social networking for customer contact — frost & sullivan

#9857-76 © 2010 Frost & Sullivan www.frost.com 1

Social Networking for Customer

Contact—Market Insight

M a r k e t O v e r v i e w

Introduction

Social networking has been and continues to be a cultural phenomenon. It is quickly also

becoming a business phenomenon. Increasingly, current and prospective customers are using

social networking to communicate about the products and services they buy or intend to buy.

These peer-to-peer or customer-to-customer communications are sometimes happening

instead of contacting the companies who offer the products and services. Leading enterprises

have recognized the importance of tapping into these customer-to-customer communications

and are following a number of paths to learn, participate, support their customers and in

other ways leverage these social conversations for their business' benefits.

Various departments in enterprises see opportunities with social networking, including sales

for lead-gen, public relations for brand promotion/defense, and product management for

product feedback and ideas. Leading enterprises are also addressing social networking for the

purpose of customer service. Customers helping each other on social networks could be

viewed as a value add by enterprises—"they are answering each others questions and it is not

costing us anything". But, most are viewing this activity as a disruptive force in customer

service or as a proof point for the movement or power shift from the enterprise to the

customer —"they are not coming to us directly because we have lost their trust or failed them

in some other ways".

Early adopter enterprises are engaging social networking for customer service in three

primary areas. One is establishing customer communities or forums which support on-line

virtual customer communities where customers and enthusiasts can ask each other questions

and share experiences with the enterprise's products and services. Another is through the use

of listening platforms, which are applications for monitoring social conversations on the

Internet and elsewhere. Through monitoring social conversations an enterprise can get an

early warning about customer service issues. And the third is building contact center applica-

tion support for processing inbound and outbound customer contacts via social media, such

as Twitter messages.


The business cases for these social networking activities in support of customer contact are

just emerging. Actual costs for establishing and supporting a customer community vary

greatly. Likewise, benefits for customer communities vary, but primarily based on calls

deflected (answered in the forum) most enterprises are realizing a payback within 12 months.

Business cases for monitoring of social conversations are less clear. But, with or without clear

business cases support for social networking has become a high priority for early adopter

enterprises, particularly large B2C enterprises.

Scope and Methodology

This research service presents a picture of the use of social networking for customer contact

in North America in 2010. This research service also outlines the key trends, drivers, chal-

lenges and restraints observed in the social networking for customer contact market during

2010, along with the Frost & Sullivan strategic recommendations for growth initiatives.

The following research methodology was employed for this research service:

■ Frost & Sullivan primary interviews—Frost & Sullivan conducted extensive interviews

with the key market participants in the North American social networking for customer

contact market to understand key dynamics and other information required for a

comprehensive market analysis.

■ Secondary research—Secondary research consisted of extensive reviews of press releases

issued by market participants, industry publications, SEC filings, as well as

Frost & Sullivan's in-house databases.

Definitions

Call Deflection—direct—the avoidance of customer telephone calls to an enterprise's contact

center—resulting from potential callers posting question/receiving answers on customer

community/forum—indirect—the avoidance of customer telephone calls to an enterprise's

contact center—resulting from potential callers finding answers to questions on customer

community/forum or web site without asking question; also referred to as savings from

search.

Customer Communities and Forums—on-line virtual community where customers and enthu-

siasts can interact with each other including: search for information, post questions, answer

questions, offer advice, share experiences. Example forum application vendors: Lithium

Technologies, Get Satisfaction, Consona, and RightNow Technologies.


Listening Platforms—applications capable of mining a wide variety of on-line sources, such

as social networking websites and blogs, to extract enterprise brand and product references.

Example listening platform vendors: Radian6, Nielsen BuzzMetrics, and Visible

Technologies.

Sentiment Analysis—language processing and text mining to determine the attitude of a

speaker or a writer with respect to a topic; also referred to as opinion mining

Social CRM—the intersection of social networking and customer relationship management

Market Trends

E x p l o s i v e g r o w t h i n t h e u s e o f s o c i a l n e t w o r k i n g

Over the past several years there has been gradual and since 2009 an explosive growth in the

use of social networking on the Internet. This is part due to the advertising-funded model

many of the most popular social networking sites operate on. Some recent statistics about the

leading social sites are:

Facebook

■ 300 million active users

■ 50% log on everyday

■ fastest growing demographic—over 35 years old

■ supports 69 languages

■ 70% of users —outside the United States

Twitter

■ 50 million tweets/day

■ 75 million users

■ 20% contain product or brand references

LinkedIn

■ 48 million over 200 countries; 1 joins each second

■ 50% of members—outside the United States

■ executives from all Fortune 500 companies are members


YouTube

■ serving 1 billion videos per day

■ every minute, 20 hours of video uploaded

I n c r e a s i n g r e l e v a n c e o f s o c i a l n e t w o r k i n g f o r

e n t e r p r i s e s

Some social networking activities are clearly business-focused, such as participating in

