Viewpoint paper

Social intelligence approaches to support four core customer scenarios

Drive social intelligence to engage with customers

Viewpoint paper | Social intelligence approaches to support four core customer scenarios

Table of contents
3 An interruption to the traditional consumer decision-making journey 3 Social intelligence 3 Customer engagement and business performance 4 Four strategies that deliver profit 4 Winning customers 5 How social intelligence is changing the game 5 Keeping customers 5 How social intelligence helps keep customers 6 Developing customers 6 How social intelligence helps develop customers 6 Reduce costs and increase yield 6 How social intelligence helps optimize costs 7 Social intelligence use cases 7  A service-oriented business architecture to support the scenarios and use cases 8 Social must be integrated with the foundations of the way a company does business 10 The socially enabled businessmaturity model 11 Conclusion 12 About the authors

Viewpoint paper | Social intelligence approaches to support four core customer scenarios

An interruption to the traditional consumer decision-making journey

Social media channels enable the brand to extend its personality to engage with consumers on their termswhen they want, at work and playthrough their chosen channels. From a brand engagement perspective, applications or content for entertaining, informing, educating, or providing insight can be designed to connect with consumers wherever they are, whenever they want. They can be used throughout the customer cycleto make people aware of the brand, to encourage them to buy, to help them buy easily and conveniently, to help them use the brand, or to help manage service issues and dissatisfaction. They can be used over the product cycle to help design new products, to increase their speed to market, to build early sales quicker so as to maintain their price premium, or to understand the functions and features that customers like most. They can also be used to optimize the costs of sales, marketing, and service incurred by engaging customers and managing transactions, by providing new communication channels to replace traditional media or to make them more effective or new distribution channels offering lower transaction costs, or by enabling peer-to-peer self-help and service channels and by listening to issues to reduce the cost of failure. Evangelists see the social revolution as putting customers at the heart of business customer centricity on steroids if you like. They argue, convincingly, that we can listen to, understand, and engage with customers in ways that were previously impossible.

Social intelligence
Social intelligence is the knowledge of customers that comes from combining insights into customers social media behavior with the classic customer intelligence arising from conventional marketing and customer relationship management. It enables us to manage real-time or near-real-time conversations with customers; listen to their points of view; and deliver contextual, relevant, and engaging communicationsnot just interruptions to a customers day. These communications can be delivered increasingly through mobile devices that provide content exactly when people need it; however, to do this, companies have to deal with new data sources and combinations, new technologies, new ways of working, new talent, new ways to measure, and a new way of thinkingand this comes at a cost.

Customer engagement and business performance

We know from many long-term, well-documented studies that improvement in customer engagement has a commercial value. But customer engagement arguments may not convince revenue-oriented senior executives to invest. An example of this is the discussion about the value of a fan. Much has been written on this. One leading report from Syncapse shows that fans are worth between $0$360 USD, averaging about $136. These studies are fraught with technical and methodological problems and also are unconvincing to the senior executives. What is needed is a clear description of the commercial benefit of an approach that integrates social and classic marketing approaches. This involves building a business case on the likely costs and impact on revenue and margin. There have been a few studies on the impact of social media on customer engagement and business performance. A study from Wetpaint and the Altimeter Group confirms that deep engagement with consumers through social media channels correlates with better financial performance. An ENGAGEMENTdb study (www.engagementdb. com) showed significant positive financial results for companies with the greatest breadth and depth of social media engagement.

Viewpoint paper | Social intelligence approaches to support four core customer scenarios

1.

WIN

Recruit more (quantity) Recruit better (quality) Improve activation Manage win-back

2.

KEEP

Focus on high-value prospects/customers Retain marzipan Retain rest Retain value/avoid value decay

3.

DEVELOP

Improve cross-sales/up-sales Manage UP the valuable tail Increase frequency of spend Increase basket size

4. MANAGE COSTS TO SERVE & YIELD

Manage the cost of sales Reduce the cost to ser ve Reduce the cost of failure Improve overall yield

Figure 1. Social intelligence customer experience optimization

The most socially engaged companies grew revenues on average by 18 percent over the previous 12 months; the least engaged companies saw revenues sink 6 percent on average over the same time period. To understand the return on investment for your specific situation, we must go back to basics. The end goal is not to recruit fans (although this may be an intermediate goal) but to increase total sales and/or margin.

