Social CRM in German Retail BanksGoethe Business SchoolGlobal Consulting Project 2010

BearingPoint - Frankfurt

September 6, 2010

Shridhar Dharne| Vijay Gaikwad| Gaurav Sharma| Venkat Srinivasan| Laura Vantellini | Martin Wellnitz

Agenda

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German Retail Banks – Post Crisis

What is Social Media

Power of the Community – Examples of Social Media in Corporations

Social CRM for a German Bank

Implementation Steps

Q & A

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Financial Crisis led to loss of trustGeneral opinion that banks make profit at customers’ expenseBanks are trying to rebuild their image after the crisis

German Retail Banks – Post crisis

“Most banks make money by keeping their customers confused” -- BankSimple

Changes in Customer Relationship

Higher Customer Advocacy leads to more repeat business

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Need to maintain customer loyaltyBuild fundamentals for cross sellingRegain customer trustNo hard-selling

Urgent Need for Customer Advocacy

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German Retail Banks – Post crisis

“Banking is necessary, banks are not” – Bill Gates, 1994 BankSimple was born out of our frustration with

banking. We were fedup with our bank: the fees, the constantly changing rules, the crappy customer service.”. –-BankSimple website.

Changes in market conditions

Fierce Competition Competition to get new customers Competition to retain existing customers

Reasons for changes in market conditions

Difficult business landscape Lack of differentiation New ‘non traditional’ players demand

a piece of the pie P2P Banks Social Banks Direct Banks

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Focus on differentiation strategy & build stronger relationship with existing customers

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Internet usage for financial productsin Germany

Top 4 Retail Banking products researched online by Germans

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Savings/ Deposit Accounts

Stocks and Shares

3 Current Accounts

4 Personal Loans

Top 4 Retail Banking products bought online by Germans

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Savings/ Deposit Accounts

Stocks and Shares

3 Credit Cards

4 Current Accounts

25% of consumers researched at least 1 financial product online

11% bought at least 1 product

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Agenda

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•German Retail Banks – Post Crisis

•What is Social Media

•Power of the Community – Examples of Social Media in Corporations

•Social CRM for a German Bank

•Implementation Steps

•Q & A

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Online communities are interactive group of people joined together by common interests or friendship

Characteristics include:ReachAccessibilityUsabilityRecency

Social Communities

“A group of Internet-based applications that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of user-generated content. It transforms and broadcasts media monologues into social media dialogues” – Andreas Kaplan

Social Communities

Family

Colleagues

Interest-groups

Friends

Blogs

SocialNetworks

Virtual World focused:“Online Social Communities”

Real World focused:

Forums

Customer

Twitter

ON

LIN

E S

OC

IAL

CO

MM

UN

ITY

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Banks

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German Banks don’t like Social Media

German retail banks are very traditional, conservative and risk averse.

Social media are unconventional, non-traditional, and carry some risks with them.

Skepticism towards user generated content

Less structured Less formal No single point of distribution

No measurable ROI

There is no simple way of measuring ROI of any social media initiatives.

Social Media initiatives cannot be ‘accounted’ for properly.

Power of communities

News travels very fast using Social Media

Bad news travels faster.

Legal Issues

Bank’s communication to the public has legal implications

Legal departments prefer to monitor fewer and less complicated channels of communication

Reasons why German Banks are not interested in Social media…

Reasons why German Banks are not interested in Social media…

1 Source: http://managementchords.blogspot.com

Half duplex Communication

Banks prefer half duplex communication not full duplex. They like to send out messages but not receive feedback simultaneously

Differentiation There is no way of differentiating

customers from non-customers.

No Cookbookrecipe

No Early Adoption

German banks are usually not early adopters of new technologies.

There are no established ‘Best Practices’ and there is no cookbook for social media.

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Agenda

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•German Retail Banks – Post Crisis

•What is Social Media

•Power of the Community – Examples of Social Media Usage

•Social CRM for a German Bank

•Implementation Steps

•Q & A

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Social Media in Action

Some examples of social media use

Hornbach ING Direct USA

United Airlines “United Breaks Guitars” Bank of America

Negative Examples Positive Examples

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Negative Example: United Airlines

“United Breaks Guitars”:

The power of the groundswell

10% drop in share price within 4 days from the day the video was released.

