Integrating Social Media and Traditional CRM

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Chapter 5

Integrating Social Media and Traditional CRM:

Toward a Conceptual Framework for Social CRM Practices Kanghyun Yoon University of Central Oklahoma, USA Jeanetta D. Sims University of Central Oklahoma, USA

ABSTRACT In recent years, marketers have paid lots of attention to a new field called social CRM, created from the combination of social media and traditional customer relationship management (CRM) practices. In the past, traditional CRM practices have mainly focused on the task of valuing individual customers’ profitability through relationship management over time as the proxy of creating the firm’s value. Shifting away from this trend, firms have recently attempted to promote customer engagement into the value creation process as the core of CRM strategy. This chapter proposes conceptual guidelines for the success of social CRM practices, while considering the development of personalized customer engagement programs with social media depending on customer status over the life cycle.

INTRODUCTION During the past two decades, the task of creating and managing long-term profitable relationships with target customers has been a top priority for firms. To achieve this goal, the firms have paid

attention to customer relationship management (CRM) strategy and its practices. Simply speaking, CRM is a business strategy to acquire and manage customers for the benefits of both customers and firms in a co-profitable fashion through maintaining relationships over time (Winer, 2001).

DOI: 10.4018/978-1-4666-5194-4.ch005

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Integrating Social Media and Traditional CRM

To make this CRM strategy a reality, marketing practitioners have developed various types of operational tactics—for instance, collecting customer information about purchasing patterns with the aid of Information Technology (IT)—and have attempted to transform the customer relationships into greater profitability by increasing the repeat purchase rates of target customers and reducing customer acquisition costs, among other tactics. To diagnose the effectiveness of current CRM practices, firms in recent years have used one popular metric called customer lifetime value (CLV), which indicates how much one customer is worth to the firm at a specific point in time (Kumar and Rajan, 2009). However, the true meaning of CRM has yet been met since firms have used CRM as an operational tool in order to maximize company profitability by taking advantage of the collected information about customers’ purchasing behaviors. As current literature in CRM indicates, most practitioners in the CRM industry have focused on what firms should do to attract and retain target customers in order to maximize CLV as the proxy of the firm’s profitability. However, firms do not have a clear understanding of how customers react to the firms’ CRM efforts, how customers create their engagement into the relationship-building process, and how customer contributions can be transformed into the entire value for the firm. In fact, what the traditional CRM practitioners should consider is one most important fact—i.e., CRM is about the well-being of customers as human beings, even though technology and process are required. Stated differently, CRM practitioners need to create strategies which are designed to align the process of gathering information about the behavioral aspects of target customers with the creation of self-motivated engagement of target customers during the process of attracting, keeping, and growing long-term relationships with target customers.

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To resolve the issue of customer engagement in the CRM process, CRM practitioners have changed their attention to social media as a future promising opportunity driven by recent impressive statistics. As of March 2013, Facebook reached 655 million daily active users on average with 79% of active users residing outside the United States and Canada (see up-to-date statistics at http:// newsroom.fb.com/Key-Facts). Twitter achieved a milestone when the 10 billionth tweet was sent on March 2010, and by July 2010, the number of tweets doubled to an amazing 20 billion (Williams, 2010). Realizing the potential power of social media, CRM practitioners have considered how to incorporate the potential of social media into the traditional CRM practices in order to meet the true meanings of CRM. Consequently, this emerging practice opens a new field called Social CRM, which is simply speaking the integration of traditional CRM practices with social media as the new communication channels. Statistically speaking, the growth pace of social CRM practices is very fast. According to Sarner et al. (2012), social CRM will be approximately 8% of all worldwide CRM spending in 2012—up from around 4% in 2010—which equates to $1 billion spent on Social CRM compared to $12.9 billion being spent on CRM in 2012. Also refer to the contents in the following webpage (http://www. forbes.com/sites/louiscolumbus/2012/10/02/ gartners-magic-quadrant-for-social-crm-and-thesocial-enterprise/). Since current social CRM practice, as an emerging trend, is at its early stage, CRM practitioners face several critical issues (Bush, 2011). Of course, the most important issue is how to meet the true meanings of CRM practices by utilizing various types of social media as alternative communication channels. Specifically, the first issue is related to the heterogeneous efforts of managing customer relationships depending on the customer status over customer life cycle. For instance, since


customers change their status from potential buyers to first-time buyers as they make a series of multiple purchases, CRM practitioners need to account for consumer heterogeneity in consumer status over time (Yoon and Kang, 2011; also refer to Reinartz, Thomas, and Kumar, 2005, for ARPRO framework). When meeting the original goal of CRM—i.e., building and managing the long-term profitable relationships with customers, not the management of target customers at a profit, CRM practitioners need to understand the dynamic aspects of customer needs over time and manage the customer relationships based on the on-going process. Second, social media are highly likely to provide the opportunities for cultivating relationship communications among potential customers, through word-of-mouth (WOM) activities, and creating active engagements with target customers. However, traditional IMC strategies for communication goals have depended on the use of traditional models of the communication process (Belch and Belch, 2007), which miss the WOM processes occurring between an opinion leader and opinion seekers. Thus, it is necessary to revise the traditional communication process model to incorporate WOM processes based on the active engagement of potential customers in an ongoing relationship-building process. Given the revised communication process model, CRM practitioners may design their integrated marketing communications (IMC) strategies at the company perspective since social media provide the firms with opportunities to create two-way communications between the firm and target customers as opinion leaders and let opinion leaders engage into the process of building customer relationships with opinion seekers. Finally, since social CRM is in the early stages of development, CRM practitioners should be equipped with various types of social CRM metrics for measuring the effectiveness of new social

CRM practices, which are called Social Analytics. Stated differently, the increased attention paid to social CRM indicates that it is necessary for CRM practitioners to update either the traditional metrics to measure the success of traditional marketing activities for selling products or services or the CRM metrics to evaluate the effectiveness of traditional CRM practices. For instance, marketers may use popular financial and market-based measures such as profitability, market share, and sales units, among others. However, much more emphasis should be placed on developing measures which are customer- and/or value-oriented in the perspective of value creation and delivery process of marketing and provide CRM practitioners with better insights into how the social CRM practices are working for building long-term relationships with customers. Given each of traditional CRM and social CRM concerns, this chapter is intended to propose a conceptual framework which provides general and personalized guidelines required when implementing social CRM practices. Social CRM practice is defined as the business practice of creating customer engagement through social media in an attempt to build and manage long-term profitable relationships with customers. To achieve an overall goal of this study, we utilize two types of new conceptual models—Model of Consumer Dynamics in Status (MCDS) which accounts for consumer heterogeneity in consumer dynamic status over the customer life cycle (Yoon and Kang, 2011) and Revised Communication Process Model which includes mass media and word-of-mouth communication channels between sellers, opinion leaders, and opinion seekers especially for social contagion process. Given these new frameworks, we discuss general guidelines of social CRM to enhance more customer engagement using social media and consequently, to meet the true meanings of traditional CRM practices which are centered on managing long-term relationships with cus-

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tomers over time. In addition, we suggest social CRM metrics which allow CRM practitioners to evaluate the effectiveness of social CRM practices. This paper is organized as follows. First, we provide a brief review of literature on traditional CRM practices, the communication process, the new emerging trend of social CRM, and Social Analytics. In the next section, we discuss fundamental issues related to the implementation of social CRM activities and provide some guidelines to resolve all the issues mentioned. Then, we close our discussions after tackling some research issues related to future trends in social CRM.

