Trouble Justifying the Social Business Impact to Organization

October 4th, 2010 by Matthew Rosenhaft No comments »

If you are like most business executives, you are struggling to justify the value of all this social business stuff in your heads let alone across the table from the rest of the management team. Don’t get me wrong, there are folks getting some good wins from the social media marketing on Facebook, LinkedIn, etc.; but we all know that mainstream business isn’t buying the “build it and they will come” in a recessionary economy. Most senior executives bought the farm on the “web” and realize that much of the hype needs to settle before setting sail on the good ship “social business”.

All true… however, justification is the least of your problems. See, the customer isn’t waiting for your organization to figure it out. The problem for your organization is that the customers are still figuring out what the social business impact is on their buying process and how that will translate to their customer experience and perceived value. The savvy ones are already leveraging the social technologies to become “smarter” and to club the crap out of brands that provide crappy service. But, this is still in the realm of anecdotal. When buyers punish a major brand with rapid market share loss, then we will all wake up to real value of social business. The problem is that it may take your organization a while to do something about it.

I don’t think behavior changes well based upon fear. I believe that change comes from real desire of the perceived benefits. Let me share the opportunity side of this equation. Social business, if done right, has the potential to bring large numbers of customer opportunities at a fraction of the cost of traditional customer acquisition. You have the ability to significantly lower costs throughout the customer delivery process, and drive a huge impact to the bottom line in terms of organizational productivity. The web gave a huge boost to organizations. Remember how many administrative assistants used to run around organizations?

Here are some of the areas of impact as examples:

  • Customer Acquisition - if your cost of customer acquisition via traditional marketing run in the $XXX per customer, we can assume that number is based upon a large number of false leads along with a large number of abandoned ones along with the fact your staff can only handle Y amount of leads comfortably. The challenge is that you cannot figure out who is a shopper who will lead to a buyer versus a browser who will lead to nowhere fast. The problem is we can’t tell which is which. We also assume that we can’t, but what if we could? What if they were encouraged to self-identify? What if we spent very little money until they did? Would your marketing and customer acquisition costs become much more streamlined?
  • Distribution Channels- there are only a few real reasons to partner with a distribution channel; 1. cost of acquisition can be much lower because they already have a relationship and 2. see #1. So, the problem most organizations have with channels is that they are inefficient and not aligned with our mission. They carry multiple products (many of their own) and don’t have the same level of training and expertise as our own. For many channel organizations, the partners still bring more sales and better market positioning. Many organizations are struggling on how to drive more leads through channels, convert at a higher rate, and train their people to do better. A little fix could go a long way to producing better channels. Social has the opportunity to build better channels if done correctly; better, faster, cheaper, and easier.
  • Customer Experience – Conventional wisdom is that it is less expensive to maintain customers than to acquire new ones. Unfortunately, for many organizations they do such a mediocre job of managing the customer experience, you have to wonder. I suspect that 20% of calls into a call center account for 50% of the costs. When a customer gets off the script, there isn’t a computer system smart enough in the world to solve that problem. However, what if you could go to a semi-automated system that could cost 20% of your costs? What if you could improve the customer experience at the same time? What if you didn’t require them to log into your website or sit on hold for 20 minutes? I know the customers are saying “bring it on.”
  • Organizational Collaboration- a lot of organizations are trying to make themselves more productive – say just 5% savings in resources has a huge boost to profits and market value. Unfortunately, many organizations are trying to work harder by doing what they are doing a little more efficiently. But, the fix isn’t do what we are doing better, but rather starting with “why are we doing it?” Many of our current business systems are designed to make the organization scalable, but not necessarily make the customer experience better for the users or the customers. If your systems are 5-10 years old, much of the latest generation of business systems are rethinking the idea of collaboration. Many of the latest business systems have moved to reuse-able, re-purpose-able components that enable users to assemble solutions in real-time based upon their needs. Social business systems; social networks and online community applications have the ability to allow organizations to bring the right information to people based upon their needs, not a generic web template. How much time is spent looking for information or the right people who know an answer? How many business processes have been broken by a frustrated customer? How many exceptions do you have to allow?
  • Hiring and Maintaining the Right People -Anyone who has gone through a hiring process lately knows that the recruiting process is broken; job boards, applicant tracking systems, deluge of resume cramming recruiters, managed service providers, resume services, etc. all are seeing the commoditization of the hiring process. When did hiring the right people become a commodity? When we move away from getting our people to find and connect with the right employees to protecting their time from the volume of crappy candidates; you know that the systems are broken. Used to be that hiring was a competitive advantage and that hiring the right people was seen as a “must do”, now seen as a luxury. What if we could screen out the masses and allow our people time with the right potential hires? What if we could empower our employees to bring in other people who share their values and work ethic? What if we got the organizations to support employees the right way by empowering them as individuals and not “risks” and “costs.”

