As social media is all about customers, here’s our definition put in customer terms. SCRM is how we…

• Listen to what you and others have to say about our brands and service
  
• Help you engage with us, whenever you need to, wherever you are, in ways that are convenient to you
  
• Provide you with the personal experience you need to keep you engaged – informed, interested and maybe even entertained!
  
• Transact with each other, or through third parties, in ways that are mutually valuable
  
• Get to know each other over time so that we can tailor what we do (and how we do it) with you in mind.
  

Does this make sense to you? How can I better it? If you like it or dislike it, simply click the thumb button below! Thanks

Much has been written about social media and its rising importance in engaging customers. A consumer’s engagement with a brand can be measured along a continuum – from no awareness, through to early engagement and maybe, if you’re lucky (and clever), onto advocacy. Like any relationship, the strength of feeling will develop and vary over time and, as in any healthy relationship, both parties should be aware of feelings so they can react accordingly. We know that consumers are much more trusting of friends and colleagues than they are of TV advertising or corporate communications. We also know consumers talk to each other like never before through a multitude of social channels. Social ‘media’ contains ‘conversations’. Like any conversation, in a cafe or bar for instance, the content varies. Some conversations are serious and some fun, some are short and some long, some happy and some angry and intense. Thoughts, opinions, ideas, jokes, confidences, experiences, photos and videos are shared by individuals to small networks and can be rapidly amplified into larger networks of people, within a location, nationally or globally. Consumers’ ‘experiences’ are naturally part of this conversation and brand and service experiences are discussed openly and frankly whether organisations are involved in the conversation or not. In this way, consumers are becoming more powerful. Opinions can be amplified very quickly and brand performance will be impacted. The locus of control in the brand-consumer relationship is shifting from brands to consumers. Brand marketing is becoming less about pushing messages out to consumers within a static relationship, and more about the brand being part of the dynamic conversation, listening, serving relevant content/ experiences to earn the trust of consumers.

Clearly monitoring the buzz and intervening, when appropriate, has advantages to brand managers in any b2b or b2c environment. This monitoring can lead to a better understanding of consumer behaviour and feelings – the mood in the market. It can lead to changes in strategy, services, products, promotions, pricing channels and so on.

But brands are using social media in ways other than listening and innovating. Consumers of all ages interact with social media content on mobile devices, PCs, kiosks, at home, at play, at events, at work, on holiday or when travelling – in just about any situation – in much greater, and ever increasing numbers than before. In a survey of 1,700 U.S. Internet users, Nielsen Online found that 73% engaged in social media at least once per week. Engagement was defined as reading a blog, visiting a social network or reading (and/or commenting on) a message board. The research estimates the total U.S. social media audience at 127 million. Brands who really understand how their consumers behave on and off line are taking advantage of an unprecedented opportunity to engage with their target consumers, sometimes in small groups, through ‘content’ and online ‘brand experiences’. The currently accepted ‘rule’ is that 90% of social media users just view content, while 9% edit it (e.g. provide a comment or review) and 1% create brand new content. This % profile is VERY different in some segments of the population.

If the content engages the consumer, the consumer may do nothing, buy the product directly or interact in some way. The interaction may be via a comment on Facebook which may not require a response or it may lead to a 1:1 exchange with the organisation, through whatever channels are right for the exchange. Traditional advertising combined with social media content and other response vehicles (e.g. on pack) will generate interactions which can be managed through a combination of SM (social media) and, for some consumers at some times, communications through more traditional CRM channels. Early pioneers have called this combination of Social Media and CRM, Social CRM or SCRM. Social CRM is a way of engaging customers and consumers a PART of the overall marketing mix

How refreshing to have a leader leading from the front and setting the vision for his brand team. In an interview with Advertising Age in April 2010, P&G Chairman-CEO Bob McDonald said that what made P&G successful in the past will not make them successful in the future. He wants to avoid the trap of leaning too heavily on the company’s marketing legacy and “it is one thing that keeps him up at night”. Increased focus on digital marketing, he said, is one of the keys to P&G’s strategy to remain a leading marketer. “Any medium that helps us create a one on one relationship with any consumers is what we want to do…an end point of marketing (or at least on the journey) is a 121 relationship with any consumer. Digital allows that relationship. I want a one on one relationship with 7bn people…where we can customise the offering”.

Brand teams in many consumer companies maintain their relentless focus on broadcast TV – looking over their shoulders nervously at the onset of new media while they purchase more slots on TV schedules. Companies like P&G target consumer engagement as the objective and appear to be striving to find the right balance between traditional and new media approaches. Social CRM has a powerful role to play as a supremely valid part of the marketing mix. In our view, 10-20% of advertising budgets should be put aside for test and learn strategies in this area. 