Twitter used as product promotion tool, rather than as a service portal

Facebook page not carefully taken care of

Social media: YES

Social media strategy: NO

Impact

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Social media initiatives

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Negative Example: Bank of America

Facebook page (4,400 followers) is completely empty and not maintained

There is a Facebook page called “Bank of America SUCKS” with almost 3,000 followers and a page called “I hate Bank of America” with 1,000 followers

No reaction from Bank of America’s side

Strong focus on Twitter: they have a portal on it (customer service and career information) which was opened early 2009

No holistic social media strategy

Bank of America

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Social Media Initiatives

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Positive Example: Hornbach

Numerous examples exist, on how companies managed to profit from the dynamics of existing social communities.

Strong Twitter and Facebook presence where they continuously build and support an engaged community

Strategic use of social media and all channels to support the “Make It Yourself” community

Social media (Twitter, YouTube, Facebook and own page) and its community used for viral marketing actions like “Das Grenzenlose Haus”

Integrated Social Media Strategy

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Positive Example: ING Direct USA

Different business model: direct online bank – no branches, just “banking cafés”

All their customers already online

Easier online interaction and use of platform

“wethesavers.com”:

“The official blog of savers”

Creation of a community of savers with a 10 point “Declaration of Financial Independence”

Funny polls (funny but useful for sure)

20,500 followers on Facebook:

Useful information

Links to interesting money-related information

Strong community feeling

Mostly positive feedback

Successful Social Media Implementation

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Agenda

15

•German Retail Banks – Post Crisis

•What is Social Media

•Power of the Community – Examples of Social Media in Corporations

•Social CRM for a German Bank

•Implementation Steps

•Q & A

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German Banking 2.0 (Competitive landscape & innovations)

Whofinance.de: an advisory website where bank advisors create their own profile and offer advice. Customers rate these advisors based on their advice quality.

Consultants have to pay a fee to the website for commercial advice The site also sells leads They have a “Best Bank Contest” based on bank ratings and the results are published in the “Bildzeitung”

Quirn Bank: Uses ratings as a way to establish and show greater customer confidence, increase service levels and get more customers.

Socially responsible and sustainable banks.

Kd-bank.deethikbank.deumweltbank.depax-bank.debkc-paderborn.deligabank.denoabank.detriodes.de

Social bank Advisory Services

Source: BearingPoint Internet Research

Fidor Bank They are social media savvy and so are their customers Their motto is “What would google do” Social media is in their vision, strategy, and culture They co-create products with their customers They use all social media channels and use the ‘word of mouth’ strategy

Auxmoney.de

Smava.de

P2P Banks

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Germany: Deutsche Bank

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Present in several social media

channels but no social media strategy to

engage customers

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How can a German Retail Bank benefit?

A chance for banks to add to their brand

Be seen as an innovative company

A chance for banks to add to their customer centricity drive

Provide support and fast and easy resolution to customer queries

Design better products

Reduction in customer acquisition and retention costs

Drive deposit generation

Opportunities for cross selling

Improve MROI

Reduce churn rate

Increase contribution margin per customer

Social media is a trend that every bank will have to adopt.

Generation Y and the generation of digital natives is becoming an important market segment

Banks will need to enhance their existing customer advocacy drive

Customers will demand faster solutions to their banking issues and seek answers through the social channels

The way banks traditionally communicate with their customers will have to change, banks will switch from half-duplex mode to a full-duplex mode.

Non-Financial Impact.Future trends in German retail banking

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Social media can impact sales, maybe not directly but this is a good chance to influence the decision of online financial product researchers

Financial Impact

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Opportunities in German Retail Banking

The communities already exist, they need to take the community online and to their social media assets

Organize communities around the local events sponsored by these banks (sports, cultural events, festivals)

Build special interest local communities by utilizing their local knowledge. For example: community of entrepreneurs, students wanting to study abroad, home buyers

They can be called social banks because they are involved with the community.

