SOCIAL CRM AND DIGITAL MARKETING COMMUNICATION IN B2B RELATIONSHIPS

Transcription

1 UNIVERSITY OF JYVÄSKYLÄ School of Business and Economics SOCIAL CRM AND DIGITAL MARKETING COMMUNICATION IN B2B RELATIONSHIPS Marketing Master s Thesis December 2011 Author: Marjo Himanen Instructor: Heikki Karjaluoto

2 JYVÄSKYLÄ UNIVERSITY SCHOOL OF BUSINESS AND ECONOMICS Author Marjo Himanen Thesis Title Social CRM and Digital Marketing Communication in B2B Relationships Major Subject Marketing Month and Year December 2011 Object of the Study Master s Thesis Number of Pages 85 + appendices Abstract The growing importance of the Internet as an everyday communication channel has transformed the marketing environment. Digital channels and the expansion of social media have produced several new tools which organizations can use for their marketing efforts. Yet, it still remains somewhat unclear how companies can utilize digital marketing communication in their customer relationship management and what it actually contains. This study investigates what meanings B2B companies give to digital marketing communication and social CRM. In particular, the study aims describing the means, moderators and outcomes of digital marketing communication in B2B relationships. In addition this study attempts to shed some light on the meanings of social CRM and its application elements. The empirical study comprises of eight interviews with managers responsible for managing key account relationships. Both the buyer side and the seller side were investigated, in order to form a coherent representation of the phenomenon. The findings of this study indicate that communication content and frequency are the means of digital marketing communication. Interestingly, the study reveals that the form of a message matters in B2B digital marketing communication as short and visual messages are more desirable for the receivers. Along with channel preferences, the importance of the right sender and receiver of messages were found to be moderators of digital marketing communication. In contrast to prior studies, the results suggest that the outcomes of digital marketing communication include value co-creation. No support was found that digital marketing would enhance trust, commitment or loyalty. The findings of the study also revealed that the elements of social CRM might have some influence on the digital marketing communication. The results suggest that online customer listening, responding, connecting and collaborating could provide inputs to the digital marketing communication process. Nevertheless, the study demonstrates that companies do not use social CRM activities at the fullest potential. Keywords Digital Marketing Communication, Social CRM, Business-to-Business relationships Place of Storage Jyväskylä University School of Business and Economics

3 FIGURES FIGURE 1 Structure of the study... 5 FIGURE 2 CRM process... 8 FIGURE 3 Traditional CRM and social CRM in business context FIGURE 4 Digital marketing FIGURE 5 The proposed research model of DMC FIGURE 6 DMC model based on the results TABLES TABLE 1 Traditional CRM vs. social CRM TABLE 2 CRM and social CRM activities of marketing TABLE 3 CRM and social CRM activities of sales TABLE 4 Social media categories TABLE 5 The case firm and its customers TABLE 6 List of interviews... 37

4 CONTENTS 1. INTRODUCTION Changes in the marketing environment Theoretical background and research questions Structure of the study SOCIAL CUSTOMER RELATIONSHIP MANAGEMENT IN B2B RELATIONSHIPS Customer relationship management (CRM) Social CRM definition Traditional CRM vs. Social CRM Customer data collection and analysis Social CRM in B2B relationships Social CRM and marketing Social CRM and sales Social CRM and digital marketing communication DIGITAL MARKETING COMMUNICATION Digital marketing communication Proposed elements of digital marketing communication Communication means Communication frequency Communication content Moderators of digital marketing communication Channel preference Interactivity Outcomes of digital marketing communication Value co-creation Trust Commitment Loyalty EMPIRICAL STUDY Case study design Data collection Data analysis RESULTS AND ANALYSIS Communication frequency Communication content Channel preference Personal communication... 47

5 5.3.2 Channels for information search Other channels of communication Interactivity Value co-creation Trust, commitment and loyalty New determinants outside the research model Form of message Sender and receiver of the message Social CRM activities Listening Responding Connecting Collaborating DMC model based on the results DISCUSSION Theoretical conclusions Managerial conclusions Validity and reliability Limitations for the study Suggestions for further research REFERENCES APPENDIX 1a: The original topic guide for sellers in Finnish APPENDIX 1b: The translated topic guide for sellers in English APPENDIX 2a: The original topic guide for customers in Finnish APPENDIX 2b: The translated topic guide for customers in English... 95

6 1. INTRODUCTION The Internet has become a significant channel for companies to communicate and maintain relationships with their customers. Development of digital channels and expansion of social media have produced several new tools which organizations can use for marketing efforts. Yet, it still remains unclear what digital marketing actually contains and how it can be used for attracting new customers and serving existing ones. 1.1 Changes in the marketing environment In the last few years, the marketing environment has changed significantly. Technology is the biggest reason for this dramatic change, where the customers have started to use power in the markets. The technology has not only transformed the practice of marketing, but also what we think about marketing. (Wymbs 2011.) The change has many reasons. First, the communication channels have changed. The use of the Internet has exploded, partly due to social networks and communities. In Finland almost half of the population that is 42% of year olds, have signed in at least one social network such as Facebook, Twitter, LinkedIn and so on. Social networks are the most popular among year olds, where 83% have signed in a social network. (Official Statistics of Finland 2010.) However, the change not only concerns social networks. The Internet has become a common source of information during a buying process. A total of 74% of the population have used the Internet for searching information about goods and services. The information is not only searched, but also shared. In fact, already 40% of Finnish population has read a blog at least once within the last three months and 42% have created content in a social network. (Official Statistics of Finland 2010.) It is not only the channels that have changed, but also the ways how we communicate. An individual can now freely communicate with other individuals or groups online. Customers have the control of what they read,