Four strategies that deliver profit

We define social intelligence customer experience optimization as using social marketing approaches to support the customer management objectives, strategies, and tactics that drive commercial value. The main scenarios or strategies are: Winning customerscustomer acquisition and activation Keeping customerscustomer retention and maintenance Developing customerscustomer penetration/share of wallet, improving the gross value produced by customers Managing customers efficientlyreducing costs and increasing yield

Winning customers
This strategy focuses on building the customer base, activating customers, and winning back valuable customers who have left. The four main sub-strategies for achieving this are: Increase customer numbers (quantity) Improve the quality of new customers you win Improve the activation rate (or second order or product use) Increase win-back of lost customers

Viewpoint paper | Social intelligence approaches to support four core customer scenarios

How social intelligence is changing the game Few organizations are managing to connect the many pieces of the data that could lead them to more effective and efficient marketing investment: Nielsen has awareness and advertising data but doesnt know what you buy. Lifestyle databases know what youve told them but little else. Financial databases know what youve bought and where youve shopped. Foursquare knows where you are now and where you have been. Retailer loyalty databases know what you buy with them but not with others. Google knows what youve been searching for. Social sites know who you influence, who your friends are, what you like, and what you are talking about. Cable databases know what ads you see, but not what you buy. Mobile telco databases know who youve called and where youve been. Your own databases store data on interactions and sales. With this data, we can identify and create like-minded prospect groupsniche segments or much larger communitiesand target relevant propositions to them through the right media. With the right permissions, we can develop one-to-one communications to valuable influencers or high-value prospects. We can learn more about indirect consumers by transacting directly with them through social or owned technologies. We can use social intelligence to improve media or connection planning to target marketing investment most effectively at prospects throughout their purchase journeyfrom prospect to customer.

Keeping customers
This strategy focuses on reducing customer attrition and retaining customer value. The four main sub-strategies for achieving this are: Acquiring, retaining, and developing high-value customers (the icing on the cake) Retaining the marzipan layer (the layer just under the icing, the high-value customers) Reducing attrition across the mass of profitable customers Reducing value decay (groups of customers who decrease their buying amount from the company but do not stop purchasing from them completely) How social intelligence helps keep customers Social intelligence analysis can help companies really get to know all of their best customers. Companies can more fully understand their customers interests and passions, their likes and dislikes, where they shop, where they congregate offline and online, what they are intending to buy, and what they have bought. If companies have the right permission from the customer, social media channels enable the brand to extend its personality to engage with consumers on their terms, when they want, at work and play, through their chosen channels. From a brand engagement perspective, applications or content for entertaining, informing, educating, or providing insight can be designed to connect with consumers wherever they are, whenever they want. Social techniques can even be used to bring the physical and virtual worlds together to bring products alive. Social intelligence approaches can be used in very practical waysto help manage loyalty programs, for instance, or to improve customer service by being not just reactive but proactive, anticipating problems, and communicating with communities to let them know of possible issues.

Viewpoint paper | Social intelligence approaches to support four core customer scenarios

Developing customers
This strategy focuses on getting increased value from all customers. The four main sub-strategies for achieving this are: Manage up the tail (increase the value of those low-value customers with higher potential) Improve cross-selling rates Increase purchase frequency (number of visits, orders) of existing products bought Increase basket size (purchase amount) each time someone shops How social intelligence helps develop customers Social intelligence can be used to encourage customers to buy more and different products, more often, and to identify the products and services they might want in the future to ensure even greater customer development. It achieves this through use of a much richer, more personal and immediate data set, including data on what interests customers and what they are searching for. Additional sales can be gained by prompting loyal customers to buy additional products or services, so avoiding the margin destruction often caused by a points-means-prizes approach. Cross-selling on inbound, well established in classic CRM, can be extended to social media. Social approaches can be used to get offers and samples more effectively to customers who are ready to buy and considering your brands. You can accelerate promotional activity by combining real-time analysis of social data and next-best-action marketing. Content encouraging customers to buy across the portfolio can be distributed via social media, increasing the effectiveness of cross-selling. Communities can be created around product ideas or content, and retail and other partners can be involved in developing joint social campaigns to encourage wider-range or more frequent buying.

