Banks’ Social Media Challenges

I had the chance to participate on a SMB Boston panel last week on Driving Business Value Through Social within Financial and Regulated Environments, which I think was just a fancy way of saying “social media in financial services.”

The main message of my presentation:

Financial institutions should integrate social media approaches into their marketing and customer service processes.

As I see it, banks (and credit unions) are wrestling with — or perhaps, simply failing to address — challenges regarding social media. And you don’t even need to be a journalist to know where these challenges came from:

  1. What: Banks don’t know what to say in social media.
  2. When: Banks don’t know when to say it.
  3. How: Banks don’t know how to say it.

There are, of course, a couple of other potential challenges, but I think that “Who to say it to” is less of a challenge, and that “Why they’re saying it” is better understood. Regarding “why”, the research that Aite Group has done on social media in banking, bears this out: Most FIs are fairly clear that engaging customers, building brand awareness, and building brand affinity are why they’re involved with social media.

Engagement may be the objective, but I’m not sure, based on what I’ve seen FIs tweet and post, that they know how to achieve that objective.

I saw one FI recently tweet:

Have a new business that needs to grow quickly? Add credit card processing to increase revenues and cash flow. #smallbiz

Here’s another from a credit union:

We are listening. We are not like the BIG Banks. Check us out!

Do people really turn to Twitter or Facebook to see shameless marketing messages, re-purposed from other marketing channels? Are these tweets effectively engaging customers/members/prospects? I don’t know. But I bet the FIs that tweeted those messages don’t know either.

Another thing that struck me reading those tweets, was thinking about why the FIs chose to tweet those messages when they did. Was some marketing person sitting around with nothing to do, and suddenly realize that ts was 30 minutes since the last tweet, so s/he might as well tweet something else? Did something trigger the need for a credit card processing tweet at that particular time? I can tell you this: The credit union’s tweet came 11 days after Bank Transfer Day, so I doubt there was some pressing need to send out that tweet when it was sent.

The tone of these tweets doesn’t sit well with me, either. How many times have you heard the phrase “join the conversation?” Look again at those tweets above — do you know anybody who talks like that in the course of a normal conversation? (If you do, I bet you don’t engage in too many conversations with that person).

This gets at a big issue that marketers (not just in financial services) have to face: They don’t know how to have (or start) a conversation with consumers. Here’s the problem:

Marketing has, to date, been driven by the need and desire to persuade consumers.

But “engagement” isn’t accomplished through persuasion. (Well, persuasion can be a part of it, but it can’t be the only part of it).

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So what should FIs do to address these challenges? There’s a tactical response and a strategic response.

The tactical response: Categorize and test.

A couple of months ago, Michael Pace from Constant Contact wrote an interesting blog post, advocating that Twitter users should periodically do a self-analysis of their tweets. Honestly, I thought that was a pretty self-indulgent thing for an individual to do. But at the company level, the idea has a lot of merit.   

A high-level analysis of your company’s Twitter stream can help you understand how well you’re balancing various types of tweets. And the same could be done with Facebook posts. The challenge, of course, is understanding what impact those messages are having, and if shaking up the mix would improve the impact (i.e., engagement).

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But even if you do this, I doubt that you’ll make more than just a minor impact on your firm’s bottom line. To have a more meaningful impact, you need the strategic response:  Integrate social media approaches into marketing and customer service processes.

In my presentation at the breakfast, I highlighted three ways to do this:

1. Influence preferences. I like what America First Credit Union does on its site (as does @itsjustbrent,  since he either borrowed this example from me, or I stole it from him). The CU incorporates members’ product reviews on the product pages. By doing this, the CU accomplishes:

  • Customer advocacy. Not just in the net promoter sense of the word — but in the more important sense of the word: Doing what’s right for the customer and not just your own bottom line. Helping consumers make better choices — that are right for them — by enabling them to access other customers’ opinions is a demonstration of customer advocacy.
  • Active engagement. I guess that, if a customer follows you on Twitter and reads your tweets, or likes you on Facebook in order to enter a contest to win a prize, you could call that engagement. But I would call it passive engagement. Customers who take the time to post a review are more actively engaged, in my book.
  • Continuous market research. I doubt many firms could capture the richness of information America First is capturing through satisfaction or net promoter surveys. And I know that they can’t capture it in as timely a basis as America First does.

