You steer but I ll shift gears!

Transcription

1 Strategy Stephanie Felgentreff, Jutta Funk Social Media You steer but I ll shift gears! Measuring the success of social media activities The implementation of social media as a communication channel requires investments and confronts companies with the challenge of finding a way to track the success generated by social media. The balanced scorecard provides a holistic method for measuring this success. 30 Detecon Management Report 2 / 2012

2 You steer but I ll shift gears! C ustomers today are better informed and consequently more selective when making their buying decisions. From the companies viewpoint, customers buying and consumption behavior is becoming more complex and less predictable. The changes in consumer behavior have been driven above all by Generation Y or the digital natives (people born between about 1980 and 1990). This generation is characterized by the way its members make use of Web 2.0 and its multitude of interaction opportunities such as , text messages, instant messaging, and social networks without a second thought. They communicate via various media, independently of the mobile end device. This gives rise to synchronous and asynchronous communication; life online merges into and becomes indistinguishable from life offline. The prerequisites for the amalgamation of online and offline worlds are the declining costs for the use of the Internet, the spread of broadband connections and the mobile Internet, the development of hardware components and mobile end devices. The permanent availability of information makes it possible to enjoy constant access to any required data, faster development of individual purchase interests, and the selection of the most flexible provider. Furthermore: customers have the opportunity to communicate with companies as well as with one another easily and quickly. In addition they play an active role in the design of the products and services they use. Customers achieve a new level of autonomy beyond what has been possible in the past. In demanddriven markets, they are consequently able to make special demands for products and services. Social media as a potential success factor for customer relationship management One possibility for better positioning of companies is the combination of social media and CRM (customer relationship management), also known as social CRM. Social CRM is an enhancement of traditional CRM and opens the door for customers to take an active role in shaping the way customers and companies communicate with one another, to network with other customers, and to appraise online the company s performance. In addition to that, the linking of social media and CRM also enables companies to interact with their customers, to gather customer knowledge, to customize customer relationships, and, to satisfy the demands of customers. This usually goes beyond the traditional understanding of customer-centric corporate management. Previously, the emphasis was on the establishment and care of individual customer relationships on the basis of customer-related information from direct communication. Accepting interaction and collaboration in social media, companies surrender control of information to the customers. In return they get access to complex networks of customer and relationships. These networks allow companies to gain information about the attitudes and preferences of their customers. Based on this knowledge, companies can establish customer relationships of sustainable value for the generation of revenues and the gain of a competitive edge. As a result, more and more companies become active in social media and use these platforms to develope valuable customer relationships. According to a study, 1 65% of the Fortune 100 companies worldwide have a Twitter account, 54% maintain a Facebook fan page, 50% operate a YouTube channel, and 33% write company blogs. This collaborative behavior pays off, as determined by another recent study 2 in which about 3,200 executives were surveyed. By using social media for customercentric activities, 63% of the companies were able to gain marketing profits with respect to awareness and loyalty, 50% claimed an increase in customer satisfaction, and 45% were able to reduce their marketing expenses. Here are two concrete best practices examples. Dell realized a sales volume of USD 6.5 million in two years by selling products on the social media platform Twitter. 3 BlendTec presents all of its products on You- 1 Cf. Burson-Marsteller (2010): The Global Social Media Check-up: Insights from the Burson-Marsteller Evidence-Based Communications Group, Burson- Marsteller. 2 Chappuis, B., Gaffey, B. und Parvizi, P. (2011): Are your customers becoming digital junkies? Consumer behavior is shifting rapidly as more people use digital devices and platforms intensively., in: McKinsey Quarterly 2011, Jg Cf. Guglielmo, Connie (2009). Dell Rings Up $6.5 Million in Sales Using Twitter. 31 Detecon Management Report 2 / 2012