7 2 hear or watch (Weber 2009, 29-33). This has transformed the information sharing on the Internet as everyone can say his or her opinion. Thereby trust in peers, the customer like me, has increased (Greenberg 2010a, ). For marketers this has brought new challenges. Companies need to listen to their customers, engage in conversation with them, be transparent and communicate with the customers in an open and human-like way. Marketing s role has changed from being a broadcaster pushing out messages to an aggregator, who brings content together, enables collaboration and participation in communities. Marketing activities now also include building up online communities, generating leads from online environments and collaborating with customers, in order to gain customer insights and better customer understanding. (Weber 2009, 22-25). Nevertheless, the main functions have remained the same. Marketers still need to define target markets, communicate with prospects and build customer loyalty. (Weber 2009, 36.) How have these changes in the marketing environment affected businessto-business (later on B2B) companies? Li and Bernoff (2008, 101) give a simple answer: as companies do not interact with each other, it is the people in the companies who do (Li & Bernoff 2008, 101). The same communication trends are seen in the business markets. According to Forrester (Ramos & Young 2009) 91% of business buyers read blogs, watch user generated videos or participate in other social media. Already in 2009 around half (55%) of the decision-makers used social networking services and 43% created some kind of content on social media, such as blogs, videos or articles (Ramos & Young 2009). The change in the marketing environment acts as a basis for this study. It seems that the old models of marketing do not apply in this new technological era. The fundamental change in people s behavior has forced marketers to adapt and keep up with the evolution in marketing practice. However, it is still unclear what marketing in digital channels really is. This is why this research is conducted: to understand what digital marketing communication is in B2B relationships and what are the best uses of it. 1.2 Theoretical background and research questions The theoretical background of this study reflects the current marketing environment. The increasing use of digital marketing has speeded up the need for academic research in digital environments. There is no clear theory of digital marketing communication (Mulhern 2009), nor clear understanding about its impact on customer perceptions. This is why digital marketing communication acts as one of the theoretical foundations for this study. Furthermore, the use of digital channels in customer relationship management has developed a new academic research branch, social customer relationship management (later on social CRM). This new branch has gained more and more attention recently. Furthermore, Forrester predicted in 2008 that social media would be the leading

8 way for CRM strategies in the future (Karpinski 2008). The literature suggests that social CRM can, in fact, have influence on digital marketing communication (Wilson 2010). Therefore, social CRM acts as the second theoretical foundation for this research. Social CRM is a relatively new research field in the marketing arena. Writers like Paul Greenberg, Brian Solis, Dave Evans and Jake McKee introduced the term in the practitioners literature. However, there is little academic research done in the field of social CRM (Mohan, Choi & Min 2008). Research articles have examined social CRM only as a technology (Mohan et al. 2008) or as a tool (Askool & Nakata 2010; Deng, Zhang, Wang & Wu 2009). Until now the research has tried to explain what social CRM is (Acker, Gröne, Akkad, Pötscher and Yazbek 2011) and not what it is actually used for. Only the publications from Greenberg (2010a, 2010b) have attempted to explain the impacts of social CRM on customer insights. He has emphasized that the new communication channels have not only changed the way companies and customers interact, but in fact, added more sources for customer related data and customer insights (Greenberg 2010b). One element of social CRM is tight communication with customers with the help of the new technologies. As the customers are spending more time in digital environments, the firms are sensing that they need to use digital marketing to respond to customers demands (Wymbs 2011). However, many companies are uncertain which elements are essential in the digital marketing process and which digital route they should follow (Wertime & Fenwick 2008, 27). Previous studies have found out that at least frequency (DuFrene, Engelland, Lehman & Pearson 2005; Godfrey, Seiders & Voss 2011) and content could be essential parts of digital marketing communication. Chaffey (2010) argues that the different customer personas, preferences and needs are the ones which need to be considered when forming a digital channel strategy. It has also been proposed that interactivity is a component of digital marketing communication. Srinivasan, Anderson and Ponnavolu (2002) state that the level of interactivity in marketing communication can have impact on e-loyalty and therefore the interactivity used in marketing communication should be considered. Previous research has also investigated the impact of digital marketing communication on value co-creation. For instance Golik Klanac (2008) studied web site s effects on customer value. Digital marketing has also been discussed with the components of trust (Wagner, Coley and Lindemann 2011) and commitment (Huang, Cheng and Farn 2007). Previous studies have also shown that there could be a link between digital marketing communication and customer life time expectancy. Reinartz and Kumar (2003), for instance, have found out that the number of the mailing efforts of a company is positively related to profitable customer lifetime duration. Also Merisavo (2008, 37-38) claims that digital marketing communication has great potential for positive interaction with loyalty. 3

