Gartner Says Companies Need to Pursue Four Steps to Harness Social Computing in CRM

Future of CRM to Be Discussed at Gartner Customer Relationship Management Summit 2009, 3-4 March, in London

Egham, UK, Social computing is becoming a significant customer relationship management (CRM) market trend and represents a disruptive force in this market, according to Gartner, Inc. Gartner predicts that, by 2010, more than 60 per cent of Fortune 1000 companies will have some form of online community that can be used for customer relationship purposes.

“Social applications* offer a great opportunity for CRM practitioners to improve customer experience and influence the customer, particularly in an economic downturn when companies are trying to keep customers and increase wallet share,” said Adam Sarner, research director at Gartner. “Investments should focus primarily on the customer online buying process where it can offer a direct return on investment (ROI) in terms of sales, awareness and customer loyalty.”

However, Gartner predicts that, by 2010, more than half of companies that have established an online community will fail to manage it as an agent of change, ultimately eroding customer value.

“Rushing into social-computing initiatives without clearly defined benefits for both the company and customer will be the biggest cause of failure,” said Mr Sarner. Gartner recommends companies follow four steps when undertaking any social-software initiative:

1. Define the initiative and its purpose

Many organisations have not taken the time to assess the business case for investment, tempted by the fact that many social applications are nominally free. Before an organisation begins a project, it needs to define a mutual, balanced purpose. The stated purpose must include a measurable business benefit for establishing the application, and a customer motivation for participating.

2. Cede some control to encourage participation

For an application to be truly social, the community must have some element of ownership in return for the value it brings with it. Organisations need to determine the level of control ceded to the community, and understand how that affects the engagement between customer and company.

Harnessing an application’s community can be difficult, because it cannot be forced to contribute. In order to encourage participation and establish the right amount of ownership to cede, Gartner recommends that organisations follow five best practices that require them to accept the risk of criticism and use the valuable data provided to make real changes; apply ground rules to install self-moderation; solicit feedback to make users feel appreciated; enable company advocates to gain powerful allies, and lastly assign a community advocate to liaise with the community and to represent it to the company.

3. Understand and reward different kinds of participation

Companies need to recognise and provide social applications for all levels of participants that can be categorised as: the creators (“I want to own this”), the contributors (“I want to be part of this”), the opportunists (“Since I’m here…”) and the lurkers (“I’ll reap the rewards”).

In addition, businesses must incorporate reputation mechanisms into their social-network initiatives to manage and get the most value from the four different groups. Social-reputation technologies allow users to rank the quality of input provided by contributors, filtering content and differentiating the best information — whether actively (by voting) or passively (by page views). “This is extremely important in high-traffic social networks, as well as for those where indicators of trustworthiness — such as names and job titles — are hidden behind online personas,” said Mr Sarner. “In addition to helping customers during their information-gathering phase, reputation systems also serve to recognise and reward your advocate groups.”

4. Acquire skills to build relationships online

Companies must acquire new skills that focus on influencing social interactions to encourage participation effectively. These skills will need to cover social sciences, such as psychology, to learn how customers interact, and how their changing needs can be met; anthropology, to learn how cultures grow, develop and interact; and game design, to create engaging virtual environments to manipulate "player" behaviour through rules, rewards and outcomes.

Since many of these skills will be difficult to find internally, companies must allocate substantial budget to recruit these skills or outsource them to specialist providers. In a global recession, companies should prioritise the acquisition of these skills because of the direct benefits they can produce in customer loyalty and increased sales.

Mr Sarner concluded: “Social networking has changed the way a critical mass of individuals behaves, including how they act as customers and prospects. Customers, not just digital natives, can no longer be adequately described by demographic information — the usual target for corporate CRM efforts.”

Additional information is available in the Gartner report “The Business Impact of Social Computing on CRM.” The report is available on Gartner’s website at http://www.gartner.com/DisplayDocument?ref=g_search&id=874421&subref=simplesearch

Gartner analysts will look into the future of collaboration with customers during the Gartner Customer Relationship Management Summit 2009, 3-4 March, at the Royal Lancaster hotel in London. More information is available on Gartner’s website at www.europe.gartner.com/crm.

Notes to editors:
* Gartner definition of social application: social applications encourage, capture and share data among users, ceding levels of control to a community by user-controlled organisation mechanisms. These applications share characteristics, such as open application programming interfaces, service-oriented design, and the ability to upload data and media. These applications may be centred on a company’s website, or they may be hosted elsewhere. Social applications may be accessed using a web browser or used on cell phones, games consoles and GPS devices. Participation and access to others in the community are the defining features of a social application. For instance, e-mail is not a social application. However, if a community used tools to share, rank, comment on or filter e-mail messages (such as a shared ranking of the value of an e-marketing campaign), it would be a social application.

Gartner, Inc. (NYSE: IT) is the world’s leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is the indispensable partner to 60,000 clients in 10,000 distinct organizations. Through the resources of Gartner Research, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,000 associates, including 1,200 research analysts and consultants in 80 countries. For more information, visit www.gartner.com.