Evolution of business in the information age

Evolution of Business in the Information Age

Information Age: Power, Peril, and Promise of Social Network Integration with Customer Relationship Management Systems

Of the many areas where technology is significantly changing the value chains of a business is in the arena of customer relationships, marketing and the rapidly emerging area of social media. The triad of these factors is combining to create disruptive innovations that are in turn redefining customer relationships by bringing a much greater level of accuracy and clarity to expectations and experiences (Palmer, 196). The intent of this analysis is to evaluate the power, peril and promise of these technologies as they all revolve around customer relationships and trust, which is the new currency of business (Greenberg, 410). The power of combining social networks with Customer Relationship Management (CRM) and marketing systems and strategies is evident in how quickly and effectively Facebook Fan pages are generating revenues for new product introductions (Shih, 12). The power of having immediacy of data from social networks to populate CRM systems and drive marketing strategies at levels of accuracy and performance never before seen before as the entire process is digital also has potential for determining Return on Investment (ROI) to a level never seen before. There are also the perils of having so much data on customers that their privacy is intruded upon online, which is an ethical boundary marketers are continually running into and in some cases, crossing over (Cheng, 824). That is the peril of such insight into a consumers' behavior online through social networks, from their "likes" and friends on Facebook to the subject matter patterns in their Tweets on Twitter or the potentially perilous locational data in Foursquare and other location-based services. With oversharing being so prevalent on social networks there is the potential for marketers to know more about consumers than their acquaintances or friends as analytics can provide insights into motivations and interests (Bernoff, Li, 36 -- 42). Balancing the power, peril and promise of the integration of social networks, CRM and marketing is the focus of this paper.

Redefining the Customer Relationship with Real-Time Social Media Data

The power, peril and promise of using social media data in the context of selling, service and customer loyalty strategies is exemplified in how precise marketers today can be with their personalization of marketing to specific audiences of prospects and customers (Ku, 1085). The power of being able to target customers with such precision opens up ethical issues, which will be discussed later in this paper (Cheng, 824).

The contextual definition of customer relationships is drastically changing based on the availability of a massive amount of personal data being mined from social networks, and in the case of Facebook, sold by them as part of their advertising strategies (Beck, 38). There is great power in having this level of consumer data from social networks as for the first time, marketers who have invested millions in CRM systems can for the first time approach the ultimate goal they had in purchasing them, which is gaining a true 360-degree view of their customers (Dyche, et.al.). Dyche continues with her description of CRM as a technology-based platform that enables the definition and differentiation of core business processes that are aimed at attracting, selling and serving customers so they become loyal and increase in lifetime value over time (4). This mindset of customers being the catalyst of long-term value vs. being only the source of the next transaction has been accentuated and accelerated due to social networks. Using the Dyche definition it is apparent how powerful the role of CRM is as a catalyst of trust and the globalization of relationships, not just the attainment of a specific run rate of sales or the meeting of a quota (Sherwin, 72, 73).

The real power of integrating social networks, CRM and marketing together is in bringing the insights and requirements of the customer right into the value chain and making their unmet needs, requirements and preferences known (Chakravorti, 299). Many companies are quickly integrating analytics into the frameworks that are based on CRM systems, social networks and marketing systems integration. These analytics provide invaluable insights into trending and analysis of customer preferences and the direction of unmet needs over time. All of this data is invaluable for supporting new product development, redefining the value chains of an entire business to be more customer centric, and optimizing pricing over time. All of these factors are the basis of the greatest area of potential in integrating social networks, CRM, and marketing systems, which is social media and customer analytics. The competitive value of having a strong analytics application platform that can integrate to social media and CRM systems can be seen in the entertainment and casino industries for example, where Harrah's uses these systems to periodically find their most profitable customers and build sales promotions specifically to their needs (Doyle, 216, 217). Analytics have also successfully been used for planning new product introductions so that their execution is successfully synchronized across multiple selling and services channels at the same time (Ernst, Hoyer, Krafft, Krieger, 290). The development of integrated marketing communications (IMC) strategies at the companies who excel in this area of marketing strategy are increasingly be based on social media, CRM, and marketing system integration and process optimization. The use of analytics to synchronize all three systems in the development of an effective IMC strategy is a best practice that Nike, Walt Disney and others have been able to pursue because of the power of social media's insights delivered (Ling-yee, 139). Forward-thinking companies are using analytics to unify their strategies across social media platforms and CRM systems to create IMC strategies that are highly relevant to target audiences of prospects and customers, and also very measurable as the entire strategy is digital in scope -- implemented online (Bernoff, Li, 41).

