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Table of contents
3 An interruption to the traditional consumer decision-making journey
3 Social intelligence
3 Customer engagement and business performance4 Four strategies that deliver prot
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 companydoes business
10 The socially enabled businessmaturity model
11 Conclusion
12 About the authors
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An interruption to the traditional consumerdecision-making journey
Social media channels enable the brand to extend its personality to engage with consumers on
their termswhen 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.
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 eective or new distribution channels
oering 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 is the k nowledge 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 providecontent 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 commercialbenet 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 conrms that deep
engagement with consumers through social media channels correlates with better nancial
performance. An ENG AGEMENTdb study (www.engagementdb. com) showed signicant positive
nancial results for companies with the greatest breadth and depth of social media engagement.
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Recruit more (quantity)
Recruit better (quality)
Improve activation
Manage win-back
Focus on high-value prospects/customers
Retain marzipan
Retain rest Retain value/avoid value decay
Improve cross-sales/up-sales
Manage UP the valuable tail
Increase frequency of spend
Increase basket size
Manage the cost of sales
Reduce the cost to serve
Reduce the cost of failure
Improve overall yield
MANAGE
COSTS
TO SERVE
& YIELD
DEVELOP
KEEP
WIN
1.
2.
3.
4.
$
4
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 specic 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 proft
We dene 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 ecientlyreducing 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
Figure 1.Social intelligence customer exp erience optimization
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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 eective and ecient 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 inuence, 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 inuencers
or high-value prospects. We can learn more about indirect consumers by transac ting directly
with them through social or owned technologies.
We can use social intelligence to improve media or connection planning to target marketing
investment most eectively at prospects throughout their purchase journeyfrom prospect
to customer.
Keeping customers
This strategy focuses on reducing customer attrit ion 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 protable customers
Reducing value decay (groups of customers who decrease their buying amount f rom 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 oine 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 providinginsight 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.
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Developing customers
This strategy focuses on getting increased value from all customers. The four main
sub-strategies for achieving this are:
Manage up the ta il (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 dierent products,
more often, and to identify the products and serv ices 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 oers and samples more eectively 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 eectiveness of
cross-selling. Communities can be created around product ideas or content, and retail and othe
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 xing 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 nd 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 budgetingthroughout the organization. In addition, there will be improvements in the protability 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.
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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 eectively. 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 aects 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 eectively. 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.
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 gure 3 and are described as follows:
Listening services: Various listening techniques can be applied to structured and unstructured
datasets from transac tion, 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 specic 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 prot from social CRM activity.
A more granular level of the business service-oriented architecture is represented in gure 4.
At the top of the pyramid we have the business use cases, which is a technology-free denition
of a business process that provides value to business actors, describing why a business process
is performed (objective), what the process does (workow), and how it is measured (KPI).
Activate
inuencers
1.011.00
2.00
3.00
4.00
1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09
WIN
KEEP
Enable
advocacy
Improve
connection
planning
Acquire
high-value
customers
Optimize
owned
assets
Socially
enable F/M/T
commerce
Recruit
through
communities
Promote
social member
get member
Social refresh
of transaction
data
Increase
engagement
DEVELOP
COSTS &
MARGIN
Implement
loyalty
program
Improve
customer
service
Partner
with
intermediaries
Resolve
crises
Merge
physical
products/social
Facilitate
owned
communities
Socially enable
customer
save program
Reward
advocates
Provide
utility
applications
Improve
strategic
account mgmt.
