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Business

Create community to build better goods

Social networking applications let manufacturers better engage consumers in constructive dialog and gather feedback on product enhacements.
Written by Sol E. Solomon, Contributor on

Increasingly, manufacturers and logistics providers in Asia are using social networking technologies to foster better relationships with their customers.

Adam Sarner, research director at Gartner, said social computing is becoming a significant customer relationship management (CRM) trend.

Sarner, who authored the Gartner report, The Business Impact of Social Computing on CRM, wrote: "Social applications offer a great opportunity…to improve customer experience and influence the customer, particularly in an economic downturn when companies are trying to keep customers and increase wallet share."

Sites such as Facebook, LinkedIn, Friendster and Second Life, typically come to mind when talking about social networking applications or services, but Gartner's definition of a social application goes beyond such Web sites.

Cede ownership and encourage participation

Gartner identifies five best practices to encourage participation and to give companies an idea of the right amount of ownership to cede:
1. Accept the risk of criticism: If criticism is censored or discouraged, users will abandon the application and this could generate negative press for the company. Companies must respond to critics fairly and openly, and use the valuable data provided to make real changes.
2. Apply ground rules: Although the community has control, sensible rules should be instituted that users will be willing to follow, such as not swearing.
3. Solicit feedback: Users will feel appreciated if a company asks them directly for input, and they will oblige with their views and experiences.
4. Enable company advocates: Enterprises should work with their biggest community contributors, and reward them with tools, special community areas and powers to express themselves more fully. Fostering user loyalty lets companies gain powerful allies in managing their communities.
5. Assign a community advocate: An employee should be appointed to liaise with the community and represent it to the company. This person can answer questions, help resolve problems and give the community reassurance that its views are being heard at a high level in the company.

"Whereas the consumer sites are...outside the firewall, other forms of social applications are hosted directly by the organization, whether 'off the radar' for use by only internal audiences such as sales and marketing staff, or accessible by customers," Sarner wrote in the report.

Jasbir Singh, Oracle's Asean senior director of supply chain management, product and solution consulting, said "progressive" manufacturing and logistics companies are now venturing into Web 2.0 to enable more value by sharing information and empowering the user.

Examples of this are evident in supply chain planning collaboration, strategic sourcing and online bidding optimization, Singh said in an e-mail interview.

"The journey starts with improving communications, collaborating on supply, tracking movement status information, and then incorporating external influencers--local pricing, arbitrage, weather, shipping/flight conditions, and energy cost parameters--to create more complex supply chain models with Web 2.0 concepts," he said.

This ability to see and provide updates is especially important in logistics where multiple parties--the shipper, consignee, forwarder, consolidator, customer agencies and others--may be involved. Getting accurate information on time is crucial to make informed decisions in order to limit risk exposure, said Singh.

Agreeing, Gartner noted that social applications for manufacturer-customer interaction are not purely within the domain of business-to-consumer (B2C). "Business-to-business (B2B) customers share the same buying stages as B2C customers, and buying groups in businesses are themselves composed of individuals who can be treated like consumers," said Gartner, which believes that B2B organizations will make effective use of social applications in the near future.

Gartner noted that in 2008, established CRM vendors such as Oracle, SAP, Salesforce.com and Microsoft, made significant steps to incorporate social computing features into their platforms, making them viable choices for customer-facing social software functions, particularly in B2B areas.

Peter Coffee, Salesforce.com's director of platform research, said Web 2.0 allows a manufacturer to provide a forum where customers who know its products well can come together, share knowledge with each other, and participate in a community process to recommend product improvements.

"This is a Web 2.0 phenomenon that is not just entertainment for social interaction, but adds enormous value for the vendor that is shrewd and vigorous in constructing such a forum," Coffee said in an interview with ZDNet Asia.

Gartner cited the example of a carmaker that would traditionally interact with its customers through broadcast advertising and its dealer network. By using social applications on its Web site, this manufacturer can build a dialog directly with its customers to encourage a purchase or to solicit feedback on product designs.

The expert is the customer
For decades, Coffee said, manufacturers operated on the belief that the people who work for them are the leading experts on their products. But, research in recent years has revealed that most of the "genuine expertise" on how to make a product better lies in the consumer world. So the vendor is sometimes not even the best source to go to for information on how to resolve a problem with its products, he noted.

Coffee said: "Now the wall has come down, the salespeople and the customers participate jointly in a community of understanding, refinement and improvement of the product."

Companies that have grasped this phenomenon, he believes, are going to gain substantial market share during the current economic crisis and will come out "with strong leadership in their industries".

If a company tries to avoid the reality of Web 2.0, there will simply be an external Web site somewhere that talks about the company and the customer experience with the company, he said. Often times, that conversation will not be favorable to the company. "They will be off talking among themselves. Your point of view will not be represented and you will not have an opportunity to guide the conversation toward constructive improvement," Coffee added.

Going in with a plan
That said, Sarner noted that "rushing into social computing initiatives without clearly defined benefits for both the company and customer will be the biggest cause of failure".

Gartner also predicts that by 2010, more than half of the companies that have established an online community will fail to manage it as an agent of change, ultimately eroding customer value.

To counter this, the research firm recommends that when a company embarks on a community initiative, it must first define the purpose for doing so. The stated purpose must include a measurable business benefit for establishing the application and customer motivation for participating.

Now the wall has come down, the salespeople and the customers participate jointly in a community of understanding, refinement and improvement of the product.
Peter Coffee, Salesforce.com

To make the application truly social, Gartner advised that the manufacturer must also cede some control to encourage participation. The community must have some element of ownership in return for the value this brings to the manufacturer. Organizations need to determine the level of control ceded to the community and to understand how that affects the engagement between the customer and the company.

Companies must also acquire new skills that focus on influencing social interactions, Gartner said. These skills will cover social sciences such as psychology to learn how customers interact and how their changing needs can be met; anthropology to understand how cultures grow, develop and interact. Also, game design to create engaging virtual environments to manipulate "player" behavior through rules, rewards and outcomes.

Since many of these skills will be difficult to find internally, manufacturers must allocate a substantial budget to recruit the necessary expertise or outsource these functions to specialist providers, Gartner advised.

Sarner added: "In a global recession, companies should prioritize the acquisition of these skills because of the direct benefits they can produce in customer loyalty and increased sales."



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