Customer 2.0: The Business Implications of Social Media

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Customer 2.0: The Business Implications of Social Media

  1. 1. Customer 2.0 The Business Implications of Social Media June 2008
  2. 2. Customer 2.0 Page 2 Executive Summary As the popularity of social media sites continues to change the way online Research Benchmark customers interact with their peers, top companies are leveraging external- Aberdeen’s Research facing Web 2.0 technologies as a means of providing additional touch points Benchmarks provide an in- for customer interaction. In March through May 2008, Aberdeen surveyed depth and comprehensive look over 360 companies to identify the challenges, tactics, and strategies into process, procedure, companies face when implementing customer-facing Web 2.0 applications. methodologies, and The research reveals that top performing organizations are not only technologies with best practice positively affecting their performance in key metrics, such as customer identification and actionable satisfaction, through a combination of organizational processes and recommendations technology implementation, but they are also fueling product development and marketing decisions with consumer-generated insights. Best-in-Class Performance Aberdeen used three key performance criteria to distinguish Best-in-Class companies. Best-in-Class demonstrated the following performance: “We want customers to have • 100% improved year-over-year performance in Return on Marketing more contact with store Investment (ROMI). On average, Best-in-Class companies increased managers, sales people, and the ROMI by 11%. service team. Making ourselves more available is a better • 82% improved year-over-year performance in customer retention. option than the alternative.” On average, Best-in-Class companies increased customer retention ~ Rich Moffat, All Seasons Spas rates by 9%. • 81% improved year-over-year performance in new product development. On average, Best-in-Class companies increased new product development by 7%. Competitive Maturity Assessment Quick Definition In addition to high levels of planned adoption, survey results show that the firms enjoying Best-in-Class performance currently share several common For the purposes of this study, characteristics: “Web 2.0” refers to technologies that promote the • Senior management fully supports external-facing Web 2.0 exchange of user-generated programs (57%) content in a manner that simultaneously begets • Dedicated personnel devoted to the enterprise-wide use of Web collaboration and individuality. 2.0 applications (39%) This includes, but is not limited • Defined metrics for measuring the impact of external-facing Web to: 2.0 applications (32%) √ Blogs √ Wikis Required Actions √ Social networking sites In addition to the specific recommendations in Chapter Three of this √ Online communities report, to achieve Best-in-Class performance, companies must: √ Collaborative tagging © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  3. 3. Customer 2.0 Page 3 • Be pragmatic about Web 2.0 adoption. The use of external- facing Web 2.0 applications can positively impact ROMI, customer retention, and new product development. However, companies cannot realistically expect to implement a technology and see immediate results. There must be organizational processes and metrics in place to ensure the success of technology adoption. Companies would be wise to start small to establish a comfort level before exploring other Web 2.0 avenues. • Evaluate vendors with strong professional service capabilities. Eighty-one percent (81%) of companies currently using, or planning to use, external-facing social media applications believe that Web 2.0 is a valuable avenue for the organization. As such, it is crucial that companies planning to engage customers through social media evaluate vendors with strong professional service capabilities. While companies will rely on their customers to provide the bulk of the web content, vendor support will be necessary to get businesses up and running. © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  4. 4. Customer 2.0 Page 4 Table of Contents Executive Summary....................................................................................................... 2 Best-in-Class Performance..................................................................................... 2 Competitive Maturity Assessment....................................................................... 2 Required Actions...................................................................................................... 2 Chapter One: Benchmarking the Best-in-Class ..................................................... 6 The Emergence of Customers 2.0 ....................................................................... 6 What Does Web 2.0 Encompass?........................................................................ 6 The Maturity Class Framework............................................................................ 9 The Best-in-Class PACE Model ............................................................................ 9 Best-in-Class Strategies.........................................................................................10 Chapter Two: Benchmarking Requirements for Success ..................................12 Competitive Assessment......................................................................................13 Capabilities and Enablers......................................................................................13 Best-in-Class Use Web 2.0 to Improve Business...........................................17 Chapter Three: Required Actions .........................................................................20 Laggard Steps to Success......................................................................................20 Industry Average Steps to Success ....................................................................21 Best-in-Class Steps to Success ............................................................................22 Appendix A: Research Methodology.....................................................................23 Appendix B: Common Web 2.0 Technologies ...................................................25 Appendix C: Related Aberdeen Research ...........................................................27 Figures Figure 1: What is Associated with the Phrase “Web 2.0?”................................. 7 Figure 2: Top Pressures for Web 2.0 Adoption .................................................... 8 Figure 3: Top Strategic Actions to Maximize Web 2.0 Adoption ...................10 Figure 4: Internal Groups Utilizing Web 2.0 Technologies...............................11 Figure 5: Active Engagement with Online Customers Improves Key Metrics .........................................................................................................................................15 Figure 6: Top Performers Improve Yearly Growth............................................18 Figure 7: Content Management Solutions .............................................................19 Tables Table 1: Top Performers Earn Best-in-Class Status.............................................. 