Social Intelligence Approaches to Support Four Core Customer Scenarios

Viewpoint paper

social intelligence to engage with customers in ways that were previously impossible.
In a recent paper, we identified four core scenarios (called strategies in that document) and sixteen substrategies that drive profitable customer management. The focus in that paper was on classic customer management approaches, but Social Intelligence and Media approaches are beginning to have a marked effect on how businesses can manage their customers in both business to consumer and business to business. This paper suggests some of the best ways to deploy social intelligence and marketing thinking and tactics to support core customer strategies.

DRIVE

Table of contents
How social is an interruption to the traditional consumer decision-making journey .........1 Social intelligence ....................................................1 Customer engagement and business performance ........2 The four customer management strategies (scenarios) that deliver profit ......................................2 Winning customers ..................................................3 Keeping customers ..................................................3 Developing customers...............................................3 Efficiency in customer management (reduce cost and increase yield) .................................4 Social Intelligence Use Cases ....................................4 A service-oriented business architecture to support the scenarios and use cases ...........................5 Social must be integrated with the foundations of the way a company does business ......................6 The socially enabled businessmaturity model ............8 Conclusion .............................................................9 About the authors ....................................................9

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.
How social is an interruption to the traditional consumer decisionmaking journey
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 (fish where the fish are). 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 most like. 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 businesscustomer 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, the knowledge of customers that arises from combining insights into customers social media behavior with the classic customer intelligence arising from conventional marketing and customer relationship management, allows 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. And 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. However, customer engagement arguments may not convince revenueoriented senior executives to invest. An example of this is the discussion about the value of a fan. Much has been written on this. Below, we reference one leading report from Syncapse that shows that fans are worth between US$0$360, averaging about $136. These studies are fraught with technical and methodological problems and also 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. Below, we describe how we do this. There have been a few studies on the impact of
social media on customer engagement and business

The four customer management strategies (scenarios) that deliver profit

We define Social Intelligence Customer Experience Optimization (SI-CEO) as using social marketing approaches to support the customer management objectives, strategies, and tactics that drive commercial value. The main scenarios (which we also call strategies) are: Winning customers: customer acquisition and activation Keeping customers: customer retention and maintenance Developing customers: customer penetration/share of wallet, improving the gross value produced by customers Efficiency in customer management: reducing cost and increasing yield
Figure 1 Social Intelligence Customer Experience Optimization

performance. The study from Wetpaint and the Altimeter Group confirms that deep engagement with consumers through social media channels correlates with better financial performance. The ENGAGEMENTdb study (www.engagementdb.com) showed significant positive financial results for companies with the greatest breadth and depth of social media engagement. The most socially engaged companies grew revenues on average by 18% over the previous 12 months, while the least engaged companies saw revenues sink 6% 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.

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 COST TO SERVE & YIELD

Manage cost of sales Reduce cost to serve Reduce cost of failure Improve overall 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 (that is, 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
How social intelligence is changing the game

Keeping customers
This strategy focuses on reducing customer attrition and retaining customer value. The four main substrategies for achieving this are: Acquisition, retention, and development of highvalue customers (the icing on the cake) Retention of the marzipan layer (the layer just under the icing, the high-value customers) Reduce attrition across the mass of profitable customers Reduce value decay (groups of customers who decrease their buying amount from the company, but do not stop completely)
How social intelligence helps keep customers

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 know 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, your friends, 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 1:1 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 journey, from prospect from customer (the path to purchase). HP Enterprise Information Solutions Social Intelligence teams can help you make sense of this data to inform your acquisition strategies.

Social intelligence analysis can help companies really get to know all or 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 ways: to 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.

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

How social intelligence helps optimize costs

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 and 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 to customers more effectively, to those customers who are ready to buy and considering your brands. Promotional activity can be accelerated 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.

