Innovation is Highest and Best Use for Social CRM

Social Customer Relationship Management (aka Social CRM). As a term, it’s freighted with connotations. That second term in particular (CRM). CRM systems have a well-worn set of use cases, strengths and weaknesses. So as a starting point for understanding the possibilities of Social CRM, one has to get past the existing uses of CRM.

The Altimeter Group published a well-read report, 18 Uses of Social CRM. The report covers a variety of ways social CRM can be applied. Many are classic CRM sales & marketing stuff: social campaign tracking, rapid response to flare-ups on social media, rapid social sales response, presenting a consistent face to the customer, etc. For context, note the following quote from a 2001 article on CRM:

“Customer-friendly CRM systems are built around the customer’s shopping and buying process, not the company’s selling process.”

Notice the focus on “shopping and buying process”. Not on the actual “jobs” for which the customer may hire your company. This is CRM as fundamentally about selling, not about understanding customer needs. Much of the Altimeter report reinforces this traditional approach, albeit with a social veneer. Can’t blame them either, CRM is a multi-billion dollar business.

However, two of the uses are specifically innovation-related: Innovations Insights and Crowdsourced R&D. And in combing through the report, there are a number of observations that are innovation oriented. I’ve captured them below:

Each of those snippets has some bearing on the emerging field of open innovation:

“Open innovation is the two-way engagement with external parties to source, co-create and develop ideas that benefit the market and the company.”

In that context, the quotes above from the Altimeter report on social CRM very much fit the philosophies of open innovation. It’s about tapping the ideas and knowledge of people at a far greater scale than your own workforce.

Voice-of-the-customer (VOC) programs have been around for a while, and social CRM as applied to innovation appears to be a new channel for that. Innovation consultancy Strategyn articulates three things a company must know to generate breakthrough innovations from a VOC (pdf):

1. What jobs the customer is trying to get done
2. The outcomes the customer is trying to achieve when performing these jobs in a variety of contexts
3. The problems and constraints that stand in the way of adoption of a new product or service

Admittedly, a tweet about your company fails to go this deep. But it is more information than you had, a new opportunity for engagement and a chance to plum the deeper needs after the initial tweet of Facebook page post. Creating a “home court” environment dedicated to capturing and engaging on these ideas and insights certainly sets up a stronger base for innovation.

The larger point is that external feedback is critical to understanding what needs your company’s products are fulfilling, and designing products and businesses accordingly. Procter & Gamble is a shining light in this regard. The company’s open innovation initiative Connect + Develop has delivered these results:

• In 2000, the success rate of new products was 15-20%. By 2008, the new product success rate rose to between 50 – 60%.
• R&D investment as a percentage of sales is down from 4.8% in 2000 to 3.4% in 2006.

The company attributes its success to its open innovation model. And the advantage continues. Diversified, globally-based P&G’s stock price is up 11% over the past five years, while the diversified, globally-based businesses of the S&P 500 are down 5%. That’s a sixteen percentage point spread.

Social CRM thought leader Paul Greenberg recently penned an article favorably looking at P&G’s open innovation efforts. He noted they are doing exactly what an evolved social CRM practitioner would do, only they never use the term “social CRM”.

Which brings me to the title of this post…

Which Social CRM Uses Have the Highest Impact?

In considering the eighteen uses of social CRM promulgated by Altimeter, a distinction can be drawn between those that have cross-enterprise impact, and those which are more tactical in nature.

The key distinction I’m going to make here is between traditional CRM and social CRM:

“CRM covers nearly all existing customers and identified prospects. Social CRM covers a small percentage of same.”

Is that blasphemy? I mean, Facebook has a population nearing 600 million members. Everybody is online, on-social these days. How can I say social CRM only covers a miniscule percentage of customers?

Two reasons:

1. Online conversations

I’ll hazard a guess and say that the vast majority of your existing and potential customers are not online talking about you, because:

• Having a Facebook account, and engaging others about a company, are two separate things; one doesn’t necessarily follow from the other
• Information search and one-way website consumption continue to be the dominant activities online
• When they do interact, it’s likely to be something other than your product. Seriously, think about the hundreds of products you use each week. How often are you talking about them online?

2. Receptivity

When people are online, how do you think they’ll take to an unsolicited message from a company? Presumably you could @reply them on Twitter, post messages to them on Facebook. Which really isn’t different than sending out email campaigns from a CRM system, is it? Except that an email account has a role for receiving all manner of information, plus a spam filter, plus CAN-SPAM unsubscribe links when I tire of your missives. My personal social media account? Very different purpose for me than my email inbox.

For these reasons, I expect any social CRM effort to only reach a small percentage of existing and potential customers for most Fortune 2000 companies. Now to be clear, a small percentage of a large customer base is meaningful. Which is why I think innovation ultimately is the top beneficiary of any social CRM effort.

The two graphics below show various Social CRM uses. The center column is what I’ll call “customers & prospects accessible through Social CRM”. This is a limited number of customers, for the reasons I outline above. The next column of many faces represents all customers and prospects. The color bands highlight a rough estimate of the number of customers impacted by a given Social CRM use.

Here are three uses with limited impact:

Each of those is tactical, as are several others among the eighteen uses in Altimeter’s report. Nothing wrong with that, there’s plenty of value there. But they don’t “gear” much. For example, the rapid social response can produce new sales, but they are a small percentage of what’s generated via a direct sales force (B2B) or effective marketing of a brand (B2C).

Next are uses that are broader in scope:

The ability to gain new insights for sales strikes me as a use that gears well. Historically, it was direct sales reports of what they were hearing from prospects. Now, in a less guarded fashion, prospects are revealing more of their underlying interests. Smart sales teams will profit from this.

Innovation insights are even better. Whereas the sales insights help to sell more of what you currently help with today, innovation insights help you understand, and build, what you’re going to sell tomorrow. This is powerful stuff, the type of insights that help companies stay ahead in their markets. Of course, it does matter which customers you listen to for innovation insights.

Finally, as Graham Hill, customer value management consultant at Optima Partners, writes in Social CRM at a crossroads: Where to next?

“The only sustainable track is to see social CRM as an enabler for value co-creation throughout the customer and product lifecycles.”

For the reasons outlined in this post, think of innovation as delivering the ultimate new value to your organization for social CRM.

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Note: this post was previously published on CMS Wire.

Hutch Carpenter is the Vice President of Product at Spigit. Spigit integrates social collaboration tools into a SaaS enterprise idea management platform used by global Fortune 2000 firms to drive innovation.