Monday 31 May 2010

Three lessons from Paul Greenberg's Social CRM Summit

Paul Greenberg’s inaugural Social CRM summit earlier this year was severely disrupted by a snow storm. It was volcanic ash and a BA cabin crew strike that threatened to disrupt my visit to the second summit, held at Kennesaw State University, in balmy Georgia.

The event was something of a gathering of minds in the SCRM space with distinguished thinkers like Paul Greenberg, Dr Jeff Tanner &  Jeff Pedowitz  presenting and thought leaders like Esteban Kolsky, Marshall Lager,  and Jacob Morgan driving a lively discussion and tweeting live from the event. It was a uniquely social event with an extended audience following the #SCRMsummit hashtag on Twitter.

Two of my fellow participants have already published excellent posts on the event. Lauren Hall-Stigerts wrote a comprehensive summary of the event here and Jacob Morgan covered the more social side of the event here! I don’t aim to repeat anything they have already written. Instead I wanted to focus on 3 key learnings I look away from the summit.

1. CRM remains the foundation of Social CRM

Although the summit focussed on the “S” in SCRM; Paul emphasised a number of times that CRM does not disappear. Companies still need to answer phones, take orders, handle complaints etc... SCRM does not replace CRM, it compliments CRM. In some ways it represents the final missing piece of the CRM puzzle. The piece that acknowledges the customer’s control of the conversation; the piece that encourages listening and responding to the direct and authentic voice of the customer (and the customer’s community); and the piece that forces companies to embrace outside-in thinking and not simply focus on internal command and control mechanisms. Many SCRM vendors and practitioners still have some way to go in articulating a strong CRM integration story, but the 2 must be treated as one.

2. Embracing Social Media does not mean you have embraced Social CRM

Setting up a Facebook fan page or Tweeting special offers to your customers is easy, but let’s be clear; that does not mean you have embraced Social CRM, you have merely adopted some new channels. Adopting social channels without a wider framework can be dangerous. Social media can give marketers more data than they ever dreamed of; the danger of which is that inside-out thinking is perpetuated and increasingly granular customer segments are bombarded with direct messages, tweets, notifications etc.  The force has both a light and a dark side! See my post on Star Wars and Social CRM.

3. The concept of “someone (or a company) like me” is central to what drives customer trust and advocacy and LTV is no longer enough

This was an interesting idea that Paul introduced at the event. The idea of “someone like me” has been told many times. Customer’s trust advice and guidance from people they perceive to be similar to themselves, far more than they trust corporate marketing, PR or a smooth-talking salesman. “A company like me” extends this concept through the alignment of a company’s brand values to those of its customers. Customer advocacy is not just driven by successful transactions; it’s a product of an emotional connection that the customer has made to the company and its brand. Co-creation is a powerful mechanism to help establish a customer’s emotional connection, as customer’s can be made to feel part of the brand. When a customer feels part of the brand and starts acting as an advocate, traditional metrics like LTV are no longer enough; the social customer can have positive or negative value far outside their direct revenue-generating transactions. See Paul’s recent post on Measuring the Social Customer.

It was a pleasure to attend the Social CRM summit and connect with many of the friends and colleagues that I have been working with for a while. A Transcript of the Tweets from the event can be found here.

Disclaimer and disclosure: I attended the Social CRM summit as a guest of Paul Greenberg and BTP Partners but my company Capgemini paid my travel costs.

Monday 24 May 2010

What's driving Social CRM - opportunity or fear?

Most clients that I have discussed Social CRM with so far have fallen into one of two camps: those motivated by the opportunity presented by Social CRM and those motivated by their fear of the social customer. Let me say from the outset that I recognise that this is quite a crude split, that there are grey areas in between, and that over time it's certainly possible for a client to move from one camp towards another; but for the moment let me explain my thinking.

