What is Social CRM?

Let’s start with what CRM or Customer Relationship Management is. CRM involves the management and enhancement of customer relationships with the help of a large quantity of data about individual customers and a set of tools to interpret and make use of such data. Putting a “social” hat on CRM, to me, it means to use information and communication/interaction in social media to enrich traditional CRM practices as described above. In other words, social CRM merges social media with traditional CRM, both to create a more 360-degree view of the customers and to interact with customers in a more proactive and engaging fashion.

What are the Benefits/Opportunities Presented by Social CRM?

Social CRM brings a slew of opportunities to enrich traditional CRM practices, as discussed in the 18 use cases report. I discuss only a few here:

1. A more complete view of your customers via what they say in social media. This is important because customers’ conversations with others in a naturalistic social media environment are more likely to reveal their true preference and opinions than self-reported data. Instead of forcing opinions out of consumers, consumers are volunteering all this information to companies who are willing to listen. This can be very helpful when it comes to offering support to customers, discovering new product opportunities, identifying brand advocates, etc.

2. Faster collection of information. Traditional feedback through the distribution channel is simply too slow in today’s environment, where consumers are fickle and their preferences are changing faster than ever. One advantage of social CRM is that it deals with real-time data. As a result, companies can gauge quickly how consumers are reacting to a marketing campaign, what they think of a newly announced product, etc. Using this year’s Oscar as an example, Jeff Bridges and Sandra Bullock could have predicted their own winning a week early if they had tallied up their online buzz in the social sphere like Nielsen did.

3. Faster support and response time to customers. Let’s face it, the Internet makes us an impatient generation. When we run into problems, we want them solved immediately. This is where social media can help a lot. It’s not uncommon to hear anecdotal evidence of consumers receiving laser-speed response from companies when they complain about problems in social media. My own experience with Delta Airlines is an example. When I twittered one day about some statement confusion, overnight I received an email from them addressing the issue. That is what I call a wonderful/well-managed customer experience.

4. Engaging Customers. Through better and faster understanding of customers and faster response time, social CRM can provide a more engaging experience to customers. As I discussed in another post about ING Direct’s social media practice, the company successfully uses a blog, Facebook fan page, and a Twitter account to engage a large number of frugal savers. As the Top 100 Brand Engagement Report shows, effective engagement with customers is correlated with financial measures, suggesting social media’s potential to affect companies’ bottom line.

What Are the Challenges?

As something still in development, there are plenty of challenges that can prevent effective social CRM implementation. Among them, I see the biggest obstacles as:

Scalability. As the 18 use cases report points out, 1:1 support is simply not doable for most B2C companies. How can a company enhance customer experience through social media but still remain scalable and cost-effective with its operations? This is definitely something that has to be addressed. Of course, there are automated tools to help streamline this process, but technical tools can only go so far. Eventually when it comes to facing individual customers, who do you listen to and talk to? Whose problems do you solve first? These will require smart prioritization and proper organizational structure to allow for agile response and operation.

Churning Data into Information. Data mining is not a simple science. Added to this the large quantity of real-time data available through social media, the challenges associated with mining social data for information becomes even greater. Scientists around the world are still working on efficient algorithms to make this happen, but the techniques are still nowhere near maturity yet. For those interested, a look at this INFORMS OR/MS Today article on social media analytics may offer some clues as to the challenges associated with (and potential solutions to) analyzing/mining one type of social media data — blogs.

ROI. This is something on everyone’s mind, isn’t it?  Earlier, I mentioned that brand engagement with consumers is correlated with financial performance. Note the words used — “is correlated with”, not “leads to”. In other words, the causal effect is less straightforward. How to measure return from social CRM efforts likely will depend on the goal of the deployment, and a single engagement measure is not going to be sufficient. Moreover, while Dell Outlet was able to pinpoint $3 million incremental revenue from its Twitter presence, for many companies, it won’t be straightforward to isolate the impact of social CRM from other strategies.

I hope you find this discussion helpful in getting you started on social CRM. If you want to dig deeper, I strongly recommend you to download and read the 18 social CRM use cases report, and join in the conversation at the Social CRM Pioneers Group.

