How social media is empowering consumers and revolutionising financial services practice and product design. Roland Slee reports.
Before the arrival of social media consumers had little influence over the way financial institutions conducted their business. They would choose a bank or insurance company to deal with, often having no easy way to compare the products and services of competing providers.
Most consumers would then only share their experiences with immediate family, friends and colleagues. If they were unhappy with some aspect of their interaction with the financial institution – for example a disputed insurance claim – there were few options available for airing any grievances. The most common approach was simply a direct complaint to the provider.
Any subsequent discussions were typically conducted behind closed doors, with the balance of power invariably tipping in favour of the financial institution over the consumer. Companies could exercise discretion on claims, pricing, product features and service levels, safe in the knowledge that there was unlikely to be any serious fallout as a result.
However, within the space of a decade, the widespread uptake of social media has turned this situation on its head. Social media has revolutionised the way we communicate, transforming previously intimate exchanges in a small circle of family and friends into open, public conversations with local, national and global communities of interest. This new dynamic has profound implications for all service providers, including financial institutions.
Previously private dialogues between customers and providers have been thrust into the public domain. Through Facebook, Twitter, Instagram and any number of other social media tools, consumers can now readily share their experiences – good and bad – with a global on-line community.
Social media has equipped consumers with a powerful voice that enables them to hold providers to account should they fail to deliver on their promises or act in good faith. In recent years, there have been many examples of a dissatisfied customer highlighting a problem through social media, successfully garnering widespread support and resolving the issue in their favour.
Financial institutions cannot afford to ignore this shift in power from providers to consumers. Savvy companies are embracing this trend by adopting fair practices and publicising their consumer responsiveness as key points of differentiation.
In the new social media landscape, it is no longer possible for companies to manage their brand through push marketing alone. A company’s reputation – as determined by the quality of customer interactions and perceptions about whether or not they have behaved fairly – plays an increasingly important role in shaping their image. For this reason, a company’s positioning must be carefully and actively managed to protect that reputation. This involves financial institutions themselves developing a strong presence in social media, actively monitoring what is being said about their brand and responding quickly and openly to consumer needs and concerns as they arise.
Further, the new wave of empowered consumers is shaping the very core of financial services by influencing policies, practices and product design. In the social media age, astute companies have recognised that, far from being desirable, ambiguity in product disclosure statements, contracts and processes can lead to public relations disasters. Increasingly, products and practices are being specifically designed to eliminate ambiguity, remove discretionary powers and deliver greater certainty on both sides, effectively minimising the possibility for disputes and customer dissatisfaction.
New Zealand life insurer, Partners Life, has been at the forefront of this movement, with its philosophy “if it’s grey, we pay”. If it’s not clear from the available evidence whether an insurance claim is genuine or not, the company always backs the client and pays the claim.
That’s a very powerful message, isn’t it? If you do business with Partners Life, the balance of probabilities will always fall in your favour, every time. In a modern, socially-connected world, that is a very clever approach.
Thanks to social media, companies that don’t deal fairly and reasonably with their customers will be caught out. They won’t just become famous – they will become infamous.
This new wave of consumer influence is extending beyond the policies and practices of individual businesses to shape whole industries. There are signs that some sectors are changing their regulatory frameworks and/or embarking on reforms specifically designed to make their industry more strongly aligned with consumer interests.
In the years ahead, a demonstrated commitment to transparency, fairness and ‘doing the right thing’ will become increasingly important. Financial institutions seeking to remain relevant and competitive will embrace social media and employ it in the pursuit of true customer centricity. Ultimately, business success will depend upon improved customer relationships, enhanced customer satisfaction and a positive business reputation and this, surely, represents a win-win situation.