Social business isn’t about social media. Just like the web wasn’t really about HTML. The real value is in the humanization of business. Social is about swinging the pendulum back towards the center. We automated our businesses for growth and efficiency, but we gutted the hearts right out of them. Nothing I described above is new in business, but is impossible in large businesses today. Or at least not consistently and beyond the exceptional; ie the employee who goes out of his/her way to satisfy a customer, a colleague who stays late to help you find the right information, the hiring manager who connects with a seemingly unqualified candidate, but who has the intangibles they need.

I am not into squishy business feel-goods, but I do believe that the social technologies will humanize business and I do believe that the organizations that can leverage these technologies to improve the customer, partner, and employee experiences effectively on an efficient basis will receive tremendous market opportunities.

We saw that 62 of the top 100 businesses get caught and passed from behind in a 10 year span from 1989 to 1999 in large part due to the web’s disruptive impact in distributing information more efficiently. I believe that we are in the current 10 year cycle that will see similar impact with the ability for the web to deliver better collaboration experiences at a fundamentally lower cost of delivery than traditional means. Those who can leverage these technologies to lower the costs of transactions and relationships will receive higher market share and valuations.

Call it “feel-good with an edge.”

The True Cost of “Free” Social Transactions

August 26th, 2010 by Matthew Rosenhaft No comments »

This week I had a conversation with another LinkedIn Group leader that I wanted to share —our conversation puts the challenges of social media marketing front and center.

We were discussing how the amount of noise has increased within social media networks and that there is a lot of junk out there on, for example, LinkedIn groups. She was frustrated with the amount of spammers posting advertisement and she felt she had to continuously monitor the group to make sure the interactions were professional and relevant.

I told her that the real cost of social transactions was shifting from sellers to buyers.

What does this mean?

If you think about it, we don’t really bother to consider the true cost of our time on Facebook, LinkedIn, Twitter, industry forums and communities, blogs, etc. Beyond the value that you get from sharing with friends and colleagues (my wife posts baby pictures up on Facebook for far-away family and friends) there is a lot of stuff that sucks time away that may not only be useless but actually a true waste of time.  Beyond slightly amusing posts my friends share…. do I really need to wade through that and the 50 other meaningless announcements on my Facebook home page to find the one nugget that is worth it?

Furthermore, how many LinkedIn group posts are a blatant sales pitch, job request, and link bait to visit your website before I tune out your group?  How many SPAM emails do I have to delete on a daily basis to keep my inbox clear for my real work? BTW – I delete pretty much everything that doesn’t have a person sending and personally addressed to me. Email marketing doesn’t really work with me. Probably most people are feeling the same way.

There is no question that there is a fundamental shift occurring on the web.   The cost of information distribution is shifting to the consumer from the distributor –social media is accelerating this. Facebook is free to post and to read. However, it costs some time to post, but it is taking a huge cost of time to filter the amount of information to read that “right” post.

Now, this may sound esoteric, but think about this on an enterprise level and from a productivity perspective. The amount of emails, posts, articles, powerpoints, etc. and you realize:

  1. We are overwhelmed with information
  2. It is costly, in terms of productivity, for our employees
  3. Social media is contributing to the problem of noise
  4. We don’t have good information filters to help our organizations yet
  5. Social marketing if done correctly, can help with the problem in that we can use “trusted sources” to credential and filter information
  6. The costs will continue to rise in terms of productivity if we don’t begin to focus on the problem.
  7. Customers actually pay a transaction cost for your marketing.
  8. The currency they use is their attention. Considering how busy many executives are, spending 10 seconds reading your email is a costly time consumer when you consider how many emails they get on a daily basis
  9. If your marketing transaction costs are too high because it isn’t relevant, timely, focused, and credentialed; you negatively impact your relationship
  10. Customers are reacting to the “hidden” costs. Companies that are SPAMMING them are losing attention and actually losing brand equity.

So, what is the solution?