9 Table 2: The Best-in-Class PACE Framework .....................................................10 Table 3: Competitive Framework (Process) ........................................................14 Table 4: Competitive Framework (Organization)...............................................14 Table 5: Competitive Framework (Knowledge Management) .........................15 Table 6: Competitive Framework (Technology) .................................................16 Table 7: Competitive Framework (Performance Measurement) ....................17 Table 8: The PACE Framework Key ......................................................................24 © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  5. 5. Customer 2.0 Page 5 Table 9: The Competitive Framework Key ..........................................................24 Table 10: The Relationship Between PACE and the Competitive Framework .........................................................................................................................................24 © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  6. 6. Customer 2.0 Page 6 Chapter One: Benchmarking the Best-in-Class The Emergence of Customers 2.0 Fast Facts The popularity of online social media forums has not only changed the way peers interact with each other, it has also succeeded in creating a new √ 70% of all companies breed of online customers. These customers have come to expect a certain surveyed plan to increase level of accessibility and interaction with businesses, as well as the ability to the budget allocated for engage with other consumers who share similar wants and needs. In order Web 2.0 technologies in 2008 to meet the expectations of their online clientele, top companies are leveraging an assortment of Web 2.0 technologies to allow for increased √ Best-in-Class companies are interaction between the business and its customers. twice as likely as Laggards to have a dedicated staff The phrase “Web 2.0” has permeated conversations concerning the responsible for Web 2.0 in Internet for the past several years; however, the use of social media the enterprise, 28% versus applications as an additional touch point for company and customer 14% respectively interaction is a relatively new concept. While the debate concerning what technologies are encompassed by the phrase “Web 2.0” continues, there is little debate among top companies about its business value. An Aberdeen survey of over 360 companies revealed that 77% of Best-in-Class companies believe that Web 2.0 will be a lasting channel for years to come, and over half (58%) of Best-in-Class companies believe that social networking sites have a tremendous amount of influence over consumers. The emphasis on the potential of social media and collaboration tools, such as blogs and wikis, is causing organizations to incorporate external-facing Web 2.0 applications into the business plan. What Does Web 2.0 Encompass? The proliferation of consumer-generated content and knowledge sharing on the web has muddied the waters a bit when it comes to a clear understanding of what businesses associate with the term “Web 2.0;” however, Aberdeen research reveals that the vast majority of survey respondents have some idea of how to define Web 2.0 technologies. Only 7% of respondents indicated that they were “not sure how to classify Web 2.0 technologies.” The responses from those survey takers who had an idea of what Web 2.0 encompasses revealed the unifying themes of collaboration and the sharing of consumer-generated information (Figure 1). © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  7. 7. Customer 2.0 Page 7 Figure 1: What is Associated with the Phrase “Web 2.0?” Social Networking Sites 90% Blogs 84% Wikis 77% RSS Feeds 72% Collaborative Tagging 66% "Mash-Ups" 64% Podcasts 64% 0% 20% 40% 60% 80% 100% All Respondents Source: Aberdeen Group, June 2008 The top technologies selected by survey respondents as being associated with the phrase “Web 2.0” have one key thing in common: they all promote the exchange of user-generated content and information in a manner that simultaneously begets collaboration and individuality (Appendix B). As a result, top companies plan to increase the adoption of social media applications as a way of creating online communities for their customers around their brand. By providing a forum for customers to engage with one another and provide candid feedback concerning certain brands and services, businesses are improving the “stickiness” of their websites by providing a dynamic reason for customers to keep coming back. The increased traffic and engagement of online customers results in a web community that contains the perspective of diverse customers, not just the company hosting the site. © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  8. 8. Customer 2.0 Page 8 Figure 2: Top Pressures for Web 2.0 Adoption Increase market 61% awareness 49% 44% Need to develop new 39% products and services 25% 21% Need to improve 27% customer satisfaction 38% 43% Need better consumer 25% insights 17% 30% Best-in-Class Improve online 23% Industry Average experience 43% 40% Laggards 0% 10% 20% 30% 40% 50% 60% 70% Source: Aberdeen Group, June 2008 Top Pressures for Web 2.0 Adoption While the need to increase market awareness was identified by the Best-in- Class, Industry Average, and Laggards as the top pressure causing the “Web 2.0 incorporates a newer organization to focus resources on external-facing Web 2.0 technologies, a genre of developing sites. significant discrepancy exists in regards to some of the other motivating People are building websites that are so readily available to factors (Figure 2). Thirty-nine percent (39%) of Best-in-Class companies, interact with. And from an ROI compared to 25% of the Industry Average and 21% of Laggards, cited the perspective, it means less need to develop new products and services as a top driver causing the expenditure from my side.” organization to utilize customer-facing Web 2.0 applications. ~ Michael Mainiero This key difference between Best-in-Class and all other companies speaks to Director of Web & Digital the business value inherent to Web 2.0 adoption. While the Industry Media Services Average and Laggards are seemingly more concerned with improving the NYU Langone Medical Center online experience for their customers in hopes of increasing customer satisfaction, Best-in-Class companies are compelled to leverage Web 2.0 technologies as a way to harvest consumer insights concerning their brand and marketing decisions. These collected insights can in turn be used to fuel new product development initiatives. Best-in-Class companies realize that metrics such as customer satisfaction cannot easily be increased simply by providing Web 2.0 portals on the company website; there must be an internal process where the insights exchanged in these forums are used to grow the business. Ultimately, top companies will increase customer satisfaction through the development of new products and services geared towards the customer-base that helped create them. Thirty-five percent (35%) of Best-in-Class companies surveyed indicated that the business use of Web 2.0 applications is a “top two” priority for the © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  9. 