Social customer. Social networks. Blogs. Wikis. Podcasts. User-created content. Communities of interest/practice. T-shirts. What do these things have to do with CRM? Do you know? If you don’t find out, it might kill your business.

Welcome to CRM 2.0, readers of CRM Transformation. You have now entered the portals of the
“Era of the Social Customer.” This is a door through which you must pass, and it might make you a little anxious as you walk the corridors. But by the end of this article or by the end of this year, you’re going to have to know what social customers are and what kind of impact they are going to have on your business –
if they haven’t already.

CRM 1.0 Goes Away

In 1999, META Group came up with what has been the enduring definition of CRM – that CRM consists of customer-facing applications that are operational, collaborative or analytical in nature. This means that sales, marketing and customer support are the focus of CRM-based technologies and (by implication) processes that are used to provide improved capabilities to intersect with customer needs. The holy grail was the 360-degree view of the customer – accessible to all, kept away from none – at least on a need-to-know basis. Somehow, if you achieved this, you would have massively improved customer satisfaction scores, not to mention improved customer retention, and maybe even a customer acquisition or two.

To get there, the CRM 1.0 story was that you had to implement software, usually acquired from Siebel, SAP, PeopleSoft or Oracle in conjunction with the processes you wanted to maintain or improve for your business. Hopefully there would be a body of best practices (high-performance processes) that you could incorporate into the planning of the CRM project and the implementation of the software. Hopefully.

But the pundits said CRM wasn’t just a technology
– it was a system and a technology. It was a business strategy. In fact, in 2003, I wrote a definition for CRM, which hung in there until today rather effectively and was adopted by multiple companies:

“CRM is a philosophy and a business strategy supported by a system and a technology, designed to improve human interactions in a business environment.”

Today however, this phrase is insufficient for the new breed of customer we’re facing. Baby boomers are retiring, demanding more and more involvement in decisions about their own lives, and younger, more strident generations of customers are
– using technologies available to them – increasingly empowered to make the choices they want to make, not that the companies want them to make.

Today we read such statistics as:

• There are approximately 71 million Englishlanguage blogs – 120,000 new blogs created every day;
• Three of the top eight most-trafficked sites on the Internet are social media sites that didn’t exist a few years ago (e.g., YouTube.com); and
• Twenty-nine percent of U.S. adults who own MP3 players have downloaded podcasts (The Pew Internet & American Life Project).

That’s a lot of blogs. And what’s this got to do with CRM? Or even business for that matter? Plenty.

These are tools that customers use to communicate and collaborate, and they are superpowered. This is CRM 2.0, and whom its social customers are.

CRM 2.0 Shows Up

CRM 2.0 has no clear definition yet. In fact, we are attempting to define it with a wiki called the CRM 2.0 wiki at crm20.pbwiki.com. But one thing that is apparent to the entire CRM industry and the practitioners who are using CRM is that it is no longer about improving the satisfaction or loyalty of a customer. CRM is much more about businesses aggregating the tools, products and services to provide customers with the means to personalize their experiences with your business. In other words, there is a collaboration going on, a conversation, between the customer and the business. The customer is a participant in your business, not just a purchaser of goods and services.

To echo the words of the call to “arms” of the new customer voice, The Cluetrain Manifesto (Rick Levine, et al, 2000), “We’ve got some ideas for you, too: some new tools we need, some better service. Stuff we’d be willing to pay for. Got a minute?”

This is what new customers are looking for. How do they get the optimal experience from a company that otherwise provides easily available products and services elsewhere? If their experience is superb, they will pay more for the experience than they would for the commodity – and, additionally, they get a loyal advocate on their behalf. The one that comes to mind and made famous by Joseph Pine II and James Gilmore in their groundbreaking book, The Experience Economy, is Starbucks. You aren’t paying $5.00 for the coffee, but you are paying for the environment and the emotions associated with it. The coffee costs Starbucks $0.20. The emotional value to you? Priceless.

The use of the social networks, blogs, podcasts and communities of interest like Flickr, the photo site, or of practices such as LinkedIn, where professionals network for business, are all part and parcel of this. The blogs, podcasts and video blogs (aka vlogs) are the means used to communicate to the business and to get feedback from the business.

Think about it. Not only are there 55 million English-language blogs but there are 8,000 blog entries per second according to blog-watching site Technorati. The blogs command a huge following and are influencers in whether or not your business is a success, failure or something in between. Same goes for the podcasts and the video blogs. Examples of where blogs took down a company or a politico – and where they boosted a product to success – are endless.

For the most part, your business is going to be most impacted by the power that lies within the social networks.

