A Scientist's View of Social CRM

[#1]

Michael Wu, Ph.D. is Lithium's Principal Scientist of Analytics, digging into the complex dynamics of social interaction and group behavior in online communities and social networks.

Michael was voted a 2010 Influential CRM Leader by CRM Magazine for his work on predictive social analytics and its application to Social CRM.He's a regular blogger on the Lithosphere's Building Community blog and previously wrote in the Analytic Science blog. You can follow him on Twitter at mich8elwu.

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Yesterday, I was pleasantly surprised to be named an Influential Leader in the 2010 CRM Market Awards by CRM Magazine. This news was certainly a shock to me, as I was munching on lunch and tweet-chatting with my fellows who were attending the CRM Evolution 2010 Conference in NY. I felt deeply honored and, at the same time, a little out-of-place to see my name among some of industry’s best known luminaries, including Marc Benioff (Salesforce), Bill McDermott (SAP), Doc Searls (Berkman Center for Internet & Society), Brian Solis (FutureWorks), Ray Wang (Altimeter), Brad Wilson (Microsoft), and Mark Zuckerberg (Facebook). I consider myself a scientist, who does research on influencers, WOM, and predictive social analytics with the hope to understand the dynamics of communities and social networks. Although much of my work can be apply to different aspects of social CRM (sCRM), I felt I really don’t know that much about sCRM.

I’ve spoken about sCRM at panels, but I’ve never actually written anything on this topic on my blog. So I thought today is probably a good time for me to talk about my perspectives on sCRM. I am not going to repeat the definitions or other aspects of sCRM that you can find elsewhere, because there are plenty of sCRM experts who know this topic way better than me. Rather, I will analyze sCRM from a communication perspective and explain some of the observed confusion around sCRM.

Traditional Communication

Before I do that, however, let’s take a look at the traditional channel of communication between corporate entities and their customers (Figure 1). Some of the key characteristics of the traditional channels are:

1. Transient & opaque: Communications between a company and a customer are usually not recorded. Even if they are tracked, they are not easily retrievable, and therefore not visible to other customers. This gives the company a lot of control over these communications.
2. Unidirectional: Customers-to-company communication is usually handled via support/service department, and company-to-customer communication is usually handled via marketing/PR department.
3. One-to-many (or many-to-one depending on the direction of communication): Since customers don’t know who and where the other customers are (due to the transience & opacity of communication), coordination between customers are difficult.

Many people think they are doing sCRM if they simply add the social media channels to their traditional channels and continue their business as usual (Figure 2). But IMHO, social CRM is not just another channel for the customers to communicate with the company.

Social Media Communication

The communications on modern day social media channels are clearly (1) Persistent & transparent, (2) Bidirectional, and (3) Many-to-Many. Some of the direct consequences of these changes in communication pattern are:

1. Persistent & transparent allow any customer to retrieve and see the communication between company and any other customers. In turn, this enables many-to-many communication and coordination among the customers. The result is that customers can now have much greater control of their communication with the company.
2. Unlike traditional media, social media is inherently bidirectional, so communications on social media channels go both ways (i.e. customer-to-company and company-to-customer). This is what led to the problem of “who owns social in an organization?” with many organizations vying for control of the medium.
3. Since the growth of many-to-many communication is roughly the square of the number of customers divided by 2, companies can never scale with the conversations of the social customers with just employees. Look at Figure 3, there are many more green lines (15) than gray lines (6). If you have 1000 customers, you will have only 1000 gray lines (customer-to-company communication), but there will potentially be 499,500 green lines (customer-to-customer communications). The difference will be even more dramatic as your customer base grows.

My Perspective of sCRM

So what is sCRM? To me, sCRM is everything that a company does to deal with the above changes in communication patterns introduced by social media. This involves many aspects of business. Clearly the technology has to change. Instead of managing the conversation with X number of customers, sCRM systems must track and manage roughly X-squared/2 number of conversations among the customers. Since these conversations are unstructured, sCRM systems must be intelligent enough to interpret and understand the conversation on the social web. Sentiment scoring is one but only the very first step in this analysis. Moreover, since there is no way for employees to engage and respond to every customer conversation, sCRM systems must enable business processes by prioritizing and routing the relevant conversations to the proper responder – in other words they have to scale with the company and their audience.

