The social consumer

The traditional one-to-one relationship between companies and their customers is rapidly evolving. Consumers now have a wide variety of new technologies at their disposal, with ubiquitous access to massive amounts of information, giving them near complete transparency into every company’s products, services and pricing data. Almost three-quarters of online adults in the US read blogs, watch online videos, listen to podcasts, post to forums and write reviews. Almost a quarter of them create their own content, publishing blogs and uploading videos and audios to sites such as YouTube. And more than a third of all bloggers post their opinions about products and brands.

New publishing, collaboration and social networking platforms let consumers compare, discuss, review and comment on products and services with ease. Nearly 600 million people around the world now actively use Facebook, with the means to broadcast their thoughts and opinions far and wide. As a result, consumers are shifting their trust away from corporate marketers and brands and instead talking and listening to their fellow consumers. Their opinions about products and services are being shaped by the information they get from fellow consumers offering their experiences, thoughts and feelings over Web 2.0 collaboration technologies such as blogs, product reviews and rankings — especially when their experiences have been bad. The newly empowered ‘social consumer’ is here to stay.

If companies are to adapt and respond successfully to this new reality, they must develop a new corporate mindset that goes far beyond the traditional one-sided, product-centric, transactional thinking. Companies must now be much more transparent in their dealings with consumers, understanding that by creating an ongoing conversation with customers they can build a better, longer-lasting, and ultimately more valuable relationship with them. However, if companies are to generate and manage this more complex relationship — and capture the resulting business value — they must encourage their marketing, sales and customer service teams to collaborate in responding to social consumers, and to develop an entirely new set of capabilities and tools, commonly called social customer relationship management (CRM), to manage their response (see Figure 1).

Figure 1
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 Managing the social web requires a new corporate mind-set of collaboration, transparency and an ongoing conversation with consumersSource: Booz & Company analysis

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Driving customer value

Social CRM should be seen not as a replacement for traditional operational and analytical CRM processes and tools, but as an extension of them. Companies seeking to build new social CRM capabilities must adapt, augment and rethink their product, channel and customer strategies, as well as their attendant delivery processes, tools, people skills, incentive systems — indeed, the entire corporate culture. Social CRM is not a ‘soft’ addition to traditional CRM goals and processes; there are real costs involved in generating the required capabilities, and the return on investment (ROI) should be clearly understood and measured.

The key to a successful social CRM effort lies in extending traditional CRM strategies and processes to a company’s entire extended social network — a dynamic, constantly evolving organism that encompasses its customers and suppliers. As with every major business effort, all the processes associated with social CRM, whether they are designed to actively generate customer involvement in some way, or to react to it, should either boost the top line, protect the bottom line, or both. And the processes involved must be consistently monitored to determine their ongoing success (see Figure 2).

Figure 2
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 Social CRM involves both proactive marketing, sales and service, and reactive preemption and mitigationSource: Booz & Company analysis

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Protecting the bottom line is most typically linked to reactive CRM activities such as monitoring complaints that may emerge from the social web and managing events such as bad publicity. No company can completely anticipate or control such events; however, it is critical that every company build the capabilities needed to manage them when they occur, and to develop the ‘social web credibility’ that will be needed in times of crisis. Companies that launch such efforts after disaster strikes will face little probability of success. The recent Gulf of Mexico oil spill severely affected BP’s reputation, yet the company only made it worse through such amateur glitches as the obviously edited photos of BP’s ‘situation room’, which quickly eliminated any credibility the company might have gained in its social web.

The most successful way to grow the top line through social CRM involves generating social sales — gains in e-commerce revenues that are driven by social media, often in the form of word-of-mouth marketing. Critically, these social techniques for boosting revenue are even more dependent on credible positioning in the social web than are reactive efforts. Moreover, proactive and reactive efforts must be considered in tandem: Social sales requires social marketing to generate attention, but that attention depends on the social support needed to gain a reputation as a credible force in the social web.

