February 04th, 2013

The following is a research note written by Jim Davies, Research Director with Gartner. In it Davies draws an analogy between the behaviour and attitudes of organisations today towards Social Media and similar attitudes a decade ago towards CRM. 

At that time Gartner developed its eight building blocks of CRM which consisted of steps such as vision from the board, implementation of strategy and changes to organisational structures, processes and culture. In this article Davies subscribes to the same approach to ensure that investment in social CRM isn’t wasteful.

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"I really got the sense that a lot of companies that are doing social CRM have actually forgotten about the building blocks. They may have had a CRM strategy and metrics and done all that in the past, but now with social they have forgotten about it and instead it’s all about playing with social monitoring platforms."

"There was a real sense that there wasn’t a social strategy in place that could then help steer them in terms of what technologies they need, what metrics they should be tracking, what data they need to collect, and what analytical tools they need to buy. All of that hadn’t been thought through. It was more of a 'kids in a sweet shop’ approach. On the back of that I published a research note which was basically eight building blocks again, but applying it to social media, because I think it is such an important finding that people have forgotten about it and they are not approaching this the way that they would approach CRM – but they absolutely should be."

Applying the Eight Building Blocks of CRM to Social Media

Jim Davies, GARTNER

The increase in adoption of social media across media, high-tech, consumer goods and retail sectors has been prolific during the past few years, and is set to expand into other industries during the next three years. Organisations need to embrace this phenomenon as an integral part of their customer relationship management (CRM) strategy.

Our research points to improvements in customer and market responsiveness, product development, sales effectiveness and operational efficiency as key drivers. Success, however, requires the same due diligence in traditional CRM that Gartner has reinforced for the past decade.

CRM is difficult to get right and Gartner estimates that fewer than 10 per cent of organisations have optimised the management of their customer relationships. A decade ago, Gartner created a framework called "The Eight Building Blocks of CRM" to help organisations be more successful. This framework has stood the test of time and is still highly regarded worldwide. Updated versions of the original research have been released over the years to reflect market shifts, but no fundamental changes have been made to the core framework.

The Eight Building Blocks of CRM

Our very latest research emphasizes the additional considerations that organisations now need to factor in across each building block from a social CRM perspective. Many of the social CRM projects Gartner has studied over the past three years have been in the "pioneer" phase, where individuals experiment and break new ground, but don't measure benefits. We are now seeing a desire to move to the "settler" phase, where a more structured approach is needed to get business results. Of course, to achieve this settler status, commitment to all eight of the building blocks will be required.

Gartner defines social CRM as a business strategy that mutually benefits cloud-based communities and the business by fostering engagement while generating opportunities for sales, marketing and customer service. The key considerations within this definition that organisations need to take heed of are:
Social CRM is a sustainable strategy, not a single project, such as setting up a Facebook page or mining social media. 

• Social CRM requires an increased level of openness and a willingness to engage more with customers. 
  
• Social CRM relationships need to be mutually beneficial for them to work. 
  
• Social CRM has to have a positive financial impact on the organisation through the associated impact on sales, marketing and service.
  

Given these considerations, each of the eight building blocks needs to be refined accordingly.

1.  Social CRM Vision

A CRM vision encapsulates the very essence of a company's reason for existence, highlighting the differentiated attraction for its customers. A social CRM vision should take this customer value proposition further by embracing the shift of power associated with social CRM to one that is much more balanced.

2.  Social CRM Strategy

The CRM strategy is a blueprint for how to create and maintain a customer base that is an asset to the company. It needs to integrate with the overarching corporate strategy, and requires the segmentation of customers by attributes such as value, loyalty and satisfaction. Adding a social dimension to a CRM strategy does not technically change anything, it just expands the options available for each segment and each phase of the customer life cycle.

3.  Social Valued Customer Experience

A successful customer experience management initiative ensures that feedback is continually used to help design and refine the customer experience. When adding a social dimension, organisations need to consider how social media can be used to better set/reset expectations with customers, to positively influence the customer experience directly and to collect feedback on the customer experience and then act on it in an appropriate and timely manner.

4. Social Organisational Collaboration

Once an organisation begins to embrace external social media, new guidelines and policies for employee participation need to be created, and associated aspects (such as its governance and enforcement) embraced. With social CRM and the emphasis on having a true relationship with customers, in which they contribute through activities such as co-creation, support, lead generation and campaign feedback, these "customers" have a far more influential role to play within each department.

5.  Social CRM Processes

Customer process re-engineering to ensure each process flows down a logical path from the customer's perspective is a common investment area and a key influencer of the customer experience. When executing against a social CRM strategy, specific processes spanning sales, marketing and customer service will potentially be impacted. The key is to determine what processes are most appropriate to be driven socially, and where mass collaboration adds value, ensuring that there is an upside to the customer, as well as the business.

6.  Social CRM Information

In addition to the sheer volume of social data that can be collected from customers and prospects from social environments, the subsequent challenges associated with determining its meaning and importance are the major hurdle to tying that data to individual customers within the existing customer database. The ability to capture the comments made by an anonymous customer called "Jimbo" and then to retrospectively assign them to "Mr Jim Davies" once a linkage can be determined is a key development area. However, there are lighter-weight approaches that can provide some degree of value and should be explored; for example, looking at participants' follower numbers on Twitter to determine the importance/impact of their comments.

7.  Social CRM Technology

Most, but not all, CRM initiatives require some form of technology to enable the CRM strategy. Within the social CRM area, the marketplace is extremely fragmented, with over 100 vendors, each providing a specific functional capability. Most have annual revenue of less than $1 million and are not profitable. No one vendor can yet provide a holistic social CRM suite that can facilitate execution of socially driven sales, marketing and customer service processes. However, over the next two years we expect significant market consolidation and much tighter integration between social processes and traditional processes across sales, marketing and customer service.

8.  Social CRM Metrics

The health of any CRM strategy can only be assessed through the provision of appropriate metrics. Once social CRM is embraced, new metrics need to be applied, which are often much harder to measure. Very few organisations have measured the return on investment of their social CRM activities, but this will begin to change in 2011 in line with growing maturity.

In another article Davies identifies the fact that the social media technology landscape is very fragmented, "populated by the likes of community builders and social media monitoring firms",  with no one vendor having a full suite of tools. He states that "next year the true social CRM suites will start to emerge as acquisitions happen [and the market consolidates] and as R&D happens then [vendors] will start to get broader in their capabilities." He finishes this article by saying; 

"In the meantime, [companies] absolutely should not wait. Because there is going to be value to be had by buying SaaS-based, pay-as-you-go service for a tool that may be acquired in a year’s time or they may not want to use in year or two’s time. So they need to think about it strategically and long-term, but don’t delay investment in the software because they are incumbent and can’t do it yet. 

"It is a learning curve. If they are running vendor X for their core CRM platform and are going to wait until 2015 for that vendor to come to market with that offering then there are three years of learning that they are not going to have benefitted from. They are going to start to lose out from a competitive point of view because if all their competitors are having social activity, talking to customers socially, using it as a lead generation or marketing tool, then they are going to start slipping behind. So there is a risk of choosing a vendor now that isn’t going to be around in two years time but I think the benefits outweigh those risks."

So the message is, define clear Social Media strategies and goals and get moving quickly. Experiment and learn because, if you don't, your competitors will.