One of the hottest marketing trends in banking, as it is in most other industries, is social media. The hype surrounding Facebook, Twitter and the like has many companies worried that if they don’t get on board, they will be left behind. Is this really so?

Not if you look at banks that have taken the plunge by simply setting up a Facebook page, a Twitter account and a blog – without any real strategy behind it. There’s not much to show for their efforts because for them, social media is a solution in search of a problem. It may get some people to “like” you or “friend” you, but there isn’t much profit in it.

To reap tangible benefits from social media, start by identifying the challenges facing your bank, and then look to social media as part of your overall marketing strategy. In our experience, social media can best help address the following problems experienced by many banks:

• How to attract new customers, especially younger customers, who are less inclined to walk into a bank branch (as banks experience natural attrition of older customers).
• How to attract customers and deposits from outside your bank’s immediate geographic market.
• How to grow your bank without relying on real estate loans and brokered deposits.
• How to protect your bank’s brand and better communicate with customers, shareholders and local communities in the wake of the Dodd-Frank Act and financial industry turmoil.
• How to differentiate your bank’s brand from other banks that offer similar marketing, products and services.
• How your bank can become more deeply involved in your community on a consistent basis.

The prime benefits of social media for banks are attracting qualified prospects that you previously did not have access to, and offering new ways to solidify and grow customer relationships. For example, there are opportunities to use social media to conduct customer research for developing new banking products and services tailored for post-college prospects.

To reap these benefits, social media programs must be based on a carefully planned, targeted strategy, supported by specific metrics by which banks can measure the success of the program and adjust the strategy as needed.

Strategy

As with any new product introduction, start by determining what the bank wants to accomplish – who you want to target, what the costs are (both time and capital) and what is expected in terms of return on the investment. Doing so will enable you to make smart choices as to the particular mix of ever-expanding social media platforms through which to market the bank.

To help determine your objectives, listen to what is being said online about the bank and its peers. Set up Google Alerts to notify you whenever your bank is mentioned on the Internet, including on blogs, Facebook and Twitter. Find out which customers are active online, what they talk about, what concerns they have. This will tell you where and how the bank can best address customer concerns and issues.

One of the most important keys to the success – OR failure – of a social media strategy is the ability to deliver compelling content consistently over time. You not only want to initially engage your targeted audience, you want to give them a reason for continuing to follow your bank.

The best sources of compelling content are likely to be a bank’s staff, culture and the local communities in which it operates. Social media messaging should reflect the bank’s personality, fostering a two-way relationship with readers, providing them with information they can use in an interesting way, which will indirectly promote the bank’s products and services along the way.

Once your social media effort is ready to go, it is vital to draw attention to it. This isn’t an if-you-build-it-they-will-come scenario. Start by promoting your social media presence through your other marketing and community efforts. Publicize your Facebook and Twitter addresses just as you do your website address in your advertising, on direct mail pieces, business cards, email signature lines, etc.

Many companies utilize contests as a way to draw people’s attention to their social media program. JPMorgan generated a lot of attention by donating $5 million to charities that received the most votes from followers on its Facebook site. A credit union held a contest where contestants wrote a blog on behalf of the institution, with the prize being the job of official blogger for the credit union. It was a free and easy way to recruit and vet candidates for a new, specialized position, and garnered a great deal of exposure for the credit union in the process.

Metrics

Tracking the ongoing performance of a social media campaign is vital to its success. As with any marketing campaign, you need to develop a benchmark against which you can measure results, and you need quantifiable metrics.

The good news is there are many available tools (too many to list here) that banks can use to measure performance of a social media program, including traffic statistics, ratio of positive/negative comments about the bank, how people are sharing the bank’s website, etc. The most common is Google Analytics, which enables users to track traffic levels to determine increases or decreases in traffic, identify where that traffic is coming from, e.g. a website or blog, Twitter, etc., and which keywords or phrases garner the most interest.

Pick and choose the specific tools that match the media platforms and goals of the program or campaign, so that you limit the data to what is most important. Prior to starting a social media campaign, track the appropriate metrics to determine a baseline. Then, once the campaign is underway, you can measure any change in results.

Costs

The hard costs of starting and maintaining a social media campaign are negligible, as most outlets are free. The most important factor to consider is the cost of time to properly operate an ongoing social media program. A truly successful effort requires a considerable employee commitment, as it requires regular updating of information.

Some experts estimate that it takes at least 5-10 hours to write 2-3 blog articles each week, another 5 hours per week for Twitter and Facebook, and untold other hours to develop and integrate video into social media initiatives. And let’s not forget monitoring and ongoing adjustment of the program.

Given the fact that many banks have reduced overhead to a minimum in the past several years, giving more work to fewer people, simply assigning the additional workload to an already stretched marketing staff may not be the best course of action. Many banks will need to outsource the work to someone outside the bank, or hire a full-time staff member to ensure a well-run, successful social media program.

Compliance

Probably the thorniest social media issue for banks is compliance. Social media falls under the same rules as print, radio and television advertising. As such, bank compliance officers need to have a say in the planning and ongoing operation of a social media program.

The ABA Banking Journal has six compliance tips regarding social media, which you can read here. These include conducting a compliance risk assessment, establishing policies and procedures in writing, and setting up a monitoring process.

In addition to these steps, bank management also needs to set clear guidelines for employee involvement in social media outside of the workplace, where staff members have the ability to say anything (good or bad) about the bank, fellow employees and customers. Having an ongoing social media program actually will help turn the employees into advocates and provide an effective way to manage their social media involvement as it regards the bank, reducing the risk of liability.

The bottom line is that social media is not going to make or break the success of your bank, but a well-structured, targeted campaign can be an effective new weapon in your marketing arsenal.

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