The raise of the Social Customer: How companies need to adapt for Social CRM in order to serve the changed consumer behavior.

Written by Julian Prell

1. Introduction

The society is changing. Today’s tech-savvy generation raised with technologies of the 20th century and shapes and influences the companies of the future. 

In todays literature there are many articles with an isolated view on social media and the changed customer behavior, how companies can engage with customers and what effect it has on decision marking, or what effect social media has on a company’s image. 

Only very few authors discuss the change of consumer behavior and how this influences companies and let them review their structures and technologies in order to serve the needs of this new customer behavior with Social CRM. 

Therefore, the following paper will first discuss the change of people’s media and Internet usage by evaluating theories about the so-called ‘Digital Natives’. 

In the second part the resulting character - The Social Customer - will be explained and how these forced companies to rethink their internal structures and strategies and furthermore what they can do in order to establish Social CRM.

2. The change of the media and Internet usage

In order to understand the challenges of businesses with Social Media, it is essential to understand how peoples’ behavior has changed in view of their communication, the todays usage of media and the Internet and what kind of special features appear. Therefore, the difference between ‘Digital Native’ and ‘Digital Immigrants’ has to be evaluated in order to understand the changed media usage.

The word ‚Digital Native’ appeared the first time in 2001. Marc Prensky, a journalist and visionary used the word ‘Digital Native’ for the first time in one of his articles „Digital Natives, Digital Immigrants“ which was published in the magazine „On the Horizon“.

Prensky (2001) describes in his article the changed media usage of young people that are born after 1979. Prensky (2001) mostly refers to people in the age between 18 and 32 years. He describes the young people as ‚Digital Natives’ because they have taken in the new technologies and their possibilities of usage and their expressions as it were their „mother tongue".

There is an agreement in the literature that the usage of media and technology in society has changed. But there is no agreement on the specific date of birth in order to classify ‚Digital Natives’. Therefore the different approaches of this theory will be further discussed in the following.

2.1. Digital Native: Prensky’s theory

„Our students have changed radically. Today’s students are no longer the people our educational system was designed to teach.“ (Prensky, 2001, p. 1)

Prensky (2001) wants to express that young people have not only changed in their way of clothing, language and other preferences, but especially also a significant change in society. Prensky (2001) calls this change „singularity“ which underlines that this change is irreversible. 

He sees the reason for this singularity in the rapid entry and the fast processing of new and digital technologies of the 20th century. Prensky further states: 

Today’s students [...] represent the first generations to grow up with this new technology. […] Computer games, email, the Internet, cell phones and instant messaging are integral parts of their lives.” (Prensky, 2001, p. 1)

Facing the changed usage of media and technology in view of ubiquity and intensity of the usage, Prensky (2001) assumes that students information and thoughts processing distinguishes significantly between then and now. 

He supports his theory with a statement from a University Professor of the Baylor College of Medicine:

„Different kinds of experiences lead to different brain Structures,“ (Prensky, 2001, p. 1)

On this basis one can conclude that growing up with new media and technologies changes the cognitive processing of information and thought structures of young people.

According to Prensky (2001), ‘Digital Natives’ have the following preferences:

  • Used to get information fast and unprepared
  • Like multitasking and parallel processes
  • Prefer images before text
  • Work best when they are connected
  • Like direct compensation and regular rewards
  • Can process many different types of information at the same time (e.g. watching TV, listening to music, homework)
  • Use special language of abbreviations in messaging
  • Have built social and digital networks
  • High affinity to new technology
  • They buy new technologies even if they have a perfect working device and always want to have the newest, fastest and coolest
  • They do not have many privacy concerns on the Internet
  • They would not print out Emails

According to Prensky (2001) a ‘Digital Native’ has three main preferences:

  • Digital Natives are born in 1980 or later.
  • Digital Natives have access to digital technologies in general and especially the Internet.
  • Digital Natives have enough knowledge how to appropriately use digital technologies.

2.2. Digital Native: Palfrey&Gasser’s theory

The researchers John Palfrey and Urs Gasser (2008) agree with some points of Prensky’s description of the ‘Digital Native’ but see his theory as too rough in order to classify young people only with these three criteria. They especially see the point of the fixed date of birth critically. 