9 4 The research in the field of digital marketing communication is disjointed. Consequently, there is a need for further research within this new marketing discipline. Mulhern (2009) states that there is a need for a theoretical framework for marketing with digital media. Constantinides and Fountain (2008) call for research on how customers experience these new marketing efforts and how the new tools have an effect on customers perceptions, needs and behavior. They argue that more research is needed around the effects of the new tools on customers retention as well (Constantinides & Fountain 2008). Also Kerrigan and Graham (2010) believe that there is a need for more research in order to understand the interaction quality of seller buyer relationships in social media spaces. It is also unclear how much and to what extent customer equity can be influenced by social media, for example by YouTube campaigns (Hennig- Thurau, Malthouse, Friege, Gensler, Lobschat, Rangaswamy & Skiera 2010). Foster (2005) emphasizes the need to understand how the Internet is used as a marketing communication tool to create value for the customers. Parasuraman and Zinkhan (2002) point out that more research needs to be done from the B2B perspective within this field. The aim of this study is to investigate how companies can utilize digital marketing in their customer relationship management. This study examines the meanings the companies give to the means, moderators and outcomes of digital marketing communication. In another words, it investigates how respondents perceive the digital marketing communication they use and receive (frequency and content of messages), which elements can have an effect on it (channel preference, interactivity) and how it is perceived (does it affect value cocreation, trust, commitment, loyalty?) in customer relationship management. In addition this study examines the new marketing research field of social CRM. This study focuses on existing buyer-seller relationships and the communication in them. This research aims to fill the research gap by examining the elements of digital marketing communication in B2B context. The research questions are targeted to study the means, moderators and outcomes of the digital marketing communication as well as the meanings of social CRM. Based on the existing literature the research questions are formulated as: Research Question 1: What meanings B2B companies give to means, moderators and outcomes of digital marketing communication? Research Question 2: What meanings B2B companies give to social CRM in connection with digital marketing communication? 1.3 Structure of the study This research is divided into six chapters (Figure 1). In the first chapter the background and the motivation of this research are presented. In the second

10 5 chapter, social CRM is examined in the context of B2B relationships. In chapter 3 digital marketing communication is introduced as well as its means, moderators and outcomes. In the fourth chapter the case study design and research methodology are presented including the description of data collection and data analysis. The fifth chapter comprises the results and analysis. In chapter 6 the theoretical as well as the managerial conclusions are presented, together with limitations and further research suggestions. Figure 1 Structure of the study

11 6 2. SOCIAL CUSTOMER RELATIONSHIP MANAGEMENT IN B2B RELATIONSHIPS The goal of marketing has always been to build and leverage relationships between the company and customer (Weber 2009, 21). In the last decades there has been a convergent view in the marketing arena that co-operation in buyerseller relationships brings major competitive advantages for a company (Ulaga & Eggert 2006). This is why many researchers in recent years have studied the relationship between buyer-seller interaction and company s overall returns. Many studies have tried to show that building a long-lasting and collaborative relationship has a positive influence on firm profitability (Reinartz & Kumar 2003). In buyer-seller relationships collaborative relationships can be established through customer relationship management (CRM). CRM has been considered as a form of relationship strategy. It determines how well a firm will relate to its customers via channels, messages, products and services. (Richards & Jones 2008.) By using CRM systems, the customer data can be used for selling and marketing purposes. It has been said that CRM aligns business processes with customer strategies to build customer loyalty and increase profits over time (Rigby, Reichheld & Schefter 2002). The main focus of CRM has been in managing the relationships from the seller s perspective. However, this more top-to-down view has been challenged by the new social customer, demanding companies to collaborate and act more like peer-to-peer in customer relationships. This demand combined with the rise of the new technology has changed the look of CRM when companies are moving towards integrating social strategies and operations into current CRM systems (Mohan et al. 2008). Social media is becoming an accepted digital tool used by companies with CRM to improve customer-firm relationships (Askool & Nakata 2010). More relevant customer insights can be mined from digital environments and communities into the existing CRM systems with different techniques and tools (Greenberg 2010b). The combination of the Internet in CRM activities is not a new phenomenon. Zeng, Wen & Yen (2003) already stated that CRM and B2B e-

12 7 commerce share similarities and could be integrated to produce benefits in marketing, sales and customer service. This integration is now called social CRM. With the help of customer listening tools more customer data could be mined from the web. Social media has helped uncovering new information that was once difficult to find (Davis Kho 2008). For instance Wilson (2010) proposed that using clickstream data and web analytics more information about buyers could be inserted in CRM system. However, social CRM is not only about the tools; it is said to be a new paradigm that aims to create meaningful conversation and high value relationships between a company and its customers (Greenberg 2010b). In what follows, the fundamentals of social CRM are presented. First the concept of customer relationship management is explicated as a foundation for social CRM. Then the term social CRM is conceptualized and compared with the traditional CRM. It is also illuminated why customer data is collected and what kind of customer data is used in social CRM. Also the social CRM functions are presented in the light of traditional CRM classification: marketing and sales. Finally, it is briefly discussed how social CRM could be used in digital marketing communication. 2.1 Customer relationship management (CRM) Social CRM has its foundation in customer relationship management (CRM). Over a few decades there has been interest of using CRM in company s operations in enhancing customer value and, as a result, shareholder value. The term CRM has been around from the mid-90, but for long it was used to describe technology-based customer software solutions, such as sales force automation (SFA). (Payne & Frow 2005.) Some IT professionals define it still strictly as a technology or specialized collection of technological tools. However, others say CRM is a set of business processes that focus on managing the customer experience, while some CRM practitioners say it is a comprehensive strategy for customer retention. (Zablah, Bellenger & Johnston 2004.) The definitions vary substantially between researchers (Payne & Frow 2005). For instance, Zablah et al. (2004) found five distinct ways to define CRM: as a process, a strategy, a philosophy, a capability and a technology. Payne and Frow (2005, 168) define CRM as a strategic approach that is concerned with creating improved shareholder value through the development of appropriate relationships with key customers and customer segments. It has said to combine marketing strategies and IT to enhance opportunities to use customer data and information in building long-term relationships and cocreating value with them (Payne and Frow 2005). Recently, the Internet has been influencing more and more the CRM literature. The Internet and wireless technologies have made CRM real time and constantly operating. Goldenberg (2008, 3) states that CRM increasingly leverages the Internet to provide

