Social Media The Final Frontier in Customer Experience Management

NICOM-2012 / MKT-30

Submitted to:

15th Nirma International Conference on Management

Global Recession to Global Recovery: Opportunity, Challenges and Strategies for Sustainable Growth January 2012

Manish Parihar Assistant Professor Shanti Business School, Ahmedabad

ABSTRACT Key words: social media, social networking,customer experience management

'Customer Experience Management' represents the discipline, methodology and/or process used to comprehensively manage a customer's cross-channel exposure, interaction and transaction with a company, product, brand or service. (Schmitt, 2003) Traditionally, the CEM systems have focused on the ability to manage multi-channel interactions like contact center, company website, self service, mobile devices and brick and mortar stores. This has been the version 1.0 of customer experience landscape which can be also labeled company centric.

But lately, there has been a phenomenal rise of a new kind of media called social media that has proliferated and fundamentally changed the way we communicate in the last five years. Social media is the online content created by people using highly accessible and scalable publishing technologies. It is a shift in how people discover, read and share information and content; it supports the human need for social interaction with technology, transforming broadcast media monologues (one to many) into social media dialogues (many to many).

Customers now create their own communities, share and collaborate information and experiences about products and services. The peer to peer recommendation and reviews through social networking is preferred over traditional customer feedback mediums. Suddenly, the customers are empowered to share their product/service/brand experiences in a whole new way and there has been a fundamental power shift in the traditional CEM model: from being company centric, to the version 2.0 of CEM which has now truly become customer centric.

But the current explosive growth and proliferation of social media has pushed the final frontier even further: from customer relationship towards community relationship. (Kane et al., 2009)

INTRODUCTION

It is said that for a corporation, the unhappy customers are its greatest source of learning and these words are frequently used in business meetings and training workshops for employees engaged in customer relationship management (CRM) activities. These famous words were spoken by Bill Gates, and at that time, the world was re-discovering the art of listening to the customers by implementing better CRM practices.

A company could discover important insights from their customers (whether happy or unhappy) and use these insights to improve processes and products so that they can make it better for their future customers. So when Whirlpool launched their washing machines way back in India, they listened to their unhappy customers and realized that the typical Indian dress such as a saree or a dhoti were too big to be washed properly in their machines. Hence, they did some product redesign and launched a series of washing machines catering to the Indian customers needs and this translated to increased sales and market share for the company.

Some companies even went out and made drastic changes in their product offerings changes that were fundamentally opposite to their corporate strategy - after they listened to their unhappy customers. Some of the examples are KFC (Kentucky Fried Chicken) offering a vegetable thali to their customers in Delhi and Maxwell House Coffee repositioning their product as a fruit drink to attract Jewish customers during the fasting season of Passover in Israel. (Kohli, 2011; Chaudhari, 2010). Companies like Starbucks learned from their happy customers that integrating the shop design to suit the local culture was the key to success and they started implementing this strategy with great success in their global expansion.

Hence, there was always was something to be learnt from the customers and this has been the fundamental motivation for all CRM aficionados. However, in the last couple of years, since the advent of a new kind of communication medium, the customers have been empowered to reach out to millions of other customers in a matter of seconds and this has drastically changed the way in which they can share their experiences about products and services and the way in which companies can respond (if at all) to such information.

This new medium called social media, which will be discussed in detail subsequently, has proved to be a game-changer in the way that people communicate with other people. So, when an American Airlines customer was not happy with the way the cabin crew behaved with him, he simply went ahead and posted his experience on a social networking site which went viral i.e. got read and shared by millions of other people, and within days, the Airways had to compensate him for shutting up. Incidentally, American Airlines is designated as most hated on social media according to a research done by Amplicate in October, 2011. (McNaughton, 2011)

In such a communication environment, where any negative experience can be shared with so many people instantaneously, the new reality for a corporation is that the unhappy customers are its greatest source of pain.

In the following sections, we will explore how the new mediums of communication referred to as social media, has given a pain in the neck to todays companies, but at the same time, given them some unique opportunities to enhance and extend positive customer engagements and thus improve their overall customer experience management.

OBJECTIVE The objective of this study is: To understand the genesis of customer experience management and to explore how social media is creating a paradigm shift in the area of customer experience management.

TYPE OF RESEARCH

The methodology employed for research is exploratory in nature and does not include primary data collection. No survey or response method is used. Data is collected from several secondary sources like journal articles, research papers, websites and online social media portals.

