CRM 2012 Forecast - The Era of Customer Engagement - Part I

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. But they have to have enough knowledge of the individual customer to support the determination of what it will take to maintain or expand the customer’s relationship with 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. These are 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?

…The Era of Customer Engagement Begins

The social customer is no longer a customer to gawk at, just a customer to deal with - like any other customer, with one explicit difference. He/she scales. Meaning they know how to impact other customers on a large scale who are “like them” in interests, and use the social channels that are not controlled by the company to do so.

But this is no longer what businesses take as a special case. What defines the Era of Customer Engagement more than anything is that so-called social channel strategy is now a normal part of multichannel strategy for the company. To be clear, customer engagement means that customers are part of the company’s collaborative value chain. The customer selects how they want to interact with you, and hopefully uses your products, services, tools and consumable experiences to make that decision.  Most companies recognize the value in being closer to the customer. In fact, IBM’s Institute for Business Value, in its 2010 CEO study found that the most important imperative for the next five years for CEOs - 88% of them to be exact - is to be closer to their customers.

But the era of customer engagement implies a lot more than that. Here are some of its characteristics and implications for your business. To make this clear, this is what I’m defining as the framework for the general level of maturity that we seem to be achieving.  This are what I think are the defining characteristics and some concepts that I think are appropriate given the current maturation of the new business models and channels and proofs of concept that we have for them.  This is not a definition of engagement itself. See above for my first rough attempts at that.

The era of customer engagement:

1. Starts from the assumption that you are going to incorporate social channels into your customer communications.
2. Identifies both the need for and how you can enable collaboration at your business for better productivity and effective employees.
3. Says that you might even go as far as converting your overall culture and business focus to a social business which means empowering (and incentivizing) employees to be able to deal with customers wherever and whenever (among other things). The opportunity and some of the body of practice to guide your company is there.
4. Means that your business understands how internal collaboration and customer interaction/involvement are not only converging but can be an important influence in your strategic direction.
5. Means that you understand that the customers social information is as important as and complementary to their transactional information.
6. Suggests that you realize that we have enough case studies, surveys, practical examples, business models, strategic parameters, frameworks, metrics, success and failure stories, programs, best practices and systems to sufficiently engage the customer. What is needed beyond that is internal cultural acceptance so that adoption of these new approaches is possible.
7. Requires that you see the channels that are already there (much less the future ones) are communications media for you and your customer.
8. Means that the mindset that you are working with is that your customers should be the subjects of an experience and partners, rather than objects of a sale and clients.
9. Also means that you recognize that there is clear evidence that the use of traditional channels is not only not ending but will continue to be vibrant. While social channels, which are now part of mainstream communications are more highly scalable and will have more potential impact because of that, they will never replace traditional channels.
10. Means that you’ll stop treating the social customer as an object of wonder that you bow down to because of their remarkable powers to change your business - and start treating them like a customer who is operating in a set of channels that have unique protocols that you have to learn.
11. Means that we’ve reached the point that we can be proactive in dealing with all the “conversation out there” on the social web, rather than waiting to react to every little bad word that a customer says on Twitter when we see it.
12. Means that the strategies to be considered should be multichannel (which combine social and traditional) and appropriate to the channels that your customers want to communicate in.  If its phone, its phone. There is no requirement that social channels be used.  They should be used if they provide some value in their use.
13. Means that we need to recognize that there are tools that actually can do some good in a number of ways but they, like always, have to be chosen well, implemented properly, and adopted by those that are needed to use them so that you get the results that you are looking for.
14. Is a recognition that while many customers are thinking differently and have much greater expectations of companies, they are still looking for, what the Edelman Trust Barometer in 2011 defined as “high quality products and services”, and a company that they can trust - something which hasn’t changed one iota - ever.
15. Means understanding that now practitioners have their own perception of what Social CRM is (see above).  That perception isn’t entirely the analyst/pundit/influencer definition, but it is going to have to do.
16. Is an understanding that while the strategies, programs et. al are now maturing and have a sufficient body of knowledge to back them up, the technologies capabilities tend to lag the strategies and programs requirements. It is time to set some standards as to what can be called “Social CRM” software.
17. Is an understanding that while we have reached a more mature stage, that doesn’t mean that experimentation is entirely done for.  Each business still has to determine what makes sense for them to try (proof of concept) and what makes sense for them to use (roll out to the whole company).
18. Is based on an idea that advocacy is a centralized focus for customer strategy - not the advocacy proposed by NPS but one closer to what Dr. V. Kumar proposed with Customer Referral value - a person who can indirectly impact revenue performance through his/her influence in any channels where he can communicate with a potential customer who is “someone like (him/her)” That means a focus on creating the environment that encourages the advocates but allows all customers to effectively self-select - decide how much and which way(s) they want to engage with you from passionate advocate to occasional buyer.

There is more but I’ll leave that to later. If you buy into this, there are a few trends that suggest themselves for major growth in 2012 or for at least the first inklings of major growth.  But to read them, you’ll have to click here which will take you to my other blog.