How social networking is redefining customer relationship management systems

Management Information Systems

How Customer Relationship Management (CRM) Systems

Are Being Redefined by Social Networking

Taken together the effects of social networking sites including Facebook, Friendfeed, MySpace, Twitter, and many others has the potential to redefine Customer Relationship Management (CRM) software and the strategies it supports. The intention of this analysis is to evaluate how social networking is changing how CRM applications are designed, used and optimized so that ultimately trust can be created and sustained with customers. Selling products on price and availability generates sales quickly yet to gain profitable growth as a company, there must be consistent relationships in place with customers. Social networking is acting as a catalyst of making companies more transparent and trustworthy to their customers, while at the same time understanding their needs better and listening more (Greenberg, 2008). Social networking's many applications and platforms are changing how customer relationships are made, sustained, and grown (McKay, 2009). There is also the perception of social networking being a fad, not really containing data or valuable information that could be used in CRM strategies (Dickie, 2005). This viewpoint often is based on the fact that social networking may seem like a torrent of information with only a few relevant points being made by customers worth listening to. As the book Groundswell (Bernoff, Li, 2008) illustrates through example, customers are now taking control of brands by candidly sharing the opinions, both good and bad.

Designing CRM Systems for Web 2.0

The essence of any effective information system that is oriented towards serving customers is that it stays in step with how they want to learn, buy and use products (Greenberg, 2008). CRM systems have traditionally been a collection of technologies that are used for enabling greater levels of customer communication, collaboration, support and service. The building blocks of CRM have also been defined by Gartner Group, a research consultancy which focused on the enterprise software market. Figure 1, The Eight Building Blocks of CRM, illustrate the research firms' organization of the elements which comprise CRM systems (Johnson, 2004). This structure captures the need for executive support of CRM strategies at the CRM Vision level followed by the need for coordination of strategy execution.

Figure 1, Eight Building Blocks of CRM

Gartner Group ((Johnson, 2004)

Starting with the CRM Vision at the top of the structure and progressing through the definition of strategies and their impact on the customer experience, this framework accurately communicates how CRM systems from an enterprise standpoint are organized and how they are coordinated to deliver customer experiences. The net effect of social networks on this hierarchy or structure of CRM systems has been to accelerate it. Social networks are changing the perception of time and trust for customers, with trust being the greatest competitive differentiator a company can have today (Toor, 2009). Social networking is also forcing companies to get better at organizational collaboration as well. No longer in a socially networked world will customer stay silent if a company gives them one answer through one support channel, say their call center, and another from in their stores (Dych, 2009). As a result of this increased focus on time and trust, it is imperative for companies to build CRM systems that enable greater levels of organizational collaboration as well. The strategic integration of knowledge management into CRM systems then is being driven by the need to not only respond to customers with accurate support information; it is to respond consistently across all channels as well (Liew, 2008). This presents a unique synchronization challenge to software companies creating the next generation of CRM systems, namely how to ensure multi-channel support for customer solutions to ensure the highest level of satisfaction is attained (Dych, 2009). Social networking's impact on the CRM process layers of the Gartner structure has been to require more intensive integration of knowledge management systems to ensure a higher level of responsiveness, and also the integration of customer preference data to capture the specifics of each customer over the lifecycle of their purchases. The concept of tracking the purchases, preferences and interests over the long-term of their relationships with companies also requires integration to analytics and business intelligence systems as well (Dych, 2009). The CRM information layer includes data, analysis and a single view across all channels. Social networking is the catalyst of an entirely new series of applications and tools in this area of CRM as well. The technologies of latent semantic indexing (LSI) which can aggregate a series of unstructured content groups including blogs and Wikis into a single linguistic model is what Google uses to define search architectures in their search engine, and what state-of-the-art CRM systems are using today to better manage the mass of customer data being generated on social networking sites (Rishel, Perkins, Yenduri, Zand, 2007). Analytics and business intelligence then has become much more attuned to finding patterns in data that were not visible or intuitively obvious in the past. The use of LSI technologies has also been supplanted with the use of sentiment analysis which can determine the emotional state of customers based on their comments and discussions online (Boiy, Moens, 2009). LSI and sentiment analysis are redefining how analytics are used in customer relationships as a result. The use of this data is highly relevant for tailoring marketing programs that earn the trust, over time, of customers. That is the new currency in customer relations and CRM systems that are re-oriented in their design to support that strategic design goal are excelling in their execution of strategies.

Advanced data analysis and business intelligence are also reflecting the change in the perception of time on the part of customers using social networks. In previous CRM systems rarely was the time-to-respond or any other metric used for evaluating how quickly and thoroughly a company responded. No longer, as the combining of insights gained from analyzing customers' comments on social networking sites is showing many companies that they have a wide gap between how they perceive time vs. their customers (Whiting, Donthu, 2009). Time and trust also are driving the next layer of the structure of CRM systems as defined by Gartner which is the definition of CRM technologies.