9. Customer 2.0 Page 9 organization in 2008, compared to 13% of the Industry Average and 13% of Laggards. Furthermore, 28% of Best-in-Class companies currently leveraging external-facing Web 2.0 applications indicated that they have a dedicated staff of full-time employees devoted solely to this responsibility, compared to 19% of the Industry Average and 14% of Laggards. The Maturity Class Framework Aberdeen used year-over-year improvement in three key performance criteria to distinguish the Best-in-Class from Industry Average and Laggard organizations: • Return on Marketing Investment (ROMI) • Annual customer retention • New product development Table 1: Top Performers Earn Best-in-Class Status Definition of Mean Class Performance Maturity Class 100% improved ROMI, average 11% increase Best-in-Class: 82% improved customer retention, average 9% increase Top 20% of aggregate performance scorers 81% experienced year-over-year improvement in new product development. On average, Best-in-Class experience a 7% improvement in new product development Industry Average: 19% improved ROMI, average 2% increase Middle 50% 31% improved customer retention, average 2% increase of aggregate performance scorers 31% improved new product development, average 3% improvement Laggard: 1% improved ROMI; however, Laggards decreased 7% on average Bottom 30% 7% improved customer retention; however Laggards decreased 4% on average of aggregate performance scorers 5% improved new product development; however, Laggards decreased 6% on average Source: Aberdeen Group, June 2008 The Best-in-Class PACE Model Leveraging external-facing Web 2.0 technologies to achieve corporate goals requires a combination of strategic actions, organizational capabilities, and enabling technologies that can be summarized as follows: • Supplement marketing campaign effectiveness with consumer- generated insights through a process designed to feed business decisions across multiple units • Improve the ability to respond to customer wants and needs through the dedicated personnel and resource commitments necessary to maximize Web 2.0 technology investments © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  10. 10. Customer 2.0 Page 10 Table 2: The Best-in-Class PACE Framework Pressures Actions Capabilities Enablers Increase market Supplement Senior management fully supports external- Company hosted blogs awareness marketing campaign facing Web 2.0 programs Campaign management effectiveness with Dedicated personnel devoted to enterprise tools consumer- use of Web 2.0 applications RSS Feeds generated insights Consumer-generated insights feed decisions Wikis Improve ability to across multiple business units Content Management respond to Cross-functional resource commitment from solutions customer wants and different departments within the organization needs Social networking sites (i.e., marketing, product development, sales) Source: Aberdeen Group, June 2008 Best-in-Class Strategies The top strategic action for Best-in-Class companies is to supplement marketing campaign effectiveness with consumer-generated insights, thereby creating a closed-loop process where the forums consumers use to discuss issues surrounding a particular brand become a breeding ground for future marketing ideas. Similar to the Best-in-Class focus on developing new products and services, the ability to harvest the consumer-generated insights found in online wikis and community forums allows businesses to refine marketing messages for the benefit of their customer base. Figure 3: Top Strategic Actions to Maximize Web 2.0 Adoption Supplement marketing 59% campaign effectiveness with 51% consumer-generated insights 44% Best-in-Class Industry Average Laggards 48% Improve ability to respond to customer 53% wants and needs 58% 0% 10% 20% 30% 40% 50% 60% 70% Source: Aberdeen Group, June 2008 Industry Average (53%) and Laggards (58%) believe that improving their ability to respond to customer wants and needs is the top strategic action for maximizing the effectiveness of Web 2.0 touch points online. While this strategy is a fundamental of good business execution, Best-in-Class companies are more inclined to “kill two birds with one stone.” By supplementing marketing campaigns with consumer-generated insights, Best- © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  11. 11. Customer 2.0 Page 11 in-Class companies are able to refine outbound messages strictly based on the “wants and needs” expressed by customers in social media settings. Therefore, Best-in-Class companies experience year-over-year growth in ROMI due to a closed-loop process that uses customer wants and needs as the foundation of marketing messages. Aberdeen Insights — Strategy “Wikis have had a positive impact on our organization While Best-in-Class companies are concerned with improving the online because of how easy it is to customer experience and improving customer satisfaction rates, the post and access information.” largest emphasis is placed on using consumer-generated insights to spur product development opportunities and refine marketing campaigns. As ~ Product Specialist, Food Service Industry such, multiple groups and departments within Best-in-Class companies leverage external-facing Web 2.0 technologies. Figure 4: Internal Groups Utilizing Web 2.0 Technologies 100% 93% Best-in-Class Industry Average Laggards 90% 86% 77% 80% 70% 67% 65% 60% 58% 60% 59% 58% 58% 48% 50% 46% 47% 49% 43% 42% 40% 35% 31% 30% 20% 10% 0% Marketing Product Sales Market Product Customer Marketing Research Development Service Source: Aberdeen Group, June 2008 Marketing and product marketing departments are the most likely to engage with online customers in Web 2.0 forums, such as blogs and wikis. The customer service department, however, is the least likely group to use Web 2.0 technologies among Best-in-Class and Laggard organizations. As the business use of social media matures and organizations realize the benefits of increased interaction between consumers and the business, the customer service department will likely become a frequent contributor to company-hosted online communities. As businesses strive to improve the online customer experience and respond to customer wants and needs, the customer service department is best equipped to satisfy these ends. In the next chapter, we will see what the top performers are doing to increase ROMI and customer retention. © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  12. 