CRM AND THE GENESIS OF CUSTOMER EXPERIENCE MANAGEMENT

Once thought of as a type of software, customer relationship management or CRM has evolved into a customer-centric philosophy that permeates an entire organization. There are three key elements to a successful CRM initiative: people, business process, and technology. Typically, a CRM is defined as follows:

A company-wide business strategy designed to reduce costs and increase profitability by solidifying customer loyalty. True CRM brings together information from all data sources within an organization (and where appropriate, from outside the organization) to give one, holistic view of each customer in real time. This allows customer facing employees in such areas as sales, customer support, and marketing to make quick yet informed decisions on everything from cross-selling and upselling opportunities to target marketing strategies to competitive positioning tactics. (Retrieved October 9, 2011 from http://www.destinationcrm.com)

CRM model depicting product and customer attributes

Source: Retrieved Ocober 9, 2011 from http://www.infovis.net/printMag.php?lang=2&num=164

CRM is a strategy used to learn more about customers' needs and behaviors in order to develop stronger relationships with them. After all, good customer relationships are at the heart of

business success. And good customer relationships are developed over a period of time by understanding the customers by collecting and analyzing information to attract, acquire and retain customers for lifetime.

It is said that if customer relationships are the heart of business success, then CRM is the valve the pumps a company's life blood. As such, CRM is best suited to help businesses use people, business processes, and technology to gain insight into the behavior and value of customers. This insight allows for improved customer service, increased call center efficiency, added cross-sell and upsell opportunities, improved close rates, streamlined sales and marketing processes, improved customer profiling and targeting, reduced costs, and increased share of customer and overall profitability.

But in the changing scenario from product centric to customer-centric approaches, the focus of marketers has shifted towards their customers and more deliberately on their experiences, which will be elaborated in subsequent sections.

Customer Experience Model

Source: Siefert. G. (2009, June 23). Customer Experience Model. Retrieved October 12, 2011 from http://customerexperienceblog.wordpress.com/2009/06/23/customer-experience-model/

The customer experience can be found in the overlap between the three fundamental pillars of CRM which were mentioned earlier i.e. people, business process and technology. A customer experience can be defined as:

The sum of all experiences a customer has with a supplier of goods or services, over the duration of their relationship with that supplier. From awareness, discovery, attraction, interaction, purchase, use, cultivation to advocacy. (Retrieved October 9, 2011 from www.wikipedia.org)

The genesis from customer relationship to customer experience happened in the beginning of the new millennium (that's 2000) when customers started demanding a higher marginal utility on their purchases; which basically means that they wanted more value for what they were paying. This shift was somehow related to the large scale internet usage and opening up of the floodgates of information, thanks to companies like Google. (McKay, 2009)

Traditionally, CRM just focused on customer retention and nothing else, which made it narrow in scope and highly inflexible. Thus, the concept of CEM was put forward. Pine and Gilmore first introduced the concept in their 1998 Harvard Business Review article titled Welcome to the Enterprise Economy.

They said that "customer experiences would drive business value and propagate financial success". What CEM basically does is cater to the emotional aspect of product purchase. That is; what customers are not getting physically in the form of rewards, discounts etc., they are being compensated for emotionally in the form of an exceptional user experience. This view has been clearly illustrated in the book "The DNA of Customer Experience" written by Colin Shaw.

This can be reinforced by an example - Apple Inc. Before his death, each time Steve Jobs made a new product announcement, the sales figures went off the charts (ex: i-Phone, i-Pad). Most people would think it's because Apple's customers are passionate about the company, but in actual reality they are passionate about the experience that it offers. This is one of the main reasons why even after pricing their products at outrageous rates, there are still people to buy

them. Apple realized the importance of CEM before most companies, and one must give them credit for that. Hence:

A company with a price advantage can be undercut, a company with a performance advantage can be outflanked, but a company with an emotional difference can potentially demand a price premium forever (Valoor, A, 2010)

INTRODUCTION TO SOCIAL MEDIA

In the age of the Web 2.0 and almost omnipresent broadband internet connections, a large majority of the online public are communicating with each other through a new medium. Apart from e-mail and instant messengers, they communicate through the medium of blogs, microblogging websites and social networking websites like Facebook, Twitter, LinkedIn and many others. (Ahuja, 2010) Unlike the traditional web-sites and corporate blogs, these social media platforms are used by the members to share, engage and collaborate with their peer groups to build lasting relationships in the virtual world. This way of communicating is termed as social networking and this new medium of communication is called social media. It has been said that social media is seen by many marketers as the next gold rush (Kaplan, 2010) and a majority of companies are engaging in social media marketing.

