When UK-based interior furnishings company Habitat started using the online microblogging site Twitter earlier this year, executives at the company may well have applauded themselves for boldly embracing a new channel for marketing the company’s products to design-conscious consumers.  

Members of the 14 million-strong Twitter community soon set them straight – in scathing messages of 140 characters or less. Habitat had committed a huge gaffe, by using ‘hashtags’ (the keywords used on Twitter messages to organise the huge torrent of updates into trends and subjects) to force links to its own catalogues and special offers into popular, but totally unrelated, conversations.

These included keywords relating to Apple’s iPhone and, more seriously, the Iran elections; so Twitter users searching for conversations about Iranian presidential candidate Mir Hossein Mousavi, for example, were blasted with messages about Habitat’s “totally desirable” spring collection.

The backlash was swift, harsh and widespread, forcing Habitat executives to issue a formal apology. “This could not have led to anything other than a consumer backlash,” said Alex Burmaster, communications director at research firm Nielsen Online, in an interview with the BBC. “The bottom line is that it was a serious misjudgement. [Habitat has] used a political and human situation that many people are concerned about to market their products and services, and that is not right.”

Habitat’s failure to grasp the fundamentals of Twitter ‘netiquette’, however, illustrates the struggle that many companies experience when it comes to deciding on how to use social networking technologies as a way to engage with customers and why even more are holding back.

The fact is that vast legions of customers and prospects now use social networking sites to share their experiences of products, services and brands. While it’s tempting to view that audience as an alluring target for sales and marketing efforts, for now the smart money is spent not on trying to boost revenues, but on boosting customer experience, according to Natalie Petouhoff, an analyst with IT market research company Forrester Research.

“When companies blatantly ignore product or service issues, customers can now use the Internet as a medium to broadcast, very publicly, their frustration to millions,” she says. Online conversations that risk damaging brand reputations have radically switched the balance of power from corporations to customers, and, whether brand managers like it or not, unmonitored conversations that could impact their business are taking place right now.

CRM gets social

The good news is that there is a clear return on investment (ROI) case for using social networking as a forum for customer service, ranging from improved brand sentiment to reduced customer service costs, says Petouhoff. These might include fewer calls to the contact centre, increased rates of first-call resolution (FCR) and enhanced agent productivity, she suggests.

Less tangible, but arguably as valuable, are the insights gained into product issues, customer preference and emerging buying trends. But in order to achieve such returns, she says, it is vital that social media is integrated with the other technologies a company uses to manage its interactions with customers – in most cases, its customer relationship management (CRM) system.

Failing to integrate social media with other business applications is a major area of risk, she says. “One key to getting an ROI is making social media part of how people get their job done. This requires that social media not be deployed as an isolated, point application, but rather seen as part of the key infrastructure and as an application that is used to get customer service work done and to improve the customer experience.”

That is prompting CRM vendors to integrate ‘social features’ into their product sets and label them as ‘social crm’. Take, for example, Salesforce.com. At the September 2009 launch of Service Cloud 2, the most recent upgrade to its software-as-a-service (SaaS) applications for customer support staff, the company announced several key social crm developments.

The first, Salesforce Knowledge, enables companies to build a knowledge base ‘in the cloud’, which customer service agents can use to access the information they need to resolve customer issues faster. These knowledge bases can also be made public, so that Internet users can access them for self-service, without needing to contact a call centre at all.

The second feature, Salesforce Answers, enables companies to build customisable databases that support question-and-answer conversations between customers, agents and partners about specific products and/or services.

With the third feature, Salesforce for Twitter, the company has extended the Twitter features already built into its sales and marketing applications to its Service Cloud product line. This enables customer service staff to search Twitter in a real-time stream, monitor and track particular conversations and create a Twitter ‘handle’ to which Twitter users can address their issues. When a customer complains to the handle on Twitter, a customer service case is automatically generated on an agent’s Service Cloud desktop and they are provided with links to relevant advice and information in the internal knowledge base.

Tim Barker, senior director of EMEA product marketing at Salesforce.com, claims that these tools have been developed to address a very real need among companies of all sizes. “Our customers are saying to us, ‘We know consumers are talking about us online, so how can we participate in those conversations in a way that is mutually beneficial?”

If you build it, they will come

Lithium Technologies, meanwhile, tackles the issue from a somewhat different angle. The company started life in 2006 selling software that enabled companies to build their own online customer community forums, typically as an adjunct to the corporate website. More recently, it has extended its scope so that these forums can be linked to both a company’s internal CRM system and the wider consumer web. For example, Lithium’s software integrates with Salesforce.com applications and uses widgets to embed relevant Twitter feeds into community pages.

“Old-school CRM doesn’t understand social crm,” argues Lyle Fong, Lithium’s CEO. “CRM is about automating one-to-one conversations between a company and its customer, so that when a customer calls a company, the agents there understand who they’re speaking to and have access to their purchasing history.”

That’s useful, he says, but it doesn’t really address what is happening out on today’s web. “Research shows that the kind of conversations that CRM systems handle only account for a tiny proportion of issues that arise with a product or service, perhaps as low as one per cent. The fact is that people today trust their peers much more than they trust corporations and prefer to turn to communities of like-minded peers for help.”