12. Customer 2.0 Page 12 Chapter Two: Benchmarking Requirements for Success As is the case with any technology adoption, companies must ensure that Fast Facts the proper organizational foundation is in place to maximize √ Best-in-Class companies are implementation. This is particularly true when it comes to the adoption of over 17-times more likely to social media, as the user-generated content posted online will often serve as improve customer a barometer for how well a company understands their customers. Top satisfaction than Laggards, companies currently implement, or plan to implement, organizational 89% versus 5% respectively. capabilities to collect and disseminate consumer-generated insights √ Nearly three-quarters (73%) throughout the organization. of Best-in-Class companies improved the accuracy of Case Study — Sportbikes.com marketing decisions through the use of external-facing Founded in 1996 by Mike DiSabatino, an avid fan and club-level racer of Web 2.0 applications. sportbike motorcycles, sportbikes.com has become the premier destination on the web for motorcycle enthusiasts looking to share their expertise and passion for performance motorcycles. However, according to DiSabatino, this was not always the case. “For years we rustled around with basic HTML sites before we grew into discussion forums,” begins DiSabatino. “However, we quickly realized that discussion forums and online engagement were more than just ways to make our advertisers happy; we found that a social environment was driving more traffic to us overall.” While the impact of a social community was evident, DiSabatino wasn’t convinced that sportbikes.com was making as large an impact as it was capable of. “That’s when I threw my hands up and said ‘we’re going to do it and do it big.’” DiSabatino implemented a web content management solution that would wrap around social media to create the largest sportbike community on the web. As a way of driving engagement with its members, sportbikes.com posted specific questions to its audience and allowed them to submit their own inquiries to be answered by professional racers. The peer-to-peer exchanges in the site’s wikis and forums ultimately decided the content of the site. A good example is the discussion forum devoted solely to female riders. “Young male riders dominate the sportbike demographics,” explain DiSabatino. “Now, we are seeing a saturation rate of around 20% among female riders, up from 1% several years ago. The online conversations in the community revealed a need for a moderated area for female riders. This forum has since become very popular. It’s a pretty successful way for us to grow our community.” Although sportbikes.com was purchased last year by an online sporting conglomerate that owns more than 150 sporting sites, DiSabatino is excited about where the site, and Web 2.0 in general, is heading. The team is already working on a new Web 2.0 based venture. “It’s only going to continue to get more fluid for the end-user,” concludes DiSabatino. “Web 2.0 has legs. It’s going to continue and expand its presence.” © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  13. 13. Customer 2.0 Page 13 Competitive Assessment Aberdeen Group analyzed the aggregated metrics of surveyed companies to determine whether their performance ranked as Best-in-Class, Industry Average, or Laggard. In addition to having common performance levels, each class also shared characteristics in five key categories: (1) process (the approaches they take to execute their daily operations); (2) organization (corporate focus and collaboration among stakeholders); (3) knowledge management (contextualizing data and exposing it to key stakeholders); (4) technology (the selection of appropriate tools and effective deployment of those tools); and (5) performance management (the ability of the organization to measure their results to improve their business). These characteristics (identified in Table 3) serve as a guideline for best practices, and correlate directly with Best-in-Class performance across the key metrics. Capabilities and Enablers Based on the findings of the Competitive Framework and interviews with end users, Aberdeen’s analysis of the Best-in-Class demonstrates best “It’s only going to continue to get more fluid for the end-user. practices for adopting or implementing Web 2.0 applications. Web 2.0 has legs. It’s going to Process continue and expand its presence.” Since top companies believe there is tangible value to be realized from Web 2.0 technologies in the company’s bottom line, it is imperative that any ~ Mike DiSabatino technology adoption be combined with specific processes designed to CPA, Founder of maximize its potential. The “perfect storm” of organizational capabilities and Sportbikes.com technology enablers results in happier customers and, in the end, top-line revenue growth. Currently, over a third (37%) of Best-in-Class companies have a defined process in place for managing Web 2.0 content, compared to 24% of the Industry Average and 12% of Laggards. Furthermore, 39% of Best-in-Class companies, versus 14% of the Industry Average and 12% of Laggards, have a process in place for feeding consumer- generated insights across multiple business units. While the current adoption of these key processes is relatively low, the planned adoption speaks to the importance of Web 2.0 to organizations. Fifty-four percent (54%) of Best-in-Class companies plan to implement a defined process for managing Web 2.0 content, thereby increasing the overall adoption rate to 91%. Furthermore, 85% of Best-in-Class companies will eventually use consumer generated insights to feed decisions across multiple business units, compared to 69% of the Industry Average and 63% of Laggards. Businesses realize that it is not enough to simply establish external-facing Web 2.0 channels to interact with consumers; care must be taken to ensure that there are processes in place to disseminate the insight throughout the organization and maximize the investment made at an organizational level. © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  14. 14. Customer 2.0 Page 14 Table 3: Competitive Framework (Process) Best-in-Class Average Laggards Defined process for managing Web 2.0 content 37% 24% 13% Process Consumer-generated insights feed decisions across multiple business units 39% 14% 12% Source: Aberdeen Group, June 2008 Organization Best-in-Class companies are more likely to receive the support of senior management when it comes to the business use of Web 2.0 applications, 57% versus 36% of Laggards. As such, Best-in-Class companies are nearly twice as likely as the Industry Average (and nearly three-times more likely than Laggards) to have dedicated personnel devoted to the enterprise-wide use of Web 2.0 applications. It is imperative for companies to support Web 2.0 implementation at the budget-holder level. This new channel to reach customers requires constant engagement and analysis of information; therefore, companies cannot hope to achieve success unless the organization, including management, is prepared to devote the resources necessary. Table 4: Competitive Framework (Organization) Best-in-Class Average Laggards Senior management fully supports external-facing Web 2.0 programs 57% 51% 36% Dedicated personnel devoted to enterprise use of Web 2.0 applications 39% 22% 14% Organization Cross-functional resource commitment from different departments within the organization (i.e., marketing, product development, sales, etc.) 37% 30% 27% Committed to promoting, maintaining and utilizing consumer-generated content 27% 23% 13% Source: Aberdeen Group, June 2008 Knowledge Management The essence of Web 2.0 applications is collaborative in nature. Therefore, the business treatment of the applications should be the same. It is beneficial for companies to present themselves as a collection of individuals working towards a common goal, not just a corporate voice. To achieve this end, Best-in-Class companies currently leverage, and plan to leverage, mechanisms for users to provide feedback and rate the usefulness of © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  15. 