Aside from technology, new strategies and business processes must be in place to collaborate with people outside your company. I once said “the only way any organization can scale with social, is via social.” So companies must learn to work with their advocates, influencers and superusers to co-create value with them. Whether it is answering technical questions about your product, helping to spread your marketing message, or defending your brand, not only are these non-corporate affiliates crucial for scaling, they are actually more effective than the voices of the company.

There should be some level of change to the internal structure of the organization to facilitate the interaction between the support, marketing, sales, and product department within the company. The social customers see the company as one corporate entity (one Twitter account, one Facebook fan page, just like any other users), not a conglomerate of disparate departments. The relationship that sCRM manages should be the relationship between your customers and your brand; it shouldn’t be the relationship between your customers and the departments within your company. Breaking down some of the organizational walls not only provides a more seamless customer experience, it will also increase customer satisfaction and loyalty in the long run.

Finally, sCRM involves a change in the philosophy and the culture of the company. As conversations become more transparent, companies must engage social customers with authenticity and learn how to be more customer-centric. You may have 10,000 employees watching the social stream, but the whole world is watching yours.

Who owns social? I honestly think it’s owned by everyone. It is certainly everyone’s responsibility to know what the social customers are saying about their brand. The company may have guidelines on how to respond and interact on in the social web. But as the Gen-Z enters the work force, what used to be guidelines will simply become part of normal social conduct and etiquette for the new generation.

Conclusion

Social CRM is a fundamental change in the way companies run their business and do business. If you are simply using Twitter, Facebook, or a community, as another channel, then you are missing the whole point of sCRM. If you take this approach, you are going to miss out on the long-term and specifically the long-tail benefits from the co-created value through customer engagement. So this is my perspective on sCRM.

I am deeply honored to be named an influential leader in this new space. To be honest, I am relatively new to sCRM. I used to be a computational neuroscientist. Surprisingly, this turned out to be rather helpful as it encourages me to think out of the box, challenge pre-established standards, and examine the problem critically. Without the experiences, my thought process is also not limited by what some people called “intellectual baggage.”

Thank you to all you loyal supporter out there, for your readership, support, and validation. I must also thank Lithium for understanding the value of research, and for providing me with an intellectually stimulating environment and the freedom to pursue and explore some of the most interesting and challenging problems in sCRM. Last but not least, a big kudo to all my colleagues at Lithium and Scout Labs, I wouldn't be where I am without all of your help and support. As usual, comments of any kind are always welcomed. See you next time.

[#2]

Kudos, Mike!

You certainly deserve the title. Thanks for your intellectually stimulating conversations and for another enlightening post. I particularly enjoyed the fact that the scalability of the social efforts within an organization depend on its ability to engage with them in value co-creation. Great food for thought!

[#3]

Congrats!  It's great to see you recognized for your great work.

[#4]

Congratulations!

I think you nailed it with the description of social media communication.

However, you mention that:

"Since the growth of many-to-many communication is roughly the square of the number of customers divided by 2"

Are you sure it's not the root mean square? Just kidding. I've learned not to challenge your mathematics.

[#5]

Hello Tim,

Thanks for the question.

I'm glad you ask, but not because I made a mistake. Rather, I believe that if you find the division by 2 strange, then others would probably find it strange too. So I will offer some explanation here.

The division by 2 is there because the communication is symmetric: If customer-A communicates with customer-B, then B also communicates with A. So between any 2 customers (red dots), there is only 1 green line between them.

The actual formula for the number of communication lines between X customers is: X*(X-1)/2. The (X-1) term is there because the number of customer any one customer can connect to is (X-1), because you don't connect with yourself.

So with 6 customers (Figure 3), you get 6*5/2=15 green lines. And if you have only 2 customers, you get 2*1/2=1 lines. And if you have 1000 customers, you will get 1000*999/2=499,500. Notice this is pretty close to 500,000, which is just 1000 squre divided by 2. OK, enough math here.

Remember what I said in the article? It is a good thing to "challenge the pre-established." You may be pleasantly surprised someday, because I do make mistakes sometimes. I'm human

Thanks for the question/challenge, and see you next time.