2. Provide collaborative support. I’ve been holding up Mint.com as an example of a firm with collaborative support, but it recently discontinued its Mint Answers page. No worries, Summit Credit Union is doing the same thing, and hopefully, they can become my poster child for this. Collaborative support is giving customers the opportunity to answer other customers’ questions. Dell has been doing it for years. Why provide collaborative support?

  • Reduced call volume. I’m not going to say that you’re going to see a huge volume of deflected calls, but over time, if you market the collaborative capability, it can help.
  • Expanded knowledge base. This is where the bigger value comes in. Customer service reps leverage internal knowledge bases to answer customer questions. Collaborative support helps grow that knowledge base, and helps figure out which answers and responses are more valuable than others. This expanded knowledge base will also prove valuable in training new employees.
  • Active engagement. Similar to the product reviews, customers who participate in collaborative support sites are demonstrating active engagement.

3. Instill financial discipline. This is about using social concepts to get people to change the way they manage their financial lives. Take a look at the research that Peter Tufano has done regarding what motivates people to save.  There are some good examples of this in practice — see Members Credit Union’s What Are You Saving For?. I recently chatted with the CEO of Bobber Interactive, and like what they’re doing about bringing social gamification to how people manage their finances.

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Bottom line: Your firm can putz around with Facebook and Twitter until you’re blue in the face. For financial institutions, this is probably not going to have much of an immediate impact on the bottom line. It will likely take years of experimentation to figure out what to say, when to say it, and how to say it on social media channels.

If you want to engage customers, you have to give them a reason to engage. Mindless, idle chatter on Twitter and Facebook isn’t sustainable. 

The path to making social media an important contributor to bottom line improvement — and sooner rather than later — will come from integration social media concepts and approaches into everyday marketing and customer service processes.

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Social Media’s Chicken And Egg Problem

An article titled Research: Most social media marketing initiatives fail on New Media and Marketing states:

From the book The Social Organization the author states “One of our more striking discoveries is that most social media initiatives fail. Either they don’t attract any interest or they never create business value.” Why ? Because social media is not a tactic social media starts with a social organization focused on consumers and its customers.

[I think there’s a grammatical problem with the last sentence. I think there should be a period after the word tactic, and that the rest of the sentence is a new sentence]

My take: Hold on a second here. For the past two+ years, I’ve been reading left and right that: 1) The ROI of social media far exceeds the ROI of every thing else on this planet, or 2) The ROI of social media can’t be measured in just dollars and cents.

The explanation for why so many firms allegedly fail with social media is intriguing: That firms fail at social media because they’re not a “social organization” which the author defines as:

One that strategically applies mass collaboration to address significant business challenges and opportunities. Its leaders recognize that becoming a social enterprise is not about incremental improvement. They know it demands a new way of thinking, and so they’re moving beyond tactical, one-time grassroots efforts and pushing for greater business impact through a thoughtful, planned approach to applying social media. As a result, a social organization is able to be more agile, produce better outcomes, and even develop entirely new ways of operating that are only achievable through mobilizing the collective talent, energy, ideas, and efforts of communities.

When I first read this, I had a deja vu moment. Ah yes — substitute “knowledge-based organization” from the late 90s or “digital business” from the early 200s, and you realize that we’ve heard all this before.

My deja vu aside, I’ve also read — countless times over the past few years — that firms that don’t get into social media “will be left behind.” (Don’t make me find links, you know they’re out there).

So what should we conclude from all this?

  • That social media does indeed have a higher ROI, but only in a small number of instances, specifically those where the organization deploying social media has already become a social organization?
  • That a company that deploys social media will most likely fail in its social media attempts until it becomes a “social organization”?
  • That somehow a company should become a “social organization” BEFORE deploying social media in order to improve its odds of social media success?

If you’re a senior business executive feeling a bit confused by all this, join the club.

What this means is that — since social media is an imperative in today’s business environment (according to social media proponents), and that a firm must first become a social organization before achieving social media success (according to the author of the book) — business executives should take a leap of faith and radically change and transform their organizations before knowing if it’s the right thing for their organization.

And that is not going to happen in any well-managed, reasonably successful firm.

Social media gurus: It’s back to the drawing boards for you. And when you come back, please get your logic, rationale, and arguments straight.