(Kotler and Keller, 2009). At the same time, marketing practitioners have shown their explosive interests on customer relationship management (CRM) as a strategic approach which capitalizes the benefits of information technology—i.e., the use of an internal customer database—in order to realize the goals of relationship marketing (Boulding et al. 2005). Thus, over the past decade, the organized CRM efforts of attracting, retaining, and growing customers in a co-satisfying relationship have been a top priority for any business. To conceptually understand what the CRM is, consider the following comprehensive definition suggested by Payne and Frow (2005, p. 168):

CONCEPTUAL BACKGROUND

CRM is a strategic approach concerned with creating improved shareholder value through the development of appropriate relationships with key customers and customer segments. CRM unites the potential of relationship marketing strategies and IT [information technology] to create profitable, long-term relationships with customers and other key stakeholders. CRM provides enhanced opportunities to use data and information to both understand customers and co-create value with them. This requires a cross-functional integration of processes, people, operations and marketing capabilities that is enabled through information, technology and applications.

In this section, we provide a review of literature on three areas: 1) traditional CRM practices and the need for accounting for consumer heterogeneity in customer status over the customer life cycle, 2) IMC persuasive communication strategy and the emerging trend of social CRM, and 3) guidelines to measure the effectiveness of social CRM practices.

CRM Practices: Past, Present, and Future Since Levitt (1960) highlights the importance of meeting customer needs as the essence of marketing activities from the customer, not business, perspective, the focus of marketing has shifted from a transaction orientation driven by the exchange paradigm (Bagozzi, 1974; Kotler, 1972; Hunt, 1983) to a relationship orientation based on the relational paradigm (Berry, 1983; Bagozzi, 1994; Kotler, 1994; Sheth and Parvatiyar, 1995; Gronroos, 1990). As a result of this evolving trend, marketing scholars have recently agreed to the definition of marketing as the process of creating and managing long-term profitable relationships with customers from the relationship perspective

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As implied, all contemporary CRM practices start with the perspective of dual creation of the values for the customers and the firm (Boulding et al., 1995; Payne and Frow, 2005; Tarasi, 1996). The efforts of making dual creation of the values imply that the firm creates the value for customers—i.e., by determining what value the firm can provide to its target customers for satisfaction—and at the same time, the value for shareholders—i.e., by determining what value the firm can receive from the customers. In order to make this value creation process possible, specifically, the firms attempt


1) to determine the strategic choices under their mission and goal(s), 2) to gather customer-related information about their purchasing patterns using IT for both the design of valuable market offering and the task of valuing individual customers, 3) design relational processes across functional departments keeping in mind optimal resource allocation, and finally 4) implement the organized CRM efforts in an attempt to attract, retain, and grow customers in a co-satisfying relationship building and management process (Tarasi 1996). For the task of customer valuation, the firms in recent years have utilized the popular concept of customer lifetime value (CLV) (Gupta, Lehmann, and Stuart, 2004; Kumar and Rajan, 2009). Despite its attractive aspects, however, the future of CRM is not promising since the outcomes from the implementation are contradictory to the expectations of CRM practitioners (Srinivasan and Moorman 2005). For instance, most CRM projects do not deliver the expected return on investment (ROI). The trend analysis results in Google Trend also support this skepticism: when considering that the number 100 represented the peak search volume in mid 2004, peoples’ interests have declined significantly as the number was down to 49 in late 2012. Thus, CRM practitioners need to reconsider the fundamental basics of CRM in order to achieve its goals of building and managing long-term profitable relationships with customers. One solution is to equip firms with the customer perspective so that marketers may understand how individual consumers become adopters and later loyal ones in the perspectives of consumer adoption and loyalty processes. In addition, another solution is to implement customer engagement programs since the level of customer engagement with the firm will arise as the market offerings fit their needs and they have commitment and trust in the firm (Morgan and Hunt, 1994; Tarasi, 1997). With respect to the implementation of traditional CRM projects, we tackle these issues in the next section.

Traditional Communication Process Model for IMC Strategy As mentioned above, a key challenge of traditional CRM practices is the lack of customer engagement, which is one of the Marketing Science Institute’s research priorities suggested by the 2010-2012 Marketing Science Institute (MSI, 2010)—for moving toward the process of creating, building and, enhancing long-term customer relationships. Significance of this research topic lies on the possibility of studying “consumers’ behavioral manifestation toward a brand or firm beyond purchase, which results from motivational drivers including: word-of-mouth activity, recommendations, customer-to-customer interactions, blogging, writing reviews, and so forth” in the perspective of relationship marketing toward the goal of making customers loyal. To design better customer engagement programs, however, marketing practitioners need to rethink the use of the popular communication process model as the basis of all kinds of integrated marketing communications (IMC) strategies (Belch and Belch, 2007; Kotler and Keller, 2009). In this section, we provide a brief discussion on how marketers have used one popular communication process model mainly for IMC strategy and why it should be updated in the era of social CRM by including the flow of the interpersonal communication process represented by word-of-mouth (WOM) activities. Originally, Harold Lasswell (1948) introduced a simple linear model of the communication process to describe the transmission of messages from one source to one receiver. As a variation of the Shannon-Weaver mathematical transmission model of communication, Wilbur Schramm (1954) later developed a circular form of communication model—called Schramm’s Model of Mass Communication—to represent the reciprocal nature of the communication process. As shown in Figure 1, Schramm’s model has become the main form of current communication process models which

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Figure 1. Traditional communication process model

characterize all kinds of message transmissions from one sender to another receiver and has been popularly used in the design of all IMC strategies. For the purposes of accounting for customer engagement in CRM practice, a better communication model is needed. The two-step flow of communication hypothesis, which was first introduced by Lazarsfeld, Berelson, and Gaudet (1944) in The People’s Choice, better captures the interpersonal communication activities in the communication process. Originally, this study focused on the kinds of decisions people make during presidential election campaigns, with the expectation that a strong relationship between media messages and voting intentions would exist. What they found instead is that informal and personal contacts have a stronger influence on voting behaviors than exposure to radio or newspaper as sources of influence. Driven by this finding, Katz and Lazarsfeld later developed the two-step flow theory of mass communication (Katz and Lazarsfeld, 1955; Katz, 1957). This theory asserts that information initiating from mass media moves in two distinct stages. 108

First, individuals—as opinion leaders—who pay close attention to mass media and its messages receive the information. Then, they pass on their own interpretations, along with the actual media content, to their friends expecting the creation of personal influence. The term ‘personal influence’ refers to the process of intervening between the media’s direct message and the audience’s ultimate reaction to that message. Opinion leaders are quite influential in getting people to change their attitudes and behaviors and are quite similar to those they influence. Thus, the two-step flow theory has improved our understanding of how mass media influence the decision-makings of opinion leaders as well as opinion seekers. This theory refines the ability to predict the influence of media messages on audience behavior and helps explain why certain media campaigns may have failed to alter audience attitude and behavior. Interestingly, the two-step flow theory is distinctly related to the theory of diffusion of innovation in marketing. A major assumption of the diffusion of innovation, along with diffusion models, is that two factors drive the entire diffusion


process in the market such as advertising for mass media communication process and word-of-mouth (WOM) activities among potential adopters for interpersonal communication process in the social system (Rogers, 1962). Following this assumption, Bass (1969) introduces a popular Bass diffusion model which describes the diffusion process of new durable goods—in terms of the timing of adoption—depending on the mixed behaviors of first adopters, called innovators, who are implicitly governed by mass communication activities and subsequent adopters, called imitators, who are involved in word-of-mouth (WOM) activities with innovators. Recently, marketing scholars have studied the effects of mass communication and WOM activities on the diffusion process together, mainly driven by the abundance of research data for empirical testing (Godes and Mayzlin, 2004; Watts and Dodds, 2007; Manchanda, Xie, and Youn, 2008; Iyengar, Van den Bulte, and Valente, 2011). In summary, it is recommended that current popular conceptual frameworks of the communication process, represented by the traditional model of communication process, be updated by incorporating the interpersonal communication activities occurring between opinion leaders and opinion seekers as suggested by the two-step flow theory and the diffusion process. Based on a new updated model of the communication process (to be discussed later) which incorporates interactivity, CRM practitioners should develop customer engagement programs to create, build, and enhance customer relationships in a holistic viewpoint, along with the new opportunities for interpersonal communication that emerge through social media for IMC strategies.