First, a reminder that Social CRM is "the company's response to the customer's control of the conversation" (Paul Greenberg 
"Time to put a stake in the ground on Social CRM"). Those driven by the opportunity of Social CRM see customer control of the conversation as a positive thing as it provides knowledge, insight and engagement that they might otherwise have missed.  If we take a Consumer Goods company as an example, most have long been separated (and as a result frustrated) from their end consumers by retailers. For Consumer Goods companies Social CRM represents a unique opportunity to engage, listen, capture and respond to the direct and authentic voice of the consumer. Consumer Products companies can leverage Social CRM to build deeper relationships with the end users of their products, create new products (or re-design old ones) based on direct community feedback, adjust promotions or test new markets based on real consumer insight.

Those motivated by fear of the customer's new found control of the conversation, on the other hand, think quite differently. These are organisations whose relationship with their customers is typically defined by negative moments of truth. Take a water utility, for example. Now I have no desire to have any sort of interaction with my water utility other than when I sign up, when I leave, or if something goes wrong in between. My relationship with my water utility is defined purely by how easy it is for me to set up or close my account, the cost of my bill, how many things go wrong and how well they are dealt with. If things do go wrong (for example, if my bill is incorrect, my water pressure is low, or if sewage is pumped into my street) them my relationship with my water company is determined by how well they deal with that negative moment of truth. If my water utility can't fix the problem in a manner I deem to be appropriate, through the channel of my choice, then the chances are that I will eventually turn to social channels to vent my frustration. I will tweet, I will blog, I will write negative reviews etc. If my negative sentiment resonates with others, then it will gain viral momentum, causing embarrassment and potentially lost customers. If you think about many of the headline-grabbing Social failures like United breaks guitars, Eurostar's Twitter storm, or BT's YouTube complaint; many have been driven by an inability to spot and deal with a negative moment of truth. Hence for some organisations, their primary driver for Social CRM (at least in the first instance) is simply to be able to better listen and respond to angry customers; putting out sparks and flames before they become fires.

Currently most commentary on Social CRM is directed towards the opportunity camp. I don't dispute that, or the logic that goes with it - the opportunity camp is where the excitement happens; where organisations can become truly customer-centric / customer-driven. But the opportunity camp is not necessarily an easy starting point for all organisations; improving customer service to quench flames of discontent is far more tangible for some. Over time I suspect companies starting in either camp will evolve their thinking and usage of Social CRM. Those who start by trying to listen and respond out of fear for the social customer may find an opportunity to better understand their customers (their desired outcomes and their value creation processes). This insight in turn may lead them to spot new opportunities for product or service enhancement.

What's your view?

Wednesday 12 May 2010

Measuring the ROI of Social CRM

For some reason ROI is often a dirty word when used in the context of a Social CRM initiative. Metrics are abundant but dollars are often harder to find. It’s easy to point to a metric like number of followers, page impressions, percentage of positive sentiment etc but ultimately all of these are just leading indicators. Every board room I have been in to have asked the tough questions:

  •    How much is this going to cost me?
  •    What cash flows will I get in return?
  •    How will this enable me to achieve my strategic objectives?
  •    What are the risks?
  •    How does the proposed course of action compare against other (viable) alternatives that I have?

I couldn’t imagine facing off to a hard-nosed exec without having answers to these questions and responses like “we need to join the conversation” simply don’t cut the mustard. Kathy Herrmann nails this point in her presentation on “What Social Business ROI really means”:

“There are folks who seem to view social media initiatives as a special class of corporate initiative that’s exempt from Business 101 fundamentals. That astounds me, especially when you consider how the costs for social media can climb...It is unrealistic not to expect execs to demand an ROI on any major corporate initiative. Companies run on money, not on tweets or the number of friends they have.”