13 8 seamless coordination among all customer-facing functions. These definitions imply that the core of CRM is to collect and use customer data in customer relationships, and to leverage technical tools, such as the Internet in these actions. Researchers and practitioners have stated that there are many benefits of using CRM. The most important one has said to be the benefit of getting better sales and marketing information (Goldenberg 2008, 4) that improve the ability to target the profitable customers and improve sales force efficiency (Richards & Jones 2008). Another proposed benefit is that CRM can improve productivity by customizing the products and services with the help of targeted market identification. CRM helps also to enhance customer care by individualized marketing messages and improving the customer service efficiency. (Goldenberg 2008, 4; Richards and Jones 2008.) As a process, CRM includes a knowledge management process as well as an interaction management process (Figure 2). Knowledge management is an organizational process that is concerned with the creation, storage, retrieval, and application of knowledge. There are three micro processes: data collection, intelligence generation and intelligence dissemination. Data collection focuses on capturing information about the customer and markets. Intelligence generation tries to convert data that has been compiled into operational intelligence. Last the intelligence needs to be disseminated throughout the company. (Zablah et al ) The knowledge management process is highly dependent on the people using it. In addition to the tools which need to be in place for collecting, generating and disseminating knowledge, the organizational members have an extensive influence on the process (Zablah et al. 2004). Whether the process is efficient or not, depends on the level employees use the systems. Figure 2 CRM process (partly adapted from Zablah et al. 2004)

14 9 The interaction management process leverages this available intelligence to build and maintain customer relationships. The relationships consist of exchange episodes where the buyer and seller engage in. These episodes can include the exchanges of products and services for money, which is defined as core benefits exchange. An episode can also include information exchange as planned (direct mail, a newsletter) or unplanned communications ( answer). In relationship management the social exchange is often occurred in meetings such as business lunches. (Zablah et al. 2004) These above mentioned exchanges reflect the content of the interactions between a buyer and a seller in CRM process. Although CRM is not merely technology, it utilizes information technology and it unites the new marketing thinking with new technology to gain and maintain long-lasting relationships. CRM is ultimately about two-way communication, but which the Internet has improved substantially. (Payne & Frow 2004). However, the Internet has brought also challenges when customers have started to use multiple channels to communicate with the firm. This has led to development of channel management and multichannel integration (Payne & Frow 2004) and lately social CRM. 2.2 Social CRM definition As previously mentioned, technological change has transformed our ways to communicate. Old CRM models have been criticized to be too technology oriented and have paid only a little attention to the people using them. Relatively little is known how CRM affects the relationship between an employee and a customer. However, the new form of CRM, social CRM, has the potential to focus on the people and their relationships. (Askool & Nakata 2010.) The focus has now changed on socializing the old infrastructure of CRM. This means that the focus will be in creating an infrastructure that recognizes the value and input of customers, includes the systems required to connect with them and contains new feedback loops. Social CRM also contains a shift from managing customers to listening and engaging with them. Hence, social CRM includes human interaction and conversations, enabled through technology platforms, providing experience for the customers. (Solis 2011, ) Greenberg (2010a, 34) defines social CRM as: a philosophy and a business strategy, supported by a technology platform, business rules, processes, and social characteristics, designed to engage the customer in a collaborative conversation in order to provide mutually beneficial value in trusted and transparent business environment. It s the company s response to the customer s ownership of the conversation.

15 10 Greenberg (2010a, 34) states that the customers now own the conversations. This fundamental change in customer behavior has forced companies to adapt social CRM strategies. Customers are already collaborating, sharing reviews, trusting peers in those reviews, sharing information and seeking transparency. Social CRM aims to engage the company in these actions, to create meaningful conversations and valuable relationships with customers. (Askool & Nakata 2010.) Social CRM is not a replacement for CRM, it is just an extension of it (Acker et al. 2011; Evans & McKee 2010, 235; Greenberg 2010b; Leary 2008;). Leary (2008) points out that it is easy to get lost in the excitement of the new tools of social media. However, social CRM works best if there is a solid existing CRM foundation, such as a customer database, efficient management of customer information, keeping track of events, management of sales and marketing processes (Leary 2008). The importance of CRM groundwork should not be underestimated and previously presented knowledge and interactions processes should be used in social CRM as well. The fundamental goal of any marketing activity is to increase sales. This is also the main purpose of social CRM. Depending on the specific needs of a company, the sub goals can be lead generation, new channel creation or testing ideas. Also brand equity can be enhanced when using social CRM to improve awareness or creating thought leadership position. (Gillin & Schwartzman 2011, 145.) In social CRM, companies must have a centralized system, where the online conversations will link to the existing customer information, helping the employees to continue the dialogue with the customer. By using social CRM, the customers do not have to tell all details about themselves. A company can utilize the information available in social networks or online environments. (Soininen, Leponiemi & Wasenius 2010, ) Social CRM application can be layered on the structured processes of existing CRM to help employees to better leverage social networks, internal and external data with the existing sales and marketing content (Mohan et al. 2008). This means that traditional CRM systems are accompanied with the new social CRM systems. Next the differences between these two are discussed. 2.3 Traditional CRM vs. Social CRM Although traditional CRM and social CRM are usually utilized together, there are some differences between them. The main difference is that traditional CRM emphasizes automation and software whereas social CRM emphasizes the conversation and the interaction with the customer. It has been said that with social CRM the relationship returns to its origin and take a more human form. (Soininen et al. 2010, 171). Figure 3 presents the social CRM process against the traditional one. The traditional CRM focuses on the operations and sales in the