Role of Social Media in Social CRM As social media become popular in recent years, CRM practitioners see that social media are likely to provide new opportunities in order to

improve the performances of traditional CRM implementations. For instance, recognizing that traditional CRM projects are not good enough to achieve the firm’s goal, marketers have started considering how to capitalize on emerging social media opportunities—for instance, 1) to make use of personal social network resources that opinion leaders are likely to have and 2) to transform the created customer engagement into the value creation process and the profitable relationshipbuilding process via two-way communication process—in a co-satisfying fashion. As the result, to capitalize the power of social media for social engagement, a mix of social media with traditional CRM practices, called social CRM, has emerged into the surface of business practices as one new direction of traditional CRM strategy. In addition, CRM practitioners have considered the development of social metrics—called social analytics—to diagnose the effectiveness of social CRM efforts. Now, we provide a brief review of literature on social CRM and social analytics. Simply speaking, social CRM is a new business strategy and practical approach that combines the power of online communities, broader social networks around opinion leaders, and traditional CRM practices (Lithium Technologies, 2009). As an expert in the CRM field, Paul Greenberg provides a nice definition of social CRM as “the business strategy of engaging customers through social media with the goal of building trust and brand loyalty” (Greenberg, 2009). In this study, we define it as a strategic business practice to build and manage long-term profitable relationships with customers by creating more customer engagement into the value creation process with the firm using social network systems. Ideally, CRM practitioners expect that social media provides better opportunity to create more customer engagement—via word-of-mouth activities between opinion leaders and opinion seekers in the two-step flow of communication process—into the process of building and managing profitable

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customer relationships. It is expected to go beyond the traditional CRM practices which focus on operational customer management using information technology. However, there have been only a handful of studies in the academic field with respect to the guidelines for its implementation since this discipline is at an early stage (Woodcock, Green, and Starkey, 2011; Mosadegh and Behboudi, 2011). The growth of social media implies that the firm can no longer control the relationship-building process with customers as traditional IMC strategies suggest. Thus, firms need to embrace this shift and develop new guidelines for the implementation of social CRM, which facilitates collaborative experiences with customers, consequently translating the process of customer relationship management into a profitable one. This is what the conceptual framework offered in this chapter is intended to do. With respect to social CRM, one important issue that CRM practitioners should consider is the development of social CRM metrics for measuring the impact of both social media and social CRM on business performance. Specifically, the increased attention paid to social CRM means that CRM practitioners need to embrace new metrics for customer engagement into the use of traditional metrics in order to meet the emerging social CRM environment. The traditional metrics represent financial- and market-based indicators such as sales units sold, profit margins, among others and customer-centric measures such as customer acquisition costs, conversion rate from prospects to buyers, retention or churn rates, among others (Gupta and Zeithaml, 2006). In the domain of social CRM, however, CRM practitioners need to measure the effort of customer engagement and sentiment—driven by social media during the interpersonal communication processes between opinion leaders and opinion seekers—in the perspective of dual creation of values for the

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firm and customers (Etlinger, 2011). Since social analytics is a new discipline, a lack of guidelines exist on how to measure the performance of social CRM activities, and this study attempts to provide new guidelines for social CRM implementation.

MAIN FOCUS OF THE ARTICLE For the successful implementation of social CRM projects, CRM practitioners first need to understand the true meanings of social CRM practices and then consider the guidelines for its implementations and performance controls. Stated differently for the success of relationship marketing, which can be another name of CRM activities, practitioners should focus more on process-oriented rather than outcome-oriented processes and on value creation practices working with customers together rather than value distribution activities driven by the firms (Sheth and Parvatiyar, 1995). To accomplish this task, we review how individual customers become adopters of a specific market offering and loyal ones for the firm as they make a series of successive purchases from the loyalty marketing perspective. Combining all of these ideas, later, we propose our general and personalized guidelines of how to design, implement, and control social CRM efforts toward building and managing long-term profitable relationships with customers using social media as new relationship communication channels. When discussing these issues, we consider how to accommodate various types of theoretical foundations—such as the adoption and loyalty processes, the diffusion process with social contagion or word-of-mouth (WOM) activities, the two-way flow of communication process with consumers’ response behaviors, the consumer heterogeneity in life cycle status, social media, and social analytics as mentioned previously—into


the design of social CRM guidelines. Note that we focus more on the value creation process as the core of CRM practices (Payne and Frow, 2005).

Issue 1: Need for CustomerOriented Social CRM Practices From the perspective of making both customers and firms better off, traditional CRM practices have mainly focused on the creation of the firm value, along with relatively less emphasis on the side of customer value (Boulding et al., 2005; Srinivasan and Moorman, 2005). One typical example is the firm’s efforts of valuing individual customers—based on the calculation of customer lifetime value (CLV)—to separate high-valued customers from the group of low-valued customers (Reinartz and Kumar, 2002; Gupta, Lehmann, and Stuart, 2004; Kumar and Rajan, 2009). Considering the fact that at the core of any CRM approach is “the concept of dual creation of value” for the firm and target customers (Payne and Frow, 2005; Tarasi, 2007), CRM practitioners need to consider ways of maximizing the customer value during the value creation process for the success of CRM. Stated differently, it is essential to remember that from a viewpoint where the customer is regarded as a co-creator and coproducer (Bendapudi and Leone, 2003; Prahalad and Ramaswamy, 2004; Vargo and Lusch, 2004), the success of CRM depends on the firm’s efforts of encouraging the participation of target customers into the value creation process for a win-win situation. Thus, there remain important questions regarding how to make CRM practices successful: 1) how to create a better value creation process driven by the promoted engagement of target customers and 2) consequently, how to redesign existing information gathering/analysis systems, which allow marketers to design better customized or personalized CRM approaches.

Customer Engagement In recent years, marketers have paid lots of attention to the role of customer engagement in an interactive process of co-creating customer value and experience with customers. The reason for this movement is that customers in an engagement process play a key role in generating transactional outcomes—for instance, creating customer referrals (Rye and Feick, 2007; Kumar, Petersen, and Leone, 2010)—as well as nontransactional outcomes—such as word-of-mouth (WOM) or recommendation behaviors to others (Godes and Mayzlin, 2004, 2009; de Matos and Rossi, 2008; Chen and Xie, 2008). As the result, some marketers argue that the popular customer lifetime value (CLV) as the proxy of company profitability should be replaced with the measure of customer engagement (CE) for the purpose of valuing individual customers (Kumar et al., 2010; Brodie et al., 2011). As a hot research priority for the period of 20102012 (Marketing Science Institute [MSI] 2010), CE can be a major driving force to maximize the effectiveness of social CRM practices. To understand why, take a look at the definition of CE as suggested by Brodie et al. (2011) shown below: Customer engagement (CE) is a psychological state that occurs by virtue of interactive, cocreative customer experiences with a focal agent/object (e.g., a brand) in focal service relationships. It occurs under a specific set of context-dependent conditions generating differing CE levels; and exists as a dynamic, iterative process within service relationships that cocreate value. CE plays a central role in a nomological network governing service relationships in which other relational concepts (e.g., involvement, loyalty) are antecedents and/or consequences in iterative CE processes. It is multidimensional concept

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subject to a context- and/or stakeholder-specific expression of relevant cognitive, emotional and/ or behavioral dimensions. The above definition indicates that as a psychological state, it happens when customers have ongoing experiences in a dynamic, interactive, and co-creative process of value with the firm. In addition, it plays a key role in a social network with friends, for instance, by exercising the responsibility of opinion leadership to others. Thus, it can be suggested that customer engagement represents a strategic imperative for building long-term relationships with customers, resulting in the enhancement of company performance such as sales growth, profitability, and return-on-investment (ROI), among others (Brodie et al., 2011).

