is that control over this sort of communication is already gone, and the best way to deal with the “blogosphere” is to understand it.
Creating a blog policy for your bank and then assigning blog duties to your staff is integral to the new marketing. You also need to be aware of what other bloggers are saying about your financial institution. It’s best to start thinking like a blogger now or hire someone who does.
The Wisdom of Crowds
“Tomorrow's customers will attach themselves to those brands that the community says can be trusted,” Michael Seaton said. “It is all about the wisdom of the crowds.”
The social Web builds a community around individual participation to the group. Social media, social lending and mobile banking are the trends through which you may be engaging your customers in the near future. The power of this big network of people is the passing of information back and forth. Its buzzword definition: Viral marketing, the ability to transmit a message between peers in a group, enabling the people to decide collectively what is important enough to advertise, whether it’s a cool new device or a humorous video clip. Marketing is becoming more of a two-way street, and teenagers are already used to the idea. They expect it to be that way now, so why should that change in the future when they become consumers?
Change the way you market to the consumer. Remember that these are all tools, not an overall strategy.
Mickey Mencin, senior vice president and advertising manager at KeyCorp, parent of KeyBank, was one of the presenters at the January Online Innovations in Financial Services conference, sponsored by Worldwide Business Research. She said KeyBank integrates online marketing strategies as a part of its overall communications mix. Her group recognizes the untapped opportunity of online PR and the opportunity to expand the communications channel through the proper use of story tagging. Stories that are tagged appropriately will be picked up by search engines and distributed, making communication more than just a one-off message. Realizing that there’s a big generation of users who have an intimate relationship to messaging is going to have to be part of a bank's focus, she said.
It’s not going to be as simple as transferring the same advertising you’ve been doing all along and putting it on the Web, say the experts. The new consumers are open to suggestion, but not in the traditional sense. It has to be integrated into the current technology, spread out and disseminated into multiple data streams in smaller bits. And the conversation is going to go both ways, so be prepared to receive the message as much as you are sending it.
“It begins by understanding the jobs and tasks consumers face in their personal finances and, providing the right mix of relevant content and community engagement across channels of interaction,” said Thornley-Fallis’ Seaton. “Banks that behave with a goal of helping people, instead of selling to potential customers, will win.”s
Lon Cohen is a freelance writer based in New York.