16 11 customer relationship process using marketing and traditional media. It uses only the customer specific information that the customer gives or what an organization already has (purchase records etc.). (Evans & McKee 2010, 237.) Figure 3 Traditional CRM and social CRM in business context (partly adapted from Evans & McKee 2010, 237) Social CRM is, on the contrary, a collaborative process. It facilitates customerdriven innovations internally as well as externally using conversations held by the customers themselves. (Evans & McKee 2010, 237.) Social CRM uses the information from the social web, converts it through social analytics into customer knowledge and uses it in developing business processes. This way the information can be tied together with the business processes allowing the social web do part of the job (Evans & McKee 2010, 237). The underlying principles of social CRM are different than its predecessor. The main differences are illustrated in table 1. Where CRM is aimed at customer management, social CRM is aimed at customer engagement. A company no more manages the relationship with the customer, it only enables customers to collaborate with the company. (Greenberg 2010a, ) Social CRM is more related to people and conversations than traditional CRM (Leary 2008). In the interaction with the customer, the authenticity and transparency are important determinants (Greenberg 2010a, 35-36) as well as the content of the messages (Leary 2008). The social media tools are integrated into the customer facing actions, such as wikis, blogs, networks and communities (Greenberg 2010a, 35-36). The underlying consequence is that in social CRM the company belongs to customers ecosystem. The customer is not seen as a target, but actually as a source of all company actions. This peer-to-peer thinking labels all functions in the company, such as marketing and sales. The marketing is no more about pushing the messages to the customers, it is more related to asking questions what the customer actually needs. By observing the conversations and engaging in customers activities and discussions, more relevant data can be collected to support the business processes. (Greenberg 2010a, ) Collecting the data

17 12 and listening what the customer actually needs is the central aim of social CRM. Next the means to accomplish this aim are clarified. Table 1 Traditional CRM vs. social CRM (Leary 2008; Greenberg 2010a, 36-37) Traditional CRM Social CRM Data-driven Content-driven Process-centric Operationally focused Customer-facing features as separate marketing, sales and support departments Tools are associated with automating functions Encourages friendly, but institutional relationship with customers CRM belongs to customer-focused corporate business ecosystem Marketing focuses on processes that send targeted, highly specific corporate message to customer Company manages the relationship with the customer Company is managing customers from top to down view Conversation-centric People/Community focused Customer-facing features fully integrated into an enterprise value chain Integrates social media tools into services, wikis, blogs, networks and communities Encourages authenticity and transparency in customer interactions social CRM belongs to customer ecosystem Marketing is front line for creating conversation with customer, engaging customer in activity and discussion and observing conversations Customer collaborates with the company Relationships more peer-to-peer 2.4 Customer data collection and analysis Customer data can be collected from many sources with different techniques. The customer conversations, for instance, can be mined, and the conversations and people behind them, can be pulled to the customer database. This context related information and the contacts can be integrated with the existing CRM data. (Evans & McKee 2010, 239.) The web offers a lot of customer touch points where the customer-generated data can be collected and mined for the CRM. Ahuja and Medury (2011), for instance, investigated the opportunity of extracting consumer-related information from the comment posts in response to a corporate blog. A company can archive these posts or the reactions to the blogs for further use (Ahuja & Medury 2011). Greenberg (2010b) points out that CRM was long misnamed as a source for 360 degree view of the customer. It contained sales, marketing and customer service transaction data of a single customer in the specific company. It actually had little or no connection to the real customer insight. Somewhere along the way the real conversations with the customer were replaced by customer insights mined from the databases. (Greenberg 2010b.) However, just by studying customer records, the true customer insight cannot be obtained. This is why the new listening tools help companies to tap the real customer insights, with sentiment analysis and other listening tools.