Some of the popular social media websites are:

Facebook, Orkut, MySpace, Google+ LinkedIn Blogs like WordPress, Blogspot YouTube Wikipedia Flickr, Picasa SlideShare and Scribd Twitter

- mainstream social networking sites - professional networking site - used for broadcasting and publishing data - video sharing website - the open-source online encyclopedia - picture sharing websites - document sharing websites - micro-blogging website where one can post only 140 characters at a time

Some critics say that social media is just another fad. (Baker, 2009) However, some of the following statistics can be quite startling, even for the harshest critic (Qualman, E, 2011): Over 50% of the worlds population is under 30 years old Facebook has topped Google for weekly traffic in the US It took radio 38 years to reach 50 million users. TV took 13 years; internet took 4 years, Apple iPod took 3 years to reach the same number of users. But social networking leader, Facebook, added over 200 million users in less than a year! If Facebook were a country, it would be the third largest after China and India. 80% of companies use social media for recruitment, especially LinkedIn 50% of mobile internet traffic in the US is for Facebook YouTube has become the second largest search engine in the world after Google Wikipedia the open source online encyclopedia, has over 15 million articles. Surprisingly, 78% of these articles are non-English. More than 1700 new articles are added on Wikipedia every hour! There are more than 20 crore blogs on the internet Kindle eBooks outsold paper books in 2010

Hence, social media isnt a fad. Its a fundamental shift in the way we live, communicate and do business.

TRANSITION FROM CUSTOMER TO COMMUNITY

The genesis from CRM to customer experience has resulted that most of the business functions today are geared towards improving the customer experience. However, CRM mostly relies on after the fact kind of systems i.e. they focus more on analytics of past or historical data. Be it an airline or a retail outlet, all analysis is typically done after the passenger has flown or the purchase has been made. And typically, this is done once in a month, or at best once in a week. And by that time, the opportunity to serve the customer better is already gone. Very little is done to influence customer behavior during or before a purchase.

But as online social networking has seen unprecedented viral growth in the past few years, there is an opportunity for a business manager to leverage a customers network to influence behavior. Social networking lends a near real time opportunity to manage customer relationships. It provides the ability to leverage the influencing power of a customers network of friends on his or her buying decisions. (Nair, 2008)

If todays customer is contemplating to buy a product, he/she could just post it on his social media profile page and invite his network of trusted connections to get feedback on the various options available and their reviews - instantaneously. Hence, todays companies are also realizing this insight to create communities around their products or offerings, invite and encourage members to join them, and then convert them into loyal customers and advocates.

Inducing a customer to make the leap from being just a customer to be a community member can result into better management of customer experiences in real time and this can be accomplished by: Identifying the social media where your customers or prospects are most active. Creating appropriate content and updating it regularly Measuring quantitative and qualitative metrics to gauge the success of CRM activities

Todays biggest brands have the largest social online communities and these are managed by dedicating valuable resources to ensure that the relationship between the brand and its community becomes and remains strong.

Top 5 most liked companies on a social networking site

Source: http://www.hacktik.com/top-5-most-liked-facebook-pages-infographics.html/

10

THE CONCEPT OF SOCIAL CRM As the shift from customer to community took place in the last couple of years, companies started using social media tools and platforms to reach out to these communities. This shift slowly gave rise to the concept called Social CRM. (Bublik, 2009) Hence, it is the use of social media services, techniques and technology to enable organizations to engage with their customers. This is an emerging field and pioneering work is done in the area by Paul Greenberg who says: Social CRM is a philosophy and a business strategy, supported by a technology platform, business rules, workflow, processes and social characteristics, designed to engage the customer in a collaborative conversation in order to provide mutually beneficial value in a trusted and transparent business environment. It's the company's response to the customer's ownership of the conversation. Social CRM is often used as a synonym for Social Media Monitoring, where organizations watch services like Facebook, Twitter and LinkedIn for relevant mentions of their product and brand and engage with fans and members. (Myron, 2010) It also includes customer communities managed by the organizations themselves. Social CRM Model

Source: Leary, B. (2009) retrieved October 9, 2010 from http://crm2.typepad.com/brents_blog/2008/07/social-crm-in-p.html

11

As shown above, the social CRM process revolves around conversations with friends, partners and collaborators to create lasting and meaningful relationships. The above model is sustainable only when all stakeholders participate across the social media lifecycle. (Petouhoff, 2009) An article published at TMCnet.com (Read, 2011) discusses how stakeholders can contribute to sustainable social CRM: Technology: CRM packages with social media components must be offered on a portal. The thrust of social media analytics should be on sentiment accuracy and multi-lingual support. Core analytics integrated with community platforms, public networks and downstream CRM applications can become a differentiator. Consulting: Solution Integrators must develop unified social CRM offerings based on proprietary frameworks, specialized analytics and platform solutions to help customers address the challenges of the social CRM ecosystem. Customers: Innovative business models, combined with a co-creation approach to analytics, ensure customer-centric operations. It is imperative for CRM agents to undergo training in social media collaboration tools.

