Social Media impact on Customer Service

The rise of the internet and availability of huge amounts of information on every conceivable topic & subject on the World Wide Web have changed the way customers interact with the businesses. A study by the Corporate Executive Board of more than 75,000 people who had contacted B2C and B2B call centers found that 57% looked for answers on the website before calling the company and such self service oriented customers will help in reducing costs for the businesses as they tend to call the call centers less frequently. Social Media particularly Social Networking sites have become integral part of people’s lives and consumers post more than 1 million social messages every minute and these social messages includes updates about individual’s personal life, share thoughts, content, comments and complaints about the companies with which they interact. Smart companies are listening to these conversations and using social media for much more than marketing. Social media has become one of the platforms for customer service over the last few years and some of the brands like Dell, Lenovo, Best Buy, etc have services their customers through various social networking sites like Facebook, Twitter, etc and significantly improved their customer satisfaction levels. There are other traditional channels like email, contact center, help lines, etc available for the customers to interact with the businesses but they are preferring social media most and this is not a recent phenomena as earlier customers and still are using other digital platforms like discussion forums, blogs, chat rooms for customer service. There are instances where businesses when neglected the social media chatter and complaints in regards to their products & services have significantly impacted the brand reputation and even the sales of the products.

This is further highlighted by eMarketer research which reveals that 46% of customers want to solve a problem when they're engaging with a brand on social media, and 39% are looking to give feedback about a product or service. The study from Fishburn Hedges and Echo Research also found that the number of customers engaging with brands through social media doubled from 19% to 38% in just the last eight months. According to the research, 65 per cent of people say that social media is a better way to communicate with companies than call centers.  The 2012 American Express® Global Customer Service Barometer found that consumers who have used social media for service have the most influence as they tell significantly more people about their service experiences, and also say they’d spend 21% more with companies who deliver great service – compared to 13% on average. They are also far more vocal about service experiences, both good and bad. In addition, more than 80% of these consumers say they’ve bailed on a purchase because of a poor service experience, compared to 55% overall. Consumers who use social media for customer service will tell an average of 42 others about a good experience -- and tell an average of 53 people about a bad customer-service experience. The general population, in contrast, will tell 15 people about a good experience and 24 about a negative one.  Businesses have realized that social media is is a valuable service and marketing channel as it allows customers and prospective buyers understand how the company can solve their problems. Despite all the facts Businesses are still not totally hooked on to social customer service and those customers that are using it effectively also feel it is very important to address customer concerns on social media but social customer requests are below 20% of total requests.

Social CRM market will grow in 2012 – Measurable ROI & M&A surge since 2011

Most of the business organizations across the world have been able to some sort of social media presence as demanded by their customers and some of the businesses are trying to actively use social media in their Customer Relationship Management (CRM). Since the usage is at an early stage businesses are finding it difficult to tie with measurable business outcomes. Gartner analysts expect the worldwide market for social CRM software licenses and subscriptions to reach $2.1 billion in 2012, up from $850 million in 2011, and social CRM revenue will represent 10% of the overall CRM market. Social CRM grew 30% in 2011 in revenue terms and is 7% of total CRM spending globally as of 2011. Despite rapid rise in adoption of social applications by sales, marketing and customer service departments, Gartner believes that by this year end, only 50% of Fortune 1000 companies are expected to receive a worthwhile return on investment (ROI) from their social CRM initiatives. Another prediction by Gartner is that by this year end three-quarters of new social CRM initiatives that receive funding will have a business case incorporating measurable ROI. This highlights the fact that both vendors and customers are looking at ways to measure effectively the return of investment (ROI) that Social CRM efforts will generate. In fact the success of social CRM in next couple of years will depend on how well businesses and social CRM technology providers can tie Social CRM investment to clear and measurable business objectives rather than make social CRM projects just social objectives.

