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Social Networking for the Equipment Finance Industry 2010

Executive Summary

"Monologue has given way to dialogue."
~Brian Solis1

Overview
When the Internet grew to critical mass, sometime in the mid 1990s, its effect was revolutionary. That era, commonly referred to as Web 1.0, allowed individuals to post information for anyone to view, introduced e-commerce, and provided the ability to search vast amounts of data via search engines.

Today, the Internet is entering a new era: Web 2.0. This second wave of what is possible on the Internet is what birthed social media. The term Web 2.0 is commonly associated with web applications that facilitate interactive, user-centered information sharing, design and collaboration. Examples of Web 2.0 include social media sites, blogs, wikis and other applications.

The very definition of social media can be confusing. In short, social media blends technology with social interaction, on the Web, so that the users generate the content and conversations.

But, the definition continues to evolve as new technologies and ways to use them are developed. There is social news, social bookmarking, social review, social network aggregation, social websites, social conversation and even certain mobile phone applications that can be considered "social."

It is easy to get lost in the acronyms, cute titles and names, jargon and the very channels themselves. At the risk of oversimplifying, the common denominator of social media is that at least two people are sharing something and/or having a dialogue, publicly and online. And, that sharing includes an inherent, relatively open invitation for other people to join in. The ensuing conversations could (and often do) impact other people. Collaborations are born, connections are formed and influence is redistributed. What they think, write, say, share, rate, espouse, and deliver, via technology, is being listened to by others, many others.

Conversations also are happening in real-time. Response is expected in minutes, not hours and certainly not longer. Even if you did not participate in these conversations you can search for them and view them. If an organization is being discussed, an expectation is growing (at lightning speed) that it will respond. People take for granted everyone is listening, simply because, anyone can.

This puts a new kind of power into the people's hands. People are helping other people make choices, helping them form opinions, and helping direct and guide them. People are influencing each other. For business, this is a profound shift in how decisions are made about products, services, and partners.

Implications
A new sales cycle is emerging thanks to social media, particularly due to social networking. Social media's promise has centered around people being able to connect, develop relationships and even conduct business online, faster, more efficiently and effectively. Proponents of social media report the sales cycle is enhanced with social networking intelligence by becoming more individualized and personal from the start.

Certainly, finding more information about people, companies and products and being able to reach out to them has been augmented. Social networking intelligence, once gleaned and assimilated, can produce:

  • Credibility. Online participants see that an organization knows more about them, and they know more about the organization.
  • Prospecting. Enormous amounts of data can be found within social networks about who is buying and why.
  • Introductions. At the very core of social networking is people's desire to get to know more people.
  • Empathy. A deeper understanding of a customer's world before entering it can be gained.
  • Collaboration. The ability to work with others more efficiently and effectively is enhanced with technology.
  • References. Peer-to-peer conversations will uncover – and can help establish – relationships that may have been hidden previously.
  • Established real relationships. Social networking allows companies to help customers solve real business problems, easily and efficiently, tying them closer to them.
  • Post-sales support. Social technologies provide a level of access to the ongoing dialogue after a transaction.

Shift in Customer - and Employee - Power
But, business leaders also will need to understand that the very nature of social media goes against many long held beliefs around how business should operate. Traditional business is built upon customers paying for products and services as they are delivered. However, social media is the embodiment of "paying it forward." Shel Israel, a social media expert and author, called this characteristic of social media as "lethal generosity." In social media, individuals offer their advice, guidance, connection and services with the understanding that the recipient may not pay them back for some time. In social media an organization must first prove its usefulness prior to the customer buying. This puts greater power in the hands of the customer. The payback then arrives in many forms – promotion, connection, referrals, and sometimes, but not always, sales.

Additionally, people on social networks want to be conversing with other people –not companies or brands. This means organizations wanting a strong social media presence need strong social media spokespeople. For many companies, especially those with formal hierarchical structures and strict representation policies, this may mean allowing people within the company who are not normally considered official spokespeople to have a greater role in speaking on behalf of the organization. This breakdown of communication gatekeepers and chains of command to a more open approach is forcing companies to develop a new kind of trust with their employee base.

They need to become comfortable and have faith that the people talking on their behalf are being appropriate, delivering the right messages, and furthering the organization's goals and objectives.

Social media has unleashed a level of individual empowerment that many say will be impossible to retract.

Many social media proponents have gone so far as to say that organizations that do not make this culture shift will find their employees doing it for them. Individuals' usage of social networks is growing, particularly in their personal lives and in their personal career management.

The number of individuals using social media channels is increasing. As illustration, as of summer 2010, 1.9 billion people worldwide are active Internet users. One social media channel, Facebook, grew from 200 million to 500 million users in just the last year and LinkedIn has grown to 75 million members. These users are bringing their social media know-how and influence to the workplace. Social media has unleashed a level of individual empowerment that many say will be impossible to retract. In response, many organizations are attempting to harness this new way of connecting people with other people even before formal return on investment can be determined. This is not unlike the first wave of the Internet, when business leaders gathered in board rooms in the mid 1990s to discuss whether or not to invest in building a website. Many did so, without fully understanding the ramifications or the return.

"What we found was that there's no need to wait; social technologies are already driving business results today. [Marketers] who wait will find it hard to catch up."
~ Bill Band, Forrester Research analyst2

Results and ROI
Businesses report that, once they try online networking, they do see advantages. They are beginning to realize that real relationships result from using online networking – meaningful connections are made, transactions and deals completed, and individual and professional branding and success attained.