CUSTOMER EXPERIENCE MANAGEMENT USING SOCIAL MEDIA Business owners are increasingly interested in using social media to optimize their customer experience management activities because they know social media is changing the CRM game. (Howell, 2010)

Before the advent of review sites such as Yelp and TripAdvisor, business unit managers were much more in control of their properties images and reputations. Now, a growing number of adults are using these sites to aid in decisions about where to eat, shop, or stay. For example, according to Forresters North American Technographics Online Survey, roughly 78 million individuals now regularly participate in travel-specific social media. Other social media reviews are skyrocketing, according to published media:

TripAdvisor alone contains 40 million reviews, double its total two years ago. Yelp, which was founded in 2005, hit 1 million reviews in mid-2007 and passed 10 million in March 2010 despite its policy restricting reviews to site members only.

12

Forrester estimates that roughly 65 million US online adults engage in 'critic' behaviour, posting ratings, reviews and other critiques on the social web at least once a month.

Customer reviews have been bundled into the user experience of most online storefronts. Reviews are central to hospitality booking sites such as Expedia.com, just as they are on Amazon.com, Walmart.com, and the online Apple Store.

Emerging location-based applications such as Facebook Places, Foursquare, and Gowalla are integrating customer reviews into their offerings.

That means that quite a few potential customers are won over by positive reviews or lost forever by negative ones. Since these reviews now have a direct effect on revenue at a particular location or branch, business managers often consider these comments an especially urgent form of customer feedback. Hence, not only companies, but individual business units or branch officies are also latching on to social media websites like Facebook (Shih, 2009) and micro-blogging sites like Twitter (Leary, 2009) to engage with customers as a part of their CRM strategy.

According to researchers (Wilson, 2011), some of the best practices in customer experience management using social media are: Use social media to listen first to determine how best to interact with customers. Recognize the importance of making emotional connections with customers via social media. Blend social media with other voice of the customer sources to create a holistic view of customer priorities. Leverage customer stories from social media to energize employees enterprise-wide in continual improvement of customer experience.

CUSTOMER EXPERIENCE 2.0 The rise of real time online social media has changed the way communities of customers engage with each other and with companies to share their experiences. The customer experience sharing process as well as the response by companies has gone to the next level where everyone has the luxury to scrutinize, comment and further share the experiences of each other: thus making the entire process an experience in itself.

13

This has given rise to the concept called Customer Experience 2.0 (Kane et al, 2009) which is a totally unique way of creating lasting customer experiences by the use of social media tools to leverage the needs and wants of the customer. The theory is as such in its nascent stage with a handful of researchers working on creating such a level of customer engagement. Some of the steps which could lead to such a level are: Defining clear and precise customer segments Identifying and selecting social media tools Designing the content Developing a blog and integrating other tools on the platform Testing it with customers and improvisation

Customer Experience 2.0 is here to stay in this era of Enterprise 2.0 as more and more companies are embracing online networking technologies. (McAfee, 2009) It is upon the companies to embrace this new media, use it and continually improve upon the experience that the customers want. This will create a lasting differentiation, increase sales and build a rock-solid competitive advantage.

LIMITATIONS OF THE STUDY

The research is limited only to the study of journal articles, websites and online resources and as such does not cover each and every dimension of customer experience management. This paper can be used as a starting point to do more research in creating social media strategies to optimize customer experiences.

FINDINGS AND CONCLUSION

Based on the study of various articles in journals and online buzz about the next generation CRM, it was found that although the traditional touch points with the customer are here to stay,

14

but the new generation online tools have radically changed in the way that companies connect and relate to their customers.

The concept of customer experience management has been an extension of the new-age customer relationship management and this itself has taken over a whole new dimension after the introduction of social media tools to create Social CRM. The dramatic growth of social media tools in the last five years has pushed a majority of the corporations on the social media bandwagon, because it is commonly accepted fact in marketing: Be where your customers are; as looking at the current trends, all the customers are logging on to some form of social media.

Hence, we can conclude that social media is the latest and most important shift in managing and optimizing customer experiences. However, a very clear strategy, customized for each

organization has to be planned to actually derive any meaningful benefits from this new medium.