Collaborate
with
colleagues
Manage
event
engagement
2.01 2.02 2.03 2.04 2.05 2.06 2.07 2.08 2.09 2.1 2.11 2.12 2.13
Provide
contextual real
time prompts
Lower time
between
desire/buy
Increase
category
(portfolio) sales
Increase sales
through
sampling trial
Socially drive
e-commerce
Bundle
products
Social gifting
& member
get member
Integrate
intermediary
approaches
Shop within
shop
3.01 3.02 3.03 3.04 3.05 3.06 3.07 3.08 3.09
Optimize
communication
costs
Improve
service &
reduce costs
Improve sales
territory
analysis
Increase
efficiency
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
4.01 4.02 4.03 4.04 4.05 4.06 4.07 4.08 4.09 4.1 4.11 4.12 4.13
Resource
empowermentDigital brand
management
Customer
experience
optimization
Product
lifestyle
innovation
Business
areas
Listeningservices
Governance
Digitaldashboard
Engagemen
tser
vic
es
Anal
yti
calservic
es
Cult
ure
Leadership
Or
ganization
Figure 2.Social intelligence Use Cases TCF Ltd. and HP 2011
Figure 3.The service-oriented business architecture
to support the social business strategy
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A business use case is formed by a number of business services. A business service represents
an individual step in a business workow dening a business use case. It is supported by a set offunctional services that interoperate in a coordinated and integrated way.
A business service, in turn, is executed by one or many functional services that are dened
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 denition, building, execution, and maintenance of each
functional service.
Social must be integrated with the foundations of the way
a company does businessMany 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 inuential customers. Some see
social and CRM as separate, with dierent 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 eorts
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, althoughtechnology that can replace legacy, unidirectional, batch-focused, and inexible 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.
Business use case
Business service
Functional service
Enterprise
information system
Business
process layer
Application
layer
Software
platform layer
Figure 4.A more granular view of the service-oriented business architecture
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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 proles 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 protable customer management is via TCFsSCHEMA model (see gure 5). TCF uses questions about organizational capabilities to assess
just how customer-centric a business real ly 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.
SUSTAINED
INCREMENTAL
PROFITABILITY
WIN
KEEP
COSTS
DEVE
LOP
Experience
management
Technolog
y&
system
s
Data
mana
gem
ent
Chann
els
&
media
Ag
ili
ty
&
wor
k
ow
Dire
ctio
n&
leader
ship
People
&
cultu
re
Insight&
planning
Brands&
prop
osition
Mea
sure
ment
Execution Enablers Foundations
Figure 5.SCHEMA model of c ustomer management TCF Ltd.
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The socially enabled businessmaturity model
Our use of SCHEMA has shown various levels of maturity in dierent 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 benet 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 benets 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 nancial services and pharmaceutical slower to adopt social approaches. Many pure
Web-play businesses in many sectors are generally up with the leaders.
M at ur it y l ev el D es cr ip ti on of ma tu ri ty st at e
0 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 techniqu es to manage brands,
products, and channels.
1 The organization is dabbling in socialmostly listening. Responsibility rmly sits
within a silo in marketing. No corporate or senior management commitment exists,
and any activity is down to some enthusiasts in the business.
2 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.
3 The organization is beginning to:
a) Introduce internally focused elements and suppor ting workow 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 ex ample, 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 e xternal 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, par tner selling, and integrated cross-channel commerce.
The company balances nicely the use of structured and un structured data.1 Woodcock, Starkey et al. QCIs State of the
Nation IV, Ch. 6. 2006. Contact neil.woodcock@
thecustomerframework.com
CPG
average
CPG
average
Top bank
(Australian)
Top pharma
(US)
Top
telco (UK) c
ab
e
d
Level 1Basic state
Level 2Emerging but disparate
Time/Scale of change
Businessbenefit
TCFs maturity model
Level 3Embedded
withgrowing
focus
Level 4
Socially enabledbusinessc
ab
e
d
Figure 6.Social business maturity model
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Conclusion
This paper has expla ined 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 benet that may be achieved from social approaches and priority use cases, which
should be deployed rst. 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 aected.
Learn more athp.com/services/actionable-analytics
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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 nancial
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 rms, including Accenture and The Technology Partner,
as well as for some large nancial services institutions. Iengo has broad international
experience working with customers in nancial services, telecommunications, and
consumer goods.
Neil Woodcock
Neil Woodcock is chief executive ocer 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 prot through more
eective and ecient customer management. Woodcock has coauthored ve 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.
Copyright 20122013 Hewlett-Packard Development Company, L.P. The information containe d herein is subje ct to change without notice. The only
warranties for HP products and servi ces 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 er rors or omissions contained herein.
Copyright 2013 The Customer Framework
Google is a trademark of Google, Inc.
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