customer 2.0: the business implications of social media

Customer 2.0 The Business Implications of Social Media

June 2008

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Customer 2.0

© 2008 Aberdeen Group. Telephone: 617 723 7890

Executive Summary Research Benchmark

Aberdeen’s Research Benchmarks provide an in-depth and comprehensive look into process, procedure, methodologies, and technologies with best practice identification and actionable recommendations

As the popularity of social media sites continues to change the way online customers interact with their peers, top companies are leveraging external-facing Web 2.0 technologies as a means of providing additional touch points for customer interaction. In March through May 2008, Aberdeen surveyed over 360 companies to identify the challenges, tactics, and strategies companies face when implementing customer-facing Web 2.0 applications. The research reveals that top performing organizations are not only positively affecting their performance in key metrics, such as customer satisfaction, through a combination of organizational processes and technology implementation, but they are also fueling product development and marketing decisions with consumer-generated insights.

Best-in-Class Performance Aberdeen used three key performance criteria to distinguish Best-in-Class companies. Best-in-Class demonstrated the following performance:

“We want customers to have more contact with store managers, sales people, and the service team. Making ourselves more available is a better option than the alternative.”

~ Rich Moffat, All Seasons Spas

• 100% improved year-over-year performance in Return on Marketing Investment (ROMI). On average, Best-in-Class companies increased ROMI by 11%.

• 82% improved year-over-year performance in customer retention. On average, Best-in-Class companies increased customer retention rates by 9%.

• 81% improved year-over-year performance in new product development. On average, Best-in-Class companies increased new product development by 7%.

Competitive Maturity Assessment Quick Definition

For the purposes of this study, “Web 2.0” refers to technologies that promote the exchange of user-generated content in a manner that simultaneously begets collaboration and individuality. This includes, but is not limited to:

√ Blogs

√ Wikis

√ Social networking sites

√ Online communities

√ Collaborative tagging

In addition to high levels of planned adoption, survey results show that the firms enjoying Best-in-Class performance currently share several common characteristics:

• Senior management fully supports external-facing Web 2.0 programs (57%)

• Dedicated personnel devoted to the enterprise-wide use of Web 2.0 applications (39%)

• Defined metrics for measuring the impact of external-facing Web 2.0 applications (32%)

Required Actions In addition to the specific recommendations in Chapter Three of this report, to achieve Best-in-Class performance, companies must:

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Customer 2.0


• Be pragmatic about Web 2.0 adoption. The use of external-facing Web 2.0 applications can positively impact ROMI, customer retention, and new product development. However, companies cannot realistically expect to implement a technology and see immediate results. There must be organizational processes and metrics in place to ensure the success of technology adoption. Companies would be wise to start small to establish a comfort level before exploring other Web 2.0 avenues.

• Evaluate vendors with strong professional service capabilities. Eighty-one percent (81%) of companies currently using, or planning to use, external-facing social media applications believe that Web 2.0 is a valuable avenue for the organization. As such, it is crucial that companies planning to engage customers through social media evaluate vendors with strong professional service capabilities. While companies will rely on their customers to provide the bulk of the web content, vendor support will be necessary to get businesses up and running.



Customer 2.0

© 2008 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897

Table of Contents Executive Summary....................................................................................................... 2

Best-in-Class Performance..................................................................................... 2 Competitive Maturity Assessment....................................................................... 2 Required Actions...................................................................................................... 2

Chapter One: Benchmarking the Best-in-Class ..................................................... 6 The Emergence of Customers 2.0 ....................................................................... 6 What Does Web 2.0 Encompass?........................................................................ 6 The Maturity Class Framework............................................................................ 9 The Best-in-Class PACE Model ............................................................................ 9 Best-in-Class Strategies.........................................................................................10

Chapter Two: Benchmarking Requirements for Success ..................................12 Competitive Assessment......................................................................................13 Capabilities and Enablers ......................................................................................13 Best-in-Class Use Web 2.0 to Improve Business...........................................17

Chapter Three: Required Actions .........................................................................20 Laggard Steps to Success......................................................................................20 Industry Average Steps to Success ....................................................................21 Best-in-Class Steps to Success ............................................................................22

