Research Paper on Social Media

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Can social media become the final frontier in customer experience management? This research paper was published in Nirma International Conference on Management, 5th Jan 2012. ISBN 93-81361-68-1

Can social media become the final frontier in customer experience management? This research paper was published in Nirma International Conference on Management, 5th Jan 2012. ISBN 93-81361-68-1

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  • 1. “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
  • 2. ABSTRACT Key words: social media, social networking,customer experience managementCustomer Experience Management represents the discipline, methodology and/or process usedto comprehensively manage a customers cross-channel exposure, interaction and transactionwith a company, product, brand or service. (Schmitt, 2003) Traditionally, the CEM systems havefocused on the ability to manage multi-channel interactions like contact center, companywebsite, self service, mobile devices and brick and mortar stores. This has been the version 1.0of 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’ thathas 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 scalablepublishing technologies. It is a shift in how people discover, read and share information andcontent; it supports the human need for social interaction with technology, transformingbroadcast media monologues (one to many) into social media dialogues (many to many).Customers now create their own ‘communities’, share and collaborate information andexperiences about products and services. The peer to peer recommendation and reviews throughsocial networking is preferred over traditional customer feedback mediums. Suddenly, thecustomers are empowered to share their product/service/brand experiences in a whole new wayand 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 frontiereven further: from ‘customer relationship’ towards ‘community relationship’. (Kane et al., 2009) 2
  • 3. INTRODUCTIONIt is said that for a corporation, the ‘unhappy customers are it’s greatest source of learning’ andthese words are frequently used in business meetings and training workshops for employeesengaged in customer relationship management (CRM) activities. These famous words werespoken by Bill Gates, and at that time, the world was re-discovering the art of listening to thecustomers 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 theirfuture customers. So when Whirlpool launched their washing machines way back in India, theylistened to their ‘unhappy customers’ and realized that the typical Indian dress such as a saree ora dhoti were too big to be washed properly in their machines. Hence, they did some product re-design and launched a series of washing machines catering to the Indian customer’s needs – andthis translated to increased sales and market share for the company.Some companies even went out and made drastic changes in their product offerings – changesthat 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 theirproduct as a ‘fruit drink’ to attract Jewish customers during the fasting season of ‘Passover’ inIsrael. (Kohli, 2011; Chaudhari, 2010). Companies like Starbucks learned from their ‘happycustomers’ that integrating the shop design to suit the local culture was the key to success andthey 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 thefundamental motivation for all CRM aficionados. However, in the last couple of years, since theadvent of a new kind of communication medium, the customers have been empowered to reachout to millions of other customers in a matter of seconds and this has drastically changed the wayin which they can share their experiences about products and services – and the way in whichcompanies can respond (if at all) to such information. 3
  • 4. This new medium called ‘social media’, which will be discussed in detail subsequently, hasproved to be a game-changer in the way that people communicate with other people. So, whenan American Airlines customer was not happy with the way the cabin crew behaved with him, hesimply went ahead and posted his experience on a social networking site which went viral i.e. gotread and shared by millions of other people, and within days, the Airways had to compensatehim for ‘shutting up’. Incidentally, American Airlines is designated as ‘most hated’ on socialmedia 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 somany people instantaneously, the new reality for a corporation is that the ‘unhappy customers areit’s greatest source of pain’.In the following sections, we will explore how the new mediums of communication referred to associal media, has given a ‘pain in the neck’ to today’s companies, but at the same time, giventhem some unique opportunities to enhance and extend positive customer engagements and thusimprove their overall customer experience management.OBJECTIVEThe 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 RESEARCHThe methodology employed for research is exploratory in nature and does not include primarydata collection. No survey or response method is used. Data is collected from several secondarysources like journal articles, research papers, websites and online social media portals. 4