Social CRM is no longer a concern of marketing, but it penetrated into most of other marketing functions, sales, customer service and support and its importance is already evident in lead generation, cross-selling and up-selling capabilities, and other major successful sales & marketing functions. Social CRM applications help in capturing and sharing of data between users including the customers and other relevant stakeholders and involve them in developing and improving the products and services through their constant feedback. Social CRM applications can have both internal and external company users, communities both public & private and customers, marketing and service organizations use apps to create brand awareness, gather information, build trust, evaluate decisions, sell and aid post purchase activities. Social CRM adoption has been mostly among business-to-consumer (B2C) type organizations and business to business (B2B) companies are seeking to aggressively invest in social and by end of 2013, B2B organizations using social CRM applications will represent 25 % of all projects worldwide. Gartner expects business-to-business applications for sales use will have the fastest growth and will account for 30% of social CRM spending by 2015, up from 5% in 2011. According to a report from Gartner’s Ed Thompson titled “What’s “Hot” in CRM Application 2012,” Software-as-a-Service (SaaS) delivery of CRM applications represented 34% of worldwide CRM application spending in 2011. More than 50% of all Sales Force Automation (SFA) spending is on the SaaS platform.

Early part of 2012 and the year 2011 saw a flurry of Mergers & Acquisitions in the Social CRM space with large CRM players like Oracle & SAP aggressively buying smaller players in this space. Oracle has continued its social media CRM spending spree with the acquisition of Collective Intellect whose cloud-based applications for social media monitoring would be combined with Oracle’s social relationship platform and earlier Oracle acquired Vitrue for $339 million, a cloud-based social marketing and engagement platform that enables marketers to centrally create, publish, moderate, manage, measure and report on their social marketing campaigns. Salesforce recently announced that it has won a bid to acquire BuddyMedia for $689 million and also recently added Radian6, while Adobe bought up Efficient Frontier last year to push its own social CRM offerings. These acquisitions highlight the need for companies and Social CRM technology vendors to dynamically engage the customers on the various social media fronts and the Social CRM technology must simplify and make the two way communication effective. There is pressure on social CRM technology vendors to differentiate their offerings from their competitors in terms of functions, analytics, ease of use and superior experience delivered through professional services and this need is driving the M&A deals in this segment. According to Gartner Research Director Adam Sarner, “Vendors that can assemble a full set of social CRM functions and make progress in two or more areas, such as marketing and customer service or sales and marketing, will be best-positioned for success.”

Despite all the positive forecasts for Social CRM there is another angle that is highlighted by Gartner, that 50% of Fortune 1000 organizations that are not determining, or even measuring, ROI, will face failed projects. Among the companies who will not see a worthwhile return, only 20% will even have the data to evaluate where their social strategy is falling short. These organizations will be unable to justify future funding according to Adam Sarner. Another critical factor is social CRM works only with user communities participating which they will do only if they perceive value from engagement and Social CRM applications therefore must be more customer-centric than traditional CRM applications and they should allow the customer to manage the relationship and organizations should allow this rather than they trying to manage the customer relationships. Another important fact that business organizations need to keep in mind is that media is constantly evolving and new uses are frequently being discovered, the organization Social CRM strategy should be refined on an ongoing basis. Nucleus has found that early adopters of social CRM have recognized clear benefits, such as increased visibility and productivity. The 11.8% productivity gain is high, and Nucleus expects adoption of social CRM, particularly by salespeople, to grow not just in real numbers, but also in frequency of activity as users become more aware of the technology’s capabilities and as vendors’ offerings mature. And Gartner believes Social CRM technology vendors have to show quantified business cases and, more importantly, deliver repeatable social CRM processes that are not yet broadly available.

Case Study - General Motors Facebook Ads – Temporarily stops Paid ads, free pages to continue

General Motors (GM), the third-largest U.S. advertiser will continue to spend roughly US$30 million (includes spend on multiple ad agencies that create and manage content) on maintaining its “free” presence on Facebook through pages and content but GM announced pull back of US$10 million spend in paid ads from Facebook. GM’s Facebook spend is minuscule compared to its $1.1 billion spend on U.S. ads in 2011 and it’s spend of about $271 million (25% -30% of total ad spend) on online display and search ads excluding Facebook advertising. The reason for stopping paid ads on Facebook is due to the little impact that paid ads are having on consumer’s purchase of cars but GM said it will continue to promote its products on Facebook, but without paying Facebook. GM’s decision will also not have major affect on Facebook ad revenues as Facebook's 2011 advertising sales revenue was around US$3.15 billion and revenue from GM was tiny. Another reason for GM cutting down its Facebook paid ads spend is because of the restructuring of GM’s marketing operations for reducing billions of dollars in marketing costs and targeting to save US$2bn over the next five years. Some people believe GM did not believe in the effectiveness of advertising on social networking sites and it is using traditional measurement tools to measure the effectiveness of social media ads which is not convincing as GM being a top ad spender knows how to measure effectiveness.