Appendix A: Research Methodology.....................................................................23 Appendix B: Common Web 2.0 Technologies ...................................................25 Appendix C: Related Aberdeen Research ...........................................................27

Figures Figure 1: What is Associated with the Phrase “Web 2.0?”................................. 7 Figure 2: Top Pressures for Web 2.0 Adoption.................................................... 8 Figure 3: Top Strategic Actions to Maximize Web 2.0 Adoption ...................10 Figure 4: Internal Groups Utilizing Web 2.0 Technologies...............................11 Figure 5: Active Engagement with Online Customers Improves Key Metrics.........................................................................................................................................15 Figure 6: Top Performers Improve Yearly Growth............................................18 Figure 7: Content Management Solutions .............................................................19

Tables Table 1: Top Performers Earn Best-in-Class Status.............................................. 9 Table 2: The Best-in-Class PACE Framework .....................................................10 Table 3: Competitive Framework (Process) ........................................................14 Table 4: Competitive Framework (Organization)...............................................14 Table 5: Competitive Framework (Knowledge Management) .........................15 Table 6: Competitive Framework (Technology) .................................................16 Table 7: Competitive Framework (Performance Measurement) ....................17 Table 8: The PACE Framework Key ......................................................................24

Customer 2.0


Table 9: The Competitive Framework Key ..........................................................24 Table 10: The Relationship Between PACE and the Competitive Framework.........................................................................................................................................24

Customer 2.0


Chapter One: Benchmarking the Best-in-Class

The Emergence of Customers 2.0 Fast Facts

√ 70% of all companies surveyed plan to increase the budget allocated for Web 2.0 technologies in 2008

√ Best-in-Class companies are twice as likely as Laggards to have a dedicated staff responsible for Web 2.0 in the enterprise, 28% versus 14% respectively

The popularity of online social media forums has not only changed the way peers interact with each other, it has also succeeded in creating a new breed of online customers. These customers have come to expect a certain level of accessibility and interaction with businesses, as well as the ability to engage with other consumers who share similar wants and needs. In order to meet the expectations of their online clientele, top companies are leveraging an assortment of Web 2.0 technologies to allow for increased interaction between the business and its customers.

The phrase “Web 2.0” has permeated conversations concerning the Internet for the past several years; however, the use of social media applications as an additional touch point for company and customer interaction is a relatively new concept. While the debate concerning what technologies are encompassed by the phrase “Web 2.0” continues, there is little debate among top companies about its business value. An Aberdeen survey of over 360 companies revealed that 77% of Best-in-Class companies believe that Web 2.0 will be a lasting channel for years to come, and over half (58%) of Best-in-Class companies believe that social networking sites have a tremendous amount of influence over consumers. The emphasis on the potential of social media and collaboration tools, such as blogs and wikis, is causing organizations to incorporate external-facing Web 2.0 applications into the business plan.

What Does Web 2.0 Encompass? The proliferation of consumer-generated content and knowledge sharing on the web has muddied the waters a bit when it comes to a clear understanding of what businesses associate with the term “Web 2.0;” however, Aberdeen research reveals that the vast majority of survey respondents have some idea of how to define Web 2.0 technologies. Only 7% of respondents indicated that they were “not sure how to classify Web 2.0 technologies.” The responses from those survey takers who had an idea of what Web 2.0 encompasses revealed the unifying themes of collaboration and the sharing of consumer-generated information (Figure 1).


Customer 2.0


Figure 1: What is Associated with the Phrase “Web 2.0?”

64%

64%

66%

72%

77%

84%

90%

0% 20% 40% 60% 80% 100%

Podcasts

"Mash-Ups"

Collaborative Tagging

RSS Feeds

Wikis

Blogs

Social NetworkingSites

All Respondents Source: Aberdeen Group, June 2008

The top technologies selected by survey respondents as being associated with the phrase “Web 2.0” have one key thing in common: they all promote the exchange of user-generated content and information in a manner that simultaneously begets collaboration and individuality (Appendix B). As a result, top companies plan to increase the adoption of social media applications as a way of creating online communities for their customers around their brand. By providing a forum for customers to engage with one another and provide candid feedback concerning certain brands and services, businesses are improving the “stickiness” of their websites by providing a dynamic reason for customers to keep coming back. The increased traffic and engagement of online customers results in a web community that contains the perspective of diverse customers, not just the company hosting the site.