  • 5. CRM AND THE GENESIS OF CUSTOMER EXPERIENCE MANAGEMENTOnce thought of as a type of software, customer relationship management or CRM has evolvedinto a customer-centric philosophy that permeates an entire organization. There are three keyelements to a successful CRM initiative: people, business process, and technology. Typically, aCRM is defined as follows:“A company-wide business strategy designed to reduce costs and increase profitability bysolidifying customer loyalty. True CRM brings together information from all data sources withinan organization (and where appropriate, from outside the organization) to give one, holistic viewof 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 fromcross-selling and upselling opportunities to target marketing strategies to competitive positioningtactics.” (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=164CRM is a strategy used to learn more about customers needs and behaviors in order to developstronger relationships with them. After all, good customer relationships are at the heart of 5
  • 6. business success. And good customer relationships are developed over a period of time byunderstanding the customers by collecting and analyzing information to attract, acquire andretain customers for lifetime.It is said that if customer relationships are the heart of business success, then CRM is the valvethe pumps a companys 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. Thisinsight allows for improved customer service, increased call center efficiency, added cross-selland upsell opportunities, improved close rates, streamlined sales and marketing processes,improved customer profiling and targeting, reduced costs, and increased share of customer andoverall profitability.But in the changing scenario from product centric to customer-centric approaches, the focus ofmarketers has shifted towards their customers and more deliberately on their experiences, whichwill 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/ 6
  • 7. The customer experience can be found in the overlap between the three fundamental pillars ofCRM which were mentioned earlier i.e. people, business process and technology. A customerexperience can be defined as:“The sum of all experiences a customer has with a supplier of goods or services, over theduration of their relationship with that supplier. From awareness, discovery, attraction,interaction, purchase, use, cultivation to advocacy.” (Retrieved October 9, 2011 fromwww.wikipedia.org)The genesis from customer relationship to customer experience happened in the beginning of thenew millennium (thats 2000) when customers started demanding a higher marginal utility ontheir 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 floodgatesof information, thanks to companies like Google. (McKay, 2009)Traditionally, CRM just focused on customer retention and nothing else, which made it narrowin scope and highly inflexible. Thus, the concept of CEM was put forward. Pine and Gilmorefirst introduced the concept in their 1998 Harvard Business Review article titled “Welcome tothe Enterprise Economy”.They said that "customer experiences would drive business value and propagate financialsuccess". 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 beingcompensated for emotionally in the form of an exceptional user experience. This view has beenclearly 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 anew product announcement, the sales figures went off the charts (ex: i-Phone, i-Pad). Mostpeople would think its because Apples customers are passionate about the company, but inactual reality they are passionate about the experience that it offers. This is one of the mainreasons why even after pricing their products at outrageous rates, there are still people to buy 7
  • 8. them. Apple realized the importance of CEM before most companies, and one must give themcredit 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 MEDIAIn the age of the Web 2.0 and almost omnipresent broadband internet connections, a largemajority of the online public are communicating with each other through a new medium. Apartfrom e-mail and instant messengers, they communicate through the medium of blogs, micro-blogging websites and social networking websites like Facebook, Twitter, LinkedIn and manyothers. (Ahuja, 2010) Unlike the traditional web-sites and corporate blogs, these ‘social mediaplatforms’ are used by the members to share, engage and collaborate with their peer groups tobuild lasting relationships in the virtual world. This way of communicating is termed as ‘socialnetworking’ and this new medium of communication is called ‘social media’. It has been saidthat ‘social media is seen by many marketers as the next gold rush’ (Kaplan, 2010) and amajority of companies are engaging in ‘social media marketing’.Some of the popular social media websites are:Facebook, Orkut, MySpace, Google+ - mainstream social networking sitesLinkedIn - professional networking siteBlogs like WordPress, Blogspot - used for broadcasting and publishing dataYouTube - video sharing websiteWikipedia - the open-source online encyclopediaFlickr, Picasa - picture sharing websitesSlideShare and Scribd - document sharing websitesTwitter - micro-blogging website where one can post only 140 characters at a time 8
