“Social Media – The Final Frontier in Customer

Experience Management”

NICOM-2012 / MKT-30

Submitted to:

15th Nirma International Conference on Management Global Recession to Global Recovery:

Opportunity, Challenges and Strategies for Sustainable Growth

January 2012

Manish Parihar

Assistant Professor

Shanti Business School, Ahmedabad

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ABSTRACT

'Customer Experience Management' represents the discipline, methodology and/or process used

to comprehensively manage a customer's cross-channel exposure, interaction and transaction

with a company, product, brand or service. (Schmitt, 2003) Traditionally, the CEM systems have

focused on the ability to manage multi-channel interactions like contact center, company

website, self service, mobile devices and brick and mortar stores. This has been the version 1.0

of customer experience landscape – which can be also labeled ‘company centric’.

But lately, there has been a phenomenal rise of a new kind of media – called ‘social media’ that

has proliferated and fundamentally changed the way we communicate in the last five years.

Social media is the online content created by people using highly accessible and scalable

publishing technologies. It is a shift in how people discover, read and share information and

content; it supports the human need for social interaction with technology, transforming

broadcast media monologues (one to many) into social media dialogues (many to many).

Customers now create their own ‘communities’, share and collaborate information and

experiences about products and services. The peer to peer recommendation and reviews through

social networking is preferred over traditional customer feedback mediums. Suddenly, the

customers are empowered to share their product/service/brand experiences in a whole new way

and there has been a fundamental power shift in the traditional CEM model: from being

‘company centric’, to the version 2.0 of CEM which has now truly become ‘customer centric’.

But the current explosive growth and proliferation of social media has pushed the final frontier

even further: from ‘customer relationship’ towards ‘community relationship’. (Kane et al., 2009)

Key words: social media, social networking,customer experience management

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INTRODUCTION

It is said that for a corporation, the ‘unhappy customers are it’s greatest source of learning’ and

these words are frequently used in business meetings and training workshops for employees

engaged in customer relationship management (CRM) activities. These famous words were

spoken by Bill Gates, and at that time, the world was re-discovering the art of listening to the

customers by implementing better CRM practices.

A company could discover important insights from their customers (whether happy or unhappy)

and use these insights to improve processes and products so that they can make it better for their

future customers. So when Whirlpool launched their washing machines way back in India, they

listened to their ‘unhappy customers’ and realized that the typical Indian dress such as a saree or

a dhoti were too big to be washed properly in their machines. Hence, they did some product re-

design and launched a series of washing machines catering to the Indian customer’s needs – and

this translated to increased sales and market share for the company.

Some companies even went out and made drastic changes in their product offerings – changes

that were fundamentally opposite to their corporate strategy - after they listened to their

‘unhappy customers’. Some of the examples are KFC (Kentucky Fried Chicken) offering a

‘vegetable thali’ to their customers in Delhi and Maxwell House Coffee repositioning their

product as a ‘fruit drink’ to attract Jewish customers during the fasting season of ‘Passover’ in

Israel. (Kohli, 2011; Chaudhari, 2010). Companies like Starbucks learned from their ‘happy

customers’ that integrating the shop design to suit the local culture was the key to success and

they started implementing this strategy with great success in their global expansion.

Hence, there was always was something to be learnt from the customers and this has been the

fundamental motivation for all CRM aficionados. However, in the last couple of years, since the

advent of a new kind of communication medium, the customers have been empowered to reach

out to millions of other customers in a matter of seconds and this has drastically changed the way

in which they can share their experiences about products and services – and the way in which

companies can respond (if at all) to such information.

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This new medium called ‘social media’, which will be discussed in detail subsequently, has

proved to be a game-changer in the way that people communicate with other people. So, when

an American Airlines customer was not happy with the way the cabin crew behaved with him, he

simply went ahead and posted his experience on a social networking site which went viral i.e. got

read and shared by millions of other people, and within days, the Airways had to compensate

him for ‘shutting up’. Incidentally, American Airlines is designated as ‘most hated’ on social

media according to a research done by Amplicate in October, 2011. (McNaughton, 2011)

In such a communication environment, where any negative experience can be shared with so

many people instantaneously, the new reality for a corporation is that the ‘unhappy customers are

it’s greatest source of pain’.