Reduce costs and increase yield

This strategy focuses on reducing the cost of customer management relative to revenue. The four main sub-strategies for this are: Reduce the cost of sale (or cost per acquisition) Reduce the cost to serve (cost of managing customers) Reduce the cost of failure (identifying the key customer complaint areas and fixing them at source) Improve yield How social intelligence helps optimize costs Social intelligence can help companies optimize or reduce the cost of marketing, sales, service, and failure incurred throughout the win, keep, and develop lifecycle. As other use cases have shown, customers use social channels to find out about, inquire, buy, and advocate brands (impact on the cost of sales); communicate and engage with brands they love and solve queries/service issues (impact on the cost to serve); and provide feedback on their experiences (impact on the cost of failure). Then it follows that integrating social and traditional channels will have an impact on budgeting throughout the organization. In addition, there will be improvements in the profitability from new products, for instance, from reduced new product failures, quicker speed to market, and faster sales growth (making the most of the new product advantage). Fans and advocates like to evangelize brands they love, amplifying early adoption messages about innovative channels or the products they use.

Viewpoint paper | Social intelligence approaches to support four core customer scenarios
1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09

WIN

Activate in uencers
2.01

Enable advocacy
2.02

Improve connection planning

2.03

Acquire high-value customers

2.04

Optimize owned assets

2.05

Socially enable F/M/T commerce

2.06

Recruit through communities

2.07

Promote Social refresh social member of transaction get member data

2.08 2.09 2.1 2.11 2.12 2.13

2.00

KEEP

Increase engagement

Implement loyalty program

3.02

Improve customer service

3.03

Partner with intermediaries

3.04

Resolve crises

Merge physical products/ social

3.06

Facilitate owned communities

3.07

Socially enable customer save program

3.08

Reward advocates

Provide utility applications

Improve Collaborate strategic with account mgmt. colleagues

Manage event engagement

3.00

3.01

3.05

3.09

DEVELOP

Provide contextual real time prompts

4.01

Lower time between desire/buy

4.02

Increase Increase sales category through (portfolio) sales sampling trial

4.03 4.04

Socially drive e-commerce

Bundle products

Social gifting & member get member

4.07

Integrate intermediary approaches

4.08

Shop within shop

4.00

4.05

4.06

4.09

4.1

4.11

4.12

4.13

COSTS & MARGIN

Optimize Improve communication service & costs reduce costs

Improve sales territory analysis

Increase eciency

Sell via alternative channels

Reduce the cost of failure

Win earned media

Develop center of excellence

Reduce new product costs

Increase customer yield

Improve new product yield

Lower the cost of risk

Improve matching of price to need

Figure 2. Social intelligence Use Cases TCF Ltd. and HP 2011

Social intelligence use cases

The Customer Framework (TCF) and HP are developing an industrial-strength methodology and deployment mechanism that any company can use to manage its customers better and/or more effectively. This involves identifying the detailed use cases that are the main opportunities to use social media (and the resulting social intelligence) to engage with and sell to customers. Each use case directly affects one or more of the business scenarios. This list will grow as new ideas and technologies emerge and as client engagements raise new possibilities. We use these scenarios to model the link between customer management activities and business performance to show returns on investment. The foundation of most of the use cases is identifying your customers and/or advocates, channels, and partners; listening to them; understanding them; and engaging them more frequently and effectively. This is the fundamental marketing application of social media channel. Figure 2 is an overview of the use cases. We believe they are the most important opportunities, but they will vary by company and market.
Leadership

al dashboard Digit

A service-oriented business architecture to support the scenarios and use cases To support the customer scenarios and use cases, we use a service-oriented business architecture. The services are shown in figure 3 and are described as follows: Listening services: Various listening techniques can be applied to structured and unstructured datasets from transaction, owned channel systems (for example, website, contact center, help desk), or from social sites and forums. In essence, they are specialized agents that crawl the external Web and connect to internal information sources to collect the voice of consumers according to specific privacy rules, internal communication policies, and industry regulations, as well as IT security standards. Analytical services: Various analytical services can be applied to the data to identify individuals and segments, plan how to connect, monitor activities, and analyze results. To analyze text, video, and calls, semantic algorithms are applied to extract an actionable meaning. Engagement services: These services are used to manage a dialogue with customers and prospects through mobile applications, social CRM applications, social network applications, and games. Digital dashboard: This is a set of services designed to monitor the key performance indicators (KPIs) associated with driving customer engagement, revenue, and profit from social CRM activity. A more granular level of the business service-oriented architecture is represented in figure 4. At the top of the pyramid we have the business use cases, which is a technology-free definition of a business process that provides value to business actors, describing why a business process is performed (objective), what the process does (workflow), and how it is measured (KPI).
7

agement service Eng s

Resource empowerment

Digital brand management

ytical service Anal s

Organization

Culture

Business areas Product lifestyle innovation Customer experience optimization

List

e nin g servic e

G ove r nance

Figure 3. The service-oriented business architecture to support the social business strategy