  • 9. Some critics say that social media is just another ‘fad’. (Baker, 2009) However, some of thefollowing statistics can be quite startling, even for the harshest critic (Qualman, E, 2011): • Over 50% of the world’s 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 2010Hence, social media isn’t a fad. It’s a fundamental shift in the way we live, communicate and dobusiness.TRANSITION FROM ‘CUSTOMER’ TO ‘COMMUNITY’The genesis from CRM to customer experience has resulted that most of the business functionstoday 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 itan airline or a retail outlet, all analysis is typically done ‘after’ the passenger has flown or thepurchase 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 doneto influence customer behavior during or before a purchase. 9
  • 10. But as online social networking has seen unprecedented viral growth in the past few years, thereis an opportunity for a business manager to leverage a customer’s network to influence behavior.Social networking lends a ‘near real time’ opportunity to manage customer relationships. Itprovides the ability to leverage the influencing power of a customer’s network of friends on hisor her buying decisions. (Nair, 2008)If today’s customer is contemplating to buy a product, he/she could just post it on his socialmedia profile page and invite his ‘network of trusted connections’ to get feedback on the variousoptions available and their reviews - instantaneously. Hence, today’s companies are alsorealizing this insight to create communities around their products or offerings, invite andencourage 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 canresult into better management of customer experiences in ‘real time’ and this can beaccomplished 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 activitiesToday’s biggest brands have the largest social online communities and these are managed bydedicating valuable resources to ensure that the relationship between the brand and itscommunity 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
  • 11. THE CONCEPT OF SOCIAL CRMAs the shift from ‘customer’ to ‘community’ took place in the last couple of years, companiesstarted using social media tools and platforms to reach out to these communities. This shiftslowly gave rise to the concept called ‘Social CRM’. (Bublik, 2009) Hence, it is the use ofsocial media services, techniques and technology to enable organizations to engage with theircustomers. This is an emerging field and pioneering work is done in the area by Paul Greenbergwho 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 andtransparent business environment. Its the companys response to the customers ownership of the conversation.”Social CRM is often used as a synonym for Social Media Monitoring, where organizations watchservices like Facebook, Twitter and LinkedIn for relevant mentions of their product and brandand engage with fans and members. (Myron, 2010) It also includes customer communitiesmanaged 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
  • 12. As shown above, the social CRM process revolves around conversations with friends, partnersand collaborators to create lasting and meaningful relationships. The above model is sustainableonly when all stakeholders participate across the social media lifecycle. (Petouhoff, 2009) Anarticle published at TMCnet.com (Read, 2011) discusses how stakeholders can contribute tosustainable 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 MEDIABusiness owners are increasingly interested in using social media to optimize their customerexperience 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 weremuch more in control of their properties’ images and reputations. Now, a growing number ofadults are using these sites to aid in decisions about where to eat, shop, or stay. For example,according to Forrester’s North American Technographics Online Survey, roughly 78 millionindividuals now regularly participate in travel-specific social media. Other social media reviewsare 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
  • 13. • 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 foreverby negative ones. Since these reviews now have a direct effect on revenue at a particular locationor branch, business managers often consider these comments an especially urgent form ofcustomer feedback. Hence, not only companies, but individual business units or branch officiesare also latching on to social media websites like Facebook (Shih, 2009) and micro-bloggingsites 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 experiencemanagement 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 2.0The rise of real time online social media has changed the way communities of customers engagewith each other and with companies to share their experiences. The customer experience sharingprocess as well as the response by companies has gone to the next level where everyone has theluxury to scrutinize, comment and further share the experiences of each other: thus making theentire process an experience in itself. 13