15. Customer 2.0 Page 15 website content. As a result, product marketing directors, for instance, can gauge the reaction to a particular offering and respond to customer’s praises or concerns. Table 5: Competitive Framework (Knowledge Management) Best-in-Class Average Laggards Plan to implement feedback mechanisms 60% 51% 52% Knowledge Management Plan to enable customer review profiles and rating scores of products / services 46% 39% 47% Source: Aberdeen Group, June 2008 This collaborative use of external-facing applications allows the different channels in an organization to post content relevant to their department. Companies must not lose sight of why customers enjoy social media sites and applications: they allow for many different voices in the conversation. Recent research conducted for the February 2008 Aberdeen benchmark report, Social Media Monitoring and Analysis: Generating Consumer Insights from Online Conversations, reveals that the more actively a company engages with customers, the more likely they are to experience year-over-year improvements in key metrics (Figure 5). Figure 5: Active Engagement with Online Customers Improves Key Metrics Rarely Post Occasional Posts Regular Posts Frequent Posts 76% Customer Satisfaction 62% 57% 50% Actionable Insights 75% Derived from Social 62% Media Monitoring and 57% Analysis 30% 62% Customer Retention 57% 56% 50% 60% Ability to Identify and 44% Reduce Risk 44% 30% 0% 10% 20% 30% 40% 50% 60% 70% 80% Note: Percentages represent companies experiencing year-over-year improvement in metrics Source: Aberdeen Group, February 2008 © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  16. 16. Customer 2.0 Page 16 While these increases cannot be attributed solely to the number of times an organization engages with consumers online per se, the correlation between the number of posts a company makes and their performance in key social media metrics suggests that companies are able to recapture some of the control that had been passed on to consumers by engaging online users in conversation concerning their brand and services, rather than simply observing the "soapbox" from afar. The companies planning to provide feedback mechanisms should consider building customer and brand loyalty by engaging with online customers around certain topics or concerns. Table 6: Competitive Framework (Technology) Best-in-Class Average Laggards Web 2.0 technologies currently in use: 57% company 43% company 32% company hosted blogs hosted blogs hosted blogs 43% wikis 31% wikis 30% wikis 37% customer 21% customer 13% customer rating / feedback rating / feedback rating / feedback solution solution solution 25% social media 21% social media 17% social media monitoring and monitoring and monitoring and analysis tools analysis tools analysis tools Technology Planned adoption of Web 2.0 technology solutions: 32% company 45% company 52% company hosted blogs hosted blogs hosted blogs 30% wikis 45% wikis 31% wikis 55% customer 54% customer 53% customer rating / feedback rating / feedback rating / feedback solution solution solution 47% social media 44% social media 35% social media monitoring and monitoring and monitoring and analysis tools analysis tools analysis tools Source: Aberdeen Group, June 2008 Technology Currently, 57% of Best-in-Class companies use company-hosted blogs to interact with customers online, compared to 43% of the Industry Average and 32% of Laggards. An additional 32% of Best-in-Class companies plan to implement company-hosted blogs in the future. Blogs offer companies the ability to reach current and perspective clients quickly, efficiently, and, perhaps most importantly, inexpensively. When combined with other technology tools, like social media monitoring and analysis solutions for example, blogs afford companies to respond directly to budding criticism concerning their product or services. Those companies who utilize social media monitoring and analysis tools to harvest consumer insights may also use company-hosted blogs to address sparks of criticism before they become full-fledged wildfires. © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  17. 17. Customer 2.0 Page 17 Performance Measurement While the adoption of Web 2.0 technologies is still relatively low, even among Best-in-Class companies, nearly a third (32%) of Best-in-Class companies that currently use such applications have defined metrics in place to measure their impact. One must remember that the use of Web 2.0 applications in business is designed to bridge the gaps between companies and the consumers that have valuable insights about their products or services. Therefore, it is necessary to measure the ROI companies achieve through the use of such tools. Table 7: Competitive Framework (Performance Measurement) Best-in-Class Average Laggards Defined metrics for measuring impact of external-facing Web 2.0 applications Performance 32% 16% 10% Measurement Plan to implement defined metrics for measuring impact of external-facing Web 2.0 applications 55% 58% 57% Source: Aberdeen Group, June 2008 Best-in-Class Use Web 2.0 to Improve Business The needs to increase the online customer experience and customer satisfaction are legitimate and pressing business concerns; however, Best-in- Class companies do not view Web 2.0 adoption strictly within this context. Best-in-Class companies are able to grow the business by creating a closed- loop marketing system of sorts. By cultivating an online community of customers and prospects, Best-in-Class companies are not just improving the traffic to their website and the “stickiness” of the engagement; they are truly succeeding at gleaning the consumer-generated insights inherent to collaboration to drive product development and supplement marketing campaigns. As Figure 6 indicates, Best-in-Class organizations are outperforming the Industry Average and Laggards when it comes to year- over-year growth in key metrics. © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  18. 18. Customer 2.0 Page 18 Figure 6: Top Performers Improve Yearly Growth 89% Customer satisfaction 42% 5% Timeliness of 77% marketing decisions 25% 8% Accuracy of marketing 73% decisions 21% 9% Best-in-Class Ability to address 63% 27% Industry Average product issues 8% Laggards 0% 20% 40% 60% 80% 100% Note: Percentages represent companies reporting year-over-year improvements Source: Aberdeen Group, June 2008 Aberdeen Insights — Technology The need to improve the online experience was identified by 38% of all respondents as a top two pressure causing organizations to focus resources on external-facing Web 2.0 applications. In order to satisfy this need, top companies are using, or planning to use, content management solutions to provide current and accurate data for their websites, thereby creating websites that attract visitors and, more importantly, engages them. Businesses are increasing the “stickiness” of their websites by providing multiple outlets for customers to engage with one another and develop a sense of community. continued © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  19. 