Applications, architectures and infrastructure of CRM systems are seeing the greatest impact from social networking. From the widespread adoption of Salesforce.com, a series of CRM applications-based entirely on the Software-as-a-Service (SaaS) model to the integration to Facebook, Friendfeed, Twitter and in some cases, MySpace, CRM systems are looking to capitalize on the exceptional popularity of social networks. The SaaS delivery model lends itself well to integration with social networks as the Application Programming Interfaces (API) and methods of application scalability on hosted platforms are comparable to each other (Toor, 2009). Integrating social networking-based content into traditional CRM systems that are based on licensed models however is more of a challenge as these systems has been specifically designed to support integration in a precise data interchange format. The exceptional growth and popularity of social networks and the SaaS platform for delivering CRM applications however have both benefited from the en masse adoption of Extensible Markup Language (XML) protocols as the primary means of systems integration (Choi, Wong, 2009). XML is revolutionizing CRM in that it makes it possible to integrate with a far greater number of potential databases, application and website that can be accessed using this integration standard. XML is also being used as the foundation for asynchronous JavaScript and XML (AJAX) programming of CRM applications. AJAX has many benefits relative to HTML or DHTML programming for CRM applications, the foremost being speed and accuracy. AJAX is a programming technology that only refreshes the part of the application that has changed. Estimates place the speed increases in application performance as high as 60% over pure HTML pages for CRM and database-intensive applications (Choi, Wong, 2009). With time and trust being the primary differentiators in CRM applications, the rapid adoption of AJAX as a programming standard for social network applications is consistent with the preferences of customers today. Instead of thorough responses to their requests for information or support, customers instead want to have a company get back to them quickly, accurately, and succinctly (Greenberg, 2008). Gone are the days of reciting back via the Internet and Web-based applications just how much a company knows about a given subject. Today the focus in CRM as a result of XML integration technologies, AJAX programming languages and integration to customer data is more about helping customers get to their goals and solve their problems as quickly as possible. When a CRM system can deliver that finely tuned of results in conjunction with being as efficient and accurate as possible, they will have met the expectations of the 21st century consumer and customer (Greenberg, 2008). The fact that so many CRM systems however are not embracing this approach to speed, trust and time being the critical differentiators means that will be a widening gulf between companies and their ability to respond to customers.

The final layer of the CRM building blocks as defined by Gartner is CRM Metrics. As was mentioned in the section on CRM Information, this area is going through rapid change as marketers attempt to keep pace with the massive volumes of data produced on social networks. Second, this area of value, retention and customer loyalty has also become even more critically important from the context of fighting back a global economic recession. Through the use of business analytics and business intelligence applications, CRM systems are capable of predicting customer behavior over time and developing strategies to better align to customer preferences. As with each layer of the Gartner CRM definition, this area is also seeing an exponential level of content being generated both through social networks and through the XML integration links with existing customer databases, order capture and order management systems throughout companies. An area that is also fascinating is how forward-thinking companies who are attempting to define the Return on Investment (ROI) for social networking integration to their CRM systems. This is occurring at the CRM Metrics level of the Gartner Model as companies integrate their financial information into the CRM systems to determine ROI of these investments. Second, there is the ability now to track the profitability of each marketing strategy or program over the long-term. Using social networking sites as a sounding board and a means of listening more proactively to customers, companies are able to better ascertain how their investments are paying off or not by the strategy level.

Conclusion

Social networking applications, their rapidly gaining popularity, and the catalyst of all these innovations, Web 2.0, is also drastically re-ordering the CRM landscape as well. In many respect social networking is bringing the voice of the customer louder and more clearly into companies than has ever been the case in the past (Greenberg, 2008). Others argue that social networking is also redefining the concepts of trust, transparency and even changing how people value and see time in the context of how they buy and consumer products and services (Whiting, Donthu, 2009). Underscoring all of these factors however is the fact that expectations continue to increase on the part of consumers for accurate, timely and useful information delivered how and when they need it. The role of CRM as enabler of customers' goals instead of a means to push more products at them and sell more is a critical one. No longer are customers content to just hear what companies want to say; customers are now redefining the value propositions of companies an in so doing, redefining their brands (Bernoff, Li, 2008). The customer being in control due to social networking is readily apparent from reviewing the applications in Appendix B. Far more intriguing that this dynamic however is how companies will cope with the massive challenge of serving customers whose expectations of service, responsiveness and truthful service are escalating over time, changing the nature of customer relationships.