Customer 2.0


Figure 2: Top Pressures for Web 2.0 Adoption

40%

30%

43%

21%

44%

43%

17%

38%

25%

49%

23%

25%

27%

39%

61%

0% 10% 20% 30% 40% 50% 60% 70%

Improve onlineexperience

Need better consumerinsights

Need to improvecustomer satisfaction

Need to develop newproducts and services

Increase marketawareness

Best-in-ClassIndustry Average

Laggards

Source: Aberdeen Group, June 2008


Top Pressures for Web 2.0 Adoption While the need to increase market awareness was identified by the Best-in-Class, Industry Average, and Laggards as the top pressure causing the organization to focus resources on external-facing Web 2.0 technologies, a significant discrepancy exists in regards to some of the other motivating factors (Figure 2). Thirty-nine percent (39%) of Best-in-Class companies, compared to 25% of the Industry Average and 21% of Laggards, cited the need to develop new products and services as a top driver causing the organization to utilize customer-facing Web 2.0 applications.

This key difference between Best-in-Class and all other companies speaks to the business value inherent to Web 2.0 adoption. While the Industry Average and Laggards are seemingly more concerned with improving the online experience for their customers in hopes of increasing customer satisfaction, Best-in-Class companies are compelled to leverage Web 2.0 technologies as a way to harvest consumer insights concerning their brand and marketing decisions. These collected insights can in turn be used to fuel new product development initiatives. Best-in-Class companies realize that metrics such as customer satisfaction cannot easily be increased simply by providing Web 2.0 portals on the company website; there must be an internal process where the insights exchanged in these forums are used to grow the business. Ultimately, top companies will increase customer satisfaction through the development of new products and services geared towards the customer-base that helped create them.

“Web 2.0 incorporates a newer genre of developing sites. People are building websites that are so readily available to interact with. And from an ROI perspective, it means less expenditure from my side.”

~ Michael Mainiero Director of Web & Digital

Media Services NYU Langone Medical Center

Thirty-five percent (35%) of Best-in-Class companies surveyed indicated that the business use of Web 2.0 applications is a “top two” priority for the

Customer 2.0


organization in 2008, compared to 13% of the Industry Average and 13% of Laggards. Furthermore, 28% of Best-in-Class companies currently leveraging external-facing Web 2.0 applications indicated that they have a dedicated staff of full-time employees devoted solely to this responsibility, compared to 19% of the Industry Average and 14% of Laggards.

The Maturity Class Framework Aberdeen used year-over-year improvement in three key performance criteria to distinguish the Best-in-Class from Industry Average and Laggard organizations:

• Return on Marketing Investment (ROMI)

• Annual customer retention

• New product development

Table 1: Top Performers Earn Best-in-Class Status

Definition of Maturity Class Mean Class Performance

Best-in-Class: Top 20% of aggregate performance scorers

100% improved ROMI, average 11% increase 82% improved customer retention, average 9% increase 81% experienced year-over-year improvement in new product development. On average, Best-in-Class experience a 7% improvement in new product development

Industry Average: Middle 50% of aggregate

performance scorers

19% improved ROMI, average 2% increase 31% improved customer retention, average 2% increase 31% improved new product development, average 3% improvement

Laggard: Bottom 30% of aggregate

performance scorers

1% improved ROMI; however, Laggards decreased 7% on average 7% improved customer retention; however Laggards decreased 4% on average 5% improved new product development; however, Laggards decreased 6% on average


The Best-in-Class PACE Model Leveraging external-facing Web 2.0 technologies to achieve corporate goals requires a combination of strategic actions, organizational capabilities, and enabling technologies that can be summarized as follows:

• Supplement marketing campaign effectiveness with consumer-generated insights through a process designed to feed business decisions across multiple units

• Improve the ability to respond to customer wants and needs through the dedicated personnel and resource commitments necessary to maximize Web 2.0 technology investments