Twitter may be a free tool, but Social CRM has real costs: People, Process, Technology and Management. It can also create tangible benefits; increasing revenues (e.g. through word of mouth marketing, up-selling or cross-selling), or reducing operational costs (e.g. through call deflection via an online community, or reduced cost of lead acquisition). Logitech for example deflect around 120,000 cases per month from their online community. Dell famously sell around $3m per annum via Twitter (tiny in the context of their overall revenues, but nevertheless growing).  As such, why shouldn’t the Board be entitled to understand the likely cash flows from their investment? Natalie L. Petouhoff, Ph.D. from Forrester has done a terrific job of detailing some of these costs and revenue as they relate to online communities in “The ROI of Online Customer Service Communities”. The Social CRM vendor, Lithium, has gone a step further and has built some of this thinking into their product.
The real question in my mind is not whether ROI is measurable or valid (it is), it’s whether ROI is the only metric worth evaluating? I would suggest that ROI as an isolated metric is not enough. In fact nothing like enough. All companies aim to create shareholder value (or “Stakeholder” in a public company); but each will have different methods of achieving that goal. For example a low-cost retailer might focus all its energies on growing revenue and market share during a time of economic recession. The retailer will actively hire and spend marketing budget to achieve those aims. Other companies may focus on earnings during the same climate of economic distress; consciously sacrificing risky revenue growth opportunities to concentrate on cost-saving. A decision to invest in Social CRM needs to be based on ROI but also on alignment to strategic objectives. This is a point Wim Rampen makes clearly:

“If the goal of your strategy is to double your market-share in 10 years... I would think that any investment you are doing should be aimed at meeting that strategic goal, hence any business cases should not only be measured against financial ROI, but against strategic-outcomes too”

Don Peppers and Martha Rogers take strategic thinking about customer-investments one step further with their comprehensive work on Return on Customer (ROC). They suggest that customer’s are the surest route to business growth:

“Most business executives would agree, intellectually, that customers represent the surest route to business growth – getting more customers, keeping them longer, and making them more profitable. Most understand that the customer base itself is a revenue-producing asset for their company – and that the value it throws off ultimately drives the company’s economic worth. Nevertheless, when companies measure their financial results, they rarely if ever take into account any changes in the value of this underlying asset, with the result that they are blind – and financial analysts are blind – to one of the most significant factors driving business success.”

This way of thinking balances short and long term objectives in a meaningful way and offers something complimentary to ROI:

“Return on investment quantifies how well a firm creates value from a given investment. But what quantifies how well a company creates value from its customers? For this you need the metric of Return on Customer (ROC). The ROC equation has the same form as an ROI equation. ROC
equals a firm’s current-period cash flow from its customers plus any changes in the underlying customer equity, divided by the total customer equity at the beginning of the period.”

What I like most about ROC is that it treats customers as an asset (the sum of all customer lifetime value) and it takes into account changes to the capital value of that asset, instead of simply looking at the dividends produced by the asset in the current quarter i.e. current quarterly revenues. The capital value of the customer asset is not just their transactional worth it is also their “social” worth. As my Capgemini colleague Mark Walton-Hayfield points out:

“Having reward mechanisms that are based on more than just what the customer spends with the company will become more important. Reward mechanisms need to develop to be based on the value that customers bring to the organisation through co-creation and customer advocacy as well as their attitude to the company brand. This could be based on the contributions they make to an online community or knowledge base, for example, and the additional customers the business may obtain through existing customers’ recommendations or positive comments made by an existing customer.”

On that basis therefore, whilst I would suggest that looking at the ROI of a Social CRM initiative is mandatory, I do not believe it should be looked at in isolation. A decision to invest in social CRM needs to be aligned to an organisation’s corporate objectives and needs to consider both short and long terms value drivers.

Further reading and presentation material:

A huge amount of work has been done on ROI in Social CRM. I’d recommend the following:

Natalie L. Petouhoff, Ph.D. (Forrester) - “The ROI of Online Customer Service Communities”
Olivier Blanchard - Basics Of Social Media ROI
Don Peppers & Martha Rogers PH. D. – “Return on Customer”

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