Social CRM at a crossroads: Where to next?

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Social CRM has evolved from a novelty used by only a few organisations, to a powerful tool that practically all use. Much of this evolution has been powered by the hype cycle. Social CRM is now at a crossroads. It can go in three directions: it can become just another communications channel, it can become a technology solution, or it can become a way to co-create more value together with customers.

Only by looking at social CRM as an enabler for value co-creation can organisations use it to develop a sustainable and profitable business model. A lot has happened in the last few years. From an interesting new experiment in influencing customers to buy an organisation’s products, social CRM has grown to become a bulwark of everyday business.

When I watched a Ford advert on TV in New York recently, the only response mechanism advertised was to go to Ford’s Facebook page. social CRM is now mainstream. But the headlong growth of social CRM, powered by the ever-present hype cycle, has not been without cost. Organisations that should have leaned from their failure with CRM in the 90s have made the same old mistakes again.

Sustainable success or short-term success

Despite these setbacks, social CRM has prospered to the point where it is estimated to take about 10% of budgets for customer management activities. With this growth comes management responsibility. Social CRM has now reached a crossroads. It can go down any one of three tracks in front of it. One of the tracks leads to short-term success, one leads to medium-term failure, but only one leads to the kind of sustainable success that companies are looking for. Management must now decide which track it wants to go down. The choice is not as straightforward as it might seem.

The first track is to see social CRM as just another communication channel to market. As inside-out marketing has become less effective, marketers have been on the lookout for a new way to get their message out. What could be better than harnessing the natural sociability of customers to market to other customers?

Just look at the success of companies like BMW, which uses social CRM to identify, develop and support brand fans. And Roger Smith Hotels, which uses social CRM to nurture relationships with niche networks of the hotel’s guests. Or even Medecins Sans Frontières, which used social CRM principles to communicate with front-line aid workers during the recent Haiti earthquake disaster. Social CRM as a channel for marketing, sales and customer service certainly works, but it is still mostly about the organisation, and not about the customer. Because of this, it can only ever be a short-term solution.

Expensive old organisation

The second track is to see social CRM as a new technology. Despite the lessons of the wasteful CRM years, many of those responsible for social CRM just see it as the latest new technology to be implemented. Just buy the technology and you have social CRM, goes the line of thought. Egged on by technology analysts, like Forrester, Gartner and Altimeter, organisations buy social CRM tools and implement them without thinking through all the other complementary capabilities required to turn the tools from expensive pieces of software, into enablers for business value creation.

There isn’t anything intrinsically wrong with social CRM tools per se, indeed, they can be a powerful enabler for business when part of a more comprehensive approach. Just look at how Lithium enables organisations to create communities that customers can use to get answer questions about its products answered by other customers. And how Attensity enables organisations to make sense of unstructured customer text data. Or even how Spigit provides a platform for organisations to use open innovation to crowdsource product ideas together with customers.

But too many implementations of social CRM technology fail to create value. They are living proof of the old saying about technology from the heyday of CRM: OO + NT = EOO (Old Organisation + New Technology = Expensive Old Organisation). Don’t become an expensive old organisation!

The only sustainable track

The only sustainable track is to see social CRM as an enabler for value co-creation throughout the customer and product lifecycles. Unlike the other two tracks, this one starts with understanding who is involved in value co-creation and what value delivery looks like to each person. It then looks at the touchpoints over the end-to-end customer and product lifecycle to see how value is delivered and what resources – knowledge, skills, experience, time, money, etc. – each person needs to bring to each touchpoint to co-create the most value.

Armed with these insights, the organisation can identify exactly which social CRM tools should be used to enable more value to be co-created. Just look at how Vodafone works closely with customers to co-create new products and services that make customers’ lives easier. And how KLM uses Twitter to support customers during their journeys, for example, during the recent Icelandic volcano eruptions when thousands of flights were cancelled or delayed. Or even how Lego provides an entire ecosystem where customers can co-design, co-produce and co-market new Lego building kits to other customers.

This is the only track that is designed specifically around maximising the value created for customers as well as for organisation; through the intelligent use of social CRM at just those touchpoints where it makes sense. It is also the only one that provides the organisation with the sustainable success from social CRM that they are looking for.

If your organisation is standing at the social CRM crossroads, I hope you know which track you should take. It is tempting to take the social CRM as a communication channel track. But you know that will only provide short-term benefits. It is also tempting to follow the crowd and take the social CRM as a technology track. But you now that just like CRM, you will struggle to achieve the promised benefits. You know that there is only one track to take for sustainable profitability. The social CRM as value co-creation track.

Good luck on your journey. As you chose the co-creation track we will be with you every step of the way. I will be one of the ‘Official Bloggers’ at the Enterprise Social 2.0 event in Brussels during the 8th/9th March. I will be tweeting (hashtag #es20) and blogging interviews with the people responsible for social CRM in many organisations just like these. Look out for my tweets and posts from the event over the next few days.

Graham Hill is a customer-centric innovator and partner at customer value management specialists Optima Partners. Follow Graham on Twitter.