19. Customer 2.0 Page 19 Aberdeen Insights — Technology Figure 7: Content Management Solutions 60% Currently Use Plan to Use No Plans to Use 49% 50% 43% 42% 43% 40% 40% 30% 30% 27% 20% 18% 10% 8% 0% Best-in-Class Industry Average Laggards Source: Aberdeen Group, June 2008 Forty-three percent (43%) of Best-in-Class companies currently use a content management solution; while an additional 49% plan to use one in the future. By integrating Web 2.0 functionality with a core content management solution, particularly a web content management solution, Best-in-Class companies are hoping to build and manage web sites that incorporate all the necessary information and collaboration tools to improve the customer’s online experience. According to Aberdeen research, 58% of respondents believe that social networking sites have a tremendous amount of influence over consumers; therefore, some solution providers offer the ability for companies to push their content to established Web 2.0 channels, such as these social networking sites, to reach customers. Others, however, pull content from customers by providing the forum and content to get the conversation started. © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  20. 20. Customer 2.0 Page 20 Chapter Three: Required Actions Whether a company is trying to move its performance in ROMI, customer Fast Facts retention, or new product development from Laggard to Industry Average, √ Best-in-Class companies are or Industry Average to Best-in-Class, the following actions will help spur the 8-times more likely than necessary performance improvements: Laggards to be satisfied with their ROMI performance Laggard Steps to Success √ 57% of Best-in-Class • Formalize a process for managing Web 2.0 content. companies are satisfied with Currently, only 13% of Laggards indicated they have a defined their current ability to process in place at an organizational level for managing Web 2.0 incorporate consumer insights into future content, compared to 37% of Best-in-Class and 24% of Industry marketing campaigns and Average companies. Despite the fact that nearly two-thirds (65%) of promotions, compared to Laggards consider the business use of Web 2.0 applications a “top 33% of the Industry Average two” or “high priority” for the organization, the proper support is and 28% of Laggards not in place to maximize the time and investments spent on external-facing Web 2.0 technologies. The lack of a formalized √ 70% of survey respondents process results in only 12% of Laggards using consumer-generated plan to increase the budget for Web 2.0 technologies in insights to feed decisions across multiple business units, compared 2008 to 39% of the Best-in-Class. In order to maximize the insights collected through external-facing Web 2.0 applications, Laggards √ 28% of Best-in-Class must implement a process for managing the content collected and companies have a dedicated disseminating the information to the relevant business units within staff responsible for Web 2.0 the organization. technology implementation and monitoring, compared • Solicit the full support of senior management. Thirty-six to 19% of the Industry percent (36%) of Laggards currently have the full support of senior Average and 14% of Laggards management in regards to external-facing Web 2.0 programs. This percentage, which is well below the 57% of Best-in-Class and 51% of Industry Average, indicates that Laggards are not realizing the benefits of Web 2.0 applications at the management level. Forty-six percent (46%) of Laggards responded that they currently devote a couple hours a week, if anything at all, to Web 2.0 technology implementation and monitoring. While 66% of Laggards plan to increase the budget devoted to the business use of Web 2.0 applications in 2008, it is crucial for senior management to realize the marketing benefits of these tools so that the appropriate organizational support structure can be created to supplement technology adoption. • Define metrics to measure Web 2.0 success. Currently, only 10% of Laggards have defined metrics in place for measuring the impact of external-facing Web 2.0 applications. Thirty-three percent (33%) of Laggards revealed that they have no plans to implement such metrics. It is difficult for a company to judge whether or not a particular technology solution is providing tangible value to the bottom line without measures designed to reveal its effects on key © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  21. 21. Customer 2.0 Page 21 metrics. Eighty-seven percent (87%) of Best-in-Class companies either currently have, or plan to have, such metrics in place for measuring the impact of Web 2.0 on the enterprise. In order to increase the effectiveness of marketing campaigns and improve key metrics, Laggard organizations must develop metrics to measures their success or failures. Industry Average Steps to Success • Use consumer generated insights to feed business decisions “Organizations that need to across multiple business units. Best-in-Class companies are create a dialogue with their experiencing year-over-year improvements in key marketing metrics customers are implementing due to the ability to analyze consumer-generated insights and Web 2.0 capabilities. Currently, disseminate them across multiple business units; however, only 14% they are cobbling them of the Industry Average, compared to 39% of the Best-in-Class, have together with 3rd party this capability in place. Since there are a number of different groups products. Creating a dialogue and nurturing those within an organization that leverage Web 2.0 applications, such as relationships is first and marketing (83%), product marketing (63%), and sales (54%), it is foremost. Second, creating a necessary to have a process in place to share the insights generated platform for experts, wherever across multiple business units. they may be, to collaborate and • Provide an outlet for engaging with customers. Company- communicate is important as well. Finally, corporations that hosted blogs are an effective way to keep the lines of dialogue open need to communicate between a company and its customers. These blogs entries, which specifically with customers and customers can directly respond to, allow an organization to respond get them specific information to criticism and publicize new product or service roll-outs. Despite quickly can do so with social blogs being identified by all respondents as a top two feature media.” associated with Web 2.0 technology, along with social networking ~ Advertising Executive, Film sites, less than half (43%) of the Industry Average connect with Industry customers in this manner. The additional 45% of Industry Average that plan to leverage company-hosted blogs must move quickly to provide an outlet for customer interaction. • Enable public customer review profiles and rating scores of products or services. Companies often face the same dilemma when it comes to connecting with customers in online forums: what if what they say isn’t what I want to hear? While it’s true that enabling consumers to review profiles and rate products will occasionally result in negative feedback, these instances should be viewed as an opportunity for growth and not necessarily as a detriment to the marketing message. Currently, 15% of the Industry Average, compared to 27% of the Best-in-Class, enable public customer reviews and rating scores in company hosted blogs and wikis. The fact that Best-in-Class are more inclined to allow this capability aligns with their need to grow market awareness and utilize consumer feedback in the development of new products and services. Industry Average companies must begin to view consumer- generated content as an opportunity to learn and grow. © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  22. 