I have to tell you up front – this is not strictly a forecast. There are elements of a forecast – a few likely trends for 2012 are embedded in the piece. But just so expectations are clear, this is more of an assessment of what I think is an important shift in Social CRM and the customer facing side of social business. At least, important to me, since for the life of me, I can never understand why anyone pays attention to what I say, but in the spirit of the season, I am eternally grateful that someone does.

One other thing, what you are reading here is something longer than an executive summary of my assessment of the shift, but not the full monte. Based on some advice from my dear dear friend and major league thought leader Esteban Kolsky, I am working on the final parts of a longer report (20+ pages) which is a more complete discussion as my first “occasional paper” of 2012. It will be available for free upon request -  One of my new years resolutions is shorter posts with occasional PDFs that reflect more complete thinking. Not that this is a “shorter” post.  But then its not the new year yet either. (Please send all requests for the document to my email at paul-greenberg3@the56group.com.)

Also, truthfully, I’m kind of uncomfortable with this post too. While I’m pretty sure my conclusion is right, I’m not entirely at ease with what it took to get there. I’ll leave it at that. So I reserve the right to treat this as a work in progress.

Also, Part II of this post is on PGreenblog here. The actual “predictions” are there. This part is the explanatory justification for what I see as the shifting of the dynamics in the (social) business world.

What I Mean By Customer Engagement

For the purposes of this post and going forward, I’d like to start with a definition of what “customer engagement’ is and isn’t, so there is no doubt about what the era of customer engagement means.

  1. First, It doesn’t mean the era of customer intimacy though that is an optimally desired “condition” for a company’s view and relationship to its customers. But engagement doesn’t require intimacy or advocacy. However, aiming at creating advocates from among your customers is part of a smart strategy.
  2. It also doesn’t mean customer loyalty.  That may and I mean may be an outcome of successful engagement with the customer – though, as V. Kumar pointed out in 2000, the correlation of loyalty to profitability is mediocre to fair, not good, so there are questions of the value of that outcome.
  3. It also doesn’t mean it is identified by the length of time that the customer is involved with you without some extra analysis. Otherwise, inertia, which occurs when the cost of switching (financial, labor cost, emotional cost) is greater than the value perceived of the result, would seem to be engagement, when it isn’t. So it isn’t just a function of the time a customer and a company are involved.
  4. What customer engagement does mean (so there is no nebulosity here) is the company’s and the customer’s relationship is defined by the customer’s ongoing involvement with the company for their own specific reasons. The company doesn’t have to know all of them.
  5. It does mean that it is an era where the engagement the customer has with the company is controlled by the customer – and it can be at any level. Intense, casual, continuous, occasional, deeply involved, barely transactional. The key phrase is “customer self-selection.”
  6. It does mean that the company model is to provide the customer with the products, services, tools and experiences that the customer needs to make an intelligent decision on how they want to be (selectively) engaged with the company. This is engagement programs organized around an ecosystem that are based on customer self-selection.
  7. It does mean the provision of a measurable result when it comes to that engagement via direct or indirect impact on revenue or some other key performance indicators that show the value of the engagement to the company – and the customer. Though they  are different values.
  8. It does mean the use of systems of engagement (see Ray Wang discussion here and Dion Hinchcliffe here) which are systems that foster the interaction of the company with the customer. They can range from enterprise feedback systems to insight solutions to online communities to internal collaboration. But fundamental is that they are systems that can foster activity among the choice multiple combinations of employees and customers e.g. customer to customer; employee to customer.

The Era of the Social Customer Ends…..