LinkedIn for maintaining/growing business contacts. However, most appear to be

purely-social—meeting new people, reconnecting with old friends, and sharing experiences

with other like-minded people. While the purely-social use of social networking continues

unabated, increasingly so people are using social networking to ask each other questions and

share experiences about the products and services they buy and are interested in. Various

groups within enterprises, particularly large B2C enterprises are beginning to see opportuni-

ties for their activities from social networking. Sales groups see the opportunity to find new

customers, public relations groups see the opportunities for brand promotion, product devel-

opment groups see the opportunity to get product feedback and new ideas, and customer

service groups see both the cost savings values of customers answering each others questions

and the imperative to connect with this peer-to-peer customer support activity. Centers of

excellence for social networking are emerging in leading adopter enterprises. The location of

these centers of excellence varies by industry and by company, but are often centered in the

public relations and marketing groups with customer service as a key participant.

G r o w i n g a v a i l a b i l i t y o f S N C C s o l u t i o n s

There is a growing availability of customer service-related social networking solutions. In

broad categories there are:

a) forums for supporting online virtual customer communities

b) listening platforms for monitoring social conversations on the Internet and elsewhere

c) applications for processing inbound and outbound customer contacts via social media,

such as Twitter messages.

Surrounding the broad categories are a number of other related applications such as knowl-

edge bases for containing the knowledge created in customer communities, analysis tools for

processing the content of social conversations and determining customer values and senti-

ment, and reporting/dashboard tools for monitoring social activities. At this point, many of

the social networking applications for customer contact are only available as hosted or

SaaS-based service offerings. These would include customer forums and social conversation

listening applications.


Market Challenges

N o n - b u s i n e s s P e r c e p t i o n o f S o c i a l N e t w o r k i n g

There is a wide-spread perception that social networking is a cultural phenomenon engaged

in primarily by young people and has little or nothing to do with business. Social networking

is also viewed to be an employee time-wasting activity and a potential security risk for

company confidential information. (Source: recent Frost & Sullivan survey of C-level

executives)

U n c l e a r B u s i n e s s C a s e f o r S o c i a l C o n v e r s a t i o n s

M o n i t o r i n g

Even as business cases for supporting customer communities and forums are very good, the

business cases for the monitoring of social conversations are not as clear. Most social

conversation monitoring business cases seem to be based on difficult-to-quantify intangibles,

such as the avoidance of low-probability, but very high-cost brand damaging incidents, or the

feedback value of product/services social commentary. While this justification is sufficient for

an increasing number of enterprise public relations groups to engage in monitoring it has not

been sufficient for most customer service organizations.

E n t e r p r i s e s ' L a c k o f S o c i a l S t r a t e g i e s

It is still early days for social networking and its value for business. In a great many enter-

prises the awareness of the potential of social network and the imperative to engage with it

are just emerging. Departments within enterprises view the opportunities differently. For

example, sales sees lead-gen opportunities, public relations see brand promotion and defense,

product management sees crowd-sourcing product/service feedback and ideas, and customer

service sees another channel for support. Very few enterprises have pulled together these

departmental views/opportunities to create enterprise social networking strategies or

programs.

E c o n o m i c C o n d i t i o n s

The current down economy in which both enterprises' capital budgets are tight and credit

hard to get makes investments in new technologies and applications particularly challenging.


S M B M a r k e t S e g m e n t C h a l l e n g e s

Selling customer contact solutions to SMBs has its own challenges, including products/serv-

ices must contain SMB-appropriate levels of functionality, must be easy-to-use, low-cost to

support, priced competitively, and sold/serviced by local-to-the-SMB suppliers. Most,

certainly not all, of the currently-available customer service-related social networking solu-

tions have been designed for large enterprises and are being sold and serviced directly by the

vendors. In addition, these solutions often require significant professional services engage-

ments to configure them to the enterprises' requirements. This last issue is not untypical of a

new technology or application, but nevertheless is an affordability challenge for SMBs.

Market Drivers

G r o w i n g A w a r e n e s s o f S o c i a l N e t w o r k i n g ' s P o w e r

To some extent the awareness of social networking's relevance to business has been fueled by

some very well-publicized public relations disasters, such as negative videos posted on

YouTube. But, increasingly social networking's positive impacts are in the news and as the

use of social networking grows more and more business people are becoming personally

aware of its possibilities for business-related communications. In addition, there is a growing

library of well-documented business success stories for the support of customer communities

and forums which document both hard-dollar cost savings and many other less-tangible

benefits.

C u s t o m e r R e t e n t i o n

One important justification for enterprises' investments in social networking programs is the

desire to better support customer retention initiatives. Providing excellent customer support

across customer interaction channels, including social networking, is one aspect of enter-

prises' customer retention strategy.

C o m p e t i t i v e A d v a n t a g e

Increasingly enterprises, particularly those in the most mature and globalized industries, are

relying on excellent customer service for competitive advantage. These competitive strategies

are driving investments in social networking for customer service programs and functionality.