3 Strategy Tube, and sales have increased strongly because of a social media campaign (700% according to the CEO). 4 These figures clearly indicate that the use of social media has enormous potential for success of customer relationship management. Experts in a Detecon study 5 state that the road to social media is a rewarding one: by providing suitable service content such as product information and application support companies can relieve the burdens on their resources. In addition to that customer feedback can be used to enhance product and service. Companies must justify their investments in social media The investments made in social CRM are also strong evidence of the significance of this subject for companies. But these investments need to be justified and methods to identify success or failure must be defined. Daily practice reveals that this is one of the greatest challenges in the realization of a social CRM strategy. Detecon recommends the use of a balanced scorecard for social CRM to master this challenge. The balanced scorecard is a holistic model for depiction of company success. It combines quantitative with qualitative indicators, creating an ideal approach for measuring the success of social CRM. In the social CRM balanced scorecard as shown in figure 1, the classic perspectives finance, customers, processes, and organization are supplemented by the perspectives IT and social media. The IT perspective represents the technical components in CRM, serving as the enabler of the defined strategy. The social media perspective, on the other hand, encloses the media component. Its focus is on the interaction and collaboration with the customers, so it is closely linked to the customer perspective. The customer perspective is also ofimportant, and serves as the central hub for all customer-centric activities. In addition, the employer and organization perspective is substantial because social CRM makes demands on the organizational structure and corporate culture. The classic processes perspective centers around the processes in the areas marketing, sales, and service. The finance perspective, just as in the classic balanced scorecard, reflects the relationship to shareholders. 4 Cf. Briggs, Christian (2009). BlendTec Will It Blend? Viral Video Case Study. 5 Cf. Penkert et al (2010): Customer Service of the Future. Greater Customer Autonomy Through Social Media and Self-Service. Figure 1: s of the Social CRM Balanced Scorecard Finance How do we want to appear to our shareholders? Customer How do we want to appear to our customers? Vision & Strategy Process How do we want to design our marketing, sales, and service processes so that we are successful? Social Media How can we improve through interaction and collaboration in social media? Source: Detecon Employees and Organization How can we exploit change and growth through our internal organization and our employees? IT How do we need to design our IT landscape so that we have optimal support of processes and our employees? 32 Detecon Management Report 2 / 2012

4 You steer but I ll shift gears! To sum up, the social CRM balanced scorecard is a tool which reveals the success of social CRM. This is the basis for discerning the strengths and weaknesses of the social CRM strategy and the derivation of scenarios for action. A balanced scorecard for the company s specific situation creates conditions for management and control As the social CRM balanced scorecard is derived from and therefore closely tied to corporate strategy, the tool must be adapted to the particular needs of the specific company. The f ollowing procedure is proposed as a concept for the development of a social CRM balanced scorecard for a company which will make the success of the social CRM measurable. To start with, the corporate vision and strategy is applied to the perspectives so that strategic goals can be derived in the next step. These goals must be backed up with measurable criteria and measures and, finally, monitored. Derivation and definition of social CRM goals The first step in the preparation and implementation of a balanced scorecard for social CRM is the derivation of the social CRM goals from the corporate objectives and synchronization of the goals with the corporate strategy and vision. In the course of Detecon s survey of industry experts, it was confirmed that the embedding of the social CRM goals in the companies target systems is regarded as a success factor and differentiation feature for the future. However, this has not been universally accomplished. There is a lack of clarity with respect to the question of what goals companies are pursuing with their social CRM and what variables influence the companies success. Before the goals for social CRM are defined, companies must answer the following questions: Is the target group being addressed active in social media and, if so, in which media? If a company is planning to implement social CRM in its organization, it is only sensible to consider beforehand whether the target group itself actively participates in social media. If the answer to this question is No, it would be advisable to rethink the general involvement in social media. But if the answer is Yes, the social platforms where the target group interacts must be identified. Networks are oriented to specific target groups and even the areas of people s lives. There must be an analysis to determine what networks are appropriate for the company s target group and the objective of the interaction. What do people say about the company in social media? What is the current status of social media activities? An important step during deliberations on social CRM and the integration of social CRM goals in the company s target system is the determination of what activities are already being conducted in social media or have been conducted in the past. These activities are analyzed and assessed. They represent the current status. This starting point is the basis for more extensive work. Moreover, it is enlightening to assess what is being said about the company in the Internet. This will indicate the areas where there is room for improvement and the areas where social media activities are perceived to be successful. The specific steering of customer expectations is a means for raising the level of customer satisfaction and with it customer loyalty. Is the corporate culture prepared for social CRM? The evaluation of the Detecon interviews with experts showed that the corporate culture and the organizational structure of the company play a pivotal role in the success of social CRM. Social CRM can be implemented successfully and credibly only if the organizational structure is oriented to interaction with customers. Thought must be given to issues related to culture and specific to the organization in addition to the linking of corporate goals with social CRM goals. If the communication and interaction with customers are to be characterized by openness and respect, these values must also be lived in the company. Furthermore, social CRM makes new demands on employees and their skills. These points represent fundamental issues which must be clarified before social CRM goals can be defined. Once they have been clarified, the social CRM goals can be derived from the corporate strategy. Breaking down the corporate strategy into the various perspectives is the groundwork for a holistic assessment. Showing cause and effect relationships Each of the perspectives is considered in terms of the question, What is supposed to be achieved through social CRM? as part of the development of relationships between corporate strategy/ goals and social CRM goals. At this time, the goal definition must not be impaired by the current possibilities for measuring success. 33 Detecon Management Report 2 / 2012