Because of these possibilities, business investments in social media are growing at a rapid pace, particularly in the business-to-business (B2B) space. In its report, "B2B Goes Social,"3 marketing agency White Horse reveals that 86 percent of B2B firms are using social media, compared to 82 percent of business-to-consumer (B2C) organizations. However, B2B firms aren't as active in their social media activity with only 32 percent engaging on a daily basis compared with 52 percent of B2C firms.

Yet, optimism about social media abounds. In January 2007, the Economist Intelligence Unit conducted a Web 2.0 survey4 in which 21 percent of participants were in financial services and 23 percent were CEOs. Although the data is older, it is still revealing. Overall:

  • 38 percent of the respondents anticipated that Web 2.0 would help them to acquire new clients
  • 25 percent projected that Web 2.0 would drive product innovation
  • 30 percent expected cost reductions in client service and support

The results are just now beginning to trickle in.

According to a 2009 McKinsey Global Survey report5 on Web 2.0 usage, "69 percent of survey respondents reported that their companies gained measurable business benefits, including more innovative products and services, more effective marketing, better access to knowledge, lower cost of doing business, and higher revenues."

A September 2010 McKinsey Quarterly report6, which provides results of a survey of global executives on the impact of what they call "participatory Web 2.0 technologies (such as social networks, wikis and microblogs)," declares that deploying these technologies "to foster collaboration among employees, customers and business partners is highly correlated with market share gains."

Additionally, a recent Wetpaint/Altimeter Group study7 found that companies who widely engage in social media "surpass their peers in both revenue and profit performance by a significant difference."

While the hard numbers have yet to emerge, businesses are reporting that they are finding incorporating social media into their marketing and communications efforts is having some benefit.

Top Level Findings
But is the finance industry embracing social media? Upon researching the uses of social media in a B2B context, with a particular focus on financial services, the social media realm revealed that all financial service industries have been slow to adopt social media and lag behind the best practices of other industries.

Other key findings, explored in this report, include:

  • The B2B market currently is using Web 2.0 technologies and social media tools to further the efficiency and effectiveness of current job functions and processes.
  • Each social media effort is different because every organization's goals and objectives and characteristics are different. No one-size-fits-all social media program for the industry exists. However, best practices do exist.
  • Social networking, when combined with customer relationships management (CRM) systems, can take data collection and assimilation to a new level in lead generation, conversion rates and sales cycle timetables.
  • Measuring the return on social media efforts has come a long way, but most organizations fail to accurately measure and synthesize their social media results, as well as that of their respective competitors.
  • Social media uses will not overcome basic business problems, such as product and service issues.
  • There are cases in which social media does not make sense, such as scenarios in which an organization is in conflict with its employees or the customer base is extremely small.

Social Media for Equipment Finance
Upon further study, cases in which social media could enhance an equipment finance organization's communications and marketing function emerged. The aspects of social networking that appear to make the most sense for most equipment finance industry members include

  • Twitter;
  • Blogs and blogger relations;
  • Private, online, gated communities and niche sites; and
  • LinkedIn.

Other social media outlets, such as Facebook, Plaxo, and others have relevancy on a case-by-case basis.

But, only if an organization commits to these channels will marketing results be earned. Several levels of social media participation are available, and results will vary accordingly.

Also, social media is similar to traditional media in one key manner: Social media cannot overcome poor customer relations, dysfunctional internal issues, or product and service concerns. In fact, these issues must be handled prior to opening the door to social media efforts. Social media is an open invitation for discussion about an organization and its people. A business should be reasonably assured those conversations will be primarily positive.

"At the end of the day your relationship with a commercial entity is more about products and services than conversations…It is more important to have a great product than it is to be great in social media activities."
~ Shel Israel8

Best Practices
There is no universal social media plan. However, there are common steps that each organization should consider before jumping into social media. Once an organization has determined that social media will be incorporated into communications and marketing efforts, six proactive steps should be taken, as outlined in this report in THE SOCIAL MEDIA PRIMER.

They include:

  • Preparation - Getting the organization ready, including developing a social media team, identifying goals and objectives and being honest about cultural and resource issues
  • Listening - Gathering intelligence about the customer base and the social media landscape itself
  • Planning - Developing a strategy, identifying risk areas, and determining measurements
  • Investing - Dedicating resources, selecting the right channels and tools, and identifying content for social media
  • Engaging - Determining the level of participation, engaging audiences in social media conversations, and promoting the effort
  • Learning - Monitoring and analyzing the social media involvement, calculating return on investment, and adjusting the activities

While each organization will find their social media experience to be distinctive, they will find best practices in each of these areas are available.

  1. 1 Brian Solis. "Social Media Manifesto," (11 June 2006) ⇑
  2. Richard Karpinski. "Forrester Survey Finds Social Media Leading Way Toward CRM 2.0," B2B, the magazine for marketing strategies. (8 December 2008.) ⇑
  3. White Horse. "B2B Marketing Goes Social," (March 2010) ⇑
  4. "2007 Web 2.0 survey," The Economist, The Economist Intelligence Unit (2007) ⇑
  5. "How Companies Are Benefitting From Web 2.0," McKinsey Quarterly. (2009) ⇑
  6. Jacques Bughin, Michael Chui, and James Manyika. "Clouds, Big Data, And Smart Assets: Ten Tech-Enabled Business Trends To Watch," McKinsey Quarterly (August 2010) ⇑
  7. Wetpaint/Altimeter Group, "ENGAGEMENTdb, The World's Most Valuable Brands. Who's Most Engaged?" (2009) ⇑
  8. Shel Israel. Twitterville: How Businesses Can Thrive in the New Global Neighborhood (Portfolio Hardcover 2009), 125 ⇑