Marketers are working in exciting times.  Never before have we been able to get so close to our customers and engage with them in such a timely and relevant manner.  Harnessed with customer relationship management (CRM), Social Media can deliver financial benefits to companies no matter what sector.  The benefits are centred around increasing ‘customer insight and engagement’ and are not peripheral but fundamental to driving business performance.  Financial benefits apply across the customer lifecycle, in acquisition, retention, value development and managing cost to serve.  In addition, social CRM can deliver insight which will help drive real customer centric innovation.  Finally, the knowledge gained on customer behaviour, attitudes and mood will help drive benefits throughout the value chain, impacting on suppliers (e.g. forecasting demand) and intermediaries (e.g. shaping in-store promotions).  However, pioneers in large companies face three hurdles;  (1) organisational readiness, (2) over-hype and over-expectation and (3) project management failings.  At the end of it all, Social CRM is about PEOPLE and RELATIONSHIPS and demands a customer focus like never before.  Forget that and you have little chance of success.  This article is in three parts.

If you are interested, leave your name and email as a comment below to receive an advance copy of our article on this (to be published May 2010).

Research shows the relationship between consumer engagement and value to the brand is fundamental to understanding brand health. It shows that for almost all brands, leadership is achieved by winning emotional commitment (adorers) from a small % of the brand community, the high value consumers (HVCs). Small changes in the way these HVCs are managed can have major impact on sales, margin and market share. Or put another way, HVC strategies can have a major impact on revenue protection, revenue growth, revenue development and cost of sales.
A convergence of two forces ((1) new, lower cost technologies and (2) consumer behaviours) has resulted in exciting new opportunities for brands to develop engagement with their brand community.

However, CPGs have had poor experiences of direct and interactive communications, and are not yet set up to take advantage of the opportunity, relying on traditional methods of brand development which sidelines, for instance, digital and relationship management techniques. We argue that the focus of brand managers needs to change to a stewardship role of consumer engagement and value, bringing in media and discipline experts when necessary.

Some brands and markets will benefit more than others. It is likely that regulated, mature markets will see quicker benefits especially with brands that have a high HVC concentration, an ‘information requirement’ and have a community that encourages the spread of viral messages.  This extract of the full article examines the importance of consumer engagement.  The pictures and graphics cannot be published in this blog - please leave your email id and we’ll send you the full article including graphics.

Aims of Brand management

Brand management aims to build in consumers’ minds a set of perceptions and attitudes relating to a product or service, leading to positive buying behaviour. Traditionally, the methods that brand managers use to find out who their consumers are and what and how much they buy are market research and retail audits. They influence consumer behaviour through powerful communication methods, such as advertising, sales promotion, packaging, display and the like. If there are any differences between consumers, none of these methods can be customised to deal with individual consumers.

Some consumers are more equal than others

Research has always shown brand managers that consumers are not a homogeneous set; they have differing value to the brand (the pereto (80/20) rule exists in some shape or form with almost all brands) and there are different levels of engagement with the brand. Importantly, multiple bodies of research have shown relationships between ‘engagement’ and value. The chart shows an adapted version of WPP’s (Milward Brown and Ogilvy) view of this.

The over-riding truth from engagement and value research is: Few consumers make or break a brand

Consider these 8 key points, which have been distilled from various research in this area.

Firstly, it is clear that the greater the consumer engagement, or ‘emotional loyalty’, the greater the financial value of the consumer. On average, consumers will spend more with you as their engagement increases.

Secondly, deeply engaged, or committed, consumers (adorers) drive brand performance. Indeed, Ogilvy BrandZ Loyalty Index can produce this type of profile (illustrated in the chart below for two different organisations in the same sector) for many consumer brands in many countries around the world. If you can move consumers from mildly engaged to committed, their value leaps dramatically. A committed consumer has 5-8x the value of an average consumer.

Thirdly, not all committed consumers are of equal value. A consumer can be very engaged with your brand, and buy your brand every time they spend money on that category – but they may not spend much in that category! For committed consumers, if you were to split the group into HIGH, MED and LOW category spenders, the HIGH spenders may spend around 5x as much as LOW spenders

Fourthly, commitment is extremely difficult to achieve. Consumers are frugal with their ‘loyalty’. Only a small % of the brand community will be committed to any brand in the category. This loyalty has to be earned, and rarely is it earned through price or sales promotion. Commitment is driven from a combination of RELEVANCE (you can’t be committed if the category is not relevant to you), INTEREST (you can’t be committed if you are not interested in the category) and UNIQUENESS (you can’t be committed if you think several providers have the same proposition each category). It is more difficult to develop committed consumers in some categories than it is in others.