Social Network: Live Like Him … And Her

It’s a simple enough premise. As human beings, we are all social. We like to interact with other humans, and depending on your age, that could mean networking to effect further business, or just to have fun. In any case, the interaction between humans in combination with our ability to create the means to transform nature and gain control over our own lives is the core of how a civilization is defined.

However, what that means for business and customer relationships (aka CRM) is profound. While we all have heard that YouTube is a phenomenon with more than 100 million videos uploaded, many of us have taken notice that the minute Google acquired it, it became (and had to become) something that was no longer just a “cool” place to share videos. Why? It had no business model other than to make its creators very wealthy. Now it is developing content partnerships with companies like NBC, CBS and Universal Music Group to provide premium content. It’s a social network seeking a business model.

If anything, we’re practical and experienced people, who love best practices, don’t we? So let’s look at examples where the businesses not only understand the social customer, but also embrace him/her.

The Big Guy: Procter & Gamble and Vocalpoint

Procter & Gamble is the epitome of how to reinvent a mega-company to be successful in the era of the social customer. This is a $45 billion empire with 300 brands; 16 of which are worth $1 billion or more each. A few years ago, their new CEO, A. G. Lafley, recognized how empowered customers are, and reconstituted the company mission and vision to this statement:

“We have to create a great experience every time you touch the brand, and the design is a really big part of creating the experience and the emotion. We try to make a customer’s experience better, but better in her terms.”

This purposeful comment was put into action in ways far too numerous to canvas for this article, but the company Vocalpoint is an example that is of critical importance.

Vocalpoint: The Power of Moms

Imagine a network of 600,000 moms. If you’re P&G, this is an amazing opportunity to provide and receive important knowledge about P&G products through a “natural marketing” channel.

Vocalpoint is a prime example of how CRM works with the new social networks. Each of those 600,000 moms is required to have a network of at least 25 others – which makes for a minimum of 15 million feedback avenues.

What P&G does is provide the “lead moms” with product. The products are then distributed by mom-bosses throughout their networks and through their normal behaviors – coffee klatches, casual conversation, etc. They get feedback from their networks. The best of the lead moms are then brought into P&G offices to discuss the results that are shared with them. They are asked such questions as, should we scrap this product, modify its color, change the price, alter the smell?

Cui Bono?

The benefits of this approach are extraordinary:

1. Viral marketing – At least 15 million of the right target audience have been exposed to the product.
2. Innovation/Design – The customer is directly involved in the modification of the product and sometimes even in the creation of the product. This is part of the P&G mandate (and mantra) that they are going to have 50 percent of their ideas, technologies and innovations coming from outside the company.
3. Empowerment – The customer, because she’s collaborated with P&G here, feels that she has a stake in the product. The lead moms feel special because P&G is entrusting their
   “products” to them to distribute to their network. Social hierarchies always exist, now, don’t they?

This model is just one of many social networks that P&G has. They also have them for teens, for scientists; you name it, they do it. This is a giant company that “gets it.” But what about the little guy?

The Little Guy: Threadless

Threadless (www.threadless.com) sells T-shirts. Their motto is “Nude no more,” and they have one of the more complete Web 2.0, 21st-century, CRM 2.0 business models – and they are eminently successful at what they do.

Their approach is unique. They spend their time building their user community – which now numbers upward of 400,000. Those 400,000 T-shirt wearers are asked for their design ideas based on themes, months and other motifs that make sense to the Threadless cognoscenti. The designs are submitted by the community members to Threadless, which then has the community vote on which ones they like. The winners are produced by Threadless and sold at somewhat premium prices primarily to the community that certainly will purchase what they voted on and designed. Designers get a small royalty on the T-shirt and other important aspects
– aka bragging rights – which is an emotional value proposition for customers.

If you examine it further, you’ll see that there are conversations both visual – through photos –
and “verbal,” through text and chats, etc., occurring continuously about the T-shirts. There is a generally excited, active tone to this youngish empowered group of customers who are thoroughly involved in doing something both cool and lucrative.

Step Up to the Plate

Business models are changing such that they can engage a customer craving interaction and participation in creating the experiences they want from your company. The collaborative tools are there with blogs, podcasts and viral videos. The operational support is there through the traditional sales, marketing and customer service processes and technologies that the CRM vendors are still, for the most part, providing.

The customers themselves are there because they are proactively demanding that they get involved in your thinking. They have the muscle through their networks, so they are happy to engage.

The only question is: Are you there? You need to be. If you don’t think you are, just ask your customers, and their networks, and their networks’ networks…