The paradigm shift that needs to be made in order to capture what is going on in the market, leverage the opportunity that social brings, and accommodate the practical lens of the executive, today’s professionals need to think about customer engagement in terms of “cost of attention” instead of “cost of customer acquisition.” With this new perspective, then focus your social business transactions to provide:

  • High quality
  • High value
  • High integrity

This will increase the customer’s perception of your importance, lower the noise in the market, and will translate to the bottom line in terms of financial transactions.  We are all trying to discuss and navigate through the speed of social, but not many are taking account the paradigm shifts necessary to help make social relevant to the enterprise.  I hope this blog post is a step in that direction.  Would welcome your thoughts.

Is Your Best Customer an Educated Customer?

August 18th, 2010 by Matthew Rosenhaft No comments »
Seemingly simple question, but one with huge implications in a socially-transparent world. I have worked for some folks over the years who were “nice guys” until they got in a room with a potential customer and turned into sharks. Their belief was that they needed to close the customer as soon as possible and with as much margin as possible.

Forget value-based pricing, it was “Caveat Emptor” or buyer-beware pricing. Their best customer was an uneducated client who didn’t understand the value of the offering. They preyed off of the buyers ignorance.

As any of us who run businesses know, it is a struggle to find the right balance between customer and company needs in a relationship. Customers do not really appreciate martyrdom when you cannot deliver at a ludicrously low price. Some buyers look for predatory deals on their own side as well. At the end of the day, win-lose negotiating means someone loses.

I have always believed in win-win relationships with customers. My belief is that you operate as if the client has all of the available information and you treat them respectfully as an educated buyer with all of the benefits in the negotiation and represent their interests even if they cannot. Integrity is not bought or sold, it is earned. Sometimes at great cost and sacrifice. And it is always constantly challenged.

I have also always believed that you can “win” with integrity and that eventually those who practice predatory business practices will be exposed.

Social media has the opportunity to profoundly impact market transparency. My sincere hope is that it will be easier for buyers to get a more “accurate” picture of the value of the offering and the integrity of the provider. Markets become more efficient with better information so I believe that the ability to check references, get self-educated, and validate product claims will make markets more efficient and reduce the ability for “bad actors” to operate.

I think those who believe in “an educated buyer” are already participating in social media for the right reasons. The “give to get” model of providing thought leadership and market education has helped many. Not sure yet that it is affecting market behavior on a macro-level, but I am always hopeful.

Where are we in the Social Business Maturity Spectrum?

July 30th, 2010 by Matthew Rosenhaft 277 comments »

I posted a discussion thread last week in the Social Executive Council and contiued with a blog post that outlines my belief that we are seeing social saturation in many markets. Nukes aren’t valuable if everyone has them and isn’t afraid to use them. The same with tweets…

I an not complaining, rather I think this is a part of the normal evolution of technology lifecycles. If you look at the web, we saw the same evolution from:
* Pioneers
* Evangelists
* Adopters
*Adapters
* Commoditizers

I think we are seeing the end of “first mover advantage” for many markets and seeing the transition to the adopters phase. We have had to tell several CEOs that we cannot broadcast message our way to awareness in their market as there are too many players creating too much noise. We have to do a different approach.

The analogy is that you are in the back of a tradeshow with a 1000 booths and 100,000 attendees with a rented 10X10 booth. How do you get attention when the front booths have rented Bon Jovi for their booth. Screaming doesn’t work, flashy colors seems great until you realize that the 9 other guys in the back with you are copying you. It now looks like a wall of color versus eye appeal. What do you do? We work on making sure that awareness, credentialling, and a relationship happens prior to the prospective customer reaching the floor.

Different stages require different strategies. What worked last year may be commoditized this year in terms of marketing or customer expectations; especially in fast moving technology maturity cycles.

Think about the web: 1994 and 1995 was a hyuge explosion for consumers, but 1996-1997 was big for first mover wave of companies. By 1998 and 1999, companies we moving into niches and adapting the technology for their markets and innovating new unique technologies. This has continued through the last decade. But when you have $29.99 ecommerce ready store front website – much of the basic website development is now a commodity and nas been for a while. On the other end of the specturm, social media spawned out ot his wave and is nolw on its own arc.

What do you think? Am I too early to declare some markets saturated? If you believe that your market is saturated, what are you doing differently to break through the noise? How are you integrating this back into a larger corporate strategy around managing customers, employees, and partners?

Or are you wondering how I can declare something saturated when you haven’t even started? Well, my suggestion is that if you look at your market and see everyone else doing the same thing over and over again, think outside the box and don’t just do it too. You are contributing to the noise, not adding value…. from a customer’s perspective, which would I appreciate?