In the following sections, we will explore how the new mediums of communication referred to as

social media, has given a ‘pain in the neck’ to today’s companies, but at the same time, given

them some unique opportunities to enhance and extend positive customer engagements and thus

improve their overall customer experience management.

OBJECTIVE

The objective of this study is:

To understand the genesis of customer experience management and to explore how social

media is creating a paradigm shift in the area of customer experience management.

TYPE OF RESEARCH

The methodology employed for research is exploratory in nature and does not include primary

data collection. No survey or response method is used. Data is collected from several secondary

sources like journal articles, research papers, websites and online social media portals.

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CRM AND THE GENESIS OF CUSTOMER EXPERIENCE MANAGEMENT

Once thought of as a type of software, customer relationship management or CRM has evolved

into a customer-centric philosophy that permeates an entire organization. There are three key

elements to a successful CRM initiative: people, business process, and technology. Typically, a

CRM is defined as follows:

“A company-wide business strategy designed to reduce costs and increase profitability by

solidifying customer loyalty. True CRM brings together information from all data sources within

an organization (and where appropriate, from outside the organization) to give one, holistic view

of each customer in real time. This allows customer facing employees in such areas as sales,

customer support, and marketing to make quick yet informed decisions on everything from

cross-selling and upselling opportunities to target marketing strategies to competitive positioning

tactics.” (Retrieved October 9, 2011 from http://www.destinationcrm.com)

CRM model depicting product and customer attributes

Source: Retrieved Ocober 9, 2011 from

http://www.infovis.net/printMag.php?lang=2&num=164

CRM is a strategy used to learn more about customers' needs and behaviors in order to develop

stronger relationships with them. After all, good customer relationships are at the heart of

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business success. And good customer relationships are developed over a period of time by

understanding the customers by collecting and analyzing information to attract, acquire and

retain customers for lifetime.

It is said that if customer relationships are the heart of business success, then CRM is the valve

the pumps a company's life blood. As such, CRM is best suited to help businesses use people,

business processes, and technology to gain insight into the behavior and value of customers. This

insight allows for improved customer service, increased call center efficiency, added cross-sell

and upsell opportunities, improved close rates, streamlined sales and marketing processes,

improved customer profiling and targeting, reduced costs, and increased share of customer and

overall profitability.

But in the changing scenario from product centric to customer-centric approaches, the focus of

marketers has shifted towards their customers and more deliberately on their experiences, which

will be elaborated in subsequent sections.

Customer Experience Model

Source: Siefert. G. (2009, June 23). Customer Experience Model. Retrieved October 12, 2011 from

http://customerexperienceblog.wordpress.com/2009/06/23/customer-experience-model/

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The customer experience can be found in the overlap between the three fundamental pillars of

CRM which were mentioned earlier i.e. people, business process and technology. A customer

experience can be defined as:

“The sum of all experiences a customer has with a supplier of goods or services, over the

duration of their relationship with that supplier. From awareness, discovery, attraction,

interaction, purchase, use, cultivation to advocacy.” (Retrieved October 9, 2011 from

www.wikipedia.org)

The genesis from customer relationship to customer experience happened in the beginning of the

new millennium (that's 2000) when customers started demanding a higher marginal utility on

their purchases; which basically means that they wanted more value for what they were paying.

This shift was somehow related to the large scale internet usage and opening up of the floodgates

of information, thanks to companies like Google. (McKay, 2009)

Traditionally, CRM just focused on customer retention and nothing else, which made it narrow

in scope and highly inflexible. Thus, the concept of CEM was put forward. Pine and Gilmore

first introduced the concept in their 1998 Harvard Business Review article titled “Welcome to

the Enterprise Economy”.

They said that "customer experiences would drive business value and propagate financial

success". What CEM basically does is cater to the emotional aspect of product purchase. That is;

what customers are not getting physically in the form of rewards, discounts etc., they are being

compensated for emotionally in the form of an exceptional user experience. This view has been

clearly illustrated in the book "The DNA of Customer Experience" written by Colin Shaw.