Consumer Heterogeneity in Customer Life Cycle To promote customers’ engagement into the value creation process, one possible approach that CRM practitioners may consider is to prepare the guideline for social CRM after addressing “potential heterogeneity in customer behavior”—specifically, accounting for consumer heterogeneity in customer life cycle (Boulding et al., 2005; Kumar, 2008). It is well-known that customers typically change their status by taking a series of successive purchases in their life cycle as the extant models of adoption and loyalty building process indicate (Dodson and Muller, 1978; Hahn, Park, Krishnamurthi, and Zoltners, 1994). For instance, marketers are likely to design acquisition, retention, and attrition strategies depending on the status of individual customers over the customer life cycle (Kumar, 2008). Due to this reason, CRM practitioners need to understand when and how individual customers become adopters and loyal to a specific market offering within the context of adoption and loyalty-building process (Reichheld, 1993). Reinartz, Thomas, and Kumar (2005) high-

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light the importance of allocating resources into acquisition and retention strategies to maximize customer profitability. To understand how target customers behave over their life cycle and utilize the gathered customer knowledge for the design of CRM strategy, we borrow one conceptual framework—called Model of Consumer Dynamics in Status suggested by Yoon and Kang (2011)—which enables marketers to account for consumer heterogeneity in the adoption and loyalty-building process in the perspective of loyalty marketing. To the best of our knowledge, this study is the first attempt to account for consumer heterogeneity in the CRM context. This conceptual framework is shown in Figure 2. One major advantage of this conceptual framework is to allow CRM practitioners to consider important customer-oriented insights and relevant metrics—as a set of challenging tasks. For instance, marketers can understand when and how potential buyers (PBs) make a purchase decision to become first-time buyers (FTBs) or adopters given the presence of marketing stimuli offered by the competing firms. Then, marketers are likely to consider when and why the FTBs stop making additional purchases, make a first-repeat purchase with the same brand, or switch to one of the competing brands before becoming one of my repeat customers (MRCs). Finally, marketers may review when and why the MRCs make a series of repeat purchases with my brand and ultimately become emotionally committed and loyal customers given the presence of marketing efforts such as loyalty programs toward the goals of relationship marketing. Of course, marketers are also able to consider how to attract competitors’ repeat customers (CRCs) as the main part of attraction strategy. Given this framework, it is necessary for marketers to identify major marketing goals, along with possible performance metrics, when targeting each type of consumer groups within the adoption and loyalty-building process. Note that the list of


Figure 2. Model of consumer dynamics in status

marketing goals identified should be based on the response process of target consumers to marketing or other incoming stimuli occurring under the two-way communication process between a sender and receivers. One popular framework for this understanding is the framework related to the response process the receiver may go through in moving toward a specific behavior and how the promotional efforts of the marketer influence consumer responses. One key aspect of this framework is that consumers are assumed to follow a series of three stages such as cognitive, affective, and behavioral (or conative) stages depending on how consumers respond to incoming stimuli (refer to Belch and Belch, 2007, p. 146). Following this notion, Oliver posits that consumers become loyal after going through four phases such as cognitive loyalty, affective loyalty, conative loyalty, and action loyalty (Oliver, 1997, pp. 392-394). Using this proposed framework, we are able to identify major marketing goals—as the guidelines—when targeting four types of consumer groups toward the goal of making them loyal, as shown in Table 1. Key ideas of our proposed framework are different from those suggested by Kumar (2008).

For the details of his framework, refer to Figure 1-5 (Kumar, 2008, p. 9). In his book, Kumar discusses various types of topics such as acquiring profitable customers, retaining current customers for profitability, allocating resources, and managing customer referral behaviors, among other topics, depending on the customer life cycle framework. In contrast, our framework enables CRM practitioners to attract, retain, and grow customers—with personalized CRM practices— after accounting for consumer heterogeneity in consumer dynamics, given the presence of a firm’s internal database. Also, our framework is able to accommodate the possible effects from the competition.

Issue 2: Role of Social Media in Relationship Communication Process The next issue is related to the tasks of creating two-way relationship communication channels with target customers and promoting their engagement into the value creation process for the ultimate goal of social CRM practices—i.e., building

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Table 1. Marketing goals and metrics for each type of consumer groups Transition Patterns

Marketing Goals

Examples of Marketing Activities

Relevant Metrics

Potential Buyers (PBs) → First Time Buyers (FTBs)

• Developing purchase intention after Increasing their awareness, knowledge, preference levels. • Maximizing the number of trials from potential customers to be the paying customers.

A series of welcome email, Conversion OTM, and E-newsletters; A series of Conversion DMs and emails.

Awareness level; Knowledge level; Intention level; Conversion rate; Churn rate.

Competitors’ Repeat Customers (CRCs) → My Repeat Customers (MRCs)

• Increasing positive attitude toward the company brand. • Increasing share of wallet after generating switches to the company brand. • Increasing the likelihood to stay with my brand as the repeat purchase customer.

A series of emails for awareness, DMs, and ADs.

Frequency of switching behaviors; Conversion rate.

First Time Buyers (FTBs) → My Repeat Customers (MRCs)

• Maximizing satisfaction with the company brand. • Reinforce the positive attitude. • Increasing likelihood to make a first repeat purchase.

Surveys for measuring satisfaction; Coupons for Repeat Purchase; frequent calls for managing ongoing relationship.

Satisfaction level, Conversion rate; Churn rate; Effectiveness of promotional campaigns.

My Repeat Customers (MRCs) → Loyal Customers (LCs)

• Increasing the likelihood to stay as repeat customer. • Prevent them from switching to other competing brand. • Making them loyal by increasing their emotional attachment level.

Loyalty programs; programs for increasing emotional attachment.

Repeat purchase rate; Loyalty level; Commitment level, level of emotional attachment.

and managing long-term profitable relationships with target customers in a co-beneficial fashion. As mentioned previously, the true meaning of social CRM can be secured when target customers voluntarily exercise their engagement into the value creation and loyalty-building process by taking advantage of two-way relationship communication channels including social media as a new hybrid element of the promotion mix (Mangold and Faulds, 2009). To achieve these goals, thus, marketers may consider the following two specific issues.

New Communication Process Model for IMC Strategy Traditional IMC efforts can be characterized as a marketer-oriented communication process in the sense that the two-way interaction activities between senders and receivers are not emphasized well and the traditional communication process

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model has not included the channels for WOM activities—as one part of social contagion—among prospective customers. In fact, one explicit goal of all IMC activities is the acceleration of the diffusion process for a specific brand/product in a target market, as the function of both mass communication processes typically driven by a mix of promotional elements such as mass media and interpersonal communication processes using new social media or word-of-mouth (WOM) marketing tools (Rogers, 1962; Bass, 1969). Note that most of the extant IMC-related studies have relied on the traditional communication model as shown in Figure 1 and as previously discussed in “Traditional Communication Process Model for IMC Strategy” section of this manuscript. Following the principles of the two-step flow of communication (Lazarsfeld, Berelson, and Gaudet, 1944; Katz, 1957), however, we propose a new revised communication process model—as shown in Figure 3—which describes how the core


Figure 3. Revised communication process model

messages of any IMC strategy can be transmitted from a sender (e.g., firm) to opinion leaders and finally to opinion seekers, along with the feedback channels. The model in Figure 3 draws from the work of Lazarsfeld, Berelson, and Gaudet (1944) who first crafted the two-step flow of communication within the context of political communication in evaluating presidential elections. Katz (1957) offered an updated report of research related to the original work of Lazarsfeld et al. Figure 3 incorporates this body of work as well as the diffusion process in rendering how interpersonal interactions in the communication process are associated with the marketing context. The contexts of political communication and marketing are different, but the research of the two-step flow hypothesis (and the diffusion process) is supported by numerous empirical studies and can fill the void of accounting for customer engagement which has been noted to be lacking from traditional CRM practice. Introduction of our revised communication process model is a necessity since it enables marketers to clearly understand the roles of mass media and interpersonal communication activities among the firm as a sender, opinion leaders,

and opinion seekers in the relationship-building process for social CRM and as a result, to design effective IMC persuasive communication strategies and social CRM practices. Next, social CRM practitioners need to consider how to build and manage relationships with customers using two-way communication channels and how to promote social engagement of customers into the value creation process by showing non-transactional behaviors such as WOM, influencing behaviors and inputting knowledge for customer engagement, particularly utilizing various types of social media. In addition to initiating social engagement of customers, social CRM practitioners should consider a plan to routinely engage in social media monitoring of relevant customer interactions that may or may not be initiated by the firm.