Quantipulation In Action: Inbound Vs. Outbound Marketing

Mashable (that highly reputable source of marketing theory and research) recently published an article called Inbound Marketing Vs. Outbound Marketing, which claimed:

“Thanks to the Internet, marketing has evolved over the years. Consumers no longer rely on billboards and TV spots — a.k.a. outbound marketing — to learn about new products, because the web has empowered them. It’s given them alternative methods for finding, buying and researching brands and products. The new marketing communication — inbound marketing — has become a two-way dialogue, much of which is facilitated by social media.

Another reason why inbound marketing is winning is because it costs less than traditional marketing. Why try to buy your way in when consumers aren’t even paying attention? Here are some stats from the infographic below.

–44% of direct mail is never opened. 
–84% of 25 to 34 year olds have clicked out of a website because of an “irrelevant or intrusive ad.”
–The cost per lead in outbound marketing is more than for inbound marketing.”

My take: Total garbage. This attempt on the part of people looking to differentiate the “new” marketing from “old” marketing completely misses the boat. 

Let’s look at this point by point:

“Consumers no longer rely on billboards and TV spots — a.k.a. outbound marketing — to learn about new products.” Who said that consumers relied on billboards and TV spots to learn about new products? Marketers relied on billboards and TV spots to make consumers aware of their products, to increase recall of their products, and create positive affinity. As long as people continue to drive along the highway (how’s the commute in your city? Yeah, sucks in mine, too) and watch TV, marketers will find that billboards and TV spots to be at least somewhat effective at those objectives. 

The new marketing communication — inbound marketing — has become a two-way dialogue, much of which is facilitated by social media. Got news for all the inbound marketing alarmists out there: Marketing has always been a two-way dialogue. It just wasn’t as easy to execute as it is today. Marketers have relied on various mechanisms — postcards, focus groups, toll-free phone numbers — to encourage feedback from consumers. Claiming that the “old” marketing was “one-way” is false.

44% of direct mail is never opened. First off, how do they know that? Think about how much direct mail you get. I challenge you to come up with even a reasonably accurate estimate of how much of it you open and how much you throw away before opening. Second, even if this were true, then I’d say: WOW! More than half of direct mail is opened. That’s pretty damn good in this marketing environment!

84% of 25 to 34 year olds have clicked out of a website because of an “irrelevant or intrusive ad.” What the hell is wrong with the other 16%?

The cost per lead in outbound is more than for inbound marketing. Stupidest claim I’ve heard all month. Just because there is no measurable media cost associated with this thing you call “inbound” marketing doesn’t mean there aren’t costs associated with the efforts. Somebody has to create and manage the social media site, right? Or, if the inbound marketing channel is the phone, do the costs of staffing the call center not count as part of inbound marketing efforts? And given the incredibly inexact science of attribution in the marketing world, how does anyone really determine that a generated “inbound’ lead wasn’t influenced by outbound marketing efforts?

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The infographic included in the Mashable goes on to claim that in the “old” way of marketing, marketers rarely sought to “entertain or educate.” Seriously? The ad industry has a RICH history of attempts at being funny and entertaining. Print ads have LONG been focused on education. 

The article also tries to differentiate “new” marketing from “old” marketing by claiming that in the new marketing, “customers come to you”, while in the old marketing, marketers sought out customers. 

Customers come to you? Really? And how do they find out about you? Simply by word-of-mouth? Good luck with that. Listen to what Groupon had t say:

“After a two-year holdout, we finally decided to run real television ads. In the past, we’ve depended mostly on word-of-mouth and limited our advertising to online search. This year, we realized that in spite of how much we’d grown, a ton of people still hadn’t heard of Groupon, so we decided to give in to our Napoleon complex and invade the rest of the world with a proper Super Bowl commercial.”

Bottom line: Trying to make inbound marketing sound like something superior and new is total BS. Marketing is a complex process. There are parts of the process that are inherently outbound and parts that are inherently inbound. There are new channels of communication that create new opportunities for both outbound and inbound communication.  Oh, and real marketers don’t take marketing advice from Mashable. 

The Hidden Costs Of Social Media

I’m really tired of hearing social media gurus preach about how social media will transform marketing. They usually can’t explain why this will be the case. And when asked for examples, they often cite people in the Middle East tweeting during a revolution. Which is great, but has nothing to do with marketing. 

If there’s a transformative potential for social media, it lies in this: The incremental cost of communicating with customers and prospects is, for all intents and purposes, zero. 

This has, until very recently, never been the case. 

Prior to the advent of email, the cost of communicating was high. Marketers either used mass media avenues (TV, radio, print) or direct mail. The cost per message was high. 