This can be reinforced by an example - Apple Inc. Before his death, each time Steve Jobs made a

new product announcement, the sales figures went off the charts (ex: i-Phone, i-Pad). Most

people would think it's because Apple's customers are passionate about the company, but in

actual reality they are passionate about the experience that it offers. This is one of the main

reasons why even after pricing their products at outrageous rates, there are still people to buy

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them. Apple realized the importance of CEM before most companies, and one must give them

credit for that. Hence:

“A company with a price advantage can be undercut, a company with a performance advantage

can be outflanked, but a company with an emotional difference can potentially demand a price

premium forever” (Valoor, A, 2010)

INTRODUCTION TO SOCIAL MEDIA

In the age of the Web 2.0 and almost omnipresent broadband internet connections, a large

majority of the online public are communicating with each other through a new medium. Apart

from e-mail and instant messengers, they communicate through the medium of blogs, micro-

blogging websites and social networking websites like Facebook, Twitter, LinkedIn and many

others. (Ahuja, 2010) Unlike the traditional web-sites and corporate blogs, these ‘social media

platforms’ are used by the members to share, engage and collaborate with their peer groups to

build lasting relationships in the virtual world. This way of communicating is termed as ‘social

networking’ and this new medium of communication is called ‘social media’. It has been said

that ‘social media is seen by many marketers as the next gold rush’ (Kaplan, 2010) and a

majority of companies are engaging in ‘social media marketing’.

Some of the popular social media websites are:

Facebook, Orkut, MySpace, Google+ - mainstream social networking sites

LinkedIn - professional networking site

Blogs like WordPress, Blogspot - used for broadcasting and publishing data

YouTube - video sharing website

Wikipedia - the open-source online encyclopedia

Flickr, Picasa - picture sharing websites

SlideShare and Scribd - document sharing websites

Twitter - micro-blogging website where one can post only

140 characters at a time

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Some critics say that social media is just another ‘fad’. (Baker, 2009) However, some of the

following statistics can be quite startling, even for the harshest critic (Qualman, E, 2011):

• Over 50% of the world’s population is under 30 years old

• Facebook has topped Google for weekly traffic in the US

• It took radio 38 years to reach 50 million users. TV took 13 years; internet took 4 years,

Apple iPod took 3 years to reach the same number of users.

• But social networking leader, Facebook, added over 200 million users in less than a year!

• If Facebook were a country, it would be the third largest after China and India.

• 80% of companies use social media for recruitment, especially LinkedIn

• 50% of mobile internet traffic in the US is for Facebook

• YouTube has become the second largest search engine in the world after Google

• Wikipedia – the open source online encyclopedia, has over 15 million articles.

Surprisingly, 78% of these articles are non-English.

• More than 1700 new articles are added on Wikipedia every hour!

• There are more than 20 crore blogs on the internet

• Kindle eBooks outsold paper books in 2010

Hence, social media isn’t a fad. It’s a fundamental shift in the way we live, communicate and do

business.

TRANSITION FROM ‘CUSTOMER’ TO ‘COMMUNITY’

The genesis from CRM to customer experience has resulted that most of the business functions

today are geared towards improving the customer experience. However, CRM mostly relies on

‘after the fact’ kind of systems i.e. they focus more on analytics of past or historical data. Be it

an airline or a retail outlet, all analysis is typically done ‘after’ the passenger has flown or the

purchase has been made. And typically, this is done once in a month, or at best once in a week.

And by that time, the opportunity to serve the customer better is already gone. Very little is done

to influence customer behavior during or before a purchase.

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But as online social networking has seen unprecedented viral growth in the past few years, there

is an opportunity for a business manager to leverage a customer’s network to influence behavior.

Social networking lends a ‘near real time’ opportunity to manage customer relationships. It

provides the ability to leverage the influencing power of a customer’s network of friends on his

or her buying decisions. (Nair, 2008)

If today’s customer is contemplating to buy a product, he/she could just post it on his social

media profile page and invite his ‘network of trusted connections’ to get feedback on the various

options available and their reviews - instantaneously. Hence, today’s companies are also

realizing this insight to create communities around their products or offerings, invite and

encourage members to join them, and then convert them into loyal customers and advocates.

Inducing a customer to make the leap from being just a customer to be a community member can

result into better management of customer experiences in ‘real time’ and this can be

accomplished by:

• Identifying the social media where your customers or prospects are most active.

• Creating appropriate content and updating it regularly

• Measuring quantitative and qualitative metrics to gauge the success of CRM activities

Today’s biggest brands have the largest social online communities and these are managed by

dedicating valuable resources to ensure that the relationship between the brand and its

community becomes and remains strong.