Relationship Communication Strategy Duncan and Moriarty (1988) propose a communication-based model for relationship marketing efforts and discuss how communication can be the foundation of any marketing effort associated

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with attracting new customers by asserting that “communication is the human activity that links people together and creates relationships” (p. 2). Later, scholars have reconsidered the role of IMC strategies from the relationship perspective (Andersen 2001; Lindberg-Repo and Gronroos, 2004; Finne and Gronroos, 2009). A key aspect of relationship communication strategy is one of interactivity, based on the feedback channel, between senders and receivers. Given this framework, CRM practitioners need to design IMC persuasive communication strategies to build new relationships with potential buyers, manage interactive relationships with existing customers, and finally promote engagement efforts of all kinds with committed customers into the value creation process toward the goal of social CRM— i.e., making customers truly loyal. However, one thing that CRM practitioners should remember is the fact that any kind of customer engagement and relationships occur uniquely and differently at each stage in the customer life cycle as indicated by the Model of Consumer Dynamics in Status. Thus, the need exists again to account for consumer heterogeneity. For this purpose, we introduce Miller’s (1980) framework which assumes consumers go through the stages of shaping, reinforcing, and changing, depending on consumers’ response process of cognitive, affective, and behavioral stages (Belch and Belch, 2007, p. 46). By combining this framework with the Model of Consumer Dynamics in Status, we are able to understand the roles of social media and customer engagement in the value creation process toward the success of social CRM practices, while accounting for consumer heterogeneity from a holistic perspective. For example, CRM practitioners may focus on how to build new relationships with potential buyers (PBs), while promoting their engagement at the same time by using customized IMC persuasive

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communication strategies with a well-designed value proposition that follows the shaping-reinforcing-changing process. A final challenge that marketers may face is the issue of what kinds of metrics should be prepared for measuring the effectiveness of social CRM efforts, depending on the type of consumers over the stages of the customer life cycle. The most popular measures for traditional CRM efforts are outcome measures such as the number of acquired customers, the “churn” rate as a percentage of the customer base, the customer retention rate, the dollar value of cross-selling and up-selling, the percentage increase in customer migration to higher margin products, and the changes in individual customer lifetime value (CLV), among others (Winer, 2001; Lerman and Winer, 2005). However, new measures are required to effectively manage the value creation process driven by the customers’ engagement efforts as customers exhibit a series of purchases over their life cycle. One way of enhancing metrics with new measures is to borrow traditional popular metrics and classify them into each category depending on the stage of the shaping-reinforcing-changing process. One typical example is the effort by Strauss and Frost (2006). In addition, marketers have been interested in measuring the value of customer engagement (CEV) from two different perspectives. For instance, van Doorn et al. (2010) argue that customer engagement (CE) involves transactional behaviors and therefore, marketers measure the transactional outcomes as the proxy of CE. In contrast, Kumar et al. (2010) assume that as an overarching new customer value, the CEV metric should capture both transactional value— such as customer lifetime value (CLV)—and non-transactional value—for instance, customer referral value (CRV), customer influence value (CIV), and customer knowledge value (CKV). Following the principles of Kumar et al. (2010),


we attempt to develop relevant metrics for CKV, CIV, CRV, and CLV, depending on customer types in their life cycle. We also identify marketing cost related metrics in the perspective of returnon–investment (ROI).

SOLUTIONS AND RECOMMENDATIONS Our guidelines for social CRM practices are built on the conceptual framework for CRM strategy which is suggested by Payne and Frow (2005, p. 171) given the assumption that social CRM is one branch of traditional CRM practices. The strategic framework that Payne and Frow propose for the CRM strategy consists of five major processes such as strategy development, value creation, multichannel integration, performance assessment, and information management process. We propose our social CRM guidelines by focusing on how to increase the likelihood of customer engagement into the value creation process with the firm. From the holistic perspective, our guidelines are the outcome of integrating the concepts of value creation process (Boulding et al., 2005; Payne and Frow, 2005), two-step flow of communication (Lazarsfeld et al., 1944; Katz, 1957), relationship communication (Duncan and Moriarty, 1998; Lindberg-Repo and Gronroos, 2004; Finne and Gronroos, 2009), relationship marketing (Sheth and Parvatiyar, 1995; Parvatiyar and Sheth, 1999), customer engagement using social media (Verhoef, Renartz, and Krafft, 2010; Bijmolt et al., 2010; Brodie, Hollebeek, Juric, and Ilic, 2010), word-ofmouth activities for social contagion (Dodson and Muller 1978; Godes and Mayzlin, 2004; Iyengar, Van den Bulte, and Valente, 2011), and social CRM metrics along with customer lifetime value (Gupta and Lehmann, 2006; Gupta et al., 2006; Kumar,

2008) into the Model of Consumer Dynamics of Status (Yoon and Kang, 2011) which makes it possible to account for consumer heterogeneity in customer life cycle. Through integrating each of the above concepts and processes into a single conceptual framework, we recommend practical and relevant guidelines that provide unique insights for implementing social CRM practices. A key benefit of this integrative framework is its utility despite shifts in existing (e.g., Facebook, Twitter, LinkedIn, Pinterest, etc.), obsolete (e.g., MySpace), or emerging social media platforms. Rather than focusing on chronicling the numerous social media platforms that may come and go, the aim of this conceptual framework is to assist marketers in retaining a focus on the value creation process for each type of consumer group while using their desired social media platform—all in an effort to manage relationships over time. Also, it should be noted that numerous measurement approaches and metrics exist, which are not fully discussed in this framework, including social media analytics (Etlinger, 2011), predictive analytics (Halper, 2011; Shmueli and Koppius, 2011), automated sentiment analysis (Pang and Lee, 2008), and social network analysis (Wasserman and Faust, 1994; Burt, Kilduff, and Tasselli, 2013). Rather than offering an exhaustive account of every metric and measure, this framework offers examples of certain metrics and measures in an effort to demonstrate utility for CRM practitioners. We summarize the guidelines of social CRM practices in the process of making individual customers loyal when targeting each type of customer group based on their respective status in the life cycle over time such as potential buyers, first-time buyers, competitors’ repeat customers, and my repeat customers. The summary is shown in Table 2. Now, we discuss the details of our guidelines for social CRM practices for each type of consumer group over time.

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Table 2. Guidelines for social CRM practices and metrics by customer types Evaluation Criterion

Targeting Potential Buyers

Targeting Competitors’ Repeat Customers

Targeting First-Time Buyers

Targeting My Repeat Customers

Major Goal for Targeting

Making them first-time buyers (FTBs).

Generating frequent switching behaviors.

Making them my repeat customers (MRCs).

Making them loyal to the company.

Underlying Marketing Concepts and Strategies

Acquiring potential buyers (PBs) based on adoption/ diffusion and IMC processes.

Attracting competitors’ repeat customers (CRCs) based on switching and share-of-wallet maximization processes.

Retaining first-time buyers based on repeat, renewal or replacement processes.

Growing my repeat customers based on the loyalty formation process.

Key Challenges in the Value Creation Process

Creating and communicating the value proposition for building new relationships.

Redesigning the existing value proposition for stronger competitive advantages.