Customer 2.0


Table 2: The Best-in-Class PACE Framework

Pressures Actions Capabilities Enablers Increase market awareness

Supplement marketing campaign effectiveness with consumer-generated insights Improve ability to respond to customer wants and needs

Senior management fully supports external-facing Web 2.0 programs Dedicated personnel devoted to enterprise use of Web 2.0 applications Consumer-generated insights feed decisions across multiple business units Cross-functional resource commitment from different departments within the organization (i.e., marketing, product development, sales)

Company hosted blogs Campaign management tools RSS Feeds Wikis Content Management solutions Social networking sites


Best-in-Class Strategies The top strategic action for Best-in-Class companies is to supplement marketing campaign effectiveness with consumer-generated insights, thereby creating a closed-loop process where the forums consumers use to discuss issues surrounding a particular brand become a breeding ground for future marketing ideas. Similar to the Best-in-Class focus on developing new products and services, the ability to harvest the consumer-generated insights found in online wikis and community forums allows businesses to refine marketing messages for the benefit of their customer base.

Figure 3: Top Strategic Actions to Maximize Web 2.0 Adoption

58%

44%

53%

51%

48%

59%

0% 10% 20% 30% 40% 50% 60% 70%

Improve ability torespond to customer

wants and needs

Supplement marketingcampaign

effectiveness withconsumer-generated

insightsBest-in-ClassIndustry AverageLaggards


Industry Average (53%) and Laggards (58%) believe that improving their ability to respond to customer wants and needs is the top strategic action for maximizing the effectiveness of Web 2.0 touch points online. While this strategy is a fundamental of good business execution, Best-in-Class companies are more inclined to “kill two birds with one stone.” By supplementing marketing campaigns with consumer-generated insights, Best-


Customer 2.0


in-Class companies are able to refine outbound messages strictly based on the “wants and needs” expressed by customers in social media settings. Therefore, Best-in-Class companies experience year-over-year growth in ROMI due to a closed-loop process that uses customer wants and needs as the foundation of marketing messages.

“Wikis have had a positive impact on our organization because of how easy it is to post and access information.”

~ Product Specialist, Food Service Industry

Aberdeen Insights — Strategy

While Best-in-Class companies are concerned with improving the online customer experience and improving customer satisfaction rates, the largest emphasis is placed on using consumer-generated insights to spur product development opportunities and refine marketing campaigns. As such, multiple groups and departments within Best-in-Class companies leverage external-facing Web 2.0 technologies.

Figure 4: Internal Groups Utilizing Web 2.0 Technologies

93%

58% 58%

86%

67%60%

47%

77%

65%59%

46%48% 49%

58%

43%35%

42%

31%

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Marketing ProductMarketing

Sales MarketResearch

ProductDevelopment

CustomerService

Best-in-Class Industry Average Laggards


Marketing and product marketing departments are the most likely to engage with online customers in Web 2.0 forums, such as blogs and wikis. The customer service department, however, is the least likely group to use Web 2.0 technologies among Best-in-Class and Laggard organizations. As the business use of social media matures and organizations realize the benefits of increased interaction between consumers and the business, the customer service department will likely become a frequent contributor to company-hosted online communities. As businesses strive to improve the online customer experience and respond to customer wants and needs, the customer service department is best equipped to satisfy these ends.

In the next chapter, we will see what the top performers are doing to increase ROMI and customer retention.


Customer 2.0


Chapter Two: Benchmarking Requirements for Success

As is the case with any technology adoption, companies must ensure that the proper organizational foundation is in place to maximize implementation. This is particularly true when it comes to the adoption of social media, as the user-generated content posted online will often serve as a barometer for how well a company understands their customers. Top companies currently implement, or plan to implement, organizational capabilities to collect and disseminate consumer-generated insights throughout the organization.

Case Study — Sportbikes.com

Founded in 1996 by Mike DiSabatino, an avid fan and club-level racer of sportbike motorcycles, sportbikes.com has become the premier destination on the web for motorcycle enthusiasts looking to share their expertise and passion for performance motorcycles. However, according to DiSabatino, this was not always the case. “For years we rustled around with basic HTML sites before we grew into discussion forums,” begins DiSabatino. “However, we quickly realized that discussion forums and online engagement were more than just ways to make our advertisers happy; we found that a social environment was driving more traffic to us overall.”