[#6]

Congratulations Mike!!

You deserve this honor. I still remember the similar discussion we had during LiNC in May 2010. A very difficult question "How to measure the true Social Influence of a person across social networks?" How to rank it in terms of spread, reach, and value creation etc. Again, Great to see you in the list.

[#7]

Hello Julian and Kevin,

Thank you for the congrats.

As for "scalability of the social efforts within an organization depend on its ability to engage with them in value co-creation," I learn that personally.

There is never enough people who can help me analyze all the data we have. I have to collaborate with academic researchers and professors and engage them in a way that co-create value for both of us. That is the only way that I can scale myself. The co-created value for both is key to keeping the collaboration alive.

[#8]

Hello Manab,

The difficulty is really not in the algorithm that identify the influencer across networks. It is simply the fact that we don't have much cross network data. If I have the necessary data from Facebook, LinkedIn, Twitter, and the community, then it is not difficult to identify influencer across these 4 channels. In fact, the same model and algorithm would probably work.

When you said "spread," I think you mean velocity of spread right? Otherwise, spread would be very similar to reach. If that is the case, as long as we have the necessary cross-channel data, then it is not difficult at all to compute and rank spread and reach. Value is the only one that can be a bit tricky, because value is in the eyes of the beholder. So that might need some ironing out. The key is on getting the cross-channel, cross-network data, not the algorithm.

Thanks again for the congrat and for commenting.

[#9]

Michael:

Nice post and congrats on the award.

I'm interested in your comment: "The relationship that sCRM manages should be the relationship between your customers and your brand". We've been working with many of our customers to help them understand if their support organization’s strategy and processes reflect their corporate brand. Interesting to find some of our customers that have a high value, high touch brand, but push everyone to poorly managed outsourced call centers or weak self service, penny pinching all the way.

Social amplifies this discrepancy and often serves to first confuse how brand is expressed (by marketing vs. post sale services), then ultimately force an organization to harmonize how their brand is expressed across the organization.

This has led us to a whole set of brand discussions with our customers bringing marketing and services together. Social provides the visibility and active collaboration with their customers to see the walls and harmonize how their brand is expressed. It's been a very interesting journey. Thoughts??

[#10]

Hello Andrew,

Thanks for the congrats.

As for my thoughts on brands and social, I think you said it well. First there will be chaos, then thing will settle, and then people will find a workable solution. The solution may be what some people call enterprise 2.0 (e2.0), or it maybe something completely different and novel on its own. Social CRM will overlap with e2.0 at certain places (e.g. customer data, the prioritization and routing of customer cases, etc).

The internal organizational divide between marketing vs. support probably won't go away over night. However, social does provide a driving force for companies to change, but it will take time. Social CRM could very well be the first step of a series of changes to come, because sCRM is the bridge between the inner workings of an enterprise with the external social web.

As companies learn and adapt to social in a deeper way (this is a necessary process in coming up with an efficient and cost effective enterprise-wide solution to deal with social) sCRM may blend with e2.0 at many integration points. Finally companies will settle on something. The final solution for each company settle on maybe different, some may completely get ride of the wall between marketing and support, other may simply provide e2.0 tools to enable them to work together.

Well, that is my though. Probably not very useful, since it's speculative. But thanks for the comment anyway. Hope to see you around Lithosphere.

[#11]

Who wants a company isolated from its own ecosytem? your observations ought to be an eye opener. You illustrate this very well with those green lines; who wants their relationships socially intermediated? With the transformation of the web, its transparency and the malleability of interactions, it's clear that there is a demand for 'straight realtionships', and that selling without support (empathy, care, understanding etc...) is definitely a formula that will facilitate exclusion from the ecosystem which one helped set up in the old days. This is not about fear and red alerts, but it seems that being socially active has more organizational benefits than we're wanting to realise. I don't think that all customers demand social interactivity from their brands or companies, but  any innovation capable of providing companies better insights, as to what customers may be needing is good.

Mike - yes indeed there is value in research and for opportunities to reflect and project your thoughts - your appreciation very moving.

[#12]

Hello Intrinzinc,

You are totally right. I think that right now companies are seeing social as potentially a red alert and responding with fear. But as you said, as companies mature socially, they will realized the benefit of being social. So, I think they are definitely shifting away from that red alert phase now, albeit slowly.