Assessing the value proposition with gap analysis for maximizing overall satisfaction.

Emphasizing emotional attachment in the value proposition for creating loyalty.

Major Focus of IMC Persuasive Communication Strategies for Relationship Building

Creating new relationships with PBs using the new value proposition by: • Shaping: Sharing new features in the value proposition. • Reinforcing: Highlighting positive aspects of prevailing attributes. • Changing: Increasing the likelihood of first-time product purchase.

Creating new relationships with CRCs using the redesigned value proposition by: • Shaping: Sharing key features in the new value proposition. • Reinforcing: Reminding about the original customer needs. • Changing: Increasing the likelihood of their switches.

Creating continued relationships with my FTBs using the assessed satisfaction results by: • Shaping: Sharing key features that address dissatisfaction in the value proposition. • Reinforcing: Reminding about the satisfied features in the value proposition. • Changing: Increasing the likelihood of their repeat purchases.

Sustaining continued relationships with MRCs using an emotional-oriented value proposition by: • Shaping: Sharing key features that address rebuy commitment in the value proposition. • Reinforcing: Reminding competitive aspects of key features in the value proposition. • Changing: Increasing the likelihood of transitioning from habitual behaviors to emotional attachment.

Role of Social Media in Customer Engagement

Listening to customer opinions for identifying target customers’ unmet needs.

Listening to customer opinions for understanding competitive advantages of competing brands.

Listening to customers’ complaints and interacting with customers for improving company brand and customer satisfaction.

Interacting with customers in a loyaltybuilding relationship process to create brand ambassadors.

Suggested Metrics for Social CRM Practices

Measuring the effectiveness of building new relationships with PBs using: • Metrics for customer engagement: Customer knowledge value (CKV), customer influence value (CIV), customer sentiment, etc. • Metrics for IMC persuasive comm.: Awareness, liking, preference, intention, trial, etc. • Metrics for marketing cost: New customer acquisition cost, etc.

Measuring the effectiveness of switching-induced programs using: • Metrics for customer engagement: CKV, CIV, customer sentiment, etc. • Metrics for IMC persuasive comm.: Awareness, liking, preference, intention, trial, etc. • Metrics for marketing cost: Customer conversion cost, cost for switching, etc.

Measuring the effectiveness of satisfaction enhancement programs using: • Metrics for customer engagement: CKV, CIV, customer referral value (CRV), CLV, consumer sentiment with number of complaints, etc. • Metrics for IMC persuasive comm.: Customer satisfaction using gap analysis, response time to customer demands, etc. • Metrics for marketing cost: Customer churn rate, etc.

Measuring the effectiveness of loyaltybuilding programs using: • Metrics for customer engagement: CKV, CIV, CRV, CLV, customer commitment rate, etc. • Metrics for IMC persuasive comm.: Customer retention rate, customer attrition rate, lead to sales, etc. • Metrics for marketing cost: Customer churn rate, customer matching cost, etc.

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Targeting Potential Buyers (PBs) In an attempt to build and manage long-term profitable relationships throughout time with customers, social CRM practices start with the task of identifying potential buyers (PBs) for a specific company brand. Given the identification of the PBs, a major goal of this targeting strategy is to make the PBs first-time buyers (FTBs) by implementing an acquisition strategy based on the diffusion/adoption and IMC processes. When incorporating the customer engagement into the value creation process, a key challenge is how to create and communicate the value proposition of a specific brand with the PBs in order to build new relationships with them. Using social media and social media monitoring, marketers may listen to customer opinions for identifying unmet needs of target customers and for identifying major trends with respect to their needs in an attempt to promote customer engagement. Through social media monitoring, marketers can listen to customer opinions, nWOM (negative word-ofmouth), fraudulent or planted reviews, and other types of secretive or detrimental activities that can occur across multiple social media platforms. Given this challenge, CRM practitioners usually design IMC persuasive communication strategies by following the stages in the shapingreinforcing-changing process in order to change the status of the PBs into the FTB status. For instance, marketers shape PBs’ new beliefs about the target brand based on the value proposition, reinforce their existing beliefs by highlighting positive aspects of prevailing attributes in the value proposition, and change their behaviors toward the trial of the target brand by increasing the likelihood of a first-time product purchase. The effectiveness of building new relationships with the PBs can be measured using various types of metrics related to customer engagement, IMC, and marketing cost. Examples of customer engagement metrics can be the likelihood of giving feedback for customer knowledge value

(CKV, Kumar et al., 2010), the number of reviews and product expertise customer sentiment for customer influence value (CIV, Kumar et al., 2010), the frequency of posting opinions on websites or blogs, and the frequency of pressing ‘like’ or posting comments in Facebook, among others. IMC-related metrics can be ones related to awareness, knowledge, liking, preference, intention, and trial or purchase following the stages in the hierarchy-of-effects model (Belch and Belch, 2007). Finally, metrics for marketing cost are new customer acquisition cost (CAC), messaging cost, and advertising cost per customer, among others.

Targeting Competitors’ Repeat Customers (CRCs) The goal of targeting competitors’ repeat customers (CRCs) is to generate frequent switching behaviors from a competing brand to the company brand and become my repeat customers eventually via the process of maximizing share-of-wallet (SOW, Magi, 2003; Cooil, Keiningham, Aksoy and Hsu, 2007). For this task, marketers usually design an attraction strategy, even though it is a very costly effort (Kotler and Keller, 2009). When incorporating the customer engagement into the value creation process, a key challenge is how to communicate the redesigned value proposition of the company brand with the CRCs in order to rebuild new relationships with them. Using social media and social media monitoring, marketers may listen to customer opinions for identifying new sources of competitive advantages in an attempt to promote customer engagement. Through social media monitoring, marketers can listen to CRC opinions, and nWOM, among other forms of social media content that can occur across multiple social media platforms. Given this challenge, CRM practitioners need to implement IMC persuasive communication strategies with a redesigned value proposition. For instance, marketers shape CRCs’ new beliefs about the target brand based on the redesigned

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value proposition, reinforce their existing beliefs by highlighting positive aspects of prevailing attributes in the new value proposition, and change their prior behaviors toward the trial of the target brand by increasing the likelihood of making their switches. The effectiveness of rebuilding new relationships with the CRCs can be measured using various types of metrics related to customer engagement, IMC, and marketing cost. Similar to the case of the PBs, examples of customer engagement metrics can be the likelihood of giving feedback for CKV, the number of reviews and product expertise customer sentiment for CIV, the frequency of posting opinions on websites or blogs, and the frequency of pressing ‘like’ or posting comments in Facebook, among others. IMC-related metrics can be ones related to awareness, knowledge, liking, preference, intention, and trial or purchase following the stages in the hierarchy-of-effects model. Finally, metrics for marketing cost are new customer attraction cost (CAC), messaging cost, and advertising cost per customer, among others.

Targeting First-Time Buyers (FTBs) Once the PBs become first-time buyers (FTBs), the next step is to make the FTBs my repeat customers (MRCs) by generating their first repeat, renewal, or replacement purchases with the company brand. When targeting the FTBs, a major challenge is how to maximize their overall satisfaction with the chosen brand since customers will not be involved into the next repeat purchase without satisfaction. To measure overall satisfaction of target customers, marketers are usually using gap analysis (Parasuraman, Zeithaml, and Berry, 1985; Zeithaml, Berry, and Parasuraman, 1988) or a survey questionnaire. Using social media and social media monitoring, marketers can also listen to customer complaints for understanding the sources of dissatisfaction and improving the quality of the company brand. Through social media monitoring, marketers can learn key themes of nWOM and other types of

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secretive or detrimental activities which may be initiated by competing brands that can become a barrier to creating MRCs. Given this challenge, CRM practitioners design IMC persuasive communication strategies in order to create continued relationships with the FTBs based on the assessed satisfaction results. Specifically, marketers are likely to share key features which address dissatisfaction in the value proposition to make them corrected. The effectiveness of building continued relationships with the FTBs can be measured using various types of metrics similar to those for the PBs. However, more measures should be developed for customer referral value (CRV) and customer lifetime value (CLV), in addition to CKV and CIV. For instance, CRM practitioners may consider number of referrals, likelihood to recommend, tendency to use social media and blogs for CRV (Kumar et al., 2010) and satisfaction, purchase intent, acquisition rate, retention rate for CLV (Kumar et al. 2010). IMC-related metrics can be satisfaction-oriented measures, and response time to customer demands, among others. Finally, metrics for marketing cost are customer churn rate and cost of initiating loyalty programs, among others.