If you're interested in customer driven innovation join the Customer Driven Innovation groups on LinkedIn or Facebook to learn more.

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07th Mar 2011 14:44

A very cogent post. You are dead on when you write about taking the co-creation track over others. I also like how you salted your post with examples of companies who are engaged in social CRM as opposed to just preaching about the theory. This is a post worth sharing and bookmarking.

I will disagree with you on one point. I don't believe that that social CRM is a tool "that practicaly all use." While a large number of organizations may be using social media, using it as social CRM is a horse of a different color. Just because someone has a Facebook page, doesn't mean they're doing anything with it. Most of them still do not know how to create a community or start a dialogue much less engage in co-creation. I believe that the number of business, government, and nonprofits using social media is still a minority. An even smaller number are using it effectively.

Sure, I've seen the numbers of Facebook users. But I challenge anyone to show me data that says a large number of Facebookers are using it regularly for anything other than posting pictures of their kids or  updating us on how their day is going.

But don't let the fact that two of my paragraphs disagree with you and only one agrees. My disagreement is, just as I said, a quibble, and the rest of your post is dead on target.

Regards,

Glenn

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07th Mar 2011 16:12

I've been thinking a very similar concept along these lines as well. Basically there are three ways to approach social. You can use it as another broadcast channel to blast out messages i.e. push marketing. Or you can use it to listen to what your customers are saying and use it as a feedback channel. But the best approach )or at least the idyllic approach, perhaps not achievable for many) is being able to collaborate. Thanks for your article, it did really resonate with me.

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By jnoble
07th Mar 2011 16:39

Social CRM provides value in that it can purpose collaboration. With customers or the general public companies like Adobe, GE, and many more are using Brightidea software to solicit feedback and incremental and disruptive new ideas and drive implementation of those ideas through a streamlined backend evaluation and social projection management system. The full Innovation Suite is powering GE's Ecomagination Challenge website. See http://challenge.ecomagination.com/

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07th Mar 2011 17:27

A great post but VCC is over the heads of most businesses who I strongly believe will only ever look at the short-term angle. Even if they don't suffer from short termism then the ceding of control/power to the customer involved in VCC will also be prohibitive. We'll need many many use cases of how this has benefited biz before there is a sea change I feel.

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08th Mar 2011 17:58

Dr. Hill,

Great post. I enjoyed it very much.

Thank you very for the mention; we appreciate it. Please let me know if I can help point you to any information regarding Spigit and our products and service offerings. I'm happy to help.

Best,

Erin Schumpert

Spigit

@eeschumpert

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10th Mar 2011 10:50

 A few answers to your comments...

@Glenn

I agree with you in principle. Many companies are only just starting out on their Social CRM journey: They are starting to gather customer sentiment from outside the company. They are starting to reach out to customers to co-create marketing. And they are starting to gather ideas for future products from customers. I tend to give these early experimenters the benefit of the doubt, even though they are not quite up to P&G's level yet.

@rustynail

Many companies start out exactly as you suggest. They see Social CRM as just another channel for inside-out marketing. And that works fine up to a point. That point is when customers recognise that there is nothing in it for them, other than maybe 15 brief minutes of fame. As we have already seen with idea competitions such as those run at MyStarbucksIdea or DellIdeastorm, customers are starting to ask why they should give away their time, energy and most important, their ideas for free, when there is nothing much of value in it for them. As the momentum for sharing value grows, companies will have to look to co-create value together with customers, or face a customer backlash.

@jnoble

Open innovation tools like Spigit, Hyve, and BrightIdea have an important role to play in enabling co-ideation together with customers. But they face challenges too. Not in the tools themselves, but in how they are used. At a recent dinner with Prof. Frank Piller and Prof. Birgit Mager (at home in Cologne), Frank said he has seen many instances of customers being unhappy to submit their ideas - ones that could easily turn into the next hot startup - where they receive practically nothing in return. Customers are starting to realise that their data, their attention and their ideas have a value that shouldn’t just be given away for free. Paradoxically, maybe companies like GE need to better understand the jobs innovative customers are trying to do, why they use open innovation tools at different points in their own customer journey to do them and how value flows between the different parties involved, BEFORE implementing open innovation tools. Think of it as co-creating open innovation!

@Tibor

I agree with you in principle too. But only for the time being! Many large and influential companies are actively experimenting with different aspects of value co-creation. B2C companies like P&G, BMW, KLM and Anheuser Busch InBev to name a few. And B2B companies like Rolls Royce, BAe Systems and Volvo. Even governments in the UK, NL, DE and ES. As these companies publish their results more widely and the business model for value co-creation is better understood, other companies will surely follow. Indeed, the rise of the social customer will mean that many companies will have little choice but to follow. 

@Erin

Call me Graham. I look forward to learning more about Spigit from yourself and from @bankervision, whose BankerVision blog I have been reading for a number of years.

Feel free to engage with me on Twitter @grahamhill if I can help further.

Graham Hill
@grahamhill

 

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