You are right on that not all customers demand social interactivity with companies and brands, but when they need to interact with brands, the medium should be there. And it should allow the customer to choose which way they want to interact with brands. And when they do interact socially, sCRM will provide a mechanism to understand customers better, which is beneficial to both the company as well as the customer.

Thank you for commenting, and I hope to see you around again.

[#13]

Hello Mike,

Congratulations once again.

I agree with you that the new world is all about interactions. To that point, I personally consider the number of 'relevant' green lines for a company to be much more than X*(X-1)/2. I know this is an academic point, but what I wanted to stress was that if a company has X customers, not only do they talk with each other but they will be talking with potential customers/prospects as well.

And while one might argue that a firm don't have control over prospects (well, neither do they have control over their customers in today's world), I think if growth is a priority for a company then they have to think outside the 'customer box'.

You are also right that sCRM is more than adding social channels - to be successful a company needs to evolve on many more friends, organizational culture being one of them.

Regards,
Ned

[#14]

Hello Ned,

Thanks again for the congrat.

Good point. A good sCRM system should definitely monitor all the conversation beyond just those of among the customers. I use X to represent the number of customers, only to illustrate the case of support/service aspect of the customer-company communication. In that case there can only be at most ~X customers talking to you. And the formula is only use to illustrate the scale difference between X and X^2.

But you are right, with the social web, X should represent the number of potential customers. You have to listen no only to your customers, but your potential customers. Moreover, you need to listen to your competitor's customers and conversation about their brands, products and services as well. The key point is that the volume of conversation that you need to monitor is so great that company employees can never scale.

Thanks again for coming back and commenting.

[#15]

Congrats, Michael. You totally deserve it. Seeing the numbers really helps drive the message home:

"If you have 1000 customers, you will have only 1000 gray lines (customer-to-company communication), but there will potentially be 499,500 green lines (customer-to-customer communications). The difference will be even more dramatic as your customer base grows."

Or maybe I'm biased because I have a Math background

[#16]

Thanks Mike,

It's great to know that you have a math background. I didn't know that at all.

I show the numbers only to give people a sense of the difference between linear scaling vs quadratic scaling. Being a engineer, it's probably second nature to you that quadratics problems are so bad that  the problem just become intractable at some scale. However, organizations that don't get this are still hiring people and trying to throw more bodies at this problem. It may work for a while, but we both know that this is not a scalable solution as companies acquire more customers (or potential customers).

Thanks again for commenting.

[#17]

Dear Michael,

What a pleasure to read these interchanges. I would be very interested learning more about social CRM.  I'm currently developing a social media guide to help put some direction into how the employees of a global company interact on social media sites. I imagine since it's a SOCIAL media guide, much will be governed by considerations of courtesy and common sense. But I believe the end document (or I should say the breathing document, since it's bound to change in our dynamic online world) must essentially respect the individual's joy of self-expression and personality. Or else, what's the point?

All the best, and a toast to you, along with your other friends here,

Ann

PS, I find it interesting to think how "rules" of etiquette are really just common sense, for the most part, until they become isolated from the original circumstances and no longer understood as just doing for other what would feel best if you were in their skin, and I guess avoiding chaos. Even those funny rules about picking up silverware from the outside of the place setting in were probably in some part designed to allow the hostess some freedom from worry about fetching an extra fork, and helping the servers be able to clear things in some standard way from a large table.  

[#18]

Hello Ann,

Thank you for the followed on twitter, the connection on LinkedIn, and the comment here.

Glad to hear that you find this post interesting. A social media guide for enterprise employees is much in need these days, because companies just don't know what they should allow or disallow. But as you mentioned a lot of them will become common sense after people are fully engaged in social media for a while. It is not any different than going to a country which very different cultural background and have to re-learn, and re-establish the social norm in those countries. Having a guide, will speed up this learning process from the much slower and potentially very expensive trial and error method.

I think there are certain rules of etiquette that are common sense, but there are also business rules that are not common sense. I will give one example with regard to online communities here, but there are actually many that I can cite.

