Managing Customer

Relationships in the Social Media Era:

Introducing the Social CRM House.
Publication Title:

Proceedings of: Journal of Interactive Marketing, 2013.

Available online: 30 October 2013, [31 citations]

Authors: Edward C. Malthouse & Michael Haenlein &

Bernd Skiera & Egbert Wege & Michael Zhang

Presented by: Hector E. Ugarte R.
Bonn University - Germany

3.6.2015
1

Customer Relationship Management

Strategy for managing all companys relationships and
interactions with customers and potential customers. It helps
companies to improve profitability.

Traditional CRM model!

Organization
Customer
have a passive role.
possesses substantial
information about its
customers.
Use the information to manage
its relationships with them.

GOAL
Maximize customer lifetime value (CLV). Determined basically just
with customers purchase behavior.
4

Customer Lifetime Value

Is a prediction of all the value a business will derive from their
entire relationship with a customer.
CLV as a periodic value:
this customer's 12-month
(or 24-month, etc) CLV is $x

Social Media
Group of Internet based applications that allow the creation and
exchange of user generated content.

The problem
CRM needs to adapt to the rise of social media.
The convergence of social media and CRM creates pitfalls and
opportunities.
Companies are likely to find it increasingly difficult to manage
the messages that customers receive about their
products/services.

Social CRM model!

Organization
Hard to gather substantial
information about its
customers.

Customer
have an active rol.
can easily express and distribute
their opinions
to large audiences.

NOTE:
some experts suggests that instead of CRM, companies should focus on
doing vendor relationship management (VRM), where consumers are
9
managing their relationships with vendors rather than the other way around.

10

The social CRM house

Framework to understand how social media affect CRM.
Two dimensions:
CRM dimension.
Social media dimension.

11

CRM dimension
comprises the three basic components of the traditional CRM
process:
ACQUISITION: relationship initiation of new customers.
RETENTION: maintenance of current customers.
TERMINATION: brake relations with customers.

12

SOCIAL CRM STRATEGY

Organizing
People
Skills
Culture
Operational
excellence

Level of Engagement

Lower

Higher

Measuring
Outcomes

Acquire

Mantain
Retain, Cross-sell, up-sell, churn prevention
Terminate
Churn prevention, reactivation, termination

Understanding Customers and Deriving Insights

Data and Information Technology

The floors

SOCIAL CRM STRATEGY

Organizing
People
Skills
Culture
Operational
excellence

Level of Engagement

Lower

Higher

Measuring
Outcomes

Acquire

Mantain
Retain, Cross-sell, up-sell, churn prevention

Terminate
Churn prevention, reactivation, termination

Understanding Customers and Deriving Insights

Data and Information Technology

14

1. Level of engagement
When a user generates content related to a specific brand, he or
she is engaging with the company.
Levels of engagement:
LOWER ENGAGEMENT: Describes situations in which
consumers either only passively consume content or use very
basic forms of feedback (e.g., liking a page on Facebook).
HIGHER ENGAGEMENT: Describes cases in which
consumers actively process the role of the brand in their lives
or participate in various forms of co-creation, such as writing
reviews or creating videos showcasing the product.
15

1.1. Lower Customer Engagement

Acquisition
uploading advertising spots on YouTube, running promotions on
Facebook, or providing information about their products on
Wikipedia.

16

 Retention
Facebook brand pages, flagship brand stores in virtual worlds, etc.

17

 Termination
Target consumers in special retention campaigns.
Identify customers who should not be abandoned because of the
special social contacts.

18

1.2. Higher Customer Engagement

Acquisition and Retention
the company no longer has full control over the messages to
which its consumers are exposed.
a separation is no longer worthwhile, since marketing activities
are likely to reach current and potential customers of the
company at the same time.
Targeting customers with a particularly high number of social
contacts or customers who are financially attractive

19

 Termination
Relationship termination is more challenging, especially when it
is initiated by the company.