While the impact of a social community was evident, DiSabatino wasn’t convinced that sportbikes.com was making as large an impact as it was capable of. “That’s when I threw my hands up and said ‘we’re going to do it and do it big.’” DiSabatino implemented a web content management solution that would wrap around social media to create the largest sportbike community on the web.

As a way of driving engagement with its members, sportbikes.com posted specific questions to its audience and allowed them to submit their own inquiries to be answered by professional racers. The peer-to-peer exchanges in the site’s wikis and forums ultimately decided the content of the site. A good example is the discussion forum devoted solely to female riders. “Young male riders dominate the sportbike demographics,” explain DiSabatino. “Now, we are seeing a saturation rate of around 20% among female riders, up from 1% several years ago. The online conversations in the community revealed a need for a moderated area for female riders. This forum has since become very popular. It’s a pretty successful way for us to grow our community.”

Although sportbikes.com was purchased last year by an online sporting conglomerate that owns more than 150 sporting sites, DiSabatino is excited about where the site, and Web 2.0 in general, is heading. The team is already working on a new Web 2.0 based venture. “It’s only going to continue to get more fluid for the end-user,” concludes DiSabatino. “Web 2.0 has legs. It’s going to continue and expand its presence.”

Fast Facts

√ Best-in-Class companies are over 17-times more likely to improve customer satisfaction than Laggards, 89% versus 5% respectively.

√ Nearly three-quarters (73%) of Best-in-Class companies improved the accuracy of marketing decisions through the use of external-facing Web 2.0 applications.


Customer 2.0


Competitive Assessment Aberdeen Group analyzed the aggregated metrics of surveyed companies to determine whether their performance ranked as Best-in-Class, Industry Average, or Laggard. In addition to having common performance levels, each class also shared characteristics in five key categories: (1) process (the approaches they take to execute their daily operations); (2) organization (corporate focus and collaboration among stakeholders); (3) knowledge management (contextualizing data and exposing it to key stakeholders); (4) technology (the selection of appropriate tools and effective deployment of those tools); and (5) performance management (the ability of the organization to measure their results to improve their business). These characteristics (identified in Table 3) serve as a guideline for best practices, and correlate directly with Best-in-Class performance across the key metrics.

Capabilities and Enablers Based on the findings of the Competitive Framework and interviews with end users, Aberdeen’s analysis of the Best-in-Class demonstrates best practices for adopting or implementing Web 2.0 applications.

“It’s only going to continue to get more fluid for the end-user. Web 2.0 has legs. It’s going to continue and expand its presence.”

~ Mike DiSabatino CPA, Founder of

Sportbikes.com

Process Since top companies believe there is tangible value to be realized from Web 2.0 technologies in the company’s bottom line, it is imperative that any technology adoption be combined with specific processes designed to maximize its potential. The “perfect storm” of organizational capabilities and technology enablers results in happier customers and, in the end, top-line revenue growth. Currently, over a third (37%) of Best-in-Class companies have a defined process in place for managing Web 2.0 content, compared to 24% of the Industry Average and 12% of Laggards.

Furthermore, 39% of Best-in-Class companies, versus 14% of the Industry Average and 12% of Laggards, have a process in place for feeding consumer-generated insights across multiple business units. While the current adoption of these key processes is relatively low, the planned adoption speaks to the importance of Web 2.0 to organizations. Fifty-four percent (54%) of Best-in-Class companies plan to implement a defined process for managing Web 2.0 content, thereby increasing the overall adoption rate to 91%. Furthermore, 85% of Best-in-Class companies will eventually use consumer generated insights to feed decisions across multiple business units, compared to 69% of the Industry Average and 63% of Laggards.

Businesses realize that it is not enough to simply establish external-facing Web 2.0 channels to interact with consumers; care must be taken to ensure that there are processes in place to disseminate the insight throughout the organization and maximize the investment made at an organizational level.


