Social Networking and CRM:

Still Searching For A Fit

By Denis Pombriant, Managing Principal, Beagle Research Group

Social Networking (SN) is another one of those things I have been watching for a long time as the technology has slowly but steadily approached the front office. The idea of using SN technology to find a needle in a haystack was a kind of panacea. Imagine being able to find a mutual contact you never knew existed who might be able to introduce you to a sales prospect.
Interestingly, about a decade ago the same use was made of business intelligence software, it was supposed to be the stuff that could help you zero in on market segments.

In both cases early promoters of the technology were right but I wouldn’t say they were far sighted enough.
Social networking was supposed to be the next thing that would transform the way we sell but in the last couple of years, SN seems to have stalled in no small part because no body likes or wants to be the target of introductory emails from virtual strangers looking for a favor. That doesn’t mean SN has no place in CRM, instead, I suspect we haven’t figured out how to use it properly. The same kind of thing happened with business intelligence, it was supposed to help you segment your potential customer base into groups you could construct specialized target messages for.
Business intelligence worked out well enough for marketers but I think the technology found its voice when vendors and users turned its focus inward and began examining a business’s data to find trends and what worked best.
So far, it seems to me that with few exceptions, companies have looked at SN as if it was just another sales tool designed to help cram product into the market thus helping the sales team to once again make quota. Unfortunately, larger and longer lasting marketplace trends give that approach decreasing likelihood of success.
Customers are savvier about products today in part because the products on the market now are evolutions on original concepts. People are buying their second, third or umpteenth cell phone, mp3 player, computer, PDA or whatever and are not as likely to buy the first thing they see. Selling has risen to a new level of sophistication because customers have gone there first therefore technologies that simply aim to turbo-charge old selling habits will show diminishing results. Using SN for sales falls into this category.
Social networking has been used effectively for a long time by companies interested in engaging customers in a conversation aimed in part or in total at improving products and services. People have been using SN techniques much longer than they’ve been using computers. My favorite example comes from Eric von Hippel’s book http://mitworld.mit.edu/video/262
Democratizing Innovation in which he describes the rapid evolution of the steam engine from something that was barely useful at pumping water out of a coal mine to something that transformed mining.
According to von Hippel, mine operators, who should have been natural antagonists and averse to helping each other, traded information about steam powered water pumps thus helping each other and the steam engine manufacturers to build better products. These people used industry associations to transmit information, much as we use these associations today.
Where SN techniques can help best, I think, is in bringing together virtual communities of interest, people who will share their ideas about products and especially about their needs and attitudes. Using SN this way has several advantages over using it to get a deal. By using SN within a community you have the opportunity to test ideas with users and see how they react. The information you collect can then go into better product designs or whole new products. SN can also be used to test and validate marketing ideas, Web site design and the like. I call this “deep marketing” and it has an analog to older more labor intensive techniques such as the phone survey and the focus group.
This application of social networking comes in the nick of time if you ask me. Vendors need ways to better understand customers — not simply better ways to identify them — for the simple reason that customers often don’t know what they want or need until there is a solution. At that point customers wonder how they ever got a long without a product like a better steam engine.
The fact that technologies like social networking or business intelligence should morph a bit between the time that they are introduced and the time when they can be said to be mature should surprise no one. Early adopters frequently adjust a technology’s focus until it optimally suits some purpose and I suspect that’s happening in social networking even as I write this. You could say that I am a believer in the power of social networking and I can’t wait to see what happens next.

Denis Pombriant founded Beagle Research Group, LLC in 2004 after a successful career in enterprise software sales and marketing. Pombriant is widely quoted throughout the industry and he is a member of the Editorial Advisory Board for CRM Magazine. Pombriant’s writings appear regularly in print and online journals such as CRM Magazine, DestinationCRM.com, CRMBuyer.com and SearchCRM.com .

Can A Loyalty Program
Help You Drive Demand?

B2B loyalty programs seem, on first consideration, to be a great idea. But they also come with their own pitfalls that don't occur in consumer-based loyalty programs. For example:

• Is it ethical to reward a client's employees to make decisions based on personal gain?
• Who should be rewarded: the business owner, management, employees, the business itself, or all?
• Is the person who gets the benefits always the one who makes the actual purchase decisions?

The list of problems grows or shrinks depending on the industry sector
involved, and on how well the relationship between supplier and client is defined and controlled.

For example, there is little point in a CPG manufacturer rewarding the product buying clerks at a supermarket's head office when the decisions on product range, quantity, and shelf space allocation are taken by others (such as marketing and merchandising managers). This represents a tightly controlled buying environment in which direct rewards for employees are fruitless.

However, in a more flexible (and typically smaller) business environment, buyers often have authority over stock control, product range, quantities, and even merchandising arrangements. In these cases, a B2B loyalty program that rewards the buyer would probably work - even if it stands on unsteady ethical ground.

There is another situation where B2B loyalty schemes work very well: channel sales partner programs. These are where a manufacturer directly rewards the sales staff of companies that resell its products. This kind of selling incentive is very constructive because it benefits both businesses equally, in terms of greater sales and profit.