Palfrey & Gasser (2008) see that not everybody who is born after 1980 is automatically a ‘Digital Native’. That is why one cannot speak from a generation. It is rather an extract of a generation. Children that are born after 1980 but live in parts of the world where there is no electricity one cannot speak of a ‘Digital Native’ (Deffenbaugh, 2010). There are also children that are born after 1980 that have access to new technologies and the Internet but still do not have the necessary knowledge to appropriately use digital technologies (Ibid). 

Palfrey & Gasser (2008) therefore see the ‘Digital Native’ as a concept of a term that has been generalized for a simplified usage. Hence, they try to further distinguish this term by adding following preferences to the ‘Digital Native’:

  • They spent a lot of time with digital technologies
  • Their identities are influenced and defined more and more online
  • They handle their personal information very liberally on the social web
  • Besides exchanging data, information and other content, ‘Digital Natives’ like to forward these things e.g. through sharing on social media 
  • They actively produce content on the web
  • They are highly connected
  • They have asynchronous information finding/evaluation/processing

From this, one can deduce that also elder people that are not born and raised into the new media and technologies can indeed learn the usage of these new media and technologies. According to Prensky’s (2001) definition, these people are called ‘Digital Immigrants’. According to Palfrey & Gassers (2008) definition these people can be classified as ‘Digital Natives’ if they fulfill their previously mentioned criteria.

For businesses and marketers of today this is an essential finding. Figure 1 shows that younger (‘Digital Natives’ / Generation Y) as well as older (‘Digital Immigrants’ / Generation X) generations are very active on the social web. This shows that new media, especially social networks become more and more relevant and have a strong potential to get in touch with all relevant target groups.

Figure 1: Who is using Social Media?, Source: Baird & Parasnis, 2011

Figure 1: Who is using Social Media?, Source: Baird & Parasnis, 2011

The technological change is unstoppable. For some people, new media are an essential part of their life and for others they are a regular benefit. In the future, regardless of the different generations, the number of ‘Digital Natives’ will constantly increase, while the number of ‘Digital Immigrants’ will constantly decrease. Hence, people of the older generations compulsory have to adopt the knowledge of the new media and technologies. This will happen through the help of ‘Digital Natives’, which in turn means that the main influence of change comes from the group of younger generations (Berman & Kesterson-Townes, 2012).

The environment will therefore adapt to this change of media usage as the young and tech-savvy generation will take the lead as model. The increasing usage of Social Media of both, Digital Natives’ and ‘Digital Immigrants’ and the extended possibilities of the Web 2.0 do not only have advantages, but also have dangers (Tiago & Verissimo, 2014). These dangers are the so-called ‘Social Customers’.

3. The Social Customer and its different characteristics

The changed media usage and the on-going change of society from ‚Digital Immigrants’ to ‚Digital Natives’ has lead to a fundamental change in peoples buying behavior. While customers could exchange goods or services against money in the past, everybody who now has value exchange with a company can be a customer today (Metz, 2012).

Through the constantly increasing connectivity not only the border between the digital and non-digital world is shifting but also the balance between work and lifetime (Deutsches Institut für Vertrauen und Sicherheit im Internet (DIVSI), 2012).

Therefore many people maintain their contacts at work but also in private through the new media such as mobile phone, email, text-message, Facebook, Twitter or Blogs (Attensity and Chess Media Group, 2010). The hereby-resulting danger for companies comes from the ongoing and increasing loss of control (Baird & Parasnis, 2011) and opinion leading over brands and buying processes as the customers nowadays can influence this through the number of Social Media channels (Gensler et al., 2013). 

Hence, the modern customer wants to cooperate and interact with companies in order to individualize and personalize products and therefore actively develop and shape the companies’ image and products (Vernuccio, 2014; Gensler et al., 2013; Brito, 2011). Additionally, they critically scrutinize advertising messages for products and are rather influenced by friends, family or like-minded people (Brito, 2011). 

These facts are basically nothing new, as these needs have already existed even before the Internet (Ibid). The specialty about this is, that people became a voice that is not only heard by a small audience but made accessible for everybody (Brito, 2011; Vernuccio, 2014). 

That is why people do not shy away to make detailed reports about their negative experiences e.g. through Blogs or Discussion boards, to proclaim their thoughts on Twitter or to write critical comments on Facebook (Ibid). These customers want to be heard by companies (Attensity and Chess Media Group, 2010). They also want to publish their opinion and through this, can influence other people in their buying decision (Ibid). 