Another area of significant promise in the integration of social network data to CRM and marketing systems is the advantages this delivers to streamlining customer processes that are heavily reliant on insights and experience to be made as accurate and efficient as possible (Lambert, 4). Data on individual customers from social networks can greatly streamline even the most complex selling or service process, as unnecessary steps in lead generation, product demonstrations, product samples or coupons and special deals can also be alleviated, increasing overall profess efficiency (Lambert, 4). Further, the use of social networking data on customers can also be used for designing more effective customer service processes as well (Babu, Kumar, 94). An example of this would be using data from social networks on a given customer to understand their preferences for how they learn about new products, product fixes and their relative level of satisfaction with previous experiences with all companies they interact with online. Having this depth of insight into customer preferences for how they learn about products, services and support shows promise for significantly increasing the effectiveness of service and support strategy definition and execution (Babu, Kumar, 97, 98). Mining social network data promises to provide significant insights into which electronic means of communication will also work best for communicating with a given audience of customers as well (Khurana, Chaudhary, 22, 23). These insights have significant promise in redefining each phase of how companies attract, sell, and serve prospects and customers. The real-time integration of social networking data into CRM has been labeled Social CRM by industry analysts and pundits (McKay, 15). The next section of this analysis explores how the traditional concepts of CRM systems are being redefined at the system and process level by the integration of social networking data. A subsequent section discusses how social networking data is used within the context of marketing systems and strategies today. Social networks are beginning to show the potential to re-order the accuracy, profitability and performance of forecasts and order fulfillment over the long-term as customers' preferences and needs are more well-understood and acted upon immediately rather than either not seen at all or ignored for lack of a process to capture and act on them (an, 157).

Creating Disruptive Innovation by Integrating Social Networking Data into CRM Systems

Today companies are not interested in just holding onto the status quo of results that their CRM systems and strategies are delivering, nearly every company is seeking a distributive innovation that can completely redefine the depth and value of their relationships with customers. In short, every company is looking at how best to create a competitive advantage in holding onto their existing customer base and gaining new prospects over time. The integration of social media data from social networks into CRM systems is today transforming the transaction-based mindset in many companies to a more trust-based one, leading to significantly greater profitability and sales as a result (Babu, Kumar, 93, 94).

One of the most promising technologies to emerge from the integration of social networking data and CRM systems is the development of Software-as-a-Service (SaaS) platforms (Lin, 70, 71). Industry analyst predict that nearly 75% of the CRM market will be SaaS-based by 2013 (Sims, 12). The major benefits to using a SaaS platform for integrating social networking, CRM and marketing systems are the significantly lower costs of operation, the pay-as-you-go approach to leasing only the application areas used, and the flexibility of scaling the computing workload up or down based on the unique requirements of a given company's strategy. SaaS has become the platform of choice for managing social networks, as Facebook, Twitter, Friendfeed, millions of blogs hosted on WordPress, and Foursquare are all hosted on the Amazon Web Services (AWS) platform which is the most popular SaaS-based computing platform in use today (Lin, 73). The SaaS platform has rapidly emerged as a dominant platform for CRM systems as Salesforce.com today has over 60,000 implementations in place, each one numbering over 100 users or more (McKay, 15).