Viewpoint paper | Social intelligence approaches to support four core customer scenarios

Business use case

Business process layer

Business service
Application layer

Functional service
Software platform layer

Enterprise information system

Figure 4. A more granular view of the service-oriented business architecture

A business use case is formed by a number of business services. A business service represents an individual step in a business workflow defining a business use case. It is supported by a set of functional services that interoperate in a coordinated and integrated way. A business service, in turn, is executed by one or many functional services that are defined as reusable, self-contained functional software blocks with mechanisms and control policies governing their use. Each functional service exposes a number of methods, representing the elementary functions composing the service. At the bottom of the architectural stack, there is an enterprise information systemthat is, the software platform enabling the definition, building, execution, and maintenance of each functional service.

Social must be integrated with the foundations of the way a company does business
Many marketers believe that social media and building a fan base (or worse, earned database) replace CRM and building a database of high-value and/or influential customers. Some see social and CRM as separate, with different teams driving two separate strategies. Despite all the talk about social marketing, social CRM, and the focus on engagement programs and participation platforms, many businesses still fail to integrate their social and CRM efforts into one customer-management strategy. A primary reason for this is obsession with technology and the assumptionso common when marketing innovations are enabled by systems innovationthat plugging in one of the many latest software-as-a-service (SaaS) or cloud-based solutions will transform the DNA of their company and enable the sudden switching on of customer centricity and participative marketing program implementation. Changing to the new marketing model demands more than changing technology, although technology that can replace legacy, unidirectional, batch-focused, and inflexible operating models is vital. But in our view, technology is only a small part of the answer. The main change required is in people and culture, processes, and ways of working. There is much talk now about the consumerization of IT, which is a step forward. But without the focus on how technology will deliver change, they are likely to have little impact. To make the required change, businesses must become socially enabled. Social-enabled businesses recognize that the focus of control of the relationship has shifted to customers. To succeed, businesses must listen to and understand customers before responding and converse in an open, two-way, relevant dialogue, ensuring focus on delivering the best customer experience across multiple channels.
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Viewpoint paper | Social intelligence approaches to support four core customer scenarios

KEE
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Me

su

rem

ent

Di l ea r e c t de

n& i o hip rs

Insi g pl an h t ni n g
Pe cu

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Brands & os i p ro p t i o n

Ag i l ity & wo r k ow

TS

x an p e ri ag ence em e nt
E

e ml o g s y&

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Execution

Enablers

Figure 5. SCHEMA model of customer management TCF Ltd.

Companies that do not take this approach are risking their customers leading a revolt against poor service and delivery. It clearly makes sense for businesses to listen to their customers properly, open communication channels, build richer profiles through the use of socially sourced data, deliver personalized experiences, and improve internal collaboration to deliver a customer-centered business strategy. One way to view how social is integrated into profitable customer management is via TCFs SCHEMA model (see figure 5). TCF uses questions about organizational capabilities to assess just how customer-centric a business really is and how close it is to being a socially enabled business that integrates traditional and well-proven methods of customer management with social marketing approaches. At the core of SCHEMA are a set of key capabilities based on tried-and-tested CRM principles that are equally relevant in todays socially driven world.

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Foundations

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Da g na a m

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SUSTAINED INCREMENTAL PROFITABILITY

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Viewpoint paper | Social intelligence approaches to support four core customer scenarios

CPG average
TCFs maturity model Business benet

d e

e
Level 3 Embedded with growing focus Level 4 Socially enabled business

CPG average Top bank (Australian)

Level 1 Basic state Time/Scale of change

Figure 6. Social business maturity model

Level 2 Emerging but disparate

c d

b Top pharma a (US)

Top telco (UK)