By generating strong engagement between channel partners' sales people and the products themselves, the resultant increase in product knowledge and familiarity means that a more authoritative line can be taken in the sales process when dealing with end users.
A fine example of this kind of program's success is networking specialist Nortel, which achieved 40% growth in channel sales after one year of running such a program, which is detailed in section 25.1.6 of the 2006-2008 edition of 'The Loyalty Guide' report.

The Loyalty Guide Volume II (The Wise Marketer's 950-page global report on customer loyalty) explains every aspect of B2B loyalty, consumer loyalty, best practices, concepts, models and innovations, including case studies, original research, illustrations, charts, graphs, tables, and detailed presentation material.

Find out how to build true customer loyalty, increase profitability, reduce defection levels (churn), and how to monitor and increase each type of customer's purchase frequency, spend level, and share of wallet. The world's key loyalty programs are detailed, studied, and summarized for you. See where others are succeeding, what works, what doesn't, and why. Full details and downloadable samples are available online at http://www.theloyaltyguide.com/volume2

Sizing up Social Networks and
Their Potential to Build Value
By: Guy R. Powell, President of DemandROMI

OK, so we want to build a social network. Sounds great but is it really going to increase our brand engagement and drive revenue? And even if it does drive engagement, how do we translate that into conversions at the bottom line?

According to Nielsen/NetRatings MySpace had 57 million unique visitors in April 2007 representing 75% of the unique visitors between the top community websites (Myspace, Facebook, Bebo, Gather.com and Friendster). But how are the marketers of these communities turning that into conversion? What we need is a framework to begin to measure the value of a social network.

There are five key components to measuring the level of engagement of a social networking community (to download a whitepaper on the community engagement funnel, go to www.SNSWorkshop.com/Metrics.html):

·External awareness – For anything to happen with a social networking community there needs to be awareness. Early on marketers must spend a significant portion of their time at this level in the engagement funnel if they are to organically drive membership.
·Subscription – The first level goal of building awareness is to drive and increase membership in the community. Whether it’s a paid or unpaid membership marketers want visitors to click on that infamous ‘Join Now’ button.
·Consumption – Once becoming a member, they can begin to consume the offerings provided by the community. They can read blogs and other content, respond to advertising and make purchases.
·Conversation – A higher level of engagement however takes place when the member begins to interact with the other members of the community. They participate in blogs or discussion groups. They post comments and they may even build their own blog or discussion topic within the community.
·Invitation – The highest level of engagement occurs when the member invites other non-members to subscribe to the community. They now have enough trust in and receive enough value from the community to invite their friends. They are convinced that their friends will also gain value from the community.

Marketers must pinpoint their marketing efforts across all levels in the community engagement funnel to drive increasing engagement for members and non-members:

·At the top level marketers drive awareness of the community to deliver visitors to the registration page. If it is a fee-based subscription, the marketer can now rack up dollars as awareness leads to increased membership.
·At the consumption level success occurs when the members consume the offerings found within the community. If there are opportunities to spend more money on the site through the purchase of products or the serving up of advertising, the marketer has a new way to convert engagement with the community into money.
·At the conversation level a marketer can gain through the content of the conversations. Many marketers have found that utilizing consumer generated verbiage in their traditional advertising is one of the best ways to improve the quality of that advertising.
·The last advantage for marketers is for the membership to invite other members to join in. This is when the viral component begins. If the marketer can find clever ways to motivate the membership to send out invitations, the marketer can gain through the multiplier effect from members inviting others to join the community.

Although there are other providers of social media solutions, ThePort Network, one of our software partners, has begun to provide its clients measurements based along this framework. Looking at myajc.com, the online community for the Atlanta Journal-Constitution, the primary newspaper for the metro Atlanta area, we have seen marked increases in traffic and engagement at the primary site (ajc.com shown in blue in the diagram) once the community (myajc.com, shown in red) was actively promoted in October 2006. (See attached chart.) Twenty seven percent 27%) of total engagement with the brand as measured by the total number of minutes spent by unique visitors with the brand was done on the community site. Since both sites provide advertising opportunities and this represents an important revenue source for newspapers, we can extrapolate that online advertising revenues increased by a similar proportion (we are not privy to the exact numbers).


As for our consumption metric we’ve found that on this site in the first 6 months, each of the users posted on average, just over three blog comments. For another site managed by ThePort, we’ve found that users invite on average four of their friends to join the community.

Measuring engagement with the community based on a clear framework allows marketers to understand the level of activity being engaged in by their members. Armed with this information marketers can begin to drive further value by pinpointing their campaigns to make certain that engagement increases in a way that is good for their members and drives value for the marketer.



About the Author:

Guy R. Powell is President of DemandROMI, a marketing consulting firm specializing in driving increased ROI from creative marketing tactics and strategies. Please visit our website at www.demandROMI.com and our blog at www.MarketingTactegy.com.