As a result, the return on investment per message was important. Each message had to pay its way. And that’s why obsessed over response and conversion rates.

Social media brings the cost of messaging way down. As a result, marketers don’t have to obsess over the ROI of each message, allowing them to shift the nature of communication from persuasion to engagement. In a world where every message doesn’t have to have an ROI, we can actually carry on a conversation with customers and prospects. 

But most marketers are missing something important as the economics of marketing change:

Costs shift from message distribution (dissemination) to message creation.

In the old world, marketers did spend a lot of money in crafting their message (witness the size of the advertising agency business). Despite this cost, more was spent on disseminating the message than creating it. After all, the message was created ONCE. Then tested, revised, and launched. And then the bulk of the marketing cost was in getting the message OUT.

Marketers in the new world have new mechanisms for getting the message out thanks to social media tools and channels. Tools and channels that radically slash the cost of dissemination.

But what too many marketers don’t realize is that there’s a new cost in town: The cost of message creation. 

Too many marketers don’t have a clue how to have a conversation with a customer or prospect through social media. Either they tweet or post their tired old marketing messages, or they deal with customer service requests. But marketing messages designed for mass media channels are inappropriate for social media channels.

I guess I can only speak to the financial services industry here, but there’s not a single financial institution that I’ve talked to — and I talk to a lot — that consciously think about the mix of messages they disseminate through social media (i.e., the mix between marketing messages, educational content, news alerts, and other types of messages), nor do they test and refine the messages they disseminate. 

Thanks to social media, the cost of marketing is shifting from message dissemination to message creation. And that’s not a grammatically correct sentence, since it’s about messages — in the plural — today, not the message. 

Seth Godin wrote that “marketing is the story marketers tell consumers.” That’s simply not accurate. It’s “stories” in the plural (and if you want to be even more correct, it’s not about the stories marketers tell, but the stories that marketers get consumers to tell). 

It’s hard to equate a tweet or Facebook posting to a story, but this is mincing words. It’s about the message. More frequent — and more meaningful — engagement with consumers, means having more frequent and meaningful messages and things to say. 

The cost of creating those messages, and understanding which ones are most effective, is the hidden cost of social media.

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Check out Snarketing 2.0: A Humorous Look at the World of Marketing in the Age of Social Media (print or Kindle format):

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Are You A Snarketer?

By my calculations, if I can sell 23.7 million copies of my new book, Snarketing 2.0, within the next two to three years, then I can retire.

That would require everyone who qualifies as a Snarketer to purchase 2,370 copies of the book, however. So it doesn’t looks like I’ll be quitting my day job any time soon.

This is the problem with trying to get rich writing business books: There’s a limited audience. There are only so many people who are even potentially interested in the topic.

I’ve got an even bigger problem: My audience is more narrow than the typical business audience. The target audience for my book is a group of business people known as Snarketers. Are you a Snarketer?

You are if you meet three qualifications: 1) You have an interest in marketing; 2) You have an unusually high degree of intelligence; and 3) You have a warped sense of humor.

For your friends who can’t process that intellectually, show them this picture to explain to them why they don’t qualify.

I’ve done the research, so I know that there are only 10,000 Snarketers in existence. If you’re in the club, you’re part of a dying breed. Our increasingly politically correct culture is stifling warped senses of humor. And thanks to our “everyone gets a gold star” educational system, there are fewer and fewer people who meet the intelligence hurdle. On the other hand, everyone and their mother thinks they’re good at marketing.

The challenge in trying to identify Snarketers is that it’s not visually obvious — it’s not like being tall, or having blond hair. So how do you, dear Snarketer, let the world know that you’re part of this elite and prestigious club?

You buy the book, moron.

And then read it on the train on your way to work, or when you’re on a plane, sitting in first class showing off how many frequent flyer miles you’ve run up because you don’t have a real life.

If you do buy it — and post a review online (I don’t care if it’s a positive or negative review) — then I will give you the next book for free (yes, there will be another book, the subject of which will be Quantipulation).

Here’s my game plan: Real Snarketers who post reviews might convince some Snarketer-wannabes to purchase the book. If you don’t think the “find a sucker” strategy works, just look at how many banks now charge customers a fee to use a debit card. 

Where do you get the book?

If you want the print copy (you show off), go here:

For an eBook version, you can get it from one of two sources: At Lulu.com, or click on the icon below for the Kindle version.

If you buy the book, thank you. If you buy and review the book, double thank you.