22. Customer 2.0 Page 22 Best-in-Class Steps to Success • Develop an enterprise-wide commitment to promoting, maintaining, and utilizing consumer-generated content. Twenty-seven percent (27%) of Best-in-Class companies indicated that they are currently committed to promoting, maintaining, and utilizing consumer generated-content. While an additional 57% plan to instill this commitment at an organizational level in the future, it is important for companies to promote content posting amongst their consumer base now. Over three-fourths (77%) of companies surveyed agree that Web 2.0 will be a lasting channel for years to come; therefore, it is crucial for Best-in-Class companies to promote their entrance into this space and utilize the insights they receive. • Embrace social media monitoring and analysis. According to a recent Aberdeen survey conducted for the Social Media Monitoring and Analysis: Generating Consumer Insights from Online Conversations Benchmark Report, 75% of Best-in-Class companies improved their ability to predict customer behavior after implementing a social media monitoring and analysis solution, compared to 11% of Laggards. While Best-in-Class companies are more likely than all others to utilize external-facing Web 2.0 applications to harvest consumer insights, they must remember that the internet is a sprawling landscape of information. There are numerous blogs, wikis, and online forums where consumers can post feedback on a particular company’s products or services; therefore, it is necessary for companies to monitor this activity as a way of supplementing the consumer insights they generated through their own efforts. Aberdeen Insights — Summary The internet has done more than simply change the way people access and share information. It has succeeded in developing a new breed of customers. These customers expect to interact with peers and businesses when they want, how they want, and in the channel of their choosing. Rather than turn a blind eye to the emergence of a new consumer base, savvy companies are providing an assortment of Web 2.0 touch points for consumers to provide feedback. While the current adoption of customer-facing Web 2.0 applications is low, even among Best-in-Class companies, the substantial planned adoption rate suggests that businesses understand the value of providing more than just a website to consumers, but an experience. As solutions like blogs, wikis, and social networking become commonplace online, businesses will succeed in creating a closed-loop process with their customers. One where the insights gleaned from consumer-generated conversations drive product development and marketing decisions. © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  23. 23. Customer 2.0 Page 23 Appendix A: Research Methodology Between March and May 2008, Aberdeen examined the use, the Study Focus experiences, and the intentions of more than 360 enterprises using, or planning to use, Web 2.0 technologies in a diverse set of enterprises. Survey respondents completed an online survey that included Aberdeen supplemented this online survey effort with interviews with select questions designed to survey respondents, gathering additional information on social media determine the following: strategies, experiences, and results. √ The degree to which Web Responding enterprises included the following: 2.0 technologies are currently deployed and the • Job title / function: The research sample included respondents with financial implications of the following job titles: senior management [CEO, COO, President] leveraging customer-facing (26%); director (23%); manager (20%); vice president (12%); other social media applications. (19%). √ The level of priority • Industry: The research sample included respondents from the companies place on Web 2.0 following industries: high technology / software (33%), publishing / in 2008 and beyond. media (11%), finance/banking (7%), education (6%), retail (4%), other √ The groups within the (39%). organization that harvest and use consumer-generated • Geography: The majority of respondents (66%) were from North insights. America. Remaining respondents were from Europe (18%), the Asia-Pacific region (11%), Middle East / Africa (3%), and South / √ The organizational processes Central America (2%). and metrics in place to support Web 2.0 technology • Company size: Fifteen percent (15%) of respondents were from large implementation. enterprises (annual revenues above US $1 billion); 22% were from midsize enterprises (annual revenues between $50 million and $1 The study aimed to identify emerging best practices for billion); and 63% of respondents were from small businesses (annual Web 2.0 usage in a variety of revenues of $50 million or less). industries, and to provide a • Headcount: Fifty-seven percent (57%) of respondents were from roadmap by which readers small enterprises (headcount between 1 and 99 employees); 20% could assess their own were from midsize enterprises (headcount between 100 and 999 capabilities. employees); and 23% of respondents were from large businesses (headcount greater than 1,000 employees). Solution providers recognized as sponsors were solicited after the fact and had no substantive influence on the direction of this report. Their sponsorship has made it possible for Aberdeen Group to make these findings available to readers at no charge. © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  24. 