Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

1 Surprising Way Big Banks are Gaining Loyal Customers

By Dave Koppenheffer - Mar 22, 2014 at 10:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Loyal and engaged customers are the most valuable to banks. With branch visit declining these banks have gotten creative on a new platform.

According to Gallup research, banking customers can be broken into four major categories. At one end of the spectrum are the fully engaged; at the other, the actively disengaged.

Fully engaged customers are the most loyal and hold a greater emotional attachment to their bank. These customers, Gallup found, are worth $400 more per years than their actively disengaged brethren. This spread more than doubles for affluent customers.  

These customers are extremely important to banks like Bank of America ( BAC 1.27% ), Wells Fargo ( WFC 2.95% ), and US Bancorp ( USB 1.42% ). There is, however, a catch. Loyalty is built through interaction. With branch visits on the steady decline this leaves banks scrambling to find a new way to engage customers.

The emerging role of social media
Currently, a very small portion of banking customers interact with their bank via social media. While this is a unique customer base, according to Gallup, it represents an important population.

Gallup noted that of the 9% of customer that interact with their bank through social media, roughly half are "younger (91% are either Gen X or Gen Y) and more affluent." In fact, the survey suggested, "they are 18% more likely to be emerging affluent (age 35 or under with incomes over $75K/year)." 

More incredibly, these customers hold a much stronger emotional connection to their bank. Gallup suggested, "This 4% slice of customers... [are] roughly twice as likely to believe that their bank is the only company they need to use for all their financial needs." 

How many people really "follow" their bank?

Social Media Presence Among Banks
CompanyTwitter FollowersTweetsFacebook likes
Bank of America 270,000 3,500 1,600,000
Wells Fargo  22,000 97,000 630,000
US Bancorp 10,000 5,300 160,000

Turns out it's a whole lot more than I would have guessed. The potential for social media is enormous, and banks are starting to dedicate an appropriate amount of resources. Wells Fargo and Bank of America, unsurprisingly, are well ahead of the smaller US Bank.  

What's the social media strategy?
There are three angles banks take when it comes to utilizing social media. These are:

  1. Another form of customer service
  2. First tier advertising
  3. Second tier advertising

The first option is fairly self-explanatory. If you have a question, comment, or concern, there's @AskUSBank, @Ask_WellsFargo, and @BofA_Help.

First tier advertising is: "Need a financial planner? We do that!" Second tier advertising is much more engaging. It could be community service, free advice, or even giveaways. That'll look something like this:


#BottomLine
Big banks can't compete with the higher interest rates online banks are offering. However, if these banks can develop relationships that garner emotional attachments, for many, that's well worth the lower interest rate on their deposits.

While it's still unclear whether social media will play an increasingly role in the relationship building aspect of banking, it certainly looks like the most viable option.

For investors, finding banks that can develop relationships without customers ever needing to step inside a physical bank is a huge competitive advantage. This is also a great sign the bank can adapt to the ever-changing environment. As it standing right now, Bank of America seems to be getting the most traction.

 
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$44.71 (1.27%) $0.56
Wells Fargo & Company Stock Quote
Wells Fargo & Company
WFC
$50.25 (2.95%) $1.44
U.S. Bancorp Stock Quote
U.S. Bancorp
USB
$57.69 (1.42%) $0.81

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
633%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/07/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.