Many of the results of the activities discussed above — such as social sales and social marketing campaigns — can be measured and quantified through traditional ROI analysis. Yet the highly interactive nature of social CRM will also bring with it secondary benefits that are in many cases even more significant, if much harder to measure. The goodwill gained from the increased transparency offered by social CRM, for instance, is hard to measure in isolation, but no less real.

Social CRM in the real world

How does social CRM work in the real world? The following three case studies will illustrate both the real benefits of creating relationships with social consumers and the potential costs when the power of those consumers is not handled well.

Dell boosts social sales

Thanks to such tools as price comparison engines and social networks, consumers have gained the upper hand in e-commerce, and companies are finding it harder and harder to distinguish themselves from the pack and to convert visitors to their websites into paying customers. In hopes of engaging potential buyers throughout the lead generation and buying process, computer maker Dell turned to Twitter as a new channel for pushing special promotions to its followers. In partnership with Intel, Dell devised a marketing programme called ‘Dell Swarm’ that applied the ‘letsbuyit.com’ concept to create an online promotion with a group-buy logic: The more people who join a ‘swarm’ through invitations over social networks, the lower the price for the entire swarm.

While the initial programme remains at a small scale, the results were impressive: Dell sold out the inventories allotted to the campaign, taking in more than US$6.5 m in incremental revenues. More than 200 blogs and 500 tweets applauded the programme, boosting positive views of the Dell brand significantly. Pre-qualified leads jumped 15 per cent, and 80 per cent of people participating in the campaign opted in for further communications. Clearly, such trials demonstrate that social sales can create real revenue. Nevertheless, companies embarking on such efforts must tightly integrate traditional sales and social sales channels in order to provide a seamless transaction experience all the way from the promotional tweet to online checkout, while keeping an eye on any potential cannibalization effects.

Best buy gains social support

Complex products such as computers and consumer electronics typically require a great deal of customer support, most of it done via costly call centres. At the same time, more and more consumers are using the internet as a support channel, by searching for solutions to their problems online, often generating random results. In hopes of leveraging the internet’s ‘collective intelligence’, embodied in other consumers, Best Buy created an online community forum where consumers can post questions and get answers from other consumers. Questions not answered by consumers are picked up by Best Buy employees, all 114,000 of whom have access to the system. The company also creates FAQ pages before the launch of major new products such as the iPhone, allowing consumers to get answers to questions in advance.

In 2009, Best Buy’s online community boasted 2.5 million visitors, who viewed more than 80 million messages and posted almost 80,000 times. Just 5 per cent of consumers’ questions had to be answered by Best Buy staffers; the rest were answered by the community. As a result, complaints to Best Buy were reduced by 20 per cent. And the iPhone FAQ page was viewed 84,000 times, saving untold numbers of call centre calls. Altogether, Best Buy estimates that its social media activities have saved it US$5 m.

There is no intrinsic reason that such self-help communities cannot become equally successful in industries other than consumer electronics. For any company, reducing the number of calls to call centres can lower the cost per contact by 75 per cent or more while enabling the organization to focus on more complex problems and concentrate on driving sales.

Crisis management at SeaWorld

More people now get their news from the internet than from either newspapers or radio — only TV still ranks higher. Three-quarters of consumers of online news say they get news forwarded to them through e-mail or posts on social networking sites, and more than half say that they share links to news with others via these means. The resulting speed at which news and publicity — especially when it is negative — can spread far and wide is astonishing, frequently allowing public relations crises to develop within hours and even minutes. Only by responding just as quickly can companies combat these negative impressions.

In February 2010, a professional trainer at SeaWorld was killed in front of a live audience by a killer whale. The bad publicity could have had disastrous consequences for the theme park, but SeaWorld acted fast. It tweeted about the incident almost immediately, and then acknowledged the trainer’s death on its Facebook page. Hours later, SeaWorld’s CEO posted plans to investigate the incident on the company’s blog, and left the blog open for comments. The next day, SeaWorld suspended the faux Twitter account of Shamu, another killer whale at the park, and users were redirected to the park’s main Twitter account. Meanwhile, emotional video tributes to the trainer were posted on YouTube. A rising tide of comments on Facebook advocating the closing of the theme park and freeing the whales was countered primarily by thousands of SeaWorld’s Facebook fans. At present, thanks to its rapid and sympathetic response, SeaWorld’s theme park operations are continuing normally.

