Gartner G2 view of the role of online communities for CRM

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This week we're very pleased to publish a presentation from Gartner G2, Gartner's topline research offering for business strategists. The paper is by Jennifer Kirkby, a Gartner CRM research director. The presentation covers Gartner G2's view of the importance of online communities for CRM. Regular readers will know that this is a particular bee in my bonnet, so I thought I'd add my pennyworth (or 2 cents worth) of comment to Jennifer's thoughts. Of course you should also have a look at Jennifer's presentation.

Before we start, perhaps I'd better outline what an online community is. Well, you're looking at one. The CRM-Forum has most of the aspects of an online community, for an audience of CRM professionals. It provides an online place for like-minded people to meet in order to transact, derive value from the information the community as a group provides, interact with each other, and access content of value to the subjects of interest to the community members. The CRM-Forum is perhaps not a typical community, but it provides facilities in all these areas. If you want a more detailed understanding of my view of a community you could check out my recent presentation on the subject.

So how do such communities come into existence? Jennifer outlines two key ways: firstly they can be established organically, set up by interested individuals who define the community's purpose. The community tends to be built by the participants themselves, and growth tends to be 'viral' through members introducing other members. That's very much how the CRM-Forum established itself. Alternatively, they can be engineered. Companies can actively decide to establish communities, aimed perhaps at a sub-set of customers, or to provide customer support and service, and actively nurture dialogue. Participants find it through online and conventional marketing.

The question now arises, what do online communities have to do with CRM? There are a number of points to be made here. Jennifer quotes Kjell Nordstrom: 'Emotion is the great differentiator in a world where sameness increasingly rules. In an excess economy success comes from attracting the emotional consumer not the rational one. Companies can tap into the emotions of consumers by focusing on a specific tribe.' This thought is reinforced by the McKinsey research on customer loyalty segmentation outlined in last week's editorial, and by the customer research mentioned in yet another editorial, and the presentation mentioned previously. I might put it another way. If we can agree that the objective of CRM is to increase customer value by increasing customer loyalty, we should recognize that people are usually more loyal to communities than they are to commercial organizations.

A slide from Jennifer Kirkby's presentation which outlines the Gartner G2 view of the evolution of CRM going forwards to 2006 reinforces this argument. Firstly, Gartner sees the business focus of CRM moving from product-oriented acquisition and portfolio-oriented cross-selling and retention in 2001 to customer service / solution provision in 2006, which Gartner summarises as developing value (though I might modify to 'develop market-leading value'). Secondly, Gartner sees CRM culture developing from a functional focus or team focus with growing customer sensitivity in 2001 to collaborative, customer-driven external networks by 2006. This sounds awfully like online communities to me.

So if this is beginning to make you feel that there might be a role for online communities in your CRM programme, how do you go about it? Jennifer's presentation suggests that there are very different routes for building communities, depending on whether you're working in a B-C or B-B environment. B-C communities tend to be focused on providing customers with access to the company and other community members, providing information, entertainment, convenience, and even discounts, with the company getting value through market research, feedback, leads, and increased customer loyalty. B-B communities are perhaps more focused on the extended enterprise, allowing companies to collaborate either on building operationally-focused value chains or innovation-focused value chains, or of course, both.

I am conscious that you're listening to an enthusiast in this editorial and enthusiasts can be dangerous in that they tend to play down the downside of their enthusiasms. Luckily, the Gartner G2 presentation provides you with a list of things to beware when it comes to online communities. I'm going to highlight one or two of them that ring a number of bells for me, but don't forget to check out the others.

Firstly, as always, make sure you understand the business case. If you don't have a good feel of how and where your community is going to add value to your organization, you are starting down a route very likely to raise questions on ROI somewhere down the road. You need to quantify those benefits in the business case, and you need to put in place the metrics so that you can measure the actual benefits achieved. Goes without saying, of course, or does our current experience with ROI from CRM suggest that it doesn't go without saying?

Secondly, don't underestimate the resources and effort required to maintain your community once it is established. A community is not a static environment. There needs to be new content and new facilities on a regular basis. Of course, much of that content may be provided by the community itself, but even that needs to be managed, taking significant effort.

The final risk I'd like to highlight (though Jennifer has more, equally valid), is the risk of a customer community turning into a customer union. It's tough, isn't it? You've put all that effort into providing a nice place for your customers to get together, and they use it to combine against you. A number of software product suppliers have created rods for their own backs by creating user groups of their products. There's a couple of points worth making about this risk. Firstly, customers can create a customer union without you being involved – ever heard of aolsucks.com? Secondly, that negative feedback can also be useful, if you use it to address those issues which your customers find most irritating. Customer complaints can be a valuable source of data for your CRM programme.

Despite these and other risks that Jennifer highlights, she seems fairly positive about the value of communities. To get started, she recommends the following approach.

Firstly, conduct market research and customer analysis on values and attitudes to find the opportunities. This is music to our ears, fitting well with the methodology we recommend for involving customers in your CRM programme (see Deliver the benefits from CRM by putting the C into CRM - Part 1 and Part 2). Out of that work should come the value proposition that the participants (including yourselves) should get from the communities that you establish.

Secondly, make sure that you have people on board who understand the frameworks and dynamics of building and running communities. People who have built communities have learned a lot of lessons. You should build on that expertise, not re-discover the lessons the hard way.

Finally, make sure that the technology and human support is there to support the community processes you decide to implement, and then – again music to our ears – start with a pilot, then provide a simple service – and watch it grow.

So what are Gartner's conclusions on online communities? On the whole, it's pretty positive stuff, which I would endorse. Online communities are seen as a tool, based on powerful social, business and technology trends, which you should consider as a way of building customer loyalty and trust. In Gartner's view, community is more powerful than collaboration, so grow the former from the latter.

On the downside, community depends on multiple technologies, some mature, but some still emerging. I would agree with this, but would argue that the technology is sufficiently mature to ensure that the 'software' of the community (the content and the interactions) are more likely to be the critical factor in deciding whether your community is a success or failure, provided you stick to proven technology. Finally, let's reiterate the key risk – you must make sure that the benefits, costs, and risks of the community you established are identified, measured and monitored.

I hope you have found some interesting food for thought in this article, and there's much more in Jennifer's presentation. I encourage you to visit it. As always we'd like to hear your comments. Make them below or email me.

Regards,

Richard Forsyth

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