As you know for the last 10 years, I’ve been proselytizing about the era of the social customer. That meant that the social customer, a technology savvy, peer trusting, highly demanding, relatively affluent customer who leverages the web for conversations that can impact business – was becoming prominent and disproportionately influential.  Business’ requirements in era of the social customer were reflected by my definition of Social CRM’s last sentence  - “The company’s response to the customer’s control of the conversation,” and its most recent permutation which adds the word “programmatic” in front of response.  This and its original formulation – “the company’s response to the customer’s ownership of the conversation” become the de facto definition – i.e. most quoted – of the time – with over 36,000 strict Google hits for the combination of the two (on December 20 at least).   Social customers, because of their aggressive approach to using the social web, stood out and forced businesses to start to respond to the new forms and channels of communication that the customers were engaging in. For the first time, marketers and customer service agents, and to a lesser extent, sales people were forced to respond to people they couldn’t push a message to or define a response to and to people who were communicating in channels the company didn’t control.

That led to a period of experimentation using social channels without a clear picture of an ROI, or best practices to latch onto or strategies that were fully formulated or technologies that were fully evolved that has been evolving as long as the external social networks like Twitter and Facebook have been growing. CRM began to morph into Social CRM, business into social business, and internal collaboration became more than just an advanced idea and was put into practice at many of the Global 2000 companies and some even smaller than that.  But the total spend in 2010 on social software was according to Gartner, $770 million, a fraction of the CRM market which was around $15 billion in 2010,  $16.5 billion in 2011 and projected to be more than $18 billion in 2012 by IDC.

But a significant number of those “social experiments” were successful. So rather than edge cases from a handful of progressive companies, as 2011 started to close, we began seeing story after story, case study after case study about the success of “social.” We began to see a positive return for CRM itself, with Nucleus Research identifying an average $5.60 return on the dollar for each CRM program that they reviewed. Multiple vendors provided so-called “Social CRM” products and services (more on that soon) and even more interesting, the key consulting firms like Accenture, Cognizant, Infosys, Booz-Allen, CAP Gemini, and CSC either created explicit Social CRM practices or began to compete on Social CRM projects, because they saw a significant market opportunity.  For the first time, we began seeing leading academicians and consultants, like Dr. V. Kumar, create a quantifiable metric for the revenue impact that social customers were having on a company that was designed to work with the traditional measure of customer lifetime value (CLV). He called it Customer Referral Value (CRV) which addressed the issue of a loyal customer versus an advocate and showed the indirect impact of “word of mouth” on company revenue. (For an excellent article on it, please read this Harvard Business Review article) (otherwise, read Dr. Kumar’s book, “Managing Customers for Profit”)

Additionally, studies began to appear to corroborate this. EConsultancy released its second annual “The State of Social Report 2011″ that appeared in November. What it confirmed is that just short of two thirds of the companies polled (more than 1000) were now using multichannel strategies across business functions that included social, rather than unique social channel strategies.  It was put as they were “beyond the experimental stage.”  These strategies encompassed things like marketing, customer service and customer feedback among other things.

Not only that, but what became increasingly apparent and was borne out by reading several hundred different articles, posts, comments, etc. on CRM and Social CRM was that Social CRM was what many, especially those new the world of CRM thought that CRM was. In other words, there was less and less reason to distinguish between CRM and Social CRM. Social CRM has almost (note the word “almost”) become what CRM is.

Interestingly, another pattern emerged. There was a specific perception of SCRM that was somewhat different than the definition of Social CRM that either I or others had given it. After running through those hundreds of discussions, here is an aggregate of the perception from the veteran practitioners of CRM to noobies as to what Social CRM is:

“Social CRM is the integration of traditional operational customer facing activities including strategies, programs, systems, and technologies with emergent social channels to provide businesses with the means to communicate and engage with customers in their preferred channels for mutual benefit.”

Note I said this is the perception of Social CRM. While it isn’t entirely accurate or comprehensive enough, it is good enough for now.  It is what most people will think when you use the term Social CRM – if they know what it is at all.

What this and other matters that are developed more fully in the 20 page opinion piece leads me to conclude is something that I think will impact business models, actions, strategies, programs and technology development well beyond 2012, though I think 2012 is a nodal point in this evolution.  The best way to put this?

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