Why?

• We tend to know or come across people who are similar to us. Therefore, the friends your loyal followers have are likely to already be your loyal follower too or at least user.
• Loyal followers are likely to buzz about you any way. So the incremental gain from a buzz campaign based on these consumers is limited.

Run the Numbers

These researchers conducted a field study and two lab experiments, which showed significant gain by choosing non-customers as buzz agents. In fact, in the case of Rock Bottom Brewery (a restaurant), they estimated an average of $192 gain in sales brought in by each interaction from non-customer buzz agents. Pretty sizable, huh?

Before You Run Away With It

I see two potential caveats that you should consider before you take the results and apply them to your business:

• Intuitively, it would take more to get people unfamiliar with you to buzz about you. So cost is definitely a consideration. In the Rock Bottom Brewery field study, the non-customer sample came from the BzzAgent company panel. Although both the customer group and the non-customer group were offered potential prizes from the campaign, the non-customer group may have received (or expected) additional incentive from the BzzAgent network (although it’s not explicitly stated in the article).
• People who don’t know a brand well enough may have low credibility when spreading words about the brand. Those who consistently buzz about something they don’t really know (for their own personal gain) may eventually lose the trust of those around them.

More Information

You can hear Professor Godes and Professor Mayzlin talk about their research in this Science of Better podcast. Or if you want to read the article yourself, you can find it in the July/August 2009 issue of Marketing Science (subscription or pay-per-view required).

Frankly, I am not impressed. With so many social media solutions already out to “revolutionize” the way we communicate, I am starting to feel indifferent.  Just count the sheer number of social networks out there, and we see how fragmented online social networking has become. While I am a strong believer in the value of social media, the number of competing solutions is suggesting that this market is getting to a more mature stage.  Just like the hundreds of car brands in the earlier part of the last century, we are bound to see a shakeup of this marketplace, and the ones that eventually survive will be the ones that offer differentiation that appeal to a large enough network of consumers.

So with this idea of differentiation, I thought of doing an exercise.  In market research, there is a technique called brand personification which is used to explore in-depth a brand’s meaning to consumers.  The technique asks consumers to imagine a brand as a person and to describe what this person would be like.  Here I took the liberty and brand personifies some of the best known or “buzzed” social networks we see today.

• Facebook: A child prodigy who won the heart of America almost overnight. But now at a mature adult age, he has not quite found who he is and who he wants to be. As a result, he does face lift or nip/tuck every so often, and he is hopelessly addicted to Farmville, Cafe World, Happy Aquarium, and the like.
• Twitter: A geek with an entrepreneurial soul.  He is fun loving, quick to act, and can get really passionate about a topic. But because of interest in a large number of topics, he also shows symptoms of ADD and can have a fairly short attention span.
• LinkedIn: A businessman dressed in a suit and tie. He is ready to do a sales pitch at any time, and he always carries with him a briefcase no matter where he goes.  In that briefcase, he never forgets to bring with him a copy of his resume in case some better job becomes available.
• foursquare: An overly social person who thrives on attention to such an extent that he literally lives in the public’s eyes.  His smartphone is his prized possession that indulges his need for constant connection to the outer world.
• Google Buzz: Someone in his 40’s or possibly 50’s.  He has gotten onto the Internet late, after his son, daughter, and friends have enjoyed it for quite a while.  Once online, he cautiously explores around and finds email as a safe haven for staying connected. He hangs out with @mashable often, who admires him for his infinite wisdom.

Not hard to see that I am a little cynical in almost all of these.  Perhaps we haven’t found the winning formula yet?  Or perhaps I am just an outlier in the sample.  If I were to pick one from this list as my friend, I would choose the geeky Twitter, which is also the service that I find myself gravitate toward the most nowadays.  What would your choice be?

