What is Social Media's Impact on CRM?

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Within the ever-expanding world of social media, there's an abundance of wild enthusiasm about the potential for new applications and ways of conducting business. There is not, however, much in the way of bottom-line value for businesses and customers.

Gartner research director Adam Sarner, the author of the firm's recent report, The Business Impact of Social Computing on CRM, believes that this could soon change - if companies learn how to more effectively leverage social media as a CRM tool that serves customer needs.

"CRM is where the rubber meets the road, one of the places where you can see a viable business model," he says. "The idea of CRM is to treat different people differently. Well, where else are you going to find the information that lets you do this better than in social media? I think [social media] is made for CRM."

For now, only a minority of organizations has attempted to build online communities and fewer still have succeeded in growing them, Sarner says. "Most are still struggling with 'what's the business justification for any of this?'" says Tac Anderson, Hewlett Packard's social media manager for its Imaging division.

Another obstacle is the follow-the-herd mentality when it comes to social media applications and platforms. "Companies don't have a good understanding of the 'what' and the 'why,'" Sarner says. "They'll say, 'Facebook - we want to do that.' But when I respond, 'Why do you want to do that?' they don't have an answer." And if the companies themselves don't have a social media raison d'etre, it's unlikely they'll be able to make a case for existing and potential customers to participate.

A third issue is the lack of a reliable roadmap. Companies struggle with linking their CRM and social media efforts because there are few examples to model those efforts after. Even if there were, many of the successes will be behind the scenes, just as they often are with direct marketing and "regular" CRM. "Companies that are integrating CRM and social media are being quiet about it," says HP's Anderson. "I know we are."

Just as a company should focus on finding the right products for each customer, the company should focus on finding the right media and communication channels for customers, says Martha Rogers, Ph.D. "Companies shouldn't engage in "social media" just to make money on that set of channels so much as to make sure they are using all the tools in their toolbox to optimize the value of each customer, and overall customer equity."

Four steps to integrating social media and CRM
To help create a social media blueprint, Gartner has identified four steps for companies endeavoring to harness social media for CRM. The first and most important: spelling out why it matters.

Sarner likens current programs that seek to link social media and CRM to the first-generation company blogs of 1997 and 1998, which are remembered mostly for their randomness. Those entities regularly featured stock quotes and buy-now widgets on the same page; current corporate social media programs face a similar identity crisis.

"Don't just throw technology at it," Sarner cautions. "I see tags for Digg and everything else, and I can't help but think, 'There's not a customer in the world who'd be interested in this.'"

Companies need to define the goals and purpose of their social media initiatives, and how they will tie into other CRM initiatives. "If there are no metrics around something and there's no purpose to it, you're basically just playing on the Internet," Sarner says.

The second step requires companies to cede control to customers. Only by taking a step back and accepting community members' criticism can a company generate the trust that serves as a cornerstone for any social media application. "Understand that [community members] are going to say negative things about you. If you're not willing to make changes or be responsive, don't have a community," Sarner says.

Along those lines, Gartner recommends hiring a community advocate, an individual charged with monitoring the company's social media activities and soliciting community feedback. That individual should also be vested with the authority to respond and make changes as he sees fit.

Without someone minding the shop, abuses tend to multiply. HP's Anderson worries about the potential for privacy violations in CRM-focused social media projects, and stresses that the project's overseers must be clear about their intent. "If you go into this trying to tell customers why your product is the best, your social network is going to suck," he says.

A third step also hinges on company/customer interaction. Gartner's Sarner believes that smart companies will distinguish between different types of community members and reward individuals for different types of behavior. By using social reputation technologies, companies will be able to identify the quality of an individual's participation - separating what Gartner calls the creators ("I want to own this") from the contributors ("I want to be a part of this"), opportunists ("since I'm here..."), and lurkers ("I'll reap the rewards").

"I'm not saying you give anybody money for being a shill," Sarner stresses. "I'm saying that working with the real advocates will make the community stronger. The more involved you are with the community, the better off you'll be."

Finally, companies attempting to reap CRM benefits from their social media efforts must go out of their way to acquire the necessary skills to do so. What's crucial to remember: Nobody really knows how to do this just yet; there's not a right way or a wrong way. Sarner suggests that as companies become more sophisticated about social media, they'll tap psychiatrists and even anthropologists to help mine their communities for psychographic data. "There's loads of intimate information you can access. The trick is harnessing it correctly," he says.

In any event, it won't be easy. While many pundits assume that social media is cheap, Sarner estimates that setting up and maintaining an online community will cost about $500,000. "You have to deal with people, internal [issues], and technology. There's a lot of hidden costs and time associated with it," he adds. "But if you nurture a community successfully, there's a huge payoff at the end."

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