Top 5 most liked companies on a social networking site

Source: http://www.hacktik.com/top-5-most-liked-facebook-pages-infographics.html/

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THE CONCEPT OF SOCIAL CRM

As the shift from ‘customer’ to ‘community’ took place in the last couple of years, companies

started using social media tools and platforms to reach out to these communities. This shift

slowly gave rise to the concept called ‘Social CRM’. (Bublik, 2009) Hence, it is the use of

social media services, techniques and technology to enable organizations to engage with their

customers. This is an emerging field and pioneering work is done in the area by Paul Greenberg

who says:

“Social CRM is a philosophy and a business strategy, supported by a technology platform,

business rules, workflow, processes and social characteristics, designed to engage the customer

in a collaborative conversation in order to provide mutually beneficial value in a trusted and

transparent business environment. It's the company's response to the customer's ownership of the

conversation.”

Social CRM is often used as a synonym for Social Media Monitoring, where organizations watch

services like Facebook, Twitter and LinkedIn for relevant mentions of their product and brand

and engage with fans and members. (Myron, 2010) It also includes customer communities

managed by the organizations themselves.

Social CRM Model

Source: Leary, B. (2009) retrieved October 9, 2010 from

http://crm2.typepad.com/brents_blog/2008/07/social-crm-in-p.html

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As shown above, the social CRM process revolves around conversations with friends, partners

and collaborators to create lasting and meaningful relationships. The above model is sustainable

only when all stakeholders participate across the social media lifecycle. (Petouhoff, 2009) An

article published at TMCnet.com (Read, 2011) discusses how stakeholders can contribute to

sustainable social CRM:

• Technology: CRM packages with social media components must be offered on a portal.

The thrust of social media analytics should be on sentiment accuracy and multi-lingual

support. Core analytics integrated with community platforms, public networks and

downstream CRM applications can become a differentiator.

• Consulting: Solution Integrators must develop unified social CRM offerings based on

proprietary frameworks, specialized analytics and platform solutions to help customers

address the challenges of the social CRM ecosystem.

• Customers: Innovative business models, combined with a co-creation approach to

analytics, ensure customer-centric operations. It is imperative for CRM agents to undergo

training in social media collaboration tools.

CUSTOMER EXPERIENCE MANAGEMENT USING SOCIAL MEDIA Business owners are increasingly interested in using social media to optimize their customer

experience management activities because they know social media is changing the CRM game.

(Howell, 2010)

Before the advent of review sites such as Yelp and TripAdvisor, business unit managers were

much more in control of their properties’ images and reputations. Now, a growing number of

adults are using these sites to aid in decisions about where to eat, shop, or stay. For example,

according to Forrester’s North American Technographics Online Survey, roughly 78 million

individuals now regularly participate in travel-specific social media. Other social media reviews

are skyrocketing, according to published media:

• TripAdvisor alone contains 40 million reviews, double its total two years ago. Yelp,

which was founded in 2005, hit 1 million reviews in mid-2007 and passed 10 million in

March 2010 despite its policy restricting reviews to site members only.

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• Forrester estimates that roughly 65 million US online adults engage in 'critic' behaviour,

posting ratings, reviews and other critiques on the social web at least once a month.

• Customer reviews have been bundled into the user experience of most online storefronts.

Reviews are central to hospitality booking sites such as Expedia.com, just as they are on

Amazon.com, Walmart.com, and the online Apple Store.

• Emerging location-based applications such as Facebook Places, Foursquare, and Gowalla

are integrating customer reviews into their offerings.

That means that quite a few potential customers are won over by positive reviews or lost forever

by negative ones. Since these reviews now have a direct effect on revenue at a particular location

or branch, business managers often consider these comments an especially urgent form of

customer feedback. Hence, not only companies, but individual business units or branch officies

are also latching on to social media websites like Facebook (Shih, 2009) and micro-blogging

sites like Twitter (Leary, 2009) to engage with customers as a part of their CRM strategy.

According to researchers (Wilson, 2011), some of the best practices in customer experience

management using social media are:

- Use social media to listen first to determine how best to interact with customers.

- Recognize the importance of making emotional connections with customers via social

media.

- Blend social media with other voice of the customer sources to create a holistic view of

customer priorities.