These customers are also known as Connected Customers (Berman & Kesterson-Townes, 2012), Social-Local-Mobile Customers (Marsden, 2011) or as the Social Customers that are increasing more and more and also becoming more and more influential (Metz, 2012).

The author Michael Brito (2011) therefore tried to cave out the different types of Social Customers in order to understand the specific characteristics and their need of these customers on the Social Web. Thereby he could identify six different characters: Venting/Complaining Customers, Passive Customers, “Used-to-be”/Habitual Customers, Collaborative Customers, Opinion leading/Advocate Customers and Future Customers. Detailed information on Social Customer can be found in 8.1 in appendix or on http://www.socialbusinessnews.com/an-overview-of-the-social-customer/

The most valuable Social Customers are the Collaborative Customers and Advocate Customers as they create positive and advocated conversations and communication about products and companies on Social Media (Brito, 2011).

In general the behavior of the Social Customer can change from day to day and depends on his emotions and preferences. This behavior can partly be formed through reactions of the company (Gensler at al., 2013; Brito, 2011). That is why it is necessary to establish Social CRM processes in the company. 

Through the many different characters of connected customers one can conclude that companies need to react individually to specific customers on the social web and in no case should ignore them. Responsible for this changed customer behavior is the Web 2.0 (Vernuccio, 2014). 

Companies need to change now and be aware to involve Social CRM. That is why it is essential that companies in the first step understand Social Media (Vernuccio, 2014), otherwise they have to worry to become a victim of bad or non-existing reputation management.

Additionally companies need to understand the needs of the customers and develop an understanding of the customer perspective. The identification and active including of opinion leaders therefore is essential (Baird & Parasnis, 2011; Vernuccio, 2014).

How the Social Customer affects the culture, structures and strategy of businesses will be explained in the second part.

4. How the Social Customer forces companies to change

With the raise of the ‘Digital Natives’ and especially the resulting Social Customer the usage of Social Media has become unavoidable for companies and therefore needs further evaluation.

Figure 2: Social Business Evolution, Source: Michael Brito (2011)

Figure 2: Social Business Evolution, Source: Michael Brito (2011)

Figure 2 shows that businesses had to readapt their communication as a consequence of the Social Customer. Social Media, as the place where their target group is hanging out, has become indispensable in order to fulfill the need of their connected customers and to hold up the communication between business and customers. According to Brito (2011) these companies are called ‘Social Brand’.

In order to keep this communication up, a coherent internal communication is very important as companies are urged to become more transparent and to respond even more individually when participating on the Social Web (Owyang, 2010; Fournier & Avery, 2011). This succeeds only if companies evolve into a ‘Social Business’.

This means that companies need to restructure and/or establish new technologies within the company in order to communicate more effectively with their customers (Brito, 2011). These technologies and organizational structures accelerate the accessibility of knowledge and skills of colleagues and will foster collaboration, innovation and the sharing of information as well as an open and transparent organization (Ibid). 

5. Positioning the company to serve the Social Customer

In the dialog with customers and in times of the Social Web, companies need to respond as previously mentioned even faster, more transparent and individually to the Social Customer. Thereby the installation of a good information and communication structure within the company is essential. 

But the corporate culture turns the balance how this structure or rather the Social Media strategy looks like (Owyang, 2010). Therefore the analyst Owyang (2010) has identified five models that show how companies can link and organize Social Media with and within the company. These models are displayed in the following figure 3.

Figure 3: The five company structures to work with Social Media, Source: Owyang J., Altimeter Group (2010) 

Figure 3: The five company structures to work with Social Media, Source: Owyang J., Altimeter Group (2010) 

These company structures may be adapted to Tiago & Verissimo’s (2014) ‘typology of digital media engagement’. According to figure 4, companies can be classified depending on the usage degree of digital marketing and the benefit perception into four types of companies: Digital Users, Interactive Users, Digital Learners and Digital Laggards (Ibid). This means, the higher the perception and the higher the digital marketing usage, one can expect the structure to be more on the right side of figure 3 and the other way around if companies have a lower digital marketing usage.

