Tuesday, August 21, 2007

TD Bank Launches Facebook App to Woo Young Clients

Financial Post, Barbara Shecter, 21 August 2007

Toronto-Dominion Bank has created a chat group on popular social networking Web site Facebook, joining a lineup of banks approaching young people where they hang out and attempting to reel them in as customers before they make major purchases such as homes and cars.

Billing itself as the first Canadian financial institution to reach Canadian students "on their own turf" through Facebook, the bank launched TD Money Lounge, a group for student financial management. The idea is to help students adjust to the financial demands of living outside their parents' homes, according to a news release distributed by the bank yesterday.

But some observers are skeptical about whether a large business enterprise can break into the social networking space which many users see as "a sacred, non-commercial space" where they can interact with peers.

"At first blush it looks like the equivalent of grandpa trying on break dance moves at a wedding to show that he's hip," said Kaan Yigit, president of Solutions Research Group Consultants Inc.

He and others are skeptical TD will be able to appeal to the university crowd on Facebook where the popularity has stemmed from making "friends" to include in daily musings and photo galleries.

"From a marketing point of view, it certainly makes sense to try to meet these prospective customers on their own familiar turf," said Alan Sawyer, a media strategist at Two Solitudes Consulting. But social networking participants may "resent - and eschew - such a blatantly commercial outreach," he said.

Companies are increasingly trying to use Facebook to keep in touch with customers and form new and deeper relationships. They communicate on discussion "threads" and sponsor stories on news feeds to promote themselves and draw in a larger audience.

"All marketers are trying to find new ways to reach and engage with the younger demographics as well as create relevance for their products and services," said Ravi Dhar, a marketing professor at Yale University. "Any kind of targeted service or feature to gain relevance is a plus and shows creativity on the part of an industry that often is not known for creating customized services."

TD is not alone among Canada's Big Five banks tapping into where young people spend time, with the hope of enticing them to forge lifelong banking relationships for car loans, mortgages and credit cards.

Bank of Nova Scotia teamed up with movie chain Cineplex Entertainment to launch a loyalty program for bank customers to earn points towards movie admissions and concessions. As part of the arrangement, cinemas in major cities including Vancouver and Toronto were re-named Scotiabank Theatre.

"Banks know that once clients have established a relationship with a bank, they are not generally inclined to switch," said Mr. Sawyer. "The cost of acquiring a customer in this manner is negligible whereas the cost of enticing a customer to switch from another bank with which they've been for a long time can be significant."