With the emergence of SaaS as a dominant platform for hosting social network applications, CRM systems and marketing applications, there continues to be a corresponding growth in the depth, breadth and complexity of integration across these applications (Shih, 12). The dominance of the Facebook Application Programmer Interface (API) is evidence of just how pervasive this integration strategy of using SaaS as the galvanizing point of integration of social networking data, CRM, and marketing systems (Langlois, Elmer, McKelvey, Devereaux, 415). The power of these integrations is seen in the proliferation of applications that are launched on Facebook on a nearly daily basis, the business model of Facebook selling their customer data for advertising, and the eventuality of Facebook becoming a CRM system (Shih, 12). What's emerging as a powerful platform for social commerce that is going to redefine what e-commerce is for the foreseeable future (Bernoff, Li, 36). This shift in commerce online is going to also redistribute the power within online communities and the role of online retailers over time. There is also the power of a very popular and pervasive API that acts as the unifying integration point across literally thousands of applications over the Web at any given time (Langlois, Elmer, McKelvey, Devereaux, 434). The power of this to redefine CRM is discussed in the following section. It is apparent however from evaluating how pervasive the Facebook API is being adopted that a network effect is occurring within just the e-commerce areas of social networks today, sometimes called social commerce by Constellation Research, Gartner Group and others (McKay, 12). The creation of the long-awaited private trading exchanges which have been discussed for decades by industry analysts including QAMR Research, Gartner, Forrester and many others could eventually happen not due to specialized transaction workflows as many believed but due to the ubiquity of APIs from social networks creating entirely new trading networks (Langlois, Elmer, McKelvey, Devereaux, 420). The power of these networks would eventually rival and in some industries replace traditional e-commerce over time.

The perils of a pervasive use of APIs and the creation of social commerce networks is that once the identity of a consumer is compromised, the entire network of sellers and any hackers who have broken into the systems have that data (Even, Shankaranarayanan, Berger, 152). The costs of security for these social commerce systems is going to be significant and continually grow over time as the complexity and integration options of APIs for social networks continually improve and gain greater flexibility and agility to respond to company's needs over time. The perils of security only at the browser level of a social commerce platform is where many of the integrations of social networking, CRM and marketing systems are today due to the focus more on Web programming languages over server-based, enterprise-wide security for social networks (Even, Shankaranarayanan, Berger, 152). This will have to shift to be more focused on the needs of the social networks to create more resilient and hardened security layers in the areas of social commerce.

The promise of these systems however far outweigh the risks and the potential for very high levels of transaction velocity also outweigh their apparent costs as consumers shift to social networks as the preferred platform for buying (Bernoff, Li, 42). Not only are the APIs from Facebook and other social networks combining more relationship data with transaction support, they are also supporting catalog management and pricing variables with increasing regularity over time (Langlois, Elmer, McKelvey, Devereaux, 431). What is emerging as the promise of these systems is the ability to have a complete distributed order management system that unifies the traditional CRM structured data from legacy customer systems, insights from pricing and transactions from marketing systems, and the development of real-time personalization of the shopping experience. Social network data integration with CRM systems to support relationship-based selling could eventually become the next-generation Enterprise Resource Planning (ERP) system by quickly interpreting customer demand and reacting to it with perfect order performance over time (Columbus, 37). This in effect will completely redefine the value chain of a business. The ability to gain insights in real time from customers' and their orders while in a social network, interpret and act on the data using legacy CRM data and then use marketing systems for predictive analytics -- all taken together will re-order the value chain of any business (Chakravorti, 299). While the term disruptive innovation is often used to describe a new approach to doing business, this level of data integration across social networking, CRM, and marketing data is going to completely change what e-commerce is and where it is going as a selling and service strategy globally. This tight level of synchronization however will not occur there is a much stronger level of trust and focus on relationships instead of transactions in the businesses just now exploring these areas of modifying their value chains and business models as a result. The next section analyzes how the traditional definition of CRM is changing based on the integration of social networking-based data, which is often called Social CRM (McKay, 15).