18 The real customer insights can be generated by combining the traditional data for instance from surveys, call centers or s to social insights gathered from the web (Wollan, Smith and Zhou 2011, 102). Listening tools help a company to tap information from many sources ranging from social networks (Facebook, LinkedIn), to discussion forums, communities around special interest or other knowledge databases (Greenberg 2010b). By combining the traditional and social information, a more plausible picture of the customer behavior and insights can be produced. Behavioral data for instance can be formed from the purchase records, web site visit or click streams, but the contextual data can be mined from the web in form of feedbacks or opinions. Combining these two can reveal business shortcomings or opportunities. (Wollan et al. 2011, ) There are at least five components for customer insights: customer data, sentiment analysis, profiles, customer experience maps and social media monitoring. Customer data, for instance, consists of purchase records, visits to sites or responses to marketing campaigns, information from personal profiles, and data from discussions or blogs. (Greenberg 2010b.) Sentiment analysis means identifying the overall attitude, either positive, negative or neutral, in a given text piece. This means that company can mine sentiments from the opinion rich sites, such as online review sites or blogs. (Ahuja & Medury 2011.) The sentiment analysis usually measures how positive or negative the discussion around the company is. If the discussion or sentiment reaches a certain level, an alert can be trigged in order to take some action. (Greenberg 2010b.) However, the sentiment of a single comment can also be saved to CRM system connected with the customer profile. Customer experience mapping means examining customer interactions at multiple touch points. This means that the expectations of interactions are mapped, as well as the results of the interaction and actual weight on the results. Customer experience mapping gives information about what the customers actually think when they are acting with the company. (Greenberg 2010b.) With social media monitoring the hot topics, influencers or other trends can be tracked from the web. (Greenberg 2010b.) Wollan et al. (2011, 76) points out that investing in such monitoring can be a waste of money for instance in B2B markets, where the sales are usually done offline. In business markets, the companies with a narrow customer database, few competitors and high switching costs, could outsource this kind of monitoring and analysis (Wollan et al. 2011, 76). In this case social media monitoring would not have to be part of the essential knowhow, but as an additional source for customer insights. With the help of customer data and insights the organizations can formulate better responses that are suited with the customer information or develop appropriate targeting strategies based on the data (Ahuja & Medury 2011). Not only targeting, but also personalization can be designed on the basis of the customer insights. Customer data can be used for instance in personalizing the web content to meet the customer preferences and needs. 13

19 14 With data mining and collaborative filtering the business opportunities can be maximized, when the right content is presented to the right customers at right time. More and more the customer profiles are combined with real time data such as clickstream to produce context-driven personalization. (Ho, Bodoff & Tam 2011.) How the customer data can be used in marketing and sales, is discussed more detailed in the next chapter. 2.5 Social CRM in B2B relationships In this chapter, the customer facing actions in the context of social CRM are discussed in more detailed. There have traditionally been three separate entities in CRM: marketing, sales and customer service. Greenberg (2010a, 283) points out that today sales and marketing are closer to each other. Although the fine lines of marketing, sales and customer service have blurred in online environments. In the business world sales and marketing still remain two separate fields, where sales focuses on getting a customer to purchase and marketing concentrates on getting the attention of a prospective customer. However, these two teams must work closely together in order to achieve the goals. (Greenberg 2010a, 283.) In this chapter, only the two parts of social CRM are presented: marketing and sales Social CRM and marketing B2B marketing differs from what we know as consumer marketing. First, the markets, customers and products are different than in consumer markets. Purchase decision making in B2B markets is more complex, includes more people and various issues can influence the purchase decisions. (De Pelsmacker et al. 2007, 533.) When designing marketing for B2B companies, the whole decision or purchase unit must be taken into consideration. Marketing communication needs to be targeted to each individual of the unit, considering their personal needs while integrating it with other marketing communication activities (De Pelsmacker et al. 2007, 549). The most used tools in B2B marketing communications are personal selling, customer relationship marketing, trade shows and public relations (Karjaluoto 2010, 22). Other forms of marketing are exhibitions, telemarketing, direct mailing, catalogues and technical documentation (De Pelsmacker et al. 2007, 546). With the new technology companies can improve their marketing performance by reducing their marketing costs and using digital channels more efficiently (Merisavo 2008,6). The use of CRM in B2B marketing has many advantages. By using the customer information, the communication can be directed to the right people, who might be the possible prospects. CRM helps the company not to overcommunicate and to tailor the messages to fit the customers needs. (Dyché 2002, 24.) CRM can also be used as a resource in all marketing activities. In cross-selling and up-selling, for instance, the importance is in understanding the

20 15 customers business and which product would increase the customer s profitability (Dyché 2002, 31). The information for the possible new deals can be mined from the CRM system using purchase data and other customer related information. CRM can be used also for the behavior prediction. This means that using data mining and modeling techniques it is determined what the customers are likely to do in the future. (Dyché 2002, 33.) The channel optimization can be done using CRM technologies. It is important to understand through which channels customers want to interact with the company. (Dyché 2002, 35.) In B2B relationships, taking care of customers typically happens in face-to-face settings (De Pelsmacker et al. 2007, 535;549.), but digital channels have facilitated the everyday interactions. It is still, however, important to remember that the customer does not necessarily want to use the channels the company wants to use. The information from CRM analysis can help to determinate the right channels as well as personalize the messages. Personalization of the marketing communication means tailoring the messages to a particular customer or customer segment (Dyché 2002, 37.) Cross-selling, upselling, behavior prediction and personalization have been the marketing activities in the traditional CRM era. These activities have not vanished, marketers have just nowadays new activities along with the old ones. The social CRM activities are, in fact, just a fusion of the old activities (Evans & McKee 2010, 235). Firstly, data collection around a specific customer and secondly, the analysis and projection of the next action with the regard to that customer. For instance listening to the customers online is providing customer insights and data from various customer touch points (Greenberg 2010b). That means collecting raw inputs from individual profiles, visits to the web sites, time spend on the sites or response to marketing campaigns. Listening means also organizing conversational data such as data gathered from discussions or blogs. This also requires quantifying conversational measures such as volume or sentiment. (Evans & McKee 2010, 235; Greenberg 2010b.) Listening to the customers online helps the old CRM activities of crossselling, upselling, channel optimization and personalization by providing deeper customer insights. Table 2 CRM and social CRM activities of marketing (partly adapted from Dyché 2002, 24-37; Evans & McKee 2010, 235) Business function CRM activities additional social CRM activities Cross-selling and upselling Listening: data collection from web data analysis Behavior prediction develop marketing insights from the data Marketing Channel optimization Personalization Responding: listening understanding responding asking questions acting