These Banks are deeply rooted in the regional economic life

They have excellent knowledge about the local market and personal contact with the people in the region and that is their main business strength

They support the local cultural and social activities in their respective regions

How can they leverage their strengths? Characteristics

Huge opportunities: Especially for Volksbanken, Raiffeisenbanken, Sparkassen

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Agenda

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•German Retail Banks – Post Crisis

•What is Social Media

•Power of the Community – Examples of Social Media in Corporations

•Social CRM for a German Bank

•Implementation Steps

•Q & A

21

Social Media Strategy for: a German Retail Bank

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Establish a baseline before you begin

Create a time line for creative activities

Pick a small number of social media goals for the coming year and start engaging

Pre-cursors of a strategy Strategy

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Listen

Who is talking What are they talking about

Needs & Complaints Customer perceptions Engagement platforms & channels

Facebook/Twitter/Blogs Engagement spread, level & diversity # Involved customers Identify influencers

Identify

Reach of one influencer

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Tools

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Engage

Full Duplex dialogue

Join the conversation discussions (e.g. blogs, Facebook, forums) and enhance the conversation

Build your own community on various social networking websites Facebook/Twitter/Blogger/Youtube External community driven websites focusing on common

interests Drive traffic to your social media assets using various sources Don’t be afraid of negative feedback. Responding appropriately to

negative feedback shows that you care Have a “call to action” in your communication

Invite the community to contribute or interact (e.g. ING Direct) Have engaging and creative posts/communications Have a URL to your other social media assets of your website in

your communication Interlink the social media assets for a seamless user experience

Radian Engagement console

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Support

Support

Get employees to contribute to the channels, on which people are talking

Offer free advice about common questions and concerns in blogs, over Twitter or Facebook

Have some dedicated staff offers customer support over “verified” Twitter accounts

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Measure (What is the ROI of a smile and a warm handshake?)

Dollars Earned

Costs

Cashflows

Risk

NPV

What the management wants to measure

Customer satisfaction

# of followers

Community Sentiment

Reduction in Call/email volume

Customer loyalty

Site traffic

# of comments

Community Engagement

Response speed

Post/ comment ratios

Available matrices

Customer satisfaction

# of followers

Community Sentiment

Reduction in Call/email volume. Savings

Reduction in acquisition cost

Increase in customer lifetime value due to reduction in acquisition and retention cost

Customer loyalty

What banks should measure

There is no straight forward way of calculating the monetary value of a social media initiative. There are some recommended methods but each bank will have to devise its own way of calculating the ROI from social media initiatives based on the social media initiative goals. Net present Value (NPV) of social media initiatives = (Cash inflows – Cash outflows)/Time

Cash outflows= Manpower, IT, Opportunity cost, Consulting fee, Miscellaneous

Cash inflow = Reduction in acquisition costs, Reduction in support cost

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Innovate

Innovate

Gain customer insight through the listening process Identify their needs

Find creative ways to get feedback from customers Opinion polls Blog comments Facebook Analytics Website Analytics

Design new products and services based on the insights gained Improve service levels based on complaints

Provides a channel for community members to contribute new ideas through crowdsourcing and collective intelligence

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Q & A

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How are some banks using Social Media as a CRM tool?

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How are German Banks using Social Media as a CRM tool?

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Facebook is the fastest growing medium with over 20 banks on Facebook

Deutsche bank is the most active with more thatn 3000 followers

The next in line is GLS bank with 400 followers

Cortal Consors has a facebook page and a facebook app.

Youtube: Some banks are on youtube but it is mostly used for marketing.

Volksbank Raiffeisenbanken had a contest channel on youtube where they showed how human needs create the need for financial services. They got 300,000 visitors per day till mid Jan.

Fidor bank founder posts videos of himself and his vision for banking and the bank.

German Social media platforms: studi.vz ; schueler.vz ; werkennetwern.de ; lokallisten.de are there but they are not as mature as Facebook and thus are only used for advertising and not for dialogue

None of the banks have integrated their social media channels with their traditional marketing and support channels. Social media channels run alongside with their classical marketing and sales campaigns.

Customers going to the main bank website don’t see the social media activities. No german banks have their own newsrooms