Customer 2.0


Table 3: Competitive Framework (Process)

Best-in-Class Average Laggards Defined process for managing Web 2.0 content

37% 24% 13%

Consumer-generated insights feed decisions across multiple business units

Process

39% 14% 12%


Organization Best-in-Class companies are more likely to receive the support of senior management when it comes to the business use of Web 2.0 applications, 57% versus 36% of Laggards. As such, Best-in-Class companies are nearly twice as likely as the Industry Average (and nearly three-times more likely than Laggards) to have dedicated personnel devoted to the enterprise-wide use of Web 2.0 applications. It is imperative for companies to support Web 2.0 implementation at the budget-holder level. This new channel to reach customers requires constant engagement and analysis of information; therefore, companies cannot hope to achieve success unless the organization, including management, is prepared to devote the resources necessary.

Table 4: Competitive Framework (Organization)

Best-in-Class Average Laggards Senior management fully supports external-facing Web 2.0 programs

57% 51% 36%

Dedicated personnel devoted to enterprise use of Web 2.0 applications

39% 22% 14%

Cross-functional resource commitment from different departments within the organization (i.e., marketing, product development, sales, etc.)

37% 30% 27%

Committed to promoting, maintaining and utilizing consumer-generated content

Organization

27% 23% 13%


Knowledge Management The essence of Web 2.0 applications is collaborative in nature. Therefore, the business treatment of the applications should be the same. It is beneficial for companies to present themselves as a collection of individuals working towards a common goal, not just a corporate voice. To achieve this end, Best-in-Class companies currently leverage, and plan to leverage, mechanisms for users to provide feedback and rate the usefulness of

Customer 2.0


website content. As a result, product marketing directors, for instance, can gauge the reaction to a particular offering and respond to customer’s praises or concerns.

Table 5: Competitive Framework (Knowledge Management)

Best-in-Class Average Laggards

Plan to implement feedback mechanisms

60% 51% 52%

Plan to enable customer review profiles and rating scores of products / services

Knowledge Management

46% 39% 47%


This collaborative use of external-facing applications allows the different channels in an organization to post content relevant to their department. Companies must not lose sight of why customers enjoy social media sites and applications: they allow for many different voices in the conversation.

Recent research conducted for the February 2008 Aberdeen benchmark report, Social Media Monitoring and Analysis: Generating Consumer Insights from Online Conversations, reveals that the more actively a company engages with customers, the more likely they are to experience year-over-year improvements in key metrics (Figure 5).

Figure 5: Active Engagement with Online Customers Improves Key Metrics

30%

50%

30%

50%

44%

56%

57%

57%

44%

57%

62%

62%

60%

62%

75%

76%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Ability to Identify andReduce Risk

Customer Retention

Actionable InsightsDerived from Social

Media Monitoring andAnalysis

Customer Satisfaction

Rarely Post Occasional Posts Regular Posts Frequent Posts

Note: Percentages represent companies experiencing year-over-year improvement in metrics

Source: Aberdeen Group, February 2008


http://www.aberdeen.com/summary/report/benchmark/4587-RA-consumer-insights-online.asp


Customer 2.0


While these increases cannot be attributed solely to the number of times an organization engages with consumers online per se, the correlation between the number of posts a company makes and their performance in key social media metrics suggests that companies are able to recapture some of the control that had been passed on to consumers by engaging online users in conversation concerning their brand and services, rather than simply observing the "soapbox" from afar. The companies planning to provide feedback mechanisms should consider building customer and brand loyalty by engaging with online customers around certain topics or concerns.

Table 6: Competitive Framework (Technology)

Best-in-Class Average Laggards Web 2.0 technologies currently in use:

57% company hosted blogs 43% wikis 37% customer rating / feedback solution 25% social media monitoring and analysis tools



Planned adoption of Web 2.0 technology solutions: Technology





Technology Currently, 57% of Best-in-Class companies use company-hosted blogs to interact with customers online, compared to 43% of the Industry Average and 32% of Laggards. An additional 32% of Best-in-Class companies plan to implement company-hosted blogs in the future. Blogs offer companies the ability to reach current and perspective clients quickly, efficiently, and, perhaps most importantly, inexpensively. When combined with other technology tools, like social media monitoring and analysis solutions for example, blogs afford companies to respond directly to budding criticism concerning their product or services. Those companies who utilize social media monitoring and analysis tools to harvest consumer insights may also use company-hosted blogs to address sparks of criticism before they become full-fledged wildfires.