21 16 Responding means responding to the need and wishes of the customers. The customers want to receive information and news they really care about (Weber 2007, 12). To know what the customer wants, the whole participative process needs to be managed: listening, understanding, responding, asking questions and acting (Evans & McKee 2010, 235). The participative process needs an active dialogue with the customers, done both by marketers as well as the salespeople. Marketing s role has moved to managing the first line conversations with the customer. This means that marketing provides the customer extra knowledge to engage them into conversations. (Greenberg 2010a, 311; 315; 320.) The second line conversations are done by the salespeople Social CRM and sales In B2B relationships it is more often the salesperson that interacts with the customer the most. Personal selling is the most important tool in B2B environment, combined with the technical documentation the salesperson has as a support. (De Pelsmacker et al. 2007, 543.) Salespeople have traditionally been responsible for managing leads up in the sales funnel. However, the use of the Internet as a primary information search tool in the buying process has shifted the role more and more to marketing. (Gillin & Schwartzman 2011, 160.) However, lead generation still is seen as part of the sales departments job although marketing and sales are both responsible for the listening and identifying the prospective customers. Leads can be generated by participating in expert discussions, without trying to sell the solutions or products (Greenberg 2010a, ). By listening, following and monitoring conversations a salesperson can add content value to the discussions and by staying visible to the group members, the first contact taking requires less persuasion. Salespeople can also participate into conversation by writing blogs, creating videos, twitter streams or communities, where they can bring forth their expertise. (Greenberg 2010a, ) Connecting as a social CRM activity means identifying the influencers on the web and linking them with the listening data (Evans & McKee 2010, 235). This means searching for the information form profiles and networks on the Internet (Greenberg 2010b). This data is combined with the data from CRM, which salespeople use for managing their pipeline, monitor their accounts, track opportunities and keep their contact list in shape. This activity was previously called sales force automation (SFA), but is nowadays part of CRM activities. (Dyché 2002, ) This sales-focused CRM system can help salespeople to focus on high revenue and high profit customers in increasing sales. At the same time, the activity with low revenue and low profit customers can be reduced. (Raman, Wittmann & Rauseo 2006.) Responding is a part of salespeople s activities as well. Listening to customers, understanding and asking questions are part of the salespeople s job, because the customers are no longer expected to be sold to, but they are expecting to be partnered with (Greenberg 2010a, 286). This is a major change in the sales process, where the customer needs to be taken into the company s

22 17 processes as an active actor. This is also an advantage, since potential for a sale increases in collaborative environment, where the salespeople get deeper customer insight (Greenberg 2010a, 306; 309). Table 3 CRM and social CRM activities of sales (partly adapted from Dyché 2002, 24-37; Evans & McKee 2010, 235) Business function CRM activities additional social CRM activities Responding: Listening Lead generation Understanding Responding Asking questions Acting Sales Sales force automation Knowledge management Connecting: Identify specific influencers Link more information about them to listening and business data Collaborating: Tap the ideas of influencers and suggestions of customers Manage conversations By collaborating, the salespeople can tap the ideas of the customers and get important suggestions about how to improve the products. Collaborating is the sales departments mean of managing the conversations with the customers. (Evans & McKee 2010, 235.) When they are managing the conversations, they are providing information. The knowledge management is a vital part of salespeople s work, because the customer needs information to support their purchase decision. There are various information that a sales representative can use during a sales process, such as sales presentation slides, expense report formats, industry and competitor data, trade show material or digitized videos. (Dyché 2002, ) The sources of information are actually provided by the sales and marketing together. Particularly at the information search stage, these two parts are needed to help the customer to make the decisions. Traditionally, the salesperson has been in the key role in giving the information. (De Pelsmacker et al. 2007, 539.) Salespeople are providing the information in everyday communications, but they are also vital channels for distributing the impersonal marketing material Social CRM and digital marketing communication As illustrated in the previous chapters, social CRM can help designing and implementing marketing or sales activities. The real advantage comes when the social CRM data can be used immediately for instance in the marketing or sales activities. This can be done when the marketing efforts are in digital form. The content can be changed quickly or shared rapidly according to the need for that specific situation (Mulhern 2009).

23 In this study, digital marketing communication is perceived as a mixture of marketing and sales efforts. Although marketing department designs marketing campaigns or sales material, in B2B relationships it is usually salespeople that channel the communication to a right place (De Pelsmacker et al. 2007, 543). This is why digital marketing communication can be sent by the salespeople as personal communication or by marketing department as impersonal communication. Social CRM and customer listening capabilities can help in focusing the marketing efforts at the right place. Social analytics, web site analytics and other measurement activities can direct marketer s attention to the right objects. When this information is combined with available CRM data, the customerfocused decisions can be improved (Wollen et al. 2011, 102). For instance, if a customer is browsing through the company s web site, he/she leaves traces where he/she has visited or which links he/she has clicked. With web site analytics, the clickstream data can be analyzed and collected to illustrate which pages of the web sites are the most appealing to the visitor (Wilson 2010). This already gives valuable information for the marketing and sales department to identify the important sites for the specific customer. The clickstream data can also be used for evaluating how well the web site is performing and what needs to be changed in determining the content or the lay out (Wilson 2010). There are many ways of personalizing web site content to match the visitors wishes. For instance, web site morphing matches the cognitive style of the web site visitor to web site content. It means that a web site can detect visitor s cognitive style from the early clicks and morphs its look and style to visitor s style. (Urban, Hauser & Liberali 2009.) Much easier web site personalization is when the customer data is already known. The most cited example for this regards is Amazon.com. It uses a recommendation algorithm that can analyze customer data and preferences, according to their purchase behavior. It also gives recommendation for further purchases base on the customer profile information. (Mulhern 2009.) Optimizing web content to match customers needs is not the only benefit of web site analytics. With the cookie data or log-in information of a closed community, the customer browsing through the site can be identified. By linking the identity data to the web analytics the company can have a complete view of the web site visits of that specific customer over time. If this data is connected with the CRM system, it can give salespeople and marketing the information about which products and services are the most relevant to the customer. This naturally improves cross-selling and upselling activities of the company. (Wilson 2010.) As presented in this chapter digital marketing communication can be changed according to the wishes of the customers. In addition, social CRM and web site analytics give valuable information for the salespeople and marketing to improve their performance. However, web analytics cannot always give comprehensive understanding what the customer needs. This is why in this study digital marketing communication is viewed in the eyes of the customer as 18