The socially enabled businessmaturity model

Our use of SCHEMA has shown various levels of maturity in different sectors. These are the early days for many companies in this socially enabled world. Figure 6 shows a maturity curve with time and perception of business benefit as the two axes. This is based on our similar study from traditional CRM research.1 HP and TCF consultants are working with clients to understand this curve and identify the challenges and benefits of maturity. Early TCF and HP research shows that among real businesses, consumer packaged goods (CPG) companies are leading in becoming socially enabled, with heavily regulated industries such as financial services and pharmaceutical slower to adopt social approaches. Many pure Web-play businesses in many sectors are generally up with the leaders.
Maturity level 0 Description of maturity state The leadership team is resisting the impact of social media, although their customers and employees are using social media in their daily lives. The organization prefers to rely solely on conventional marketing and CRM techniques to manage brands, products, and channels. The organization is dabbling in socialmostly listening. Responsibility firmly sits within a silo in marketing. No corporate or senior management commitment exists, and any activity is down to some enthusiasts in the business. There is clear but isolated usage of social, with disparate and tactical objectives focusing on the obvious external uses in reactive service, interaction, and community. The organization is beginning to: a) I ntroduce internally focused elements and supporting workflow methods to make Level 2 elements more robust (for example, escalation and closed-loop resolution of support/service, campaign creation aspects, and lead management) b) U  se social for internal purposes, for example, project management, ideation cycles, human resources (HR), and building knowledge bases Use of data is beginning, with serious investigation taking place. 4 There is clear and visible broad and integrated use of social marketing across all areas of the organization, including external customer engagement, internal processes, collaboration and analytics/measurement, and working in a coordinated business system. Social has a clear, accepted role in driving direct sales, sales through delivery chain, partner selling, and integrated cross-channel commerce. The company balances nicely the use of structured and unstructured data.

2 3

1

Woodcock, Starkey et al. QCIs State of the Nation IV, Ch. 6. 2006. Contact neil.woodcock@ thecustomerframework.com

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Viewpoint paper | Social intelligence approaches to support four core customer scenarios

Conclusion
This paper has explained the use cases that can be used to deploy social intelligence and media approaches across the four strategic customer management scenarios of win, keep, develop, and manage. It provides a planning framework that companies can use to determine both the scale of benefit that may be achieved from social approaches and priority use cases, which should be deployed first. It shows that deploying the use cases demands the provision of four common technology serviceslistening, analytical, engagement, and digital platformand describes what these services look like. A socially enabled approach to marketing, sales, and service also relies not just on technology but on the foundations of the business. The SCHEMA model shows the areas affected.

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Viewpoint paper | Social intelligence approaches to support four core customer scenarios

About the authors

Massimo Pellegrino Massimo Pellegrino is vice president of HP Information Management and Analytics. He has deep business and strategy consulting experience, particularly in financial services, telecommunications, and manufacturing, where he managed several CRM, data warehousing, and information management initiatives. He is also well known internationally for speaking at conferences and thought leadership research. Massimo Iengo Massimo Iengo is a social intelligence solution lead at HP Enterprise Information Solutions. He is a well-known data warehousing and information management guru who worked for many consulting firms, including Accenture and The Technology Partner, as well as for some large financial services institutions. Iengo has broad international experience working with customers in financial services, telecommunications, and consumer goods. Neil Woodcock Neil Woodcock is chief executive officer and chairman at The Customer Framework and is one of Europes leading experts and authors in customer management. His background with Mobil, Unilever, Accenture, and McKinsey has provided him with the knowledge and experience to advise companies about how to improve bottom-line profit through more effective and efficient customer management. Woodcock has coauthored five books, various reports, and numerous articles on customer management. He is on the editorial board of leading journals and is an honorary fellow of the IDM. He is a regular speaker at conferences, at home and overseas. Professor Merlin Stone Merlin Stone is the head of research at The Customer Framework. He is a leading expert in customer management, including strategies and tactics for customer recruitment, retention, and development. He has been a leading contributor to developing the customer-management assessment methodologies for which The Customer Framework is best known. His work focuses on improving customer experience, satisfaction, loyalty, and trust, and also the customer research, data analysis, systems decisions, and supplier selection and management needed to support improved management of customers. Stone is also well known for speaking at conferences and thought leadership research.

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Copyright 20122013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. The only warranties for HP products and services are set forth in the express warranty statements accompanying such products and services. Nothing herein should be construed as constituting an additional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein. Copyright 2013 The Customer Framework Google is a trademark of Google, Inc. 4AA3-9484ENW, October 2013, Rev. 2