Social intelligence can help companies optimize or reduce the costs of marketing, sales, service, and failure incurred throughout the win, keep, develop life cycle. As other use cases have shown, customers use social channels to find out about, inquire, buy, and advocate brands (impact on cost of sales); communicate and engage with brands they love and solve queries/service issues (impact on cost to serve); and provide feedback on their experiences (impact on cost of failure). It follows then that integrating social and traditional channels will have an impact on budgeting throughout the organization. In addition, there will be improvements in the profitability (yield) 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. HP Enterprise Information Solutions Social Intelligence will help bring the required data together and use it to optimize returns throughout the customer and product life cycle.

Social Intelligence Use Cases

TCF and HP Enterprise Information Systems are developing an industrial-strength methodology and deployment mechanism, which any company that wants to manage its customers better and/or more effectively can use. 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 impacts one or more of the business scenarios. This list will grow as new ideas and

Efficiency in customer management (reduce cost and increase yield)

This strategy focuses on reducing the costs of customer management relative to revenue. The four main substrategies for this are: Reduce cost of sale (or cost per acquisition) Reduce cost to serve (cost of managing customers) Reduce cost of failure (identifying the key customer complaint areas and fixing them at source) Improve yield

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 ROIs. The foundation of most of the uses 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 Social Intelligence Use Cases TCF Lrd and HP Enterprise Information Systems 2011

1.00

1.01

1.02

1.03

1.04

1.05

1.06

1.07

1.08

1.09

WIN

Activate influencers
2.01

Enable advocacy
2.02

Improve connection planning

2.03

Acquire high value customers

2.04

Optimize owned assets

2.05

Socially Recruit Promote Social refresh enable F/M/T through social member of transaction Commerce communities get member data
2.06 2.07 2.08 2.09 2.1 2.1 1 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 Facilitate Socially enable physical owned customer products/ social communities save program
3.06 3.07 3.08

Reward advocates

Provide Improve Collaborate utility strategic with applications account mgmt. colleagues

Manage event engagement

3.00

3.01

3.05

3.09

DEVELOP

Provide contextual real time prompts

4.01

Lower time Increase Increase sales Socially drive between category through e-commerce desire/buy (portfolio) sales sampling trial
4.02 4.03 4.04 4.05

Bundle products
4.06

Social gifting & member get member

4.07

Integrate intermediary approaches

4.08

Shop within shop

4.09 4.1 4.1 1 4.12 4.13

4.00

COSTS & MARGIN

Optimize Improve Improve sales communication service & territory costs reduce costs analysis

Increase efficiency

Sell via alternative channels

Reduce the cost of failure

Win earned media

Develop center of excellence

Reduce new product cost

Increase customer yield

Improve new product yield

Lower the cost of risk

Improve matching of price to need

Above is an overview of the use cases. We believe they are the most important opportunities, but they will vary by company and market. We shall be publishing more about these use cases in a later paper.

A service-oriented business architecture to support the scenarios and use cases

To support the customer scenarios and use cases, services-oriented business architecture is used. The services are shown in the diagram and described as follows:
Figure 3 Service-oriented business architecture

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 as well as connect to the 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, for example, use of content, 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 apps, social CRM applications, social network apps, and games. Digital dashboard: This is a set of services designed

Leadership

tal dashboard Digi

agement services Eng

Resource empowerment

Digital brand management

Culture

Product lifestyle innovation

Business areas Customer experience optimization

to monitor the key performance indicators associated with driving customer engagement, revenue, and profit from social CRM activity.

lylitical services Ana

Organization

s Liste nin g servic e

G ove rnance

Figure 4 Business Services Oriented Architecture

Business use case

Business process layer

Business service
Application layer

Functional service

Enterprise information system

Software platform layer

A more granular level of the Business Services Oriented Architecture is represented above. 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).