20

The roof

SOCIAL CRM STRATEGY

Organizing
People
Skills
Culture
Operational
excellence

Level of Engagement

Lower

Higher

Measuring
Outcomes

Acquire

Mantain
Retain, Cross-sell, up-sell, churn prevention
Terminate
Churn prevention, reactivation, termination

Understanding Customers and Deriving Insights

Data and Information Technology

2. Social CRM Strategy.

Key considerations that a company should take into account in
developing a social-CRM strategy.
The strategic objective of social CRM should include multiple
forms of value to the company, including:
CLV: Customer Lifetime Value.
CRV: Customer Referral Value.
CIE: Customer Influence Effect.
CIV: Customer Influence Value
Value to the consumer.
22

 CRV: The net present value of the future profits of new

customers who purchased products/services due to the referral
behavior of the current customer.
CIE: the net influence wielded by a social network user in terms
of his or her ability to spread positive or negative word of mouth
through his or her direct and indirect connections.
CIV: the monetary gain/loss realized by the firm that is
attributable to a customers influence effect.

23

 Value Fusion
Joint focus on the value derived both by the company and by the
consumer, produce an interaction in which both parties benefit.
Content Marketing Strategy
Provide engaging content, attract an audience by providing
content they value, while their ultimate goal is to sell more
products or services in the future.

24

The basement

SOCIAL CRM STRATEGY

Organizing
People
Skills
Culture
Operational
excellence

Level of Engagement

Lower

Higher

Measuring
Outcomes

Acquire

Mantain
Retain, Cross-sell, up-sell, churn prevention
Terminate
Churn prevention, reactivation, termination

Understanding Customers and Deriving Insights

Data and Information Technology

3. Data and Information Technology

Datatheir collection, analysis, and applicationform the nuts
and bolts of social CRM strategies.
the vast quantities of data made available by social media enable
companies to derive insights about their customers and to act on
them.

26

 TRAINING: senior executives must first learn to ask the right

questions and to embrace this approach to decision-making.
NOT GENERALIZE: Consumers contributing to social media
may not represent the larger population of targeted consumers
of a product.
PRIVACY AND SECURITY: Social media CRM entails linking
disparate sources of data.

27

 UNSTRUCTURED DATA: much of the data generated in the

social CRM processe.g., text commentsis unstructured.
there is a need for improvements in natural language
processing, pattern recognition and machine learning.
DATA ACCESS MUST BE FAST: There is also a need for
systems that enable the fast aggregation and analysis of such
data.

28

4. Understanding Customers and

Deriving Insights.
The processes of extracting value from the databases.

29

The Pillars

SOCIAL CRM STRATEGY

Organizing
People
Skills
Culture
Operational
excellence

Level of Engagement

Lower

Higher

Measuring
Outcomes

Acquire

Mantain
Retain, Cross-sell, up-sell, churn prevention
Terminate
Churn prevention, reactivation, termination

Understanding Customers and Deriving Insights

Data and Information Technology

5. Organizing People
A company's employees are at the core of the success of any
CRM strategy.
An organizational change and to revolutionize the mindsets of
employees is necessary.
3 key factors:
Empowering culture.
Relevant skillsets.
Operational excellence.

31

5.1. Empowering Culture

A company must foster a culture that enables employees to
break out of outdated mindsets and free themselves from
traditional organizational norms and hierarchical structures.
Employees must live and breathe social media.
Google, Zappos, and IBM are examples of companies that
champion a social media culture.

Zappos.com is an online shoe and clothing shop

32

5.2. Employee Skills

Companies must identify, attract and develop people whose
skillsets are relevant to the world of social media and its heavy
reliance on data analysis.
a specific balance of three types of intelligence:
Scientific, interpretive, and business.

Data Scientists needed!

33

5.3. Operational Excellence

Refers to the setup of harmonized business processes and
structures that enable social media to become an integral part
of organizational and CRM processes.
Integration and remove silo mentality is needed.

34

6. Measuring Outcomes
In order to evaluate whether its social-CRM framework is
successful, a company must develop key performance
indicators (KPIs) to measure the performance of each
component of the framework.
Overall Social CRM Strategy.
People.
Specific Components of the CRM Process
Data and Information Technology.

35

SOCIAL CRM STRATEGY

Organizing
People
Skills
Culture
Operational
excellence

Level of Engagement

Lower

Higher

Measuring
Outcomes

Acquire

Mantain
Retain, Cross-sell, up-sell, churn prevention
Terminate
Churn prevention, reactivation, termination

Understanding Customers and Deriving Insights

Data and Information Technology

37

Conclusions
Social media and other new technologies have empowered
consumers.
Technologies have also enabled consumers to filter out
advertising and CRM messages, compare prices with
competitors from anywhere with mobile devices, and distribute
positive or negative brand messages to a global audience.
CRM must evolve if it is to survive in this marketplace, by
producing contact points that engage the consumer and provide
value to both the company and consumer.

38

39