Socal Media Savvy

When ShoreBank of Chicago introduced an online high-yield savings account, it built a microsite laden with social media tools to help promote it. Aside from being able to apply for the account online, visitors to the site can access ShoreBank’s blog, refer friends, and read and share stories about the bank’s customers.

The microsite has been successful on a number of fronts. Since September 2007, it has helped attract more than 4,200 new accounts, many of them from customers who skew younger than the bank’s traditional base. Just as important, it has helped ShoreBank share the story of its three-part mission to help the environment, develop local communities, and run a profitable business.

Social media help spread ShoreBank’s message in an authentic way. One of the most frequently e-mailed pages from the microsite, for example, is the story of the Villareals, who were about to lose their home to foreclosure until ShoreBank refinanced the family into a stable, fixed-rate, 30-year mortgage. “We’ve been amazed,” says Karen Weigert, a senior vice president at ShoreBank. “When your story is available, lots of people find you and then talk about you.”

Sometimes, of course, a particular story may not be so appealing, and all that online attention can backfire. Bank of America no doubt is still smarting from an internally produced video of two executives earnestly singing about the bank’s merger with MBNA to the tune of U2’s “One.” The video somehow made its way onto YouTube and has prompted mostly snarky comments from more than 500,000 viewers.

While Bank of America boasts a number of social media successes, including an active online community for small businesses and a bustling presence on Twitter for customer service, the YouTube episode lingers on as a painful lesson. As Kevin McIntosh, a social media marketing strategist, pointed out in his blog in early May, the BofA video was still attracting hits-and derision-more than two years after being posted.

Social media pack a lot of potential marketing power, but part of the bargain is that customers and prospects are free to manipulate the message, opening the door to misunderstanding, embarrassment, or worse. Experts say banks need to tread carefully. All of the standard tasks that apply to traditional banking operations, including risk assessments and the drafting of policies and procedures, also apply to the use of social media.

“You’re inviting the world into your home,” explains Kevin Funnell, author of the Bank Lawyer’s Blog and an attorney in private practice in the Dallas-Fort Worth area. And there’s no way of knowing whether you’ll be visited by a witty sophisticate or a raging lunatic, he adds.

Social media marketing carries all the same risks as traditional marketing, Funnell says. “The wrinkle comes from the fact that you have people talking back to you.” Banks face the risk that people posting on their sites could infringe on a copyright, defame someone, or volunteer information about themselves or others that would constitute an invasion of privacy.

One of the biggest oversights related to the use of social media is that many banks don’t consider it to be a form of advertising when actually it is, says Nancy Derr-Castiglione, president of D-C Compliance Services in Highlands Ranch, Colorado. Banks can trip up in a number of ways by not applying the appropriate advertising-related due diligence around social media, she says. For example, bankers sharing the interest rate of a particular product with a customer or prospect over Twitter may fail to include the appropriate disclosures that go along with that rate. In fact, the required disclosures may not even fit into a Twitter message.

In addition, the broad exposure that social media afford-essentially across the Internet and thus around the globe-may lead a bank to advertise the availability of its services in locations where it cannot actually provide them, Derr-Castiglione says. The ubiquity of social media also makes it easy for individual employees acting on their own to err. Derr-Castiglione has encountered numerous examples of employees pitching products through social media outlets, without the benefit of any vetting from the compliance department.

The legal risks of social media, however, are not so overwhelming that banks should stay on the sidelines. “They’re overblown,” Funnell says of the risks. “They can be managed with the appropriate policies and procedures.” For example, bank management needs to be confident that the people it puts in charge of social media tasks have the proper attitude, he says. In other words, make sure “they can interact with others without losing their cool.” Also advisable is conducting a full-blown assessment of the bank’s use of social media, the associated risks, and how those risks are being mitigated, he adds.

Umpqua Bank of Portland, Oregon took several steps to manage its risk when it expanded its use of social media in early May with the introduction of a multifaceted account offering and a presence on Twitter. The new account automatically transfers money from checking to savings accounts, and kicks in a $10 bonus every month if certain requirements are met. The centerpiece of Umpqua’s Save Hard, Spend Smart campaign is a microsite that features three profiles of people aiming to save money for a particular goal.

Visitors get to know each of Umpqua’s “savings heroes” through their bios and photos, and can follow the progress of their savings plans through regular blog postings. In one of the blogs, a couple writes about their quest to save up for a new kitchen. Recently, a post from this couple spurred seven comments regarding the pros and cons of kitchen islands. While hardly standard banking conversation, the postings send a positive signal about the community’s level of engagement with Umpqua’s effort.

In preparation for its bigger push into social media, Umpqua trained employees throughout the bank on the proper way to communicate with customers through social media, says Lani Hayward, executive vice president of creative strategies. Five service representatives in the call center, for example, have been trained to monitor and appropriately respond to Twitter messages concerning the bank.

Umpqua’s proactive stance paid off recently when an aggrieved customer tweeted about a problem he was having with the bank, Hayward says. A Twitter-trained representative responded immediately and was able to help resolve the customer’s overdraft situation. Within hours, the same customer was touting the bank on Twitter. “We’ve always loved buzz marketing,” Hayward says. “This is word of mouth on steroids.”

Umpqua has also trained 12 employees throughout the bank to be “social media leaders,” tasked with maintaining appropriate standards in all the new methods of communicating with customers, such as blogging. In addition, Umpqua has put its policies and procedures under scrutiny. Over the past year, the bank introduced new policies concerning everything from which employees are authorized to use social media and how they may do so, to the archiving of Twitter messages. By next year, Umpqua expects to have one employee fully dedicated to social media strategy, Hayward says.

Banks considering using social media tools need to clearly define what they hope to achieve before jumping in, experts say. “You need to have a business case for doing it that makes sense,” Funnell says. But that business case probably will not be built around hard-dollar returns. Says McIntosh, the social media marketing strategist, “If banks simply view social channels as a way to hawk products, then they’ve totally missed the point of what social media marketing is about and need to stay out of that space.”

Perhaps the most important requirement of social media is that banks commit to representing themselves honestly, while tolerating the feedback, however negative it may be. “You can’t let the PR people dominate,” says James Van Dyke, president and founder of Javelin Strategy & Research of San Francisco. He adds, “You have to give to get. If you’re not comfortable with that, you’re better off not wasting your time.”

Every bank, however, should consider using social media as part of its preparedness strategy for unfortunate events, such as data breaches or natural disasters, Van Dyke says. In the event, for example, a bank falls victim to a credit card or identity theft scam, it should have a blog “ready to go at the flip of a switch.” That’s because the potential negative impact of a security breach on an institution’s reputation is so huge that it could only be a good thing to open the floodgates to communication through a blog, he says.

Though most community banks are still getting used to the idea of using social media, there is reason to consider the two a good fit. “Social media is about community and building trusting relationships,” McIntosh says. “And unless I’ve missed something, that’s what community banking is supposed to be about.”

It’s a message that resonates well with ShoreBank. The bank has a good story to tell, Weigert says, and social media enable it to tell its story where people are congregating. “We spend our time finding the stories and making sure we’re part of the conversation.”

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