To do this, we collected a random sample of slightly more than 100 videos from YouTube over the course of a week. These are all fresh new videos just uploaded onto YouTube, so that we can study their rise to popularity from scratch. We traced each video for a period of two months, recording the number of views and the average user ratings each day. We also collected a large number of characteristics for each video (see the figure below), including those related to the video content, to the video author, and to the network of users connected to the video author. We further recruited a group of individuals to rate each video on its production quality, educational value, and entertainment value, which are the three components of what we call “innate content quality”.

Equipped with all these data, we then used a technique called recurrent events analysis to see how these video characteristics affect the popularity of a video. Below are some of the main things we found:

• Authors with a large number of subscribers who each has only a handful of friends are in a better position than authors with a small number of subscribers who in turn may have a large number of friends.
• Once past an author’s direct network of subscribers, influence rather than simple reach becomes critical. We attribute this to the large amount of user-generated content (UGC) being passed around everyday and as a result our tendency to ignore most sharing unless they come from someone we are really close to or someone whose opinion we respect (opinion leadership is not dead!)
• What proportion of an author’s subscribers know each other also matters. A totally segregated set of subscribers does not help get the words out, but a group of subscribers where everyone knows everyone else is not optimal either. We found that the ideal connection ratio (termed connectivity or density in network analysis) was about 38%. Below this ratio, diffusion rate increases with connectivity up to the maximum, and then decreases after this threshold.
• Of the three innate quality components, entertainment value and educational value are equally important in determining a video’s popularity. Production quality, on the other hand, did not matter.
• But the biggest impact did not come from innate quality but from what we call “manifested quality”, which is quality information publicly available through other users’ ratings (i.e., the little stars underneath each YouTube video). Increasing the average rating by 1 star can lead to as much as 13.5% gain in diffusion rate.
• Age has a negative effect on diffusion rate, meaning that younger users’ contributions are more likely to be popular.
• An author’s past experience and success also carry over to the new content. More prolific authors and authors whose past contributions were more popular are more likely to see their new content popular.

Of course, with only one study, we are far from completely answering our initial question.  But what we found here suggest that there are indeed systematic differences among videos and authors that can help predict the success of future content. Carrying this over to other types of user-generated content such as tweets and consumer blogs, these findings and findings from future studies should help companies pour through the overwhelming amount of user-generated content available online and selectively invest effort in the ones that are most likely to become popular.

What do you think?  I’d love to hear your thoughts.  Is there anything important that we are missing? If you are interested in more details about our study, you can download our working paper at http://www.yupingliu.com/files/papers/liu_rogerson_ugc_diffusion.pdf.

1. Emergence of “Individual” Corporate Identity

As social media give companies an opportunity to step closer to their end customers, this new strategy also puts individual faces onto what used to be a collective corporate identity.  Two cases in point: Peter Cashmore for Mashable, Scott Monty for Ford, to name just a few.  While such corporate spokespersons have existed before, now they have a much more personal face that interact with consumers day in and day out. This new corporate “individual” identity can have important implications for corporate branding and even companies’ hiring practices.

2. Mobilization of communication via geo-enabled services and mobile devices

Foursquare, need I say more?  Undoubtedly this represents great business opportunities for many companies. But more than that, this finally arriving mobile market is going to create new consumer privacy concerns and will require new types of policy to regulate how consumers’ geographic information can be used and protected.  Coupled with the buzz on real-time search and interaction, business practice and public policy in this area can be complicated.

3. Real-time verbal and textual translation

Google recently added a real-time translation service that can be integrated into an online chat session or used via its new Google Wave service.  When the precision of this type of services improves, its impact on cross-cultural communication will be tremendous. With the help of the Internet and social media, individuals already collaborate in many areas such as R&D, open source applications, and cause advocacy.  Now only imagine magnifying this many times to a global scale.

In the spirit of this blog, I’d also like to refer my interested readers to the predictions made by a few other web and social media experts:

• Social media prediction for 2010 by Scott Monty (Ford social media expert)
• Trendspotting’s expert trend predictions in 140 characters
• Social marketing trends from reviewing 2009 by web strategist Jeremiah Owyang

What about you?  What do you expect to see in 2010? Whether you agree or disagree with all these predictions, I hope everyone has a happy and productive year!