UPDATE: If you order from Lulu by October 20, you can get free shipping:

Update #2: Apparently, there’s a formatting problem with the Kindle version. I’ve pulled that “off the shelf” for now (and disabled the link above).

The CU Water Cooler Symposium 2011

If you’re a financial services professional trying to choose a conference to go to, you can flip a coin to make your choice.

Heads, you go to some large industry-wide boondoggle in Las Vegas with a thousand other attendees and see Sully (oops, I mean CAPTAIN Sullenberger) in the 43rd minute of his 15 minutes of fame. Tails, you go to a smaller functionally-focused conference with 150 other attendees and see your colleagues talk about what their firms are doing (if you can stay awake through their entire presentation, that is).

If you’re lucky, however, the coin will land on its edge. And then you can decide between Finovate and the CU Water Cooler Symposium.

I wasn’t able to attend Finovate last week, but I did get to go to the CU Water Cooler conference. Even better, I got to present there.

When Tim McAlpine told me a few months ago that he was selecting me to speak, I asked him what he wanted me talk about. He said “I don’t know. I like the way you bring humor to your blog, and want you to bring that to the Symposium.” I told Tim that I don’t do stand-up comedy, so he said “Do what you want.”

I chose to speak on Quantipulation, and tried to debunk a few marketing myths. CU Times wrote that I have a “simple message for credit unions, ‘Don’t believe any numbers without question.’”

Not to make a mountain out of a molehill here, but that’s not quite accurate. Instead, I told the conference attendees not to believe any number they heard over the course of the conference without questioning the number’s assumptions.  But I’m quibbling here.

With no intended disrepect to the speakers I’m not mentioning below (I didn’t actually get to hear all of the presentations), here are the three highlights for me, in no particular order:

1. Demystifying Creativity. Someday Charlie Trotter (the one living in Foat Wuth Texas, not the restaurant owner) is going to be well known, and I’m going to get to say “yeah, I know Charlie.” It’s OK if he doesn’t admit to knowing me. Charlie talked about what creativity really is. Charlie helped me (and I hope everyone else) to better see how creativity is not synonymous with imagination. Imagination is the ability to imagine. Creativity is about DOING something. According to Charlie, you aren’t creative until you’ve actually created something. The third concept Charlie hit upon was talent. Talent + Imagination + Creativity = Success. Charlie didn’t actually say that, I’m just quantipulating.

2. Boomification of Credit Unions. Damn, that Denise Wymore is a good speaker. I truly wish that I had her ability to connect with an audience. On the other hand, I’m glad that I’m not wrong about stuff like she is. Denise’s presentation truly was excellent — engaging and compelling. Problem is, her ideas are just simply wrong. Ideas like getting rid of FICO, and judging loan applicants based on their “character.” They have a name for that, Denise: Discrimination. And it’s illegal. Or the idea that profit-driven is somehow the antithesis of people-driven. A false dichotomy, Denise. Denise’s cumbaya makes for a great presentation, but cumbaya won’t sustain a credit union, nor the credit union industry.

3. Future of Payments. As I listened to Jeff Russell, CEO of The Members Group, a little voice inside my head was screaming “ARE YOU LISTENING TO THIS, PEOPLE?!” My perhaps skewed perspective on the things I hear from credit union professionals lead me to believe that too much of the conversation is about lending. Jeff’s message, if I’m interpreting it correctly, is that payments is where the focus should be. If I’m getting him right, I couldn’t agree more. There’s no better way to help a credit union member best manage his/her financial life than to help them make smart everyday spending decisions. You simply can’t do that if their primary spending account is a checking account or credit card held at some other financial institution. On top of that, the future of cross-sell marketing for banks and credit unions will come from payments-related and payments-triggered transactions. If your credit union is a payments laggard, good luck. You’re not going to make it up on car loans.

I do wish, though, that Jeff hadn’t said two things that he did. The first being that mobile payments will be the dominant form of payments in five years. I’m willing to bet a LOT OF MONEY that that won’t be the case. In the past 15 years, I’ve NEVER been wrong underestimating the rate of technology adoption.

Second, I’d argue with Jeff regarding his view that free checking is dead. Free checking isn’t — or shouldn’t be — dead, and for two reasons. First of all, unlike Jeff said, debit interchange doesn’t fund free checking accounts. Free checking accounts have been around for a lot longer than the increase in debit card activity.