  • 14. This has given rise to the concept called ‘Customer Experience 2.0’ (Kane et al, 2009) which is atotally unique way of creating lasting customer experiences by the use of social media tools toleverage the needs and wants of the customer. The theory is as such in its nascent stage with ahandful of researchers working on creating such a level of customer engagement. Some of thesteps 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 improvisationCustomer Experience 2.0 is here to stay in this era of Enterprise 2.0 as more and more companiesare embracing online networking technologies. (McAfee, 2009) It is upon the companies toembrace this new media, use it and continually improve upon the experience that the customerswant. This will create a lasting differentiation, increase sales and build a rock-solid competitiveadvantage.LIMITATIONS OF THE STUDYThe research is limited only to the study of journal articles, websites and online resources and assuch does not cover each and every dimension of customer experience management. This papercan be used as a starting point to do more research in creating social media strategies to optimizecustomer experiences.FINDINGS AND CONCLUSIONBased on the study of various articles in journals and online buzz about the next generationCRM, it was found that although the traditional touch points with the customer are here to stay, 14
  • 15. but the new generation online tools have radically changed in the way that companies connectand relate to their customers.The concept of customer experience management has been an extension of the new-age customerrelationship management and this itself has taken over a whole new dimension after theintroduction of social media tools to create ‘Social CRM’. The dramatic growth of social mediatools in the last five years has pushed a majority of the corporations on the social mediabandwagon, 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 andoptimizing customer experiences. However, a very clear strategy, customized for eachorganization has to be planned to actually derive any meaningful benefits from this new medium. 15
  • 16. ACKNOWLEDGEMENTMany thanks to Shanti Business School (www.shantibschool.edu.in) and its management forsponsoring me to take part in this conference. Special thanks to Mr. Jai Sanghani (Head – NewInitiatives), Major Benor, Prof. Bala Bhaskaran (Executive Director) and Dr. Kishor Barad (AreaChair – Marketing) for their support and guidance.Deep gratitude is expressed to the Director of B K School of Business Management, and PhDguide of the author, Dr. Sarla Achuthan for her insights and guidance in the area of modern toolsof 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 ManagementAssociation. Thanks to colleagues and friends for providing random but meaningful inputs to thesubject. 16
  • 17. REFERENCESAhuja, V. (2010, March 23). Corporate blogs as e-CRM tools – Building customer engagementthrough content management. Journal of Database Marketing & Customer StrategyManagement, 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. 30-31.Chaudhari, R. (2010). Business is marketing. Retrieved October 10, 2011 fromhttp://rajitachaudhuri.blogspot.com/Howell, N. (2010, February 4). Social Discourse – How does CRM fit with social media? NewMedia 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 SocialMedia". Business Horizons 53 (1): 59–68.Kohli, G. (2011, February 5). KFC announces the launch of its maiden restaurant in Delhi. InAgency FAQs. Retreived October 10, 2011, fromhttp://www.afaqs.com/news/company_briefs/index.html?id=7342_KFC+announces+the+launch+of+its+maiden+restaurant+in+DelhiLeary, B. (2009, March). The tweet is mightier than the sword. Customer RelationshipManagement, pp. 48.McAfee, A. (2009, November). Shattering the myths about Enterprise 2.0. Harvard BusinessReview, 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, VirginAmerica ‘Most Loved’. The Realtime Report. Retrieved October 10, 2011 fromhttp://therealtimereport.com/2011/10Myron, 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
  • 18. Petouhoff, N. (2009, September). CRM’s still getting social. Customer RelationshipManagement, pp. 6-7.Qualman, E. (2011, August 16). Social network user statistics. Socialnomics. Retrieved October12, 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 inbuilding social CRM. Call Centre Services Featured Article retrieved from http://call-center-services.tmcnet.com/topics/call-center-services/articles/155059-infosys-identifies-what-business-stakeholders-should-consider-building.htmSchmitt (2003), Customer Experience Management: A Revolutionary Approach to Connectingwith Your Customers, Wiley; 1 edition, ISBN 0-4712-3774-4Shih, C. (2009, November). Facebook is the future of CRM. Customer RelationshipManagement, pp. 12.Siefert. G. (2009, June 23). Customer Experience Model. Retrieved October 12, 2011 fromhttp://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 socialgenesis. Retrieved October 12, 2011 from http://thesocialgenesis.blogspot.com/2010/Wilson, D. (2011, August 19). Social media customer experience management: The next bigtrend? My Customer. Retrieved October 14, 2011 fromhttp://www.mycustomer.com/topic/customer-experience/social-media-customer-experience-management-why-emerging-field-important/1# *** 18