- Leverage customer stories from social media to energize employees enterprise-wide in

continual improvement of customer experience.

CUSTOMER EXPERIENCE 2.0

The rise of real time online social media has changed the way communities of customers engage

with each other and with companies to share their experiences. The customer experience sharing

process as well as the response by companies has gone to the next level where everyone has the

luxury to scrutinize, comment and further share the experiences of each other: thus making the

entire process an experience in itself.

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This has given rise to the concept called ‘Customer Experience 2.0’ (Kane et al, 2009) which is a

totally unique way of creating lasting customer experiences by the use of social media tools to

leverage the needs and wants of the customer. The theory is as such in its nascent stage with a

handful of researchers working on creating such a level of customer engagement. Some of the

steps which could lead to such a level are:

• Defining clear and precise customer segments

• Identifying and selecting social media tools

• Designing the content

• Developing a blog and integrating other tools on the platform

• Testing it with customers and improvisation

Customer Experience 2.0 is here to stay in this era of Enterprise 2.0 as more and more companies

are embracing online networking technologies. (McAfee, 2009) It is upon the companies to

embrace this new media, use it and continually improve upon the experience that the customers

want. This will create a lasting differentiation, increase sales and build a rock-solid competitive

advantage.

LIMITATIONS OF THE STUDY

The research is limited only to the study of journal articles, websites and online resources and as

such does not cover each and every dimension of customer experience management. This paper

can be used as a starting point to do more research in creating social media strategies to optimize

customer experiences.

FINDINGS AND CONCLUSION

Based on the study of various articles in journals and online buzz about the next generation

CRM, it was found that although the traditional touch points with the customer are here to stay,

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but the new generation online tools have radically changed in the way that companies connect

and relate to their customers.

The concept of customer experience management has been an extension of the new-age customer

relationship management and this itself has taken over a whole new dimension after the

introduction of social media tools to create ‘Social CRM’. The dramatic growth of social media

tools in the last five years has pushed a majority of the corporations on the social media

bandwagon, because it is commonly accepted fact in marketing: “Be where your customers are”;

as looking at the current trends, all the customers are logging on to some form of social media.

Hence, we can conclude that social media is the latest and most important shift in managing and

optimizing customer experiences. However, a very clear strategy, customized for each

organization has to be planned to actually derive any meaningful benefits from this new medium.

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ACKNOWLEDGEMENT

Many thanks to Shanti Business School (www.shantibschool.edu.in) and its management for

sponsoring me to take part in this conference. Special thanks to Mr. Jai Sanghani (Head – New

Initiatives), Major Benor, Prof. Bala Bhaskaran (Executive Director) and Dr. Kishor Barad (Area

Chair – Marketing) for their support and guidance.

Deep gratitude is expressed to the Director of B K School of Business Management, and PhD

guide of the author, Dr. Sarla Achuthan for her insights and guidance in the area of modern tools

of marketing.

The author wishes to acknowledge the constant support and encouragement of his former boss:

the Director of Saraswati Institute of Engineering and Management (SIEM), Prof. Dr. K. N.

Sheth.

Many thanks to Dr. Mukund Patel, Director of American Corners, Ahmedabad Management

Association. Thanks to colleagues and friends for providing random but meaningful inputs to the

subject.

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Chaudhari, R. (2010). Business is marketing. Retrieved October 10, 2011 from http://rajitachaudhuri.blogspot.com/

Howell, N. (2010, February 4). Social Discourse – How does CRM fit with social media? New Media Age, pp. 28-29.

Kane, G., Fichman, R., Gallaugher, J. & Glaser, J. (2009, November). Community Relations 2.0. Harvard Business Review, pp. 45-50.

Kaplan, M. (2010). "Users of the world, unite! The challenges and opportunities of Social Media". Business Horizons 53 (1): 59–68. Kohli, G. (2011, February 5). KFC announces the launch of its maiden restaurant in Delhi. In Agency FAQs. Retreived October 10, 2011, from http://www.afaqs.com/news/company_briefs/index.html?id=7342_KFC+announces+the+launch+of+its+maiden+restaurant+in+Delhi

Leary, B. (2009, March). The tweet is mightier than the sword. Customer Relationship Management, pp. 48.

McAfee, A. (2009, November). Shattering the myths about Enterprise 2.0. Harvard Business Review, pp. 1-6.

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