The advent of free checking was born out of the the belief that getting someone’s checking account was the steppingstone to getting more of their financial accounts. If that belief is true — and it’s certainly a discussion for argument, since so few financial institutions have done a good job of successfully cross-selling — then a cut in debit interchange shouldn’t portend the complete death of free checking.

The other reason why is free checking isn’t dead is because it never really was alive. When we say “free checking” what we’re really saying is “no monthly fee” checking. Tell the people who don’t pay a monthly fee, but pay out hundreds of dollars in overdraft, foreign ATM, and safety deposit box fees that their checking account is “free.” I hope you don’t get punched in the face.

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Beyond the presentations themselves, the other thing that makes this conference top-notch is the attendees.

I wonder how it felt for first-time attendees who aren’t tied in to the credit union twittersphere. I wonder if they felt like this was some party they were crashing. I certainly hope not. But the conference really is a gathering for a lot of credit union professionals who actively engage with each other on a daily basis. And of course, some of the attendees have known each other for a long time. Denise Wymore and Janine McBee told me they’ve known each other for….

Oh, hey, did I tell you that I finally met Jimmy Marks in person? I’ve never hugged a man the first time I met him. But I gave Jimmy Marks a hug when I “met” him. (It’s OK, it was one of those male “shoulder bump” hugs). Although I had never met him in person before this week, I’ve been tweeting with him for at least two years. And I “know” him better than I know a lot of my colleagues at work.

It was also a treat to see Rob Rutkowski and Jeff Hardin at the conference. For two reasons: The first, because I had met the both of them at the Forum Symposium in 2007, and hadn’t seen either of them since; and second, because the two of them make me feel like I’m not the only “old” guy at the conference (even though both of them are younger than I am).

Bottom line: Love this conference. Thanks to the CU Water Cooler editors — Carla, Matt, Kelley, William, Gene, Doug, Brent, Christopher — for their time, effort, and brainpower on doing what they do. And huge thanks from me to Tim McAlpine for giving me the opportunity to present and attend the conference.

Why Proponents Of Klout Are Missing the Big Picture

Jay Baer wrote a blog post titled Why Critics of Klout Are Missing the Big Picture in which he argues that  “influence measures help business create order from chaos.” Baer goes on to write:

“What’s important is to recognize that more and more and more and more of our behaviors occur online and often with the social media realm. And if companies are going to succeed in a chaotic, real-time environment, they need some mechanism – even a flawed one – to triage promotion and reaction. So yeah, Klout isn’t perfect. But instead of rehashing the same old “look how screwed up their formula is” argument, let’s focus instead on how advanced metrics will enable companies to deliver highly specific interactions with customers based on perceived influence.”

My take: Baer makes a good and valid point. But I think Baer and I might disagree on what the “big picture” is.

Baer’s definition of big picture  seems to be “making sense of chaos.” My notion of the big picture is “making the right decisions.”

And, using my definition, what I see are marketers making questionable business decisions based on people’s Klout score.

The best example I can give you to demonstrate this is the bank that’s reserving the best spots in its parking lots for its customers with a high Klout score.

Let me state this is no uncertain terms, and aim it directly at the bank with which I do business:

If you reserve the best spots in your parking lot for some pimply-faced 25 year old (who spends too much time on Facebook and Twitter and has somehow managed to get himself a high Klout score) instead of for me, then I’m pulling my millions out of your bank.

If you think I’m kidding, try me. And I’ll also pull my kids’ accounts (they’re Gen Yers, btw — not little kids), too.  THEN you’ll learn who has INFLUENCE. And when dear-old Mom and Dad (who turns 80 this year!), ask me to take over the day-to-day management of their finances, their money is getting pulled out of your bank, as well. THEN AGAIN you’ll learn who has INFLUENCE.

All because you made the bad decision to reward one group of customers over another.

Bottom line: The purpose of a business metric isn’t just making sense out of chaos — it’s taking action. And unless your customer base is made up of just heavy social media users, then making decisions on what to do based on Klout scores may lead to sub-optimal decisions. 

Stop The Banking SMadness

The “logic” behind the justification of social media as some new emerging “power” channel in banking is so twisted and misguided, that it just HAS TO STOP.

