Guest Post: Social CRM and Firm Performance

September 10, 2012

Organizations increasingly recognize that their customers are among their most important assets.  Hence we have seen an increase in CRM across many industries.

However, due to advances in technology and the Internet, CRM has transformed into two-way, interactive, and Internet-based customer service.  Because of the emergence of Web 2.0 customers are given more opportunities to network and connect straight to the organization and with each other.  Due to revolutionary ways individuals now communicate over social media, Social CRM has been introduced.

At the time it came for me to write my dissertation, I observed that very little empirical research had been done in the area of Social CRM and its effect on firm performance.  Therefore, my research aimed to investigate if companies can expect Social CRM to increase firm performance.  An online questionnaire was distributed to CEOs and managers of organizations who used social media from a range of different industries.  The questionnaire sought to measure if the company had established Social CRM in their organization and how they use Social CRM techniques.  Participants were then asked to rate how Social CRM had affected their company’s firm performance.  Organizational performance was measured in financial terms and also by indirect measures; capability for innovation, business process efficiency, and customer perceptions.

It was found that Social CRM had a positive impact on customer perceptions and contributed towards increased efficiency in business processes.  This study stresses that there is an indirect relationship between Social CRM and firm performance that may not necessarily translate straight away into financial terms.  Therefore, when a company adopts Social CRM, it should not quickly dismiss it if there is not an instant return on investment.  Social CRM is about building relationships that have implications for long-term financial performance.

Somewhat surprisingly, this study found a negative relationship between monitoring and engaging with customers and financial performance.  A possible explanation for this could be that organizations are trying too hard to satisfy all customers, which is not cost-effective.  It was asked in the questionnaire if the organization calculated customer lifetime value to determine which customers are the most profitable, with most answering that they did not.  This indicates that companies are unfocused with their Social CRM efforts which ultimately waste money.  Therefore, this study advises organizations to focus on customers with the most potential for profits.

Another explanation is that constant engagement with customers can enhance attrition rates as customers can feel harassed and annoyed.  Too many updates from the organization may lead to customers unsubscribing from these updates.  This highlights how the power is now with the customer as he/she decides the interaction they have with the company or brand.

This study supports the findings that Social CRM can enhance firm performance.  However, this can most likely be seen in indirect ways, such as more positive customer perceptions and improved business efficiency.  Social CRM is a long process that may take time to see the financial returns.  This study also highlights the importance of distinguishing customers with the most potential for profits and targeting Social CRM efforts toward them.  Additionally, organizations must be aware they are not over-engaging with customers as this can have an adverse effect on customer satisfaction.

Jade Normington

jadenormington Jade Normington (@JadeNormington) is a recent Business & Marketing Graduate from the University of Hull. She conducted research about Social CRM for her dissertation and has been fascinated with social media ever since.  After working on a social media marketing placement in her home town of Hull, UK she is now about to live and work in Sydney, Australia.

Tags: Firm Performance, Guest Post, Newsletter by Jade Normington, social crm

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