Targeting My Repeat Customers (MRCs) From the perspective of loyalty and relationship marketing, a major goal of targeting my repeat customers (MRCs) is to make them truly loyal after generating a series of successive repeat purchases. For this task, CRM practitioners may consider the loyalty formation process. For instance, Oliver (1997) argues that individual customers tend to form cognitive loyalty first, followed by affective loyalty and conative loyalty, before forming action loyalty as assumed in the four-stage loyalty model. In recent years, marketers have used various types of loyalty or reward programs to induce a series of repeat purchases and ultimately loyalty


behaviors. However, some scholars and practitioners have questioned the effectiveness of these programs since attractive rewards are likely to induce the repeat purchases of retained customers, not true loyalty behaviors (Dowling and Uncles, 1997; Whyte, 2004). Due to this reason, a key challenge is how to develop customer emotional attachment to the target brand in order to promote customer engagement into the value creation process. Note that emotional attachment is likely to be one of the driving forces toward true customer loyalty (Hallberg, 2004 and Papdatos, 2006 for storytelling; Funk and James, 2006; Patwardhan and Balasubramanian, 2011). Another challenge is how to interact with current retained customers using social media in a loyalty-building process to eventually transform them into brand ambassadors. Through social media and social media monitoring, marketers can routinely interact with MRCs and listen for opportunities to cultivate loyalty formation processes and brand ambassadors. Through social media monitoring, marketers can listen for evidence of interactions initiated by brand loyalists as well as listen for nWOM or other forms of secretive or detrimental activities which may be initiated by competing brands in an effort to remove the stronghold developed with truly loyal customers. Considering this challenge, marketers may design IMC persuasive communication strategies for promoting customers’ rebuy commitment at the shaping stage, reminding competitive aspects of key features in the value proposition at the reinforcing stage, and increasing the likelihood of transitioning from habitual behaviors to emotional attachment at the changing stage. The effectiveness of the loyalty-building relationship process with MRCs can be measured using various types of metrics related to customer engagement, IMC, and marketing cost. Similar to metrics with FTBs, examples of customer engagement metrics may include a variety of measures for CKV, CIV, CRV, and CLV. IMC-related metrics

are customer retention rate, customer attrition rate, and lead to sales, among others. Finally, metrics for marketing cost are customer churn rate and customer matching cost, among others.

FUTURE RESEARCH DIRECTIONS A number of proven and useful concepts exist that individually account for relevant and very important marketing and CRM processes. However, an integrative approach that unites each of these concepts into a single framework for social CRM practice is rare, if not non-existent. The primary aim of this chapter has been to share the relative merits of each of these concepts and combine them in an integrative conceptual framework that provides much-needed guidelines for social CRM practice in a way that accounts for consumer heterogeneity over time. In order to use our guidelines in social CRM practices, CRM practitioners need to consider the following issues as discussed below.

Viability of Our Guidelines for Social CRM The first condition for the viability of our guidelines depends on the company-level process of gathering customer information using an IT system that can equip the firm with better customer knowledge over the customer life cycle. This condition is related to a current hot issue of Big Data (McKinsey Global Institute 2011). In recent years, we have witnessed explosive growth in the amount of data around us. As a typical example, Facebook users create tons of information everyday by posting their own shopping opinions or comments to other friends’ opinions. Facing the new era of big data, CRM practitioners should be ready to change their entire information process for improving competitive advantages of the firm and creating the value for target customers. This

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is the reason that the Marketing Science Institute (MSI) marked this issue as one of top research priority – Leveraging Research Tools and New Sources of Data (MSI 2010). Along with this new perspective on the data gathering process, social CRM practitioners also need to develop a mix of two-way relationship communication channels including social media in order to achieve the goals of social CRM—i.e., promoting high levels of customer engagement into the value creation process and ultimately, building and managing long-term profitable relationships with target customers. As mentioned previously, marketers have started coordinating traditional communication channels and social media as the fifth element in the promotional mix together with a perspective on relationship- and loyalty-building processes. As one activity, Hennig-Thurau et al. (2010) consider the impact of new social media such as Facebook, YouTube, and Twitter, among others on building and managing customer relationships. In addition, more in-depth discussion is needed on how to promote engaged efforts of customers into the firm’s value creation process in a win-win situation. Finally, another important condition for making social CRM practices successful is to conceptualize the concept of customer engagement (CE) or social engagement (SE) in the context of value creation, along with the identification of relevant metrics. As mentioned before, it is not possible to maximize the effectiveness of social CRM approaches without this effort since customers’ voluntary participation into the co-creating efforts is a critical requirement for the success of the program. In addition, inappropriate and incomplete use of relevant social CRM metrics can put the firm at the risk of generating long-term failure (Boulding et al., 2005). Thus, the tasks of conceptualizing, operationalizing, and measuring the customer engagement construct are topics for future research.

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New Perspective of Creating Shared Value For several decades, at the bottom of any marketing activities has been an exchange process of the value—in the form of a product, service, or market offering—between sellers and customers. Driven by the efforts of the American Marketing Association (AMA) in recent years, however, marketing scholars have attempted to shift their major paradigm from the exchange process to the value creation process (Sheth and Uslay, 2007; Yoon and Tran, 2011). As one of these efforts, marketers often regard marketing activities as the value creation and delivery process (Kotler and Keller, 2009). Beyond this paradigm change, another group of scholars have started considering the role of corporate social responsibility (CSR, Porter 2006) on firm’s performance and furthermore, have found ways to maximize the social value from the perspective of creating shared value (CSV, Porter, 2011). Findings of the extant research indicate that there is a positive relationship between corporate social responsibility and financial performance (Piercy and Lane, 2009; Surroca, Tribo, and Waddock, 2010; Lacey and Kennett-Hensel, 2010). As stated previously, the main idea of the value creation process is based on the concept of dual creation of the firm and customer value, not the society value or social value from the society perspective. Given this emerging trend, CRM practitioners may ponder the task of reinterpreting the value creation process as the core part of social CRM practices with the process of creating shared value. Stated differently, marketers may consider a new perspective on the value creation process—i.e., considering the tri-creation of the customer, the firm, and the society value as the core of social CRM. This is an important issue for future research in the social CRM field.