In an article titled Mobile and social to emerge as power channels for banking, Finextra recently wrote:

“Social networking is becoming more popular, with 57% of adult Internet users [in the UK] using online social networks in 2011, up from 43% in 2010. The UK data is in line with international trends. A just-published survey of 12,000+ Canadian consumers issued by JD Power & Associates finds social media emerging as an increasingly important alternative to traditional retail banking channels. More than 60% of retail banking customers responding to the poll say they use social media. Among customers who use social media for banking purposes, 24% indicate they use it to discuss their banking experience or inform their bank of a customer service issue.”

First off, the last sentence is completely misleading. Sixty percent may be using social media, but that doesn’t mean that all use if for banking purposes. So when the last sentence says that “among those who use SM for banking purposes,” we have no idea how many that actually is.

If it’s 10% of the 60%, then 24% of that means that only 1.5% of Canadians use social media to discuss their banking experiences or for service issues. Ooooh….1.5%!

More importantly, however, is the false logic behind the claims. Just because a large percentage of people use a technology doesn’t make that technology relevant to all applications. 

Using the logic from Finextra (yes, I’m singling them out, but let’s get real — they’re hardly the only ones singing this tune), the following would be true:

McDonald’s to become “power” channel for banking!

Everyday, 27 million Americans — nearly 10% of the total population — visit a McDonald’s location. And that number is growing by 1 million every year. Over the course of the year, on average, Americans visit McDonald’s 33 times! Among Americans who visit McDonald’s, 99.9% make a payment (some just use the restroom) while they’re there. 

But wait, you say, the two examples aren’t analogous. After all, banks can’t take a customer service question at a McDonald’s.

True enough, but they can leverage McDonald’s to influence consumers’ choice of payment mechanisms (and you better believe that, as a result of the recent interchange regulations, this is going to happen a lot more frequently).  And with 27 million Americans visiting McDonald’s every day (and making a payment there every day) which channel — social media or McDonald’s — is more likely to emerge as “an increasingly important alternative to traditional [marketing] channels”?

I’m not arguing that social media isn’t important. Just trying to bring a little perspective to the situation. And trying — probably in vain — to turn down the volume a notch or two on the social media hype.

More Likely To Purchase: Quantipulation In Action

How many times this week have you heard about some research study that found that one consumer segment is XX% more likely to purchase your products than another segment?

These studies and claims come out every day. And every one of them is a shining example of Quantipulation: The art and act of using unverifiable math and statistics to convince people of what you believe to be true.

The problem with these “more likely to purchase” claims is that they’re leading you to make bad marketing decisions.

For example, it’s popular these days to claim that Facebook fans are an important segment of your customer base because they’re “more likely to purchase” than other customers are. DDB (a very reputable advertising and marketing services firm) conducted a study last year and found that:

“Facebook users who like a brand’s page on the site are thirty-three percent more likely to buy a product, and 92 percent more likely to recommend a product to others. “Fan status is indicative of high purchase intent, especially when compared to any traditional form of advertising, and is an even greater predictor of advocacy with over 90% noting that being a fan has a positive impact on recommending a brand to friends,” said Catherine Lautier, Director of Business Intelligence at DDB.”

The implication of this is that: 1) If marketers can drive up their brands’ Facebook fan count, then more customers will become more likely to buy, and 2) Marketers should focus their marketing efforts on Facebook fans because of higher purchase likelihood.

But there are a few problems here:

1. What does “more likely to purchase” mean? If in a survey Customer A (Facebook fan) says he’s “very likely to purchase” and Customer B (non-Facebook fan) says he’s “somewhat likely to purchase”, what does this really tell you? How much more likely is “very likely” than “somewhat likely”? Isn’t timeframe important? Is that very likely to buy in the next 2 weeks or very likely to buy at some point in the future? Even if Customer B says “not likely”, does that mean we should give up on marketing to him? Really? People don’t change their opinions? After all, he’s already a customer — and isn’t the cost of acquisition 5x higher than the cost of retention?

2. The absolute numbers might not be compelling. In the DDB study, only 36% of Facebook fans said that they were very likely to purchase. Which means that 27% of non-Facebook fans were very likely to purchase (you do the math). Assume that your company has 10 million customers, of which 1 million are Facebook fans. That means you’ve got 360,00 Facebook fans who are very likely to purchase, and 2, 430,000 non-Facebook fans that are very likely to purchase. Which group do you want to market to?

3. Causation versus correlation. Do Facebook fans become “more likely to purchase” after becoming Facebook fans, or did the fact that they were already “more likely to purchase” lead them to become Facebook fans? Granted, their act of becoming a Facebook fan helps marketers better identify them out of the pack. But if — as the numbers above indicate — the differences in likelihood to purchase aren’t that compelling, then it’s simply not a very helpful segmentation tool.