5 Strategy s and goals are mutually dependent on each other. The challenge in this respect is to define the goals in such a way that they do not contradict one another. The goal of market analysis in real time (social media perspective), for instance, is mutually dependent on the goals acceleration of the processes (processes perspective) and more in-depth data analysis (IT perspective). These mutual dependencies and cause and effect relationships are depicted with the aid of a strategy map showing the relationships across departmental and perspective boundaries. This cross-over observation is important for developing and understanding of the relationships beyond the limitations of departments and perspectives. The relevant corporate units should be involved in the development of the strategy map, especially marketing, sales, service, and IT. The participation of the various business units in the creation of the strategy map ensures an overall view. This procedure promotes dialog across process and departmental boundaries. In addition to that, the backing and support of top management is necessary for realizing the strategy map. Support goals with indicators and activities The next step is the operationalization of the defined goals and the assignment of activities for measuring the achievement of goals. At this time, quantitative targets such as the number of Followers or the number of Likes are frequently used to measure success. Both indicators give a rough idea of the success of social media activities. However, there are other possible methods of measuring success e.g. in the area of innovation and sales. The area of innovation includes above all product development and/or co-creation. In a customer-centric company, this area has a direct impact on customer relationships. Co-creation means that companies involve their customers in the evolvement or new development of products. In addition to product development in close proximity to the customers, it generates a high level of identification of customers with the product. Customers specify their needs, and these needs can be incorporated into the product. Before customer ideas are realized in a product, they are assessed by the company and reviewed for technical feasibility. This marketing effort is compared to the expenditure for the development of innovative products. This mechanism creates measurability of social CRM in the area of innovation. The aspects recommendation, purchase, and multiple purchase are applied for the measurement of success in the sales area. The problem in measuring success is similar to those in the area of service. The factors influencing a buying decision cannot be differentiated. It is nearly not possible to state that the buying decision is a direct consequence of a recommendation in social media. If, however, the online shop is accessed directly from the social media platform and the visit results in a purchase, conclusions can be drawn about the social CRM activities. Figure 2: Social CRM Balanced Scorecard Finance Customer Vision & Strategy Process Social Media IT Source: Detecon 34 Detecon Management Report 2 / 2012

6 You steer but I ll shift gears! In addition to the determination and operationalization of the goals, it is necessary to define a target corridor or benchmark and a time frame. This value can be either a target value defined internally or an external best practice value serving as a benchmark. Draft the balanced scorecard In the next step, the components described above are compiled into a balanced scorecard customized for the particular company. Social CRM Balanced Scorecard This balanced scorecard presents the vision and strategy of the company from the perspectives finance, processes, IT, associates and organization, social media, and customers. Once this basis is in place, the success of social CRM activities can be measured. Implementation When the social CRM balanced scorecard has been defined, it is implemented in the company. This is simply the operational realization in the perspectives so that the defined goals are achieved. During and after the implementation, the goals, the indicators, their weighting, and the target corridor must be critically observed so that necessary countermeasures can be taken. Steering and controlling The use of the described balanced scorecard is a tool companies can use to measure the success of social CRM. Conclusion The recommendations described here give companies the chance to adapt today to the challenges of tomorrow, securing valuable competitive advantages for themselves. By implementing these recommendations, companies can not only get closer to their current and potential customers in a completely new dimension, but can also take advantage of the customers voices in social media to orient clearly their own operations more to the customers and to prepare their services and products for durability in weathering the storms of future competition. While companies surrender control of information to the customers when they make proactive use of social media, they in return are given the opportunity to create new customer relationships of long-term value, to develop innovative products, and to design customer-centric service. The focus on collaboration and communication with customers is sharpened. The investments in social media can be justified by applying the expanded balanced scorecard and activities can be steered specifically according to the principle, You want to steer, but I will shift gears. Stephanie Felgentreff has been working as Management Consultant on the Global Competence Team CRM at Detecon since She began looking closely at the subject of social CRM while studying at the University of Karlsruhe and explored it in greater depth in her master s thesis at the FOM. Her work on various projects has provided impressive proof of her knowledge concerning customer loyalty and customer contact management and their implementation in IT systems, customer satisfaction, and social media. [email protected] Jutta Funk has been working as Management Consultant on the Global Competence Team CRM at Detecon since After earning her degree in international business administration at the University of Aalen and the University Antonio de Nebrija in Madrid, Jutta Funk gained comprehensive experience in projects related to customer service in various industries and has contributed her expertise to the areas of campaign management, customer bonding and customer loyalty management, social CRM, and others. [email protected] Social Media 35 Detecon Management Report 2 / 2012