Are financial service online communities effective?

Online communities are a powerful tool. Get the strategy right and they can help to generate a major success story: get them wrong, and they fade into insignificance, if you are lucky! 

Historically, social media was seen as an anathema to businesses like banks.

Thankfully such narrow minded thinking is a thing of the past, but some businesses have gone too far in the other direction. 

Excesses are dangerous. If a financial organisation is excessively insular it looks out of touch, whereas by going to the other extreme, and jumping on every social media trend available, banks risk being seen like the deeply embarrassing parent dancing to the latest youth anthem.  

Rob Cottingham captures this phenomenon well in the attached comic strip.

In the most recent Mapa Credit Card Dashboard update we recorded the demise of First Direct's Little Black Book.

This was the first UK bank online community site retained exclusively for customers to share reviews of both banking and non-banking experiences when it was launched way back in 2008.

The bank's stated reason for closure was customer feedback which identified that "numerous review sites online…have become a lot bigger than the Little Black Book". No doubt the usual suspects of social media like Facebook, Twitter etc. are 'bigger' - but size is only one factor when considering online communities, and not necessarily the most important.

Online communities can be used to develop customer relationships but they come into their own when considered as sources of information for targeted sales.

The most successful way to exploit this opportunity for sales is to develop a number of groups and or sub-groups within the main online community. These groups are defined by customer interests and service requirements.

By increasing the number of groups the online community benefits and the community provider, in this case banks, profits from the opportunity to identify additional customer segments. At a certain point when enough information has been generated within the communities it becomes possible to segment further into highly personalised micro-segments.

Micro-segmentation is a hotly debated topic often mentioned in the same breath as big data. In the context of online communities these micro-segments provide more targeted insight, making sales and marketing strategies more effective, whilst providing a highly personalised and predictive approach to the sales process.

The online community sales and market segmentation opportunity

By interrogating the data provided from communities, for example considering communication streams and topics of conversation, upsell and cross-sell opportunities can be increased. 

Targeted use

Social media, like any communication platform, needs to be used in a targeted fashion: its use should imitate a scalpel not a meat cleaver. 

Good online communities should follow a set of simply guidelines: 

1. Relevance. Communities must make sense in relation to the customer or segment in question. For example who is it targeting and for what reason? Is it to increase spending or to keep the customer from churning?
2. Logic. It must make sense for the service, product or information to be delivered through the social platform in question. There is nothing worse than a random product insertion and it has the potential to alienate the community members.  
3. Integration. Any service offering should appear to seamlessly link into the community ethos, its pertinence and relevance being unquestionable. 

Successful targeted online financial communities

Whilst monitoring the digital strategies of banks we have come across a number of innovative uses of online communities. An area within which banks have been particularly active is the enterprise sector with SMEs.

Many of the communities developed for this segment have been highly successful and widely utilised. One of the most original is Commonwealth Bank's "Women in Focus", a forum dedicated to connecting business women in Australia through the provision of events, workshops and partnerships.

The community even has an area where business owners can promote their products and services. Although the services provided are not within the remit of the bank's core products, this site does fulfil the criteria of a good online community by providing pertinent and useful services to its members.

A leading example in the US is American Express with its OPEN Forum, which provides video, articles, blogs, podcasts and expert advice for business owners.

The Community has a "Highlights" section which features blogs and articles on topics such as branding and employee morale. In its second year OPEN increased unique visitors by 525% from 160,000 to over a million.

AMEX's proposition demonstrates a number of online community best practice features including pertinence, relevance and service integration through the incorporation of the OPEN Forum within the wider proposition, which includes a dedicated selection of credit card products for SMEs.

Financial communities are both relevant and useful for SMEs, as business owners are limited in their choices, yet have a close working relation with their financial advisors.

This provides the opportunity for banks to provide SME communities with core banking products through integration into the communities themselves.

In this way the community serves as a cross-selling and value added service opportunity. In contrast The Little Black Book did not promote cross sales and First Direct made minimal effort explaining how these features were relevant to the bank or its customers.

Perhaps the most important factor for banks to maintain a successful community is the integration of products and services.

The Little Black Book may have had more success had it integrated information and services surrounding loyalty and other schemes usually associated with credit cards such as frequent flyer programmes.

But let us not denigrate First Direct. It was the first to approach communities indirectly by providing a non-core banking offering. It remains an innovator in this space and has simply been overtaken by developments elsewhere on the web.

It should also be commended for recognising this and reacting to customer input to remove the service, and thereby proving that they actually listen to those very online community members.