Bottom line: Don’t be quantipulated into believing these “more likely to purchase” claims.

Quantipulation: ROI Versus Success

[This is a follow-up post to Quantipulation. I thought I could get away with just floating a few ideas out there, but some comments I’ve seen suggest that there’s a lot more to quantipulation than I wrote about, and those comments are correct.]

Quantipulation — the art and act of using unverifiable math and statistics to convince people of what you believe to be true — is commonplace in the marketing world, but perhaps nowhere more so than in the social media environment. Especially when it comes to everyone’s favorite topic: Social media ROI.

Whenever I use the term ROI in my reports, the editor where I work asks me to spell it out. As she rightly says, there may be people who aren’t familiar with the term. I don’t tell her this, but if you don’t know what ROI is, I don’t want you reading my reports.

There’s another reason why she’s right: There may be people who define ROI differently than I do. I won’t tell her this, either, but those people don’t deserve to read my reports.

ROI = return on investment. It doesn’t mean return on influence or any other “I” word you can dream up. And despite what some quantipulators would have us believe there’s only one formula for ROI: Financial return divided by financial investment. The only “variable” piece to the formula is the timeframe you use to quantify these variables.

That won’t stop some people from trying to redefine the formula, however.

The most egregious example comes from a firm called Digital Royalty. I won’t besmirch my blog by linking to the offending post. Instead, I’ll point you to Anna O’Brien’s brilliant (and very funny) critique of it.

Here’s another example of ROI quantipulation:

My bet is that tthe firm that put this chart together wanted to include other ROI components, but since it would have messed up their inverted hour glass figure, they decided to leave them out.

Then there’s attempt at redefining social media ROI:

This guy has decided that the ROI unit of measure should be “conversation”. He goes on to tell us that we can measure the “value” of conversation by looking at participation, engagement, influence, imagination, energy, and stickiness. But not increased revenue or decreased cost. Sweet.

There are (at least) two things going on with these attempts to redefine ROI. One is bad, the other is good. 

The bad: An annoying attempt to demonstrate thought leadership. Ugh. Not the way to do it. Anna O’Brien said it best in her blog post: “Random metric names and symbols is not an equation.” (Maybe she didn’t say it best, because it should be “are not an equation”).

There is a good aspect to what the ROI quantipulators are doing, however. They’re raising the very valid point that there are other measures of success beyond ROI. 

There’s a formula for that, too. The one I like is from Pat LaPointe who writes a blog called Marketing NPV. Pat’s formula says that success can be measured by dividing the value added by the resources used. And as this formula implies, “value” can take on the form of many of those measures that those other people wanted to use to calculate ROI.

But this isn’t the whole formula.

Pat added something on to this formula that, as far as I’m concerned, qualifies Pat as a marketing genius. Pat’s formula for calculating success is:

(Value Added/Resources Used) * Perception

What Pat recognized was that what you might consider to be “value” might not be viewed as valuable by other people. Other people like, say, your CEO or CFO.

We’re living in an ROI culture. Suggest that your company do something, and somebody will ask “what’s the ROI on that?” If you want to get up in front of your management team and suggest that your company do something because you “feel” it’s the best thing for the company to do, go for it. Just don’t send me your resume when you’re on the street. 

That doesn’t make your feeling wrong. But being right doesn’t make you successful. Persuading others to do the right thing does. 

This is why quantipulation is so important:  Quantipulation is an attempt to influence perception. To be a successful leader, innovator, or change agent, you have to shape, change, and confirm people’s perceptions.

There’s a reason I call quantipulation an art. Successful quantipulators know that it’s about more than just the data – it’s about logic and emotion. And there’s no formula or recipe for figuring out how much logic and emotion to mix in with the data.

The examples of ROI quantipulation shown above fail not because they’re wrong, but because they fail to influence perception. Those formulas simply confirm for the social media believers what they already believe. That’s easy. Converting the heathen is hard.

Had those social media ROI formulas made any attempt to link social media results to the conventional definition of ROI — financial return — they might have been more persuasive.

Last thought: Quantipulation is not inherently bad or evil. Yes, it’s a play on the word manipulative, which doesn’t have positive connotations. But I prefer to take a more realistic view: It is what it is. And it’s a necessary skill for today’s business world.