When employees are participating in an online community, there is a danger of responding too much, because it is normal for people to respond to whatever they can when they see it. That is, if they see something that they know the answer, and they have the time, resource and confidence to answer it well, then most likely they will. Sometimes that may not be such a good thing to do, because you don't want consumers to get the feeling that the community is just another support channel. Why?

1. Because consumers will have a much higher expectation that you might not be able to meet. Consumers will think that the community is nothing more like a email, or phone channel that support staff go and respond to question. So if they don't get a timely response immediately, they will feel frustrated and disappointed.

2. You lose out on the opportunity to let your superusers shine, and reap the rewards from the community's recognition. This means that you superuser, advocate, influencer, etc. cultivation program will be slower. Some of them may even leave because they don't want to be mistakenly thought of as a support staff.

However, if employees wait a while before responding, and let the community's superuser, advocates, and influencers respond first, they will be rewarded we get a lot more benefit.

1. Superuser, advocates, and influencers, get the proper reward and community recognition, so they continue to help out.

2. Other consumers feel the genuine authenticity in the community, because it is not just a bunch of staff responding.

3. They won't have the high expectation that other peers, consumers just like themselves to respond immediately.

4. Needless to say, your employees must still carry out their daily routines on top of the being responsive on the community.

Employees should only respond when the community is not able to provide a satisfactory answers in a timely manner. This wait time is different for every community and depends on the urgency of the product and nature of the question.

So this is where a guideline will really help. But I suspect that in the future (when everyone is social media matured), people will learn this too. And it will eventually become common knowledge. But, I think that there are some rules and guidelines that are not common sense for most employees now.

Good luck developing the social media guide. Feel free to ask questions on Lithosphere's discussion forum. There are a lot of experts there on various area, such as community management, business processes, etc. I've learned a great deal from them too.

Anyway, thank you for the comment. Hope to see you again next time.

[#19]

Thought you would like to know that this blog is STILL being shared.  A friend of mine pointed it out to me today.  It is great to hear in a clean and clear way how the underlying rules of bussiness are changing.

There have been a lot of comments on the math of relationships, and while I am pretty math savvy myself, I think the point is that there are an enormous amount of interactions going on now.

The trick seems to be that we must learn to guide those relationships even while they are too numerous to track... to push on just the right places in a social environment to guide the tone.   Empowering super-fans, modeling behavior, engaging with those who post passionately and/or frequently.... these sort of actions on our part can ripple through the social medium.  I have had a great intuitive grasp on how to do this, but we need to be able to teach it.

[#20]

Hello Bryan,

Thank you for the nice comment and I'm so glad that things that I've wrote is STILL being shared and people are STILL finding it clean and clear.

Yes, relationship online is starting to mean something quite different from relationship in the real world now. Interactions and having an underlying common interest is very important in building online relationship. Part of it is analytics, and part of it is really just art. That is why we have best practices here. And my goal is to understand and explain the vast amount of best practice with science and mathematics.

Thanks again for commenting. See you around on Lithosphere.

[#21]

20 years ago I wrote about a fundamental change in the way companies run their business and do business in my book Database Marketing, after completing some of the first big customer database projects anywhere in the world.  My PhD in nuclear physics helped add to the mystique and convinced the business world that this was the next big thing.

There was a grain of truth in it.  But an awful lot of untreated sewage.  The important thing was to sound clever and complex and always have a smart answer. 

Social CRM has all the hallmarks of database marketing 3.0 - what's intriguing is figuring out what's gold nuggets and what's sewage. 

Michael, I'd like to discuss your ideas by phone, do call me.

Best wishes,

Prof. Robert Shaw

[#22]

Hello Prof Shaw,

Thank you for the comment. 

I must say that it wasn't my intention to sound complex then pop out the smart answer. I simply wanted people to learn and understand why there will be a transformation now. Only when we have smart and inquisitive audience can the whole business ecosystem move forward and innovate.

I am not familiar with Database Marketing 3.0. So I'm happy to talk, discuss, and explore anytime. Why don't we LinkedIn first. I think this will facilitate our future communication and interaction. Unless you like to share your contact some other ways (in that case, please let me know how I can contact you).

Thanks again for the nice comment. Hope to see you around Lithosphere.