Customer 2.0


Performance Measurement While the adoption of Web 2.0 technologies is still relatively low, even among Best-in-Class companies, nearly a third (32%) of Best-in-Class companies that currently use such applications have defined metrics in place to measure their impact. One must remember that the use of Web 2.0 applications in business is designed to bridge the gaps between companies and the consumers that have valuable insights about their products or services. Therefore, it is necessary to measure the ROI companies achieve through the use of such tools.

Table 7: Competitive Framework (Performance Measurement)

Best-in-Class Average Laggards Defined metrics for measuring impact of external-facing Web 2.0 applications

32% 16% 10%

Plan to implement defined metrics for measuring impact of external-facing Web 2.0 applications

Performance Measurement

55% 58% 57%


Best-in-Class Use Web 2.0 to Improve Business The needs to increase the online customer experience and customer satisfaction are legitimate and pressing business concerns; however, Best-in-Class companies do not view Web 2.0 adoption strictly within this context. Best-in-Class companies are able to grow the business by creating a closed-loop marketing system of sorts. By cultivating an online community of customers and prospects, Best-in-Class companies are not just improving the traffic to their website and the “stickiness” of the engagement; they are truly succeeding at gleaning the consumer-generated insights inherent to collaboration to drive product development and supplement marketing campaigns. As Figure 6 indicates, Best-in-Class organizations are outperforming the Industry Average and Laggards when it comes to year-over-year growth in key metrics.

Customer 2.0


Figure 6: Top Performers Improve Yearly Growth

8%

9%

8%

5%

27%

21%

25%

42%

63%

73%

77%

89%

0% 20% 40% 60% 80% 100%

Ability to addressproduct issues

Accuracy of marketingdecisions

Timeliness ofmarketing decisions

Customer satisfaction

Best-in-ClassIndustry AverageLaggards

Note: Percentages represent companies reporting year-over-year improvements


Aberdeen Insights — Technology

The need to improve the online experience was identified by 38% of all respondents as a top two pressure causing organizations to focus resources on external-facing Web 2.0 applications. In order to satisfy this need, top companies are using, or planning to use, content management solutions to provide current and accurate data for their websites, thereby creating websites that attract visitors and, more importantly, engages them. Businesses are increasing the “stickiness” of their websites by providing multiple outlets for customers to engage with one another and develop a sense of community.

continued


Customer 2.0


Aberdeen Insights — Technology

Figure 7: Content Management Solutions

43%40%

30%

49%

42% 43%

8%

18%

27%

0%

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30%

40%

50%

60%

Best-in-Class Industry Average Laggards

Currently Use Plan to Use No Plans to Use


Forty-three percent (43%) of Best-in-Class companies currently use a content management solution; while an additional 49% plan to use one in the future. By integrating Web 2.0 functionality with a core content management solution, particularly a web content management solution, Best-in-Class companies are hoping to build and manage web sites that incorporate all the necessary information and collaboration tools to improve the customer’s online experience. According to Aberdeen research, 58% of respondents believe that social networking sites have a tremendous amount of influence over consumers; therefore, some solution providers offer the ability for companies to push their content to established Web 2.0 channels, such as these social networking sites, to reach customers. Others, however, pull content from customers by providing the forum and content to get the conversation started.


Customer 2.0


Chapter Three: Required Actions

Fast Facts

√ Best-in-Class companies are 8-times more likely than Laggards to be satisfied with their ROMI performance

√ 57% of Best-in-Class companies are satisfied with their current ability to incorporate consumer insights into future marketing campaigns and promotions, compared to 33% of the Industry Average and 28% of Laggards

√ 70% of survey respondents plan to increase the budget for Web 2.0 technologies in 2008

√ 28% of Best-in-Class companies have a dedicated staff responsible for Web 2.0 technology implementation and monitoring, compared to 19% of the Industry Average and 14% of Laggards

Whether a company is trying to move its performance in ROMI, customer retention, or new product development from Laggard to Industry Average, or Industry Average to Best-in-Class, the following actions will help spur the necessary performance improvements:

Laggard Steps to Success • Formalize a process for managing Web 2.0 content.