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 conventional CRM and building a database of high-value and/or influential customers. Some see social and CRM as separate, with different teams A business use case is formed by a number of driving two separate strategies. Despite all the talk business services. A business service represents about social marketing, social CRM, and the focus on an individual step in a business workflow defining a engagement programs and participation platforms, business use case. It is supported by a set of functional many businesses still fail to integrate their social and services that interoperate in a coordinated and CRM efforts into one customer management strategy. integrated way. A primary reason for this is obsession with technology and the assumption, so common when marketing A business service in turn is executed by one or innovations are enabled by systems innovation, that many functional services that are defined as plugging in one of the many latest software-as-areusable self-contained functional software blocks, service (SaaS) or cloud-based solutions will transform with mechanisms and control policies governing their the DNA of their company and enable the sudden usage. Each functional service exposes a number switching on of customer centricity and participative of methods, representing the elementary functions marketing program implementation. composing the service. At the bottom of the architectural stack, there is an enterprise information system, that is, the software platform enabling the definition, building, execution, and maintenance of each functional service.

Changing to the new marketing model demands more than changing technology, although technology that can replace legacy, uni-directional, batch-focused, and inflexible operating models is vital. However, 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 (CoIT), 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 (SEB) recognize that the focus of control of the relationship has shifted to customers and that to succeed they 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. Companies who do not take this approach are taking the risk of their customers leading a revolt against poor service and delivery. It clearly makes sense for businesses to listen to their customers properly, open up communication channels, build richer profiles through the smart use of socially sourced data, deliver personalized experiences, and get better at internal collaboration to deliver a customer-centered business strategy. One way to view how social is integrated into profitable customer management customer management is via TCFs SCHEMA model. TCF uses questions about organizational capabilities (covering our core strategies) to assess just how customer-centric a business really is and, in addition, 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.

Figure 5 SCHEMA model of customer management TCF Ltd.

W I

N
ea
M

re su

m en

Di Lea r e c t de

n& i o hip rs

Insi g Plan h t nin g

Pe Cu

EE
P
B ra nd s & os Prop ition

&

& le o p ture l

Agility & Workflow

TS

x a n p e ri ag ence em e nt

s el nn C h a e dia M

DE

Execution

Enablers

Figure 6 Social business maturity model

EL

Foundations

OP
CPG average

&

lo em gy s &

Ma

ta em en
D aa g n

SUSTAINED INCREMENTAL PROFITABILITY

o hn t Te c Sy s

E
TCFs maturity model

CO
Level 1 Basic state

d e

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

CPG average Top bank (Australian)

Business benefit

Level 2 Emerging but disparate

c d

b Top pharma a (US)

Top telco (UK)

Time/Scale of change

The socially enabled business maturity model

Our use of SCHEMA has shown various levels of maturity in different sectors. It is early days for many companies in this socially enabled world. Figure 4 shows a maturity curve with time and perception of business benefit as the two axis. This is based on our similar study from traditional CRM research. 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 (although it is early days in terms of progress) 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) introduce 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) use 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 places.

1 2 3

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.

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 costs. In combination with our previous article, 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 the deployment of the use cases demand the provision of four common technology services: listening, analytical, engagement, and digital platform and describes what these services look like. The paper has explained that 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.

About the authors

Massimo Pellegrino

Vice President of HP Enterprise Information Solutions Massimo has deep business and strategy consulting experience, in particular in financial services, telecommunications, and manufacturing where he managed several CRM, data warehousing, and information management initiatives. He is also well known internationally for conference speaking and thought leadership research.
Massimo Iengo

Social Intelligence Solution Lead at HP Enterprise Information Solutions Massimo is a well-known data warehousing and information management guru. He worked for many consulting firms like Accenture and The Technology Partner, as well as for some large financial services institutions. Massimo has broad international experience working with customers in financial services, telecommunications, and consumer goods.
Neil Woodcock

CEO & Chairman at The Customer Framework Neil 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, practically, about how to improve bottom-line profit through more effective and efficient customer management. Neil has co-authored 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.
neil.woodcock@thecustomerframework.com Professor Merlin Stone

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 and has been a leading contributor to the development of 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. He is also well known for conference speaking and thought leadership research.
merlin.stone@thecustomerframework.com

Share with colleagues

Get connected
www.hp.com/go/getconnected

Get the insider view on tech trends, alerts, and HP solutions for better business outcomes

Copyright 2012 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 2012 The Customer Framework 4AA3-8914ENW, Created January 2012 This is an HP Indigo digital print.