CONCLUSION CRM is a business strategy to create, retain, and grow profitable relationships with customers over time in a two-way interactive communication process, using gathered customer knowledge via an IT system. Thus, it can be said that CRM is about a mix of customers, process, and strategy implemented over time. In this regard, this book chapter attempts to provide the guidelines for personalized social CRM practices, depending on the heterogeneous status of individual customers over the life cycle. For the preparation of the guidelines, we specifically discuss how individual customers become adopters after trying the company brand and later loyal customers in a loyalty-building process. We also discuss how to reconceptualize the traditional communication process from the relationship perspective in Figure 3. And, we prepare our guidelines by discussing how to promote customer engagement into the value creation process using social medial as well as traditional mass media. A major contribution of this study is to provide an integrated framework—from a holistic perspective—which allows CRM practitioners to design, implement, and manage the efforts of social CRM in order to make consumers loyal in the end, using IMC persuasive communication strategies associated with both traditional mass and new social media. This framework is characterized with two key features. First, the social CRM strategy is based on consumer heterogeneity in purchasing experience as consumers change their status in the Model of Consumer Dynamics in Status as shown in Figure 1. Using this conceptual framework, marketers are able to provide customized or personalized marketing and IMC programs, along with proper metrics for measurement, depending on the needs as well as characteristics of the target group of consumers. Second, this study

allows marketers to capitalize on various types of traditional mass media and new social media in an attempt to promote their engagement into the value creation process. This chapter is not without limitations. Since the manuscript provides a conceptual framework and offers guidelines for social CRM practices by integrating various existing concepts and processes, there is a lack of empirical evidence to support our argument. Thus, more empirical studies can be designed to test the feasibility of our conceptual framework in the future. Welcome to the new world of Social CRM! In the era of new social CRM, it is necessary for you as a CRM practitioner to have a more expansive way of thinking about traditional CRM practices in order to induce a full level of customer engagement into the value creation process, to make customers emotionally attached to the company brand, and ultimately, to develop and manage long-term profitable relationships with customers. The conceptual framework we offer should assist CRM practitioners as they usher in this new era and as they engage in efforts to re-conceptualize traditional IMC modes of thought with the unique role and metrics of social media. By moving toward a more relationship-building perspective that incorporates the status of individual customers over the life cycle, we believe CRM practitioners will be more poised for the new social CRM.

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ADDITIONAL READING

Greenberg, P. (2009). CRM at the Speed of Light: Social CRM 2.0 Strategies, Tools, and Techniques for Engaging Your Customers. 4th ed., McGrawHill Osborne Media. (for Social CRM)

Ang, L. (2010). Community Relationship Management and Social Media. [for Social Media]. Database Marketing & Customer Strategy Management, 18(1), 31–38. doi:10.1057/dbm.2011.3 Baird, C. H., & Parasnis, G. (2011). From Social Media to Social CRM: What Customers Want – Part I. white paper, IBM Global Business Services. (for Social CRM) Baird, C. H., & Parasnis, G. (2011). From Social Media to Social CRM: Reinventing the Customer Relationship – Part II. white paper, IBM Global Business Services. (for Social CRM) Brown, J. T., & Reingen, P. H. (1987). Social Ties and Word-of-Mouth Referral Behavior. [for Referral Behavior]. The Journal of Consumer Research, 14(3), 350–362. doi:10.1086/209118 Castronovo, C., & Huang, L. (2012). Social Media in an Alternative Marketing Communication Model. [for Social Media]. Journal of Marketing Development and Competitiveness, 6(1), 117–134. Dholakia, U. M., Bagozzi, R. P., & Pearo, L. K. (2004). A Social Influence Model of Consumer Participation in Network- and Small-Group-Based Virtual Communities. [for Social Network]. International Journal of Research in Marketing, 21, 241–263. doi:10.1016/j.ijresmar.2003.12.004 Dong, B., Evans, K. R., & Zou, S. (2008). The Effects of Customer Participation in Co-Created Service Recovery. [for Customer Participation]. Journal of the Academy of Marketing Science, 36, 123–137. doi:10.1007/s11747-007-0059-8

Hauser, J., Tellis, G. J., & Griffin, A. (2006). Research on Innovation: A Review and Agenda for Marketing Science. [for Diffusion Process]. Marketing Science, 25(6), 687–717. doi:10.1287/ mksc.1050.0144 Hoffman, D. L., & Fodor, M. (2010). Can You Measure the ROI of Your Social Media Marketing? [for Social Analytics]. MIT Sloan Management Review, 52(1), 41–49. Kumar, V., & Reinartz, Werner (2012). Customer Relationship Management: Concept, Strategy, and Tools, 2nd ed., Springer. (for CRM) Laroche, M., Habibi, M. R., & Richard, M.-O. (2013). To be or not to be in social media: How brand loyalty is affected by social media. [for Social Media]. International Journal of Information Management, 33, 76–82. doi:10.1016/j. ijinfomgt.2012.07.003 Metz, Adam (2011). The Social Customer: How Brands Can Use Social CRM to Acquire, Monetize, and Retain Fans, Friends, and Followers, McGraw-Hill Education. (for Social CRM) Mollen, A., & Wilson, H. (2010). Engagement, Telepresence, and Interactivity in Online Consumer Experience: Reconciling Scholastic and Managerial Perspectives. [for Customer Engagement]. Journal of Business Research, 63(9-10), 919–925. doi:10.1016/j.jbusres.2009.05.014

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Palmatier, R. W., Dant, R. P., Grewal, D., & Evans, K. R. (2006). Factors Influencing the Effectiveness of Relationship Marketing.‖ [for Relationship Marketing]. Journal of Marketing, 70(October), 136–153. doi:10.1509/jmkg.70.4.136 Peppers, Don & Rogers, Martha (2011). Managing Customer Relationships: A Strategic Framework, 2nd ed., Wiley. (for CRM) Roebuck, Kevin (2011). Social CRM: High-Impact Strategies, Emereo Pty Limited. (for Social CRM) Schmitt, P., Skiera, B., & Van den Bulte, C. (2011). Referral Programs and Customer Value. [for Referral Behavior]. Journal of Marketing, 75(January), 46–59. doi:10.1509/jmkg.75.1.46 Smith, J. B., & Colgate, M. (2007). Customer Value Creation: A Practical Framework. [for Value Creation]. Journal of Marketing Theory and Practice, 15(1), 7–23. doi:10.2753/MTP1069-6679150101 Snijders, T. A. B., Steglich, C. E. G., & Schweinberger, M. (2005). Modeling the Co-Evolution of Networks and Behavior. working paper, University of Groningen. (for Social Network Analysis) Trusov, M., Bucklin, R. E., & Pauwels, K. (2009). Effects of Word-of-Mouth Versus Traditional Marketing: Findings from an Internet Social Networking Site. [for Referral Behavior]. Journal of Marketing, 73(September), 90–102. doi:10.1509/ jmkg.73.5.90 Van den Bulte, C., & Joshi, Y. V. (2007). New Product Diffusion with Influentials and Imitators. [for Diffusion Process]. Marketing Science, 26(3), 400–421. doi:10.1287/mksc.1060.0224

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KEY TERMS AND DEFINITIONS Customer Engagement: As a psychological state, it happens when individual customers have ongoing experiences with a firm in a dynamic, interactive, and co-creative process of value. Customer Heterogeneity: It describes the degree to which individual customers are unique and different from each other in a defined target market. Customer Relationship Management (CRM): It is a firm’s strategic approach to build and manage long-term relationships with customers—based on the co-creation process of dual values—from the perspective of relationship marketing. Model of Consumer Dynamics in Status: As a new conceptual framework, it describes how each potential buyer becomes first-time buyer, my or competitor repeat customer before becoming a loyal one, depending on the stages of customer life cycle. This model is introduced to account for consumer heterogeneity in the adoption and loyalty-building process. New Communication Process: Unlike the traditional communication process which focuses on the communication efforts of firms with customers using mass media, it emphasizes the perspective of two-step communication process which includes mass media—i.e., between a firm and an opinion leader—and interpersonal communication functions—i.e., between an opinion leader and opinion seekers. Relationship Communication Strategy: It focuses on the building and managing interactive relationships with customers in the context of


persuasive integrative marketing communications (IMC) efforts. Specifically, it focuses on building new relationships with potential buyers, manage interactive relationships with existing customers, and finally, promoting engagement efforts of committed customers into the value creation process toward the goal of social CRM—i.e., making customers truly loyal. Social Analytics: The firms need various types of social CRM metrics or measures—called social analytics—to measure the effectiveness of new social CRM practices.

Social CRM Practice: It is a strategic business practice of creating more customer engagement through social media in an attempt to build and manage long-term profitable relationships with customers. In fact, it happens after combining traditional CRM with social media. Social Media: It refers to the collection of media which allows people to interact by creating, sharing, and exchanging user-generated content in virtual communities and networks.

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