15

ACKNOWLEDGEMENT

Many thanks to Shanti Business School (www.shantibschool.edu.in) and its management for sponsoring me to take part in this conference. Special thanks to Mr. Jai Sanghani (Head New Initiatives), Major Benor, Prof. Bala Bhaskaran (Executive Director) and Dr. Kishor Barad (Area Chair Marketing) for their support and guidance.

Deep gratitude is expressed to the Director of B K School of Business Management, and PhD guide of the author, Dr. Sarla Achuthan for her insights and guidance in the area of modern tools of marketing.

The author wishes to acknowledge the constant support and encouragement of his former boss: the Director of Saraswati Institute of Engineering and Management (SIEM), Prof. Dr. K. N. Sheth.

Many thanks to Dr. Mukund Patel, Director of American Corners, Ahmedabad Management Association. Thanks to colleagues and friends for providing random but meaningful inputs to the subject.

16

REFERENCES Ahuja, V. (2010, March 23). Corporate blogs as e-CRM tools Building customer engagement through content management. Journal of Database Marketing & Customer Strategy Management, Vol. 17, 2, 91-105. Baker, S. (2009, December 14). Beware social media snake oil. Bloomberg Businessweek, pp. 48-51. Bublik, C. (2009, August 6). Social factors innovations shaping CRM. New Media Age, pp. 3031. Chaudhari, R. (2010). Business is marketing. Retrieved October 10, 2011 from http://rajitachaudhuri.blogspot.com/ Howell, N. (2010, February 4). Social Discourse How does CRM fit with social media? New Media Age, pp. 28-29. Kane, G., Fichman, R., Gallaugher, J. & Glaser, J. (2009, November). Community Relations 2.0. Harvard Business Review, pp. 45-50. Kaplan, M. (2010). "Users of the world, unite! The challenges and opportunities of Social Media". Business Horizons 53 (1): 5968. Kohli, G. (2011, February 5). KFC announces the launch of its maiden restaurant in Delhi. In Agency FAQs. Retreived October 10, 2011, from http://www.afaqs.com/news/company_briefs/index.html?id=7342_KFC+announces+the+launch +of+its+maiden+restaurant+in+Delhi Leary, B. (2009, March). The tweet is mightier than the sword. Customer Relationship Management, pp. 48. McAfee, A. (2009, November). Shattering the myths about Enterprise 2.0. Harvard Business Review, pp. 1-6. McKay, L. (2009, January). The Google-ization of CRM. Customer Relationship Management, pp. 22-26. McNaughton, M. (2011, October). American Airlines Most Hated on social media, Virgin America Most Loved. The Realtime Report. Retrieved October 10, 2011 from http://therealtimereport.com/2011/10 Myron, D. (2010, August). Social CRM gains social acceptance. Destination CRM, pp. 4. Nair, S. (2008, July). CRM: From customer to community. Silicon India, pp. 40-41.

17

Petouhoff, N. (2009, September). CRMs still getting social. Customer Relationship Management, pp. 6-7. Qualman, E. (2011, August 16). Social network user statistics. Socialnomics. Retrieved October 12, 2011 from: http://www.socialnomics.net/2011/08/16/social-network-users-statistics/ Read, B. (2011, March 11). Infosys identifies what business stakeholders should consider in building social CRM. Call Centre Services Featured Article retrieved from http://call-centerservices.tmcnet.com/topics/call-center-services/articles/155059-infosys-identifies-what-businessstakeholders-should-consider-building.htm Schmitt (2003), Customer Experience Management: A Revolutionary Approach to Connecting with Your Customers, Wiley; 1 edition, ISBN 0-4712-3774-4 Shih, C. (2009, November). Facebook is the future of CRM. Customer Relationship Management, pp. 12. Siefert. G. (2009, June 23). Customer Experience Model. Retrieved October 12, 2011 from http://customerexperienceblog.wordpress.com/2009/06/23/customer-experience-model/ Swamy, V. (2010, September). Creating a buzz in social CRM. Silicon India, pp. 22-23. Valoor, A. (2010, August 24). Will customer experience be the next big thing? The social genesis. Retrieved October 12, 2011 from http://thesocialgenesis.blogspot.com/2010/ Wilson, D. (2011, August 19). Social media customer experience management: The next big trend? My Customer. Retrieved October 14, 2011 from http://www.mycustomer.com/topic/customer-experience/social-media-customer-experiencemanagement-why-emerging-field-important/1#

***

18