The fifth point is that commitment is a key driver of brand leadership. The brand that has the highest % of committed consumers is almost always the leading brand. The worldwide BrandZ study shows this very clearly. The number 1 and 2 brands in any category have a higher % of committed consumers. In Insurance for instance (high relevance, low interest), only 2% of UK consumers are committed to a particular insurance company (across the sector). However, even with this sector, the brand leader has 3x the number of committed consumers as the follower brand. That is why they are the leading brand.Next, ’satisfaction’ with the brand is not enough and does not imply re-purchase – it is simply a hygiene factor for being in the category. Commitment keeps buyers loyal. They are more likely to resist competitive promotions, search out your brand if they cannot immediately find it; pay more for it; be more forgiving of service issues. Put another way, research shows that ‘commitment’ is the only stage of engagement where re-purchase of your brand is virtually guaranteed.

The seventh point is that although emotional commitment by itself correlates strongly with brand performance, there can be barriers to purchase. Even with highly engaged consumers (but less so with them) practical factors impact on sales because full commitment is a combination of emotional (engagement) and functional (e.g. price, availability, promotion) factors. If the price is perceived as too high; if the consumer cannot find your product on the shelf or on the web; if the packaging size is wrong, or if promotions aren’t attractive, then consumers may switch to a competitor brand – at least for that purchase. Correlation analysis shows a very close relationship if brand performance is compared to both engagement and functional factors. The correlation chart shown is from Synovate.

Finally, you can identify not just the degree of engagement with your brand, but the degree of engagement with competitive brands (see bar chart from TNS). This will help you identify both brand equity and potential.

In summary, a small % of your consumer base (perhaps 5-20%) will drive the profitability of your brand. If you can increasingly engage consumers to become committed to your brand and if you have more committed consumers than your competitors, you are very likely to be the brand leader.

I was reading a book the other day on leadership which caused me to reflect a little about what makes an effective leader. In their book The Leadership Code: 5 Rules to Lead By
(Dave Ulrich, Norm Smallwood, and Kate Sweetman, 2009) the authors
have boiled leadership down to 5 essentials. They wrote the book because they thought there was too much confusing literature on ‘leadership’. Indeed, if you Google ‘leadership’ or ‘leader’ you get >350m hits – a morass of ideas. The key question in the book is “Across industry sectors, geographies and levels, what is it that leaders have to do to be effective”?

The conclusions were drawn from a meta-qualitative
study of the thoughts and experiences of 15 leadership thought-leaders who have carried out a vast number of survey and interviews and have written many books on the subject. The authors asked two questions:

1. Based on your experience (meta analysis) ‘what % of leadership is the same basic stuff – no matter level, sector, geography’. Most people said that between 60-70% of leadership is generic.
2. Then they asked ‘what is it that defines this 60-70%’ (qualitiative analysis). This is where the 5 areas emerged.

So what are the 5 areas:

1. Leaders must invest in themselves to be personally proficient. Effective leaders manage their physical, emotional, intellectual, and spiritual selves well. They learn constantly. They are capable of quick, bold actions as well as great patience. They constantly deepen their insight about themselves. This is especially true in tough economic times when people look to their leaders for hope and confidence.

2. Good leaders know how to be strategists
and are able to answer the question “Where are we going?” They test their big ideas pragmatically, and they work with others to find the path from the present to the desired future.

3. Effective leaders are executors. They ask: “How will we ensure that we reach our goal?” They understand how to make change happen, assign accountability, delegate appropriately, and make sure that teams work well together.

4. These leaders are talent managers
and engage people to get things done now and in a manner that generates intense personal, professional, and organizational loyalty. They help people bring their best to the job at hand.

5. Finally, they are human capital developers
who build the next generation. They make sure that the organization has the longer-term skills, knowledge, behaviors and attitudes for future strategic success.

The first one (Personally proficient) may be the hardest one to train and develop, yet it will give us the personal resource to cope with leadership pressures. We need to look after ourselves:

• Physically – the right nutrition, the right exercise, enough sleep
• Socially – develop a network of good friends, have a laugh, care for someone and know that there is someone who cares about you as a person, not just as a leader.
• Emotionally – be aware of your strengths and weaknesses. Understand your style and where this may be at odds with colleagues. Keep looking to develop yourself and don’t become set in your ways.
• Intellectually – develop the capacity to learn and develop mental agility – this gets harder as you get older and rely on models that worked previously. Constantly challenge yourself. As Marshall Goldsmith (New York Time journalist said “What got you here won’t keep you here”. For example, your previous attention to detail and command of minutia may have been your signature trait that got you to a leadership position – but they may hinder your ability as a leader. Coaching can help new leaders understand how they may have to change to become effective
• Spirituality – try and find meaning and purpose at work that goes beyond ‘doing a job’.