Figure 4: Digital Engagement Matrix, Source: Tiago & Verissimo, 2014 

Figure 4: Digital Engagement Matrix, Source: Tiago & Verissimo, 2014

 

In general Owyang (2010) sees that companies in the future will build their information structure in a “Hub and Spoke” or “Dandelion” model (see figure 3), as they are best to fulfill the needs of internal (Employees) and external (Social Customer) stakeholders. 

Although, one should clearly keep in mind, that corporate culture is an important point when considering the implementation of a suitable structure for Social CRM and the Social Customer (Owyang, 2010).

6. The urge for a Social CRM Strategy

Facing the need for structural and cultural change (see 4. & 5.) and the need of understanding the customers’ needs (see 2. & 3.), it is obvious that CRM has changed from an unidirectional shaping of the customer behavior to a bidirectional interaction between company and customer (Tiago & Verissimo, 2014; Vernuccio, 2014) and therefore needs a Social CRM strategy. 

Social CRM is strategy to make conversations with customers who bring you money and make your customer happy (Metz, 2012, p. 35).

This means that Social CRM is rather about ‘WHAT product should we sell’ and not ‘HOW do we sell a product’ (Ibid).

According to Baird & Parasnis (2011, p. 5) “a Social Media strategy is not the same as a Social CRM strategy”. Social Media Marketing as well as traditional CRM is all about tapping out the value of the customer through the whole customer lifecycle.

But today the Social Customer has the control and therefore in Social CRM it is necessary to manage dialogs and not the customer himself (Attensity and Chess Media Group, 2010; Vernuccio, 2014). Social CRM therefore can be visualized as in the following figure 5.

Figure 5: Social CRM, Source: Attensity and Chess Media Group, 2010 

Figure 5: Social CRM, Source: Attensity and Chess Media Group, 2010

 

Figure 6 illustrates the further development of Social media projects to Social CRM.

Figure 6: Development from Social media projects to a Social CRM strategy, Source: Baird & Parasnis (2011) 

Figure 6: Development from Social media projects to a Social CRM strategy, Source: Baird & Parasnis (2011)

 

A standout example for Social CRM is the ‘Old Spice’ campaign from 2010 that shows, how to respond to Social Customers in a funny way. This best practice is explained in the following video:

 http://dai.ly/xe2zj9

It is of course discussable to what extent this campaign was Social CRM or rather Social Media marketing as it was marketing driven. But when considering figure 6 and 2 it shows, that companies in 2010 where just in the beginning to become a Social Business and do rather Social CRM than Social Media projects.

In order to build a solid Social CRM strategy as seen in the example of “Old Spice’, Metz (2012) suggests the ‘LPOSTm’-Methodology as a thorough planning process. “LPOSTm” stands for ‘listen’, ‘People’, ‘Objectives’, ‘Strategy’, ‘Technology’ and ‘measure’. This methodology is explained in the following Slideshare-presentation:

http://www.slideshare.net/metzconsulting/social-customer-management-101

Further explanation on this methodology can be found in appendix point 9.

7. Managerial Implications

Through today’s ubiquitous technology, Social Media and the raise of ‘Digital Natives’, the resulting Social Customer today owns the conversations around companies (Brito, 2011; Gensler et al., 2013; Vernuccio, 2014).

As Social Media is a useful tool to create a strong brand, companies can gain competitive advantages with the correct setup and strategy. That is why companies need to rethink their strategy, corporate structures and culture in order to serve this changed consumer behavior (Owyang, 2010). 

This is only possible if companies understand Social Media (Vernuccio, 2014) but also realize that the Web 2.0 has empowered customers to shape the image of a company (Gensler et al., 2013). Concretely customers now have the possibility to share their experiences, opinions and stories with others while companies lose control over communication and image (Ibid). 

Therefore companies need to adapt to this change and establish a Social CRM strategy in order to cope with this changed balance of power. In order to do this the ‘LPOSTm’-Methodology is a good possibility to plan engagement in Social CRM (Metz, 2012).

8. Appendix

8.1. The Social Customer characters

8.1.1. Complaining Customers 

These customers complain from time to time in social networks such as Facebook or Twitter. They want to have attention from their network and write neutral-critical comments on purchased products.