24. Customer 2.0 Page 24 Table 8: The PACE Framework Key Overview Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows: Pressures — external forces that impact an organization’s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competitive) Actions — the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product / service strategy, target markets, financial strategy, go-to-market, and sales strategy) Capabilities — the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products / services, ecosystem partners, financing) Enablers — the key functionality of technology solutions required to support the organization’s enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management) Source: Aberdeen Group, June 2008 Table 9: The Competitive Framework Key Overview The Aberdeen Competitive Framework defines enterprises In the following categories: as falling into one of the following three levels of practices Process — What is the scope of process and performance: standardization? What is the efficiency and Best-in-Class (20%) — Practices that are the best effectiveness of this process? currently being employed and are significantly superior to Organization — How is your company currently the Industry Average, and result in the top industry organized to manage and optimize this particular performance. process? Industry Average (50%) — Practices that represent the Knowledge — What visibility do you have into key average or norm, and result in average industry data and intelligence required to manage this process? performance. Technology — What level of automation have you Laggards (30%) — Practices that are significantly behind used to support this process? How is this automation the average of the industry, and result in below average integrated and aligned? performance. Performance — What do you measure? How frequently? What’s your actual performance? Source: Aberdeen Group, June 2008 Table 10: The Relationship Between PACE and the Competitive Framework PACE and the Competitive Framework – How They Interact Aberdeen research indicates that companies that identify the most influential pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute those decisions. Source: Aberdeen Group, June 2008 © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  25. 25. Customer 2.0 Page 25 Appendix B: Common Web 2.0 Technologies For the purposes of this benchmark report, the term “Web 2.0” is used to refer to a set of technologies that promote the exchange of user- generated content and information in a manner that simultaneously begets collaboration and individuality. Common Web 2.0 technologies include: • Blogs. Short for “web log,” a blog is an online journal of sorts. Blogs are typically used by individuals to share information and insights with both acquaintances and strangers alike. Blog entries are often kept in chronological order of when they were posted; furthermore, a majority of blogs allow readers to post feedback or comments regarding the content of the entry. Nowadays, company executives use blogs as a way announce a new product release, respond to an industry issue, or simply share some insights with their customer base. • Wikis. Wikis, which share their name with the Hawaiian word for “fast,” are web pages that allow anyone who visits it to modify or contribute content. The overall purpose of a wiki site is to create a shared online community around a particular topic area. As more companies have become comfortable incorporating Web 2.0 technologies into the enterprise, wikis have been utilized to facilitate knowledge sharing within the organization. Common examples include a dynamic glossary of company-specific terminology, company-wide memos and notices, and a repository of information used for onboarding and training purposes. While security and credibility may be an issue for companies looking to create an online wiki around their brand, general security measures, such as mandatory logins, exist to curtail someone from editing another’s entry. • Social networking sites. Social networking sites have become a popular place for people to interact with others who share similar lifestyles. By creating an online profile, users can search for people they know personally or who they may share common interests with. In addition to unique user profiles, social networking sites often share other common features, such as: messaging, blogs, photo and video sharing, searchable fields, and, in some cases, add-on applications. The large number of users on popular social networking sites has caused some organizations to reach their audience in these social forums through marketing campaigns or specific add-on applications. • RSS feeds. The growing number of online customers turning using the web as their primary source of news and information has resulted in the need for a streaming feed of “fresh” news information. RSS feeds automate the traditional process people © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  26. 26. Customer 2.0 Page 26 relied on for receiving updated content, namely daily checks of particular sites. By aggregating the content from several different web sources, such as online journals, blogs, and newspapers, RSS feeds allow people to customize what information is fed through to them and the mode by which they receive it. • Mashup. The term “mashup” typically refers to a web application that integrates data from various third-party sources. Furthermore, inherent to the phrase “mashup” is the ability for the end-user to configure the look and feel of the web tool in which they receive their information. For example, a consumer may use a “mashup” to feed his or her RSS feeds, local weather reports, sports scores, and top headlines of interest directly into a particular homepage. Ultimately, “mashups” are designed to collect and present various forms of data in a format that the user dictates and customizes. © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897
  27. 27. Customer 2.0 Page 27 Appendix C: Related Aberdeen Research Related Aberdeen research that forms a companion or reference to this report includes: • Protecting the Brand by Using Social Media Monitoring As an Early Warning System (March 2008) • Social Media Monitoring Proves Its Worth to the Product Development Department (March 2008) • CRM Shakeup: Oracle and SAP Break New 2.0 Ground (March 2008) • Active Engagement with Online Consumers Maximizes Returns from Social Media Monitoring Solutions (February 2008) • The Rise of Social Media Integration: Monster and Wal-Mart Lead the Way (February 2008) • Social Media Monitoring and Analysis: Generating Consumer Insights from Online Conversation (January 2008) • Social Media Becomes a Key Factor in the Quest for Return on Marketing Investment (December 2007) Information on these and any other Aberdeen publications can be found at www.aberdeen.com. Author: Alex Jefferies, Senior Research Associate, Customer Management, alex.jefferies@aberdeen.com Since 1988, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter — the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.2 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500. As a Harte-Hanks Company, Aberdeen plays a key role of putting content in context for the global direct and targeted marketing company. Aberdeen's analytical and independent view of the "customer optimization" process of Harte- Hanks (Information – Opportunity – Insight – Engagement – Interaction) extends the client value and accentuates the strategic role Harte-Hanks brings to the market. For additional information, visit Aberdeen http://www.aberdeen.com or call (617) 723-7890, or to learn more about Harte-Hanks, call (800) 456-9748 or go to http://www.harte-hanks.com. This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc. © 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897

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