Companies that deploy online communities – and tiny Lithium has supplied software to big names such as Dell, Nintendo and Sprint – are able to leave much of the effort of servicing and supporting customers to other community members, typically existing customers, he says. Plus, successful communities achieve high rankings on search engines such as Google, so that people are naturally drawn to these ‘official’ sites.

In that way, conversations about products or services remain under the observation (and to some extent control) of the companies that offer them. This ownership of the site also enables the company to reuse the knowledge about recurring support issues and customer preference that is created there.

But social crm isn’t just about customer service and support. So far, applications vendor Oracle has largely focused its social CRM efforts on increasing the efficiency of internal sales teams, by incorporating features into its core Siebel CRM suite that enable them to apply social networking methods to their day-to-day interactions with each other, such as identifying prospects and devising campaigns, as well as to tap into external customer conversations that may assist in the selling processes.

Steve Fearon, head of CRM for Oracle EMEA, says that the rise of social media has had a “seriously disruptive” effect on these teams. Citing the Edelman 2008 Customer Index Report, he says: “Over 80% of consumers are more likely to take a recommendation about a product or service from someone they consider to be like themselves, rather than from anyone else, be it an advertising agency or the CEO of the company offering that product or service. So sales teams need to be able to listen, spot trends and engage in an appropriate way,” he says.

The approach is similar at Sage, where the company has enhanced its Act! CRM system so that sales teams can grab a feed (from Twitter, for example), convert it into an internal communication and hand it to a colleague to follow up as a lead. It has also upgraded its Saleslogix systems, so that teams can monitor traffic and look for keywords. If a user tag is recognised, it can be embedded against a customer’s main record, according to David Beard, pre-sales manager at the company.

Where to start?

Many companies still hang back from using social networking to participate in customer conversations. They view the opening up of a whole new customer channel at a time when budgets are seriously constrained with understandable trepidation, says Forrester’s Petouhoff.

But they don’t need to “start big”, she says: “While it’s important to have a social media strategy and have technology to empower that, you don’t have to wait to buy social media software applications to start.”

Comcast (the US-based provider of broadband, telephone and cable TV services) chose first just to listen to customer comments in around 6,000 blogs. It then moved on to listening to customer comments on Twitter before starting to tweet using the handle @ComcastCares.

Today, the company is widely recognised as a skilled practitioner of social CRM and has become a reference customer for both Salesforce.com and Lithium as its approach has become more sophisticated – but it started by simply listening.

Getting it right: Social CRM recommendations from Gartner

In recent research, Gartner analyst Michael Maoz and his team considered how forms of social software will become key in closing the ‘experience gap’ between business objectives for customer satisfaction and customers’ real-world perceptions. Their recommendations are:

• Be aware of the serious governance issues that surround social networking. “If you are an IT manager or the director of customer service, or anyone below the level of the senior operating committee, then you must obtain consent and support from the highest operating committee in your enterprise,” Maoz advises. Issues of privacy, data sharing, security, branding and adherence to codes of conduct can arise when engaging customers and non-customers on the Internet.

• Ask customers and business partners about their expectations across channels and functions (such as face-to-face, website and call centre), and determine whether these match the intended brand values of your organisation.

• Ensure that a multichannel feedback system is in place. Respond to customers that provide feedback, and communicate the results to employees. 

• Work to build the appropriate alignment, understanding, empowerment and motivation of customer service groups to orchestrate the intended customer experience to be positive.

• Experiment with social software, such as forums, wikis, collaborative content and discussion boards. Monitor and respond to the insights that derive from the input and exchanges that occur on these sites.

Letting your customers do the talking

Online customers love to comment on products, share experiences and discuss what a brand means to them. Smart online retailers, meanwhile, listen in and use that information to tweak their merchandising strategies, plan new marketing campaigns and develop closer links with their customer base as a result. And increasingly they’re opening up their own websites to customer debate and playing host to these discussions.

User-generated content (UGC) – in the form of product reviews, discussion boards or company-led blogs to which customers can respond – is fast becoming a key tool in helping online retailers to understand what makes their customers ‘tick’, according to Evan Andrews, an analyst with Forrester Research.

For a start, websites featuring UGC tend to appear higher up on the lists generated by search engines such as Google. “Users search for information using the same words and similar syntax to how they post and publish content to websites. Search engines regularly return UGC in response to a search, because user-created content is unfiltered and matches the exact keywords searched,” he explains. And the constant addition of new information improves site relevancy within search engine indices. “Other things being equal, search engines will prioritise a user review of a hotel last week over a standard web page about the hotel, or a review of it ten years ago,” he says.

But more importantly, UGC increases a shopper’s propensity to buy, according to Brett Hurt, chief executive of Bazaarvoice, an online product reviews service used by online retailers including QVC and Borders. The company’s research, he says, shows that 78% of US consumers and 53% of their UK counterparts put more trust in brands that offer product reviews than those that don’t.