Are leaders born or made – is it nature or nurture? The authors believe half of who we are is what we are born with – our pre-disposition. The other half is what we can learn, about ourselves and about the business we are in.

The good news from the authors is that no matter what our pre-dispositions, ALL OF US, if we are self aware enough, can learn the skills to plug gaps and become more effective leaders.

I was shown a very clever website by a colleague the other day which takes a section of text (or an RSS feed) and converts it into what the site calls a “word cloud” with the words appearing the most in the text being the largest in the cloud . I tried this on this blog and came up with this cloud!  I think it does focus the viewer on many of the key ideas – as well as having more impact to me than a series of paragraphs and bullet points!  http://www.wordle.net/ .

It’s a fun thing mostly, but perhaps this could be used to take a closer look at mission statements or home pages? Must get out more.

Customer management programmes can achieve all of these things with a visible return within 3 months if [designed correctly]. In 2009 alone, our clients have identified practical ways of achieving up to 35% increases in revenue (6% market share increase); 28% reduction in costs; 12% increase in EBIT.  Customer management is a vital lever of business performance, and investors and analysts are beginning to take more notice of how well companies manage customers.  Make sure you can tell them.

Ask any manager who has successfully implemented a new customer management strategy or system about the one vital ingredient of success.  Very likely, they’ll say ‘Leadership’. Visible, active, passionate leadership.  Research shows* time and time again that leaders have a vital role in making customer management change happen. Without strong Leadership, customer management projects tend to be reduced to within-function process changes, one-off campaigns, small scale training exercises or customer experience projects with grand aims that end up having little or no impact on the customers’ experience! 

So, it follows, if leaders want to increase business performance significantly (arguably in every industry) they need to lead their organisations visibly and consistently to manage customers more professionally.  A chapter in our forthcoming book is for leaders who want to guide their organisations to become better managers of customers.  Leave a comment here and we’ll send you an e-copy of the leadership chapter, packed with examples, behaviours, tips and techniques for business leaders.  Thanks

Now is the time to take behavioural economics more seriously. Surely the recent financial market collapse is another nail in the coffin of traditional economics, where rational self interest is the primary motivation that is considered. Behavioural economics, the combination of economics, sociology and psychology will prove much more capable of explaining and predicting economic behaviour which traditional economics never did. Behavioural economists often concentrate on cases where people’s actions depart from the systematic, rational strategies Professor John Forbes Nash Jr and his counterparts envisioned in the early 1990s. Despite Nobel recognition for Daniel Kannebahn (prize winner) and Amos Tversky (cited, now deceased), two of the most well known behavioural economists, it appears that the field still does not have much prestige in academic institutions other than as a topic of interest.

Human behaviour, sometimes rational and sometimes not, was always an important factor in financial decisions and has a much bigger impact on economics than traditional economists, and the models that they use, have recognised. The Wall St journal published an article on 10 November 2008 discussing the collapse of AIG. The final statement was that their most senior advisor could see ‘no fundamental reason’ why AIG’s customers panicked“! The article went on to say that “The turmoil at AIG is likely to fan scepticism about the complicated, computer-driven modeling systems that many financial giants rely on to minimise risk”. Warren Buffett, chief executive of Berkshire Hathaway, which owns insurance companies, has been sounding the alarm about the issue for years. Recently, he told US TV interviewer Charlie Rose: “All I can say is, beware of geeks…bearing formulas.” As Tom Davenport said in his blog about the AIG advisor’s comment; ‘if there was ever a better story where traditional econometric models could bring down a company and perhaps even an economy I haven’t read it’.

Why do people buy and sell rationally or irrationally, be that shares, products or services? We have an advantage in the customer management world in that we have for a long time had to understand how events and attitudes drive customer behaviour. But behavioural economic theory can help develop our understanding.  For instance, Kannebahn’s work has an impact on how customer experience is designed. The ‘peak-end’ theory, as he described it, says memorable customer experiences are achieved through a combination of the peak of the emotion felt during the experience (good or bad) and the end experience. The whole experience does not have to be memorable and this knowledge can be useful in designing how you deal with customers over time.

We need to develop further this understanding of behavioural economics and its impact on customer management. We believe that just as there is confusion between traditional economics and behavioural economics in achieving the macro-economic performance, there is a similar confusion over how to generate business performance in a business – i.e. from customers. Economic value from customers is obtained not just through focusing on increasing revenues and decreasing costs, but on the system that influences the customers’ rational and irrational behaviour. This system will be based around the four stakeholder or ‘interest’ groups in corporate life; shareholders, customers, employees and the local community. We write more on this elsewhere. Let me know if you are interested!