selling social crm to the cfo

NucleusResearch.comPhone: +1 617.720.2000

Nucleus Research Inc.100 State Street Boston, MA 02109

THE BOTTOM LINE

Nucleus’s analysis of social monitoring and social engagement solutions have shown that there are real returns to be gained from social CRM efforts, and smart companies are looking beyond the “nice to haves” of greater customer engagement to what social can deliver in real, achievable returns that the CFO will buy. Nucleus has looked at hundreds of social CRM deployments over the past year, followed the acquisition announcements as competing vendors work to build out their social listening and campaign portfolios, and heard a lot of pitches about customer experience, customer engagement, and customer centricity. All the activity and innovation are great, but what does it mean for the CFO who actually has to write the check? There are no new rules for calculating the ROI from social CRM. The same old rules of ROI and credibility apply when you’re looking at making the business case for a social technology investment, be it internal, external, listening, or campaigning.

THE BENEFITS OF SOCIAL CRM

There are only three types of benefits: those that increase revenues, those that reduce costs, and those that increase productivity. The key to building a credible business case is determining which application of social technologies is likely to deliver on one of those areas and how it is likely to be achieved.

There are no new rules for calculating the ROI from social CRM.

In building the business case for a social CRM investment, companies need to first look at breadth and repeatability to see where they’re likely to get the greatest bang for their buck. The more people using an application (breadth) and the greater frequency with which they use it (repeatability), the greater the potential ROI. As you look at your laundry list of potential social CRM projects, rating them in terms of breadth and repeatability will quickly tell you the ones that are likely to get you a positive, provable ROI − and result in more budget for other projects.

RESEARCH NOTESELLING SOCIAL CRM TO THE CFO

July 2013 Document N105

© 2013 Nucleus Research, Inc. Reproduction in whole or part without written permission is prohibited. Nucleus Research is the leading provider of value-focused technology research and advice. NucleusResearch.com


Once you’ve identified your best potential projects, you’ll want to identify the top benefits of those projects and what types of benefits they are. FIRST-ORDER BENEFITS First order benefits are direct cost savings that everyone believes will be achieved. In the case of social, these tend to be reduction in microsite or ad development costs, reductions in agency fees, or reduced services costs associated with bringing all your listening and campaign activities on one platform. In the case of JetBlue, for example, the company was able to reduce the direct costs associated with a lot of rework outside agencies charged each time a new microsite was needed for a promotion. Now the team uses a cloud-based social platform to quickly spin microsites up themselves, and the reduction in fees alone were enough to justify the cost of the project. Another important type of first-order benefit that you don’t want to overlook – particularly in emerging technology areas like social – is avoided cost. One retailer that was using social CRM to engage with customers found it was able to accelerate the time to solve customer inquiries and complaints without adding additional customer service agents – driving greater customer satisfaction. The alternative would have been to hire additional order agents. The tip here is that an avoided cost is also a first-order benefit. In emerging technology areas, new innovations and capabilities often enable companies to do things that never would have been cost-effective to do before with traditional means (like additional agents, for example). If you expect to increase customer engagement with social, what is the alternative? Could you do it with additional advertising spend or additional customer service agents? If so, cost avoidance is a reasonable benefit for your business case. SECOND-ORDER BENEFITS Second-order benefits are just like first-order benefits but they contain a hedging word: We think we can reduce advertising spend We hope to reduce customer service agent hours We expect we can trim our Web development budgets We should be able to increase sales Second-order benefits are not bad, they’re just a step away from first-order ones in credibility and achievability. With second- order benefits, your CFO is likely going to demand a little more due diligence, and a more detailed action plan, on exactly how you expect to achieve them. Second-order benefit success is often political (about getting other groups on board) or structural (about changing traditional workflows, project timelines, or approval structures), so they take more work to achieve. If you find yourself with a lot of second-order benefits, your best strategy is to go back to your breadth and repeatability checklist and identify a small pilot project you can hit out of the park.



THIRD-ORDER BENEFITS Third-order benefits are all about productivity. Although Nucleus has found most social CRM efforts have some productivity impact, in most cases productivity gains make up fewer than 30 percent of the overall returns from a social campaigns or listening project. This is largely because of the relatively low penetration of social technologies today (with only a few campaigns or marketing experts using existing tools on a limited basis). Whenever you’re measuring the impact of third-order benefits, you’ll want to recognize that just like individuals that drive them, third-order benefits have a lot of variability. If you expect the campaigns team will each save 3 hours a week by using the new tools, what additional work will they do because of that time savings? The more credibly you can answer that question (or prove those results), the more likely you’ll have a credible case for a third-order benefit. The other way to increase the credibility of a third-order benefit is to use a correction factor to account for the inefficient transfer of time from time saved to additional time worked. For example, if the team plans to save three hours a week and they’re already overworked and working overtime, they’ll probably use at least 50 percent of that time saved to do more work. FOURTH-ORDER BENEFITS Fourth-order benefits are a social marketer’s delight – but don’t mean much to the CFO. If your benefits statement sounds like a narrative tale, it’s probably a fourth-order benefit. Here are some common examples Nucleus has seen with customers: We increase responses to social questions and because our response rates are better

and we reduce the likelihood that unaddressed social questions will result in a crisis. Because we have social listening and communities we get better feedback on our

products and our product development teams can do a better job with new products and so customers will buy more.

Customers are more engaged and we gain more insight into their daily operations so we can sell them more.

With each of these examples, you’re a few steps away from achieving benefit. That doesn’t mean it won’t happen, it just means the financial decision maker is unlikely to write a check for it. If you look a little deeper, however, there’s first-order benefit potential in each of these fourth-order stories: We increase responses to social questions and because our response rates are better

and we reduce the likelihood that unaddressed social questions will result in a crisis - can we increase the volume of responses and response rates while avoiding new agents?

Because we have social listening and communities we get better feedback on our products and our product development teams can do a better job with new products



and so customers will buy more. Can we avoid focus group or survey costs that would otherwise be needed to gain the same insights?

Customers are more engaged and we gain more insight into their daily operations so we can sell them more. How many more sales engineers or lead nurturing programs would we need to engage customers to achieve the same impact? Can we avoid those costs?

CONCLUSION

Beyond the marketing hype, Nucleus has seen that adoption of social monitoring and engagement solutions can deliver significant return on investment. In an emerging technology area, however, CFOs are less likely to spend without a compelling and believable business case. Applying a common structure to evaluate benefits from most direct (first order) to most indirect (fourth order) can help you separate marketing from value and identify the projects that are most likely to pass the CFO test. Ultimately, it will also help you to keep projects on track and show measurable ROI from your social CRM efforts.

selling social crm to the cfo

Business