Defining Social CRM

The traditional definition of CRM is centered on capturing customer data with the intention of creating strategies for attracting, selling, and serving customers. This transformation of CRM has been directly attributable to the change in CRM strategies over time, shifting from being purely a database extension of records management and customer data retrieval to the development of more role-based software that can more precisely align with the needs of customers. The shift in CRM based on social networking data integration has taken selling and service strategies out of being so myopic and focused only on the immediate to seeing a true 360-degree view of the customer over time so that trust can be more effectively earned and kept through consistent system and strategy execution

(Chakravorti, 299). Integrating social networking data into CRM applications has also led to an immediate level of feedback of the customer experience as well (Ku, 1085). The immediacy of feedback and ability to better manage the user experience based on having real-time social networking data, especially about brand and product preference and experience, is critical for the success of any system integration effort (Chakravorti, 299). Integrating social CRM data then leads to a much more experiential definition of CRM than had been the case in the past.

There is an abundance of CRM definitions yet the most pervasive is provided by Gartner Group as a series of eight modules shown in Figure 1 (Gartner 2001). These eight components of CRM are defined by the vision of uniting a company's unique value proposition and market position with the needs of the customers, delivering a valued customer experience in the process.

Figure 1: Gartner Conceptual Definition of CRM

The definition Gartner has created looks to unify the role of CRM metrics, technology, information, processes and valued customer experience, all synchronized through organizational collaboration. The role of social networking integration in the context of this diagram is in two areas. First, social networking data integration is completely defining the increasing the value of the customer experience, and also fueling the development of more effective strategies in the areas of organizational collaboration and internal performance. The point was made earlier of how pervasive SaaS-based integration has become in this area of the market. The use of platforms for social networking, CRM, and marketing systems integration include the Force.com platform, the Amazon Web Services (AWS) platform on which the majority of social networks are hosted on, and the use of the Google AppEngine platform each of which has API integration completed to Facebook (Langlois, Elmer, McKelvey, Devereaux, 443). What emerges from an analysis of the Social CRM market using the Gartner framework shown in Figure 1 is an ecosystem that can quickly take in data and contextualize it for use in defining a 360-degree view of customers in real-time. The role of real-time analytics is also proliferating throughout social networks as companies increasingly are looking to create linguistic models of the massive amounts of unstructured content that permeate social networks and platforms today. The model that Gartner has created also shows the power of social network data integration to marketing as well, as the layer of the model dedicated to processes is going through a disruptive innovation of its own today as well. The model shows how all the elements of a CRM strategy, social networking integration, marketing data and customer insights can be used for defining the most optimal approach to not only selling more but also understanding customers at a level and perspective not possible before.

Another area of significant power in the area of CRM data integration to CRM and marketing systems is that the Applications, Architectures and Infrastructure layer of CRM technology. This area is where the power of Force.com as a development platform is permeating the development of next-generation applications driven by pervasive use of social networking APIs and their continual refinement and fine-tuning to meet customer requirements (Langlois, Elmer, McKelvey, Devereaux, 424). This layer of Applications, Architectures and Infrastructure is also where the power of Software-as-a-Service (SaaS) platforms are becoming prevalent. The benefits of SaaS as a platform can be seen in the shifting economics of enterprise software as well, as SaaS makes it possible to expense only the areas of an application that are used. Called operating expense (OPEX) budgeting, this approach is focused on charging only for the software functionality used. It is tantamount to leasing an application over time (Lin, 70). Traditionally CRM systems are sold through a capital expense (CAPEX) approach, where the company pays very expensive licenses and maintenance fees for the total cost of the system. The advent of SaaS and the role of OPEX have completely re-ordered this strategy. In a sense the economics of SaaS is changing the adoption of social networking data as a viable business tool, making this data affordable given the lower costs of CRM systems (Lin, 69). The peril of this layer of the model, which is going through major disruptive innovation today, is the lack of security standards and the tendency on the part of SaaS hosting vendors to fully support multi-tenancy and advanced security standards over time (Lin, 72). The peril of this approach is that customer and application data can be quickly comprised and accessible over the Internet to literally anyone happened to be logged onto a given instance of the cloud network. There is also the risk of customer data being stolen if there are not enough safeguards in place for the data to begin with.