8.1.2. Passive Customers 

These customers urgently need customer support but are not actively searching for an answer. They are patient and have rather a calm character. Often they report in their communities about their problems by linking it to the company. They are not directly writing to the company in order to get a direct response.

8.1.3. Habitual Customers

These customers are more communicative and need as fast as possible the attention of the company as they become angry very fast. They already have published many issues on the social web whereupon there was no response or the problem was not solved. That is why they constantly communicate their negative experiences.

8.1.4. Collaborative Customers 

These customers are all around happy with their product, their customer service or with the company. The company uses this as an opportunity to recommend new products or product add-ons through direct messaging on the social web. These customers are highly valuable because they can turn into opinion leaders.

8.1.5. Opinion leading Customers 

The opinion leading customers talk about the brand, the products or the services of a company even if they do not get any attention from these companies. They are more than excited of the company’s products and voluntarily write about their impressions and experiences. That is why they do not need any active compensation. As these customers are highly valuable, companies should get in touch with them in order to cooperate with them.

8.1.6. Future Customers 

Future customers are either new customers or existing customers that want to buy a new product. They communicate their initial purchase experiences on the social web. These statements have to be identified and in the following a good offer has to be communicated before the future customer buys a competitive product. The identification of these statements is only possible through the usage of Social CRM tools.

8.2. ‘lPOSTm’-Methodology

8.2.1. Listen

In the first step a company should monitor conversations on the Internet and social web about themselves, their competitors and also should get information internally from their employees (Morgan, Chan, & Mackenzie, 2011) in order to setup a thorough workflow and engagement plan (Metz, 2012).

8.2.2. People

In Social Media marketing a specific target group would be identified here. But Social CRM is about the relationship between the company and the customer. So with ‘people’ Metz (2012) means internal (employees) and external (customers) stakeholders. That means, that, if there is no good relationship internally, you cannot have a good relationship externally with your customers. Therefore it is essential to create a fitting structure as discussed in point 5.

8.2.3. Objectives

Besides finding advocates as the main goal in Social CRM (see 3.), other goals also are the response to customer complaints and the solving of customer problems (Metz, 2012). Metz (2012) suggests further to select one or two goals from the following figure 7.

Figure 7: Possiblities of Social CRM usage, Source: Metz (2012)

Figure 7: Possiblities of Social CRM usage, Source: Metz (2012)

8.2.4. Strategy

For Social CRM it is essential to implement a Social Media Management System in order to monitor customer activities and react/interact, as well as to build a team or corporate culture that engages and to setup a budget for interaction in Social Media (Greenberg, 2010; Bucholtz, 2011; Metz, 2012). 

Having set up a team, they should formulate the strategy that creates a “wow-effect”. Metz (2012) refers to the Blue Ocean strategy, meaning that the company should create a differentiated approach than its competitors in order to make competition irrelevant for the same Social Customer.

A Red Ocean would be if a company would just try to beat its competition in order to get to the Social Customers (Metz, 2012).

8.2.5. Technology

With technology Metz (2012) means what kind of social media platform will be used for Social CRM. As Social CRM has no specific target group that is mainly participating on a specific Social Media channel, conversations about the company can be everywhere on the Internet (Metz, 2012). Therefore it is recommendable to mainly interact on the main social media channels, such as Facebook, Twitter, YouTube, etc. and at the same time monitor the Internet in order to react on other platforms if necessary.

8.2.6. Measure

The last point is about how to measure the success of Social CRM. As Social CRM is rather about relationships than about purchases, Key Performance Indicators (KPI) will be rather qualitative than quantitative.

The number of followers or fans as KPI cannot be used, as they do not contribute to the targeted result (Metz, 2012). Metz (2012) suggests a three parts formulary that can measure the interactions around the Social Customer independently of the targeted goal. This formula is shown in figure 6:

Figure 8: Social CRM KPI’s, Source: Own visualization on the basis of Metz (2012)

Figure 8: Social CRM KPI’s, Source: Own visualization on the basis of Metz (2012)

Other KPIs could also be Share of Voice, Reach of discussions, Activity of Fans (advocates), Influence of Fans, Rate of problem solving, etc. (Ibid). Depending on the goal, dialog quality, fans, service quality or rate of innovation the company needs to decide to choose rather qualitative or quantitative KPIs.

In general a reasonably KPI has to be found in order to measure the success of Social CRM.

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