According to some sources Facebook has to blame itself for GM pull back of paid ads on its site as Facebook officials' failed to convince top marketing executives at GM of the benefits of  paid ads at a meeting that was held couple of weeks before GM’s paid ads pull back announcement. Moreover Facebook officials emphasized the advantages and impact of free posted content on their website which made paid ads spend unnecessary and also suggested GM cut down its number of ad agencies it engaged to manage its ad spend and content on Facebook. Facebook's "click-through rate", also known as "clicks per page view," is half the average for ads on the Internet and the average targeted ad on the Internet is "clicked" on by a consumer once every 1,000 times it is viewed while Google's is 4 in 1,000 according to Larry Kim, founder & CTO of Internet ad consultant Wordstream. Google AdSense ads are more effectively targeted than Facebook ads and GM preferred to stick with them. GM spent more money on creating and managing content rather than advertising and the ratio of spend is $3 on brand pages for every $1 on paid ads. Also Facebook is expected to increase its ad rates after the IPO. Facebook sells ads for brand pages, sponsored posts that appear on user’s news feeds, and other formats like called "sponsored stories," that allows advertisers to pay to republish positive Facebook messages that people had posted about their brand.

But the fact is Facebook is struggling to develop a scalable revenue generator like Google AdSense and in the past few years Facebook attempts for successful ad model for marketers and businesses included charging marketers to host brand pages, featured banners ads on pages from MSN ad networks and Facebook Beacon system, that sent data from external websites to Facebook, for the purpose of allowing targeted advertisements and allowing users to share their activities with their friends. In March 2012, Facebook announced Premium, a new suite of products for marketers designed to leverage the social network’s access to friends and friends of friends. Facebook has been gradually increasing its ad revenues and recommends to marketers that unpaid content like brand pages and building a base of online fans who like a brand is successful and users will know about the unpaid content easily only when paired with paid advertisements like display ads and its "sponsored stories." Facebook said in March, for example, that only 16% of a brand's fans will see a post about the brand without paying. Facebook will use technology to ensure that the Paid ad is seen by 75% of those who click a company's "like" button on its website. Another problem area for Facebook is the mobile platform as most of its users are logging in to the site through their mobiles and the company doesn’t have a viable business model to generate revenues on the mobile devices. Facebook need to convince the marketers and businesses about paid ads, their effectiveness and also need to develop a measurement tool for measuring the effectiveness and reach of the ads that is as simple to use as TV ratings.

Facebook has more than 900 million users as of March 2012 and businesses cannot ignore such a huge platform for promoting their products and services. Realizing this fact many businesses across the globe spent millions of dollars and hired digital ad firms for creating content for their Facebook pages in order to stimulate buzz, which advertisers liken to word-of-mouth marketing campaigns. GM decision of cutting its Facebook paid ads spend is not a permanent decision and the company plans to revive it’s spend once it feels the Facebook ads are effective and reach the targeted customer who will spend in buying cars. GM is not alone in this regards as some of the companies too are apprehensive as quoted by Forrester analysts in their blog post. Businesses, Marketers and Analysts are all demanding Facebook to improve its paid advertising model, make its platform more attractive and post IPO the shareholders are also looking for significant improvement in the company revenues and business model which will increase the profitability. According to Facebook most of the businesses and marketers are still learning and experimenting with the best ways to leverage Facebook to create more social and valuable ads. Some of the GM competitors like Ford are supporting Facebook as they are effectively using the site for various promotional activities but Facebook needs to focus on improving its business model and ad platforms to attract more businesses and make sure that more businesses follow General Motors suit calling it an ineffective platform.