Managing incidents such as this one depends greatly on developing a strategic framework for responding quickly to potential online crises. That framework should include a systematic effort to develop the processes, tools and people needed to monitor social networks constantly, ‘keeping an ear to the ground’. Finally, the use of social media to manage crises should not be an entirely reactive measure to a potential threat; instead, companies must use social networks to develop permanent relationships with their customers and other consumers.

Building capabilities

The case studies above demonstrate a common truth about all social CRM efforts. They are not primarily technology problems requiring technology-driven solutions. Instead, all social CRM activities must be driven as part of the entire corporate culture if they are to have the credibility to be effective. We recommend taking what we call the ‘MASTER’ approach to building the capabilities needed for a successful social CRM effort — monitor, assess, strategize, test, embed and review.

  • Monitor: Listen to what the social web has to say. Systematically gather insights, data and experience in order to understand your target consumer community and its dynamics, codes and unwritten rules. This is often best done by participating in the social web just like any customer would. And pay attention to competitors as well.

  • Assess and analyse: Consider carefully the results of your monitoring, and rigorously map those areas of both opportunity and threat presented by the social web, which can in turn be addressed by social CRM.

  • Strategize and structure: Develop a clear and workable social CRM value proposition, and then structure your response, including the channel or platform mix — social networks, blogs, apps, social bookmarks — as well as the tools and practices needed, along with a go-to-market road map.

  • Test: Begin by testing your strategy on a small, controllable scale in order to determine whether your initial assumptions and your set of tools and practices work — and calculate the ROI.

  • Embed: Once you have decided on a set of successful activities, put them into practice by defining their respective processes, installing the necessary social campaigning systems and tools, and determining the required roles and responsibilities, employee incentives and business targets.

  • Review: Reassess embedded activities regularly to improve, extend or suspend them, as needed. And remember that the social web is a dynamic environment, and thus be prepared to adapt with it, continuously evolving your response to it.

This framework provides the general guidelines for building a successful social CRM presence, but getting the details right is critical. At each step of the framework, specific capabilities must be acquired in three areas in particular: business functions from innovation to marketing to sales to service; organizational structures, including the people and skills needed — and an incentive structure designed to promote them — as well as a plan for developing a corporate culture that encourages thinking and working in terms of transparency and collaboration, both requirements for social CRM; and technology platforms, including social CRM-specific tools and systems, as well as the broader integration of social CRM processes into the end-to-end IT architecture. Figure 3 offers a breakdown of those specific capability requirements, both at the initial stage of the social CRM effort and in its mature phase.

Figure 3
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 Embedding social CRM into business functions, the organization as a whole, and technologySource: Booz & Company analysis

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The corporate social web

The rise of the social customer has embedded every company in a complex web of relationships among customers, consumers, tastemakers and employees. This social web contains many risks and threats — from much greater transparency into prices and customer opinions to the instant proliferation of bad news. In response, social CRM offers a whole range of new and powerful ways to build loyalty, market, sell and otherwise influence every member of that web.

Nevertheless, it is critical to remember that the social web functions according to an entirely new set of rules that are always changing, and changing fast. Understanding these new rules will be a challenge for most companies — until they succeed in embedding the necessary spirit of transparency and collaboration in their corporate culture and everyday business practices. As a guide to meeting this challenge, we offer three initial steps every company should take:

  • Start monitoring the social networks for mentions of your brand and company name. This is a critical first step in building reactive social CRM capabilities.

  • Decide whether you are ready to use social CRM as a tool for proactive communication with customers. Doing so will require a conscious change in the company’s culture.

  • Follow the MASTER framework, while forming a small team of dedicated employees who are already active in social networks so that you can leverage their know-how and networks for early trials of the system and to begin building your social reputation.

Ultimately, truly successful social CRM will require long-term thinking and investment. It is not a one-off project, but rather a major capability that will take time to build properly. If done right, however, it will generate significant financial rewards and reputational benefits.