24 well as the salespeople. In the subsequent section, the definitions and proposed elements of digital marketing communication are explained more detailed. 19

25 20 3. DIGITAL MARKETING COMMUNICATION Social CRM literature underlines the importance of collaborative conversation in the buyer-seller relationships supported by a technological platform such as the Internet or mobile phone (Greenberg 2010a, 34). Therefore in this chapter one element of social CRM, digital marketing communication, is described in more detailed. First, the digital marketing communication concept is defined and clarified. Then the proposed research model of digital marketing communication is described briefly. Finally each of the proposed elements of digital marketing communication is presented shortly. 3.1 Digital marketing communication Digital marketing is used for describing the marketing activities and content in digital form, e.g. on the Internet. Digital Marketing Institute has defined digital marketing as the use of digital technologies to create an integrated, targeted and measurable communication which helps to acquire and retain customers while building deeper relationships with them (Smith, 2007). Similar definition is being used by Merisavo (2008, 20) as he defines digital marketing communication as communication and interaction between a company or brand and its customers using digital channels (e.g. the Internet, , mobile phones, and digital TV) and information technology. Besides the digital channels, the definitions usually emphasize the two-way, personalized dialogue with each customer (Wertime & Fenwick 2008, 30). Digital marketing communication (later denoted as DMC) is a close term for e-marketing that is used to describe the real-time dialogue mediated by information technology (Coviello, Brodie, Brookes & Palmer 2003) Also the terms like interactive marketing, and one-to-one marketing, are close to digital marketing definition (Merisavo 2008, 6). Wymbs (2011) say that, in fact, these terms are included in digital marketing. However, he points out that marketing is increasingly using other digital forms as well, not just the Internet

26 21 solely as a technology. This is why the term digital marketing is better than the previous concepts such as e-marketing or Internet Marketing. (Wymbs 2011.) There are two distinct things defining DMC. The first one is the channel used in DMC, which is purely in digital form. This means that digital marketing does not exclude channels outside the Internet, but take into account also other means and tools, by which digital marketing communication can be transmitted. (Karjaluoto 2010, 13.) This means that all digital channels that are in digital form, can be used as communication tools for DMC. The main driver of digital marketing is the business returns of gaining and maintaining customers. It is not the technology that enables digital marketing. (Wymbs 2011.) This is the second defining element of DMC. Digital marketing is referred to the personalized and participatory media that is used for communicating with the customers. The customers are, in fact, creators and contributors of the marketing communication, not just passive targets. (Wertime & Fenwick 2008, ) Figure 4 Digital marketing (partly adapted from Wymbs 2011) Digital marketing can be understood as a bridge bringing the customer touch points and firm s conversation interfaces together (Figure 4). The customer touch points are for example the social networks, search, mobile applications, e- commerce and . Firms conversation interfaces can be for instance digital advertising, , channel integration, search engine optimization and content development. Digital marketing can provide through these touch points and interfaces the relevant content to the customer when it is needed. (Wymbs 2011.) Digital marketing is therefore a mix of customer perspectives as well as firm perspectives.

27 Proposed elements of digital marketing communication Communication channels are essential part of DMC. What else belongs to the means, moderators or outcomes of DMC? Many companies are uncertain which elements are essential in the digital marketing process and which digital route they should follow (Wertime & Fenwick 2008, 27). The following research model is proposed to illustrate the DMC process supported by social CRM (Figure 5). The research model is partly adapted from a study of Merisavo (2008, 7) on the interaction between digital marketing communication and customer loyalty. The model is completed with contemporary research findings from the marketing research on value co-creation (Vargo & Lusch 2008; Vargo 2009; Grönroos 2011; Ballantyne & Varey 2008) and trust (Morgan & Hunt 1994; Pavlou & Gefen 2003). The elements of social CRM were added to the model, because it has been proposed that they give significant inputs to DMC (Wollen et al. 2011, 102; Wilson 2010). Figure 5 The proposed research model of DMC (partly adapted from Merisavo 2008, 7; Evans & McKee 2010, 235) The research model of DMC has three parts: communication means, its moderators and the outcomes of the communication. To the means, by which the marketing is implemented, the model includes communication frequency and communication content. To the factors that could have an influence on the digital marketing include channel preference and interactivity. Finally, it is proposed that the outcomes of DMC are value co-creation, trust, commitment and loyalty. Next these elements are presented more detailed.