C u s t o m e r E x p e r i e n c e s

As with the customer retention and competitive advantage drivers, many enterprises are

increasing their focus on tracking and providing excellent customer experiences for their

customers and prospects. Support for social networking and its seamless linkage with other

customer interaction channels is a natural extension of a comprehensive customer experience

program.

P r o - A c t i v e C u s t o m e r C o n t a c t

Leading companies are discovering the strategic business value of comprehensive approaches

to pro-active customer contact. Again, pro-actively addressing customer questions and issues

which are expressed in social networking settings is a natural extension of a comprehensive

pro-active customer contact program.

Market Restraints

C o m m o n V i e w o f C o n t a c t C e n t e r a s C o s t C e n t e r

The mission of most contact centers is customer service, not revenue generation. These

customer service-focused centers are typically operated as cost centers. The perception that

social networking has more to do with lead-gen, and brand promotion/defense than customer

service is one restraint. But, even for those who see customers searching for answers on

social sites rather than contacting customer service, the business case for reaching out in the

social world to address those questions/issues is a hard one to make. This is particularly true

for cost-focused organizations which have spent years trying to reduce incoming calls, such

as by deflecting them to self-service. Enterprises which don't see the value of being pro-active

with their customers won't see the value in reaching out to address customers in the social

world.

S N C C P o i n t S o l u t i o n s N o t P a r t o f F o r m a l C u s t o m e r

S e r v i c e

Most social networking for customer contact solutions available today are point solutions,

such as for customer communities, or social conversation monitoring/analysis. These point

solutions are being integrated with early adopter enterprises' contact center applications, but

are not yet generally available as pre-integrated contact center solutions.


R e l u c t a n c e t o A d d N e w C u s t o m e r I n t e r a c t i o n C h a n n e l s

Almost all enterprises support customer contact via telephone calls. About three-fourths also

support customer contacts via email and about half support Web collaboration. Far fewer

support other channels of customer interaction, such as video, and text. No doubt some

enterprises' contact centers will add support for social media, such as inbound and outbound

Twitter messages, but most will not—at least for the foreseeable future. The reasoning for

not supporting Twitter messages is a bit like the "chicken and egg" parable—can't justify

supporting Twitter messages because we don't get many vs. we don't get many Twitter

messages because we don't support that channel. As unlikely as it seems today with the

explosive growth of social networking, some might wonder if it is a fad which will decline

over the next few years.

E n d U s e r B u d g e t C o n s t r a i n t s

End-user budget constraints will continue to be a significant restraint for investments in

social networking support. This is particularly true for enterprises which do not view their

customer service as strategic to the business.

L a c k o f U n d e r s t a n d i n g o f o r F o c u s o n C u s t o m e r S e r v i c e

R e q u i r e m e n t s

Many of today's social networking support vendors have limited knowledge or experience

with customer service. This is the result of them being recent startups with a primary focus

on other uses of their applications, such as brand promotion/defense, lead-gen, customer

loyalty, and internal enterprise uses of social networking such as collaboration.

B u s i n e s s C a s e f o r C u s t o m e r C o m m u n i t i e s

Customer Community Benefits

Customer communities or forums support customer-to-customer communications.The bene-

fits for the participants include:

■ Receive answers to questions from knowledgeable customers

■ Receive answers about 3rd-party and off-label uses of products

■ Learn from other customers' experiences

■ Share experiences

■ Help other customers – gain status in customer group


The benefits for the enterprise supporting the customer community include:

■ Reduce support costs (customers help each other)

■ Grow/strengthen knowledge base

■ Promote customer loyalty, and

■ Receive feedback on products/services.

Customer Community Costs

Actual costs for establishing and supporting a customer community varies greatly, depending

upon many factors including: the functionality supported, the size of the community, whether

it is integrated with the enterprises other business applications. The categories of costs for a

customer community can include the following:

S t a r t - u p C o s t s

■ community web design

■ community integration with enterprise's customer service and other business applications

■ community integration with knowledge base

■ training

■ project management

■ community manager

■ IT support

■ community launch activities, and

■ community planning/policy-setting

O n - g o i n g C o s t s

■ subscription fees for forum hosting vendor

■ community manager

■ community monitors

■ community KB manager

■ IT support


S t r a t e g i c C o n s i d e r a t i o n s

End User Recommendations

For enterprises not already supporting social networking for customer service, some recom-

mended beginning steps to take:

■ Investigate your enterprises current social activity by conducting a trial of one of the

listening/monitoring social conversations services. The results will provide input to your

next decisions on what to do and how urgently.

– How many of your customers/target prospects use social sites?

– What are they saying about your products and services?

– How much of these conversations are customer service-related?

– Track competitors' social conversations—look at the same topics, notice how actively

your competitors are engaging in social conversations.

– Analyze patterns (growth rates, types and frequency of references…)

■ Ask your contact center vendors about their plans to support social networking

■ Find out which other departments have or are planning social support?

■ Consider business cases for adding social networking support

■ Consider listening to social conversations as part of your overall "voice of the customer"

initiatives

social networking for customer contact — frost & sullivan

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