Currently, only 13% of Laggards indicated they have a defined process in place at an organizational level for managing Web 2.0 content, compared to 37% of Best-in-Class and 24% of Industry Average companies. Despite the fact that nearly two-thirds (65%) of Laggards consider the business use of Web 2.0 applications a “top two” or “high priority” for the organization, the proper support is not in place to maximize the time and investments spent on external-facing Web 2.0 technologies. The lack of a formalized process results in only 12% of Laggards using consumer-generated insights to feed decisions across multiple business units, compared to 39% of the Best-in-Class. In order to maximize the insights collected through external-facing Web 2.0 applications, Laggards must implement a process for managing the content collected and disseminating the information to the relevant business units within the organization.

• Solicit the full support of senior management. Thirty-six percent (36%) of Laggards currently have the full support of senior management in regards to external-facing Web 2.0 programs. This percentage, which is well below the 57% of Best-in-Class and 51% of Industry Average, indicates that Laggards are not realizing the benefits of Web 2.0 applications at the management level. Forty-six percent (46%) of Laggards responded that they currently devote a couple hours a week, if anything at all, to Web 2.0 technology implementation and monitoring. While 66% of Laggards plan to increase the budget devoted to the business use of Web 2.0 applications in 2008, it is crucial for senior management to realize the marketing benefits of these tools so that the appropriate organizational support structure can be created to supplement technology adoption.

• Define metrics to measure Web 2.0 success. Currently, only 10% of Laggards have defined metrics in place for measuring the impact of external-facing Web 2.0 applications. Thirty-three percent (33%) of Laggards revealed that they have no plans to implement such metrics. It is difficult for a company to judge whether or not a particular technology solution is providing tangible value to the bottom line without measures designed to reveal its effects on key


Customer 2.0


metrics. Eighty-seven percent (87%) of Best-in-Class companies either currently have, or plan to have, such metrics in place for measuring the impact of Web 2.0 on the enterprise. In order to increase the effectiveness of marketing campaigns and improve key metrics, Laggard organizations must develop metrics to measures their success or failures.

Industry Average Steps to Success “Organizations that need to create a dialogue with their customers are implementing Web 2.0 capabilities. Currently, they are cobbling them together with 3rd party products. Creating a dialogue and nurturing those relationships is first and foremost. Second, creating a platform for experts, wherever they may be, to collaborate and communicate is important as well. Finally, corporations that need to communicate specifically with customers and get them specific information quickly can do so with social media.”

~ Advertising Executive, Film Industry

• Use consumer generated insights to feed business decisions across multiple business units. Best-in-Class companies are experiencing year-over-year improvements in key marketing metrics due to the ability to analyze consumer-generated insights and disseminate them across multiple business units; however, only 14% of the Industry Average, compared to 39% of the Best-in-Class, have this capability in place. Since there are a number of different groups within an organization that leverage Web 2.0 applications, such as marketing (83%), product marketing (63%), and sales (54%), it is necessary to have a process in place to share the insights generated across multiple business units.

• Provide an outlet for engaging with customers. Company-hosted blogs are an effective way to keep the lines of dialogue open between a company and its customers. These blogs entries, which customers can directly respond to, allow an organization to respond to criticism and publicize new product or service roll-outs. Despite blogs being identified by all respondents as a top two feature associated with Web 2.0 technology, along with social networking sites, less than half (43%) of the Industry Average connect with customers in this manner. The additional 45% of Industry Average that plan to leverage company-hosted blogs must move quickly to provide an outlet for customer interaction.

• Enable public customer review profiles and rating scores of products or services. Companies often face the same dilemma when it comes to connecting with customers in online forums: what if what they say isn’t what I want to hear? While it’s true that enabling consumers to review profiles and rate products will occasionally result in negative feedback, these instances should be viewed as an opportunity for growth and not necessarily as a detriment to the marketing message. Currently, 15% of the Industry Average, compared to 27% of the Best-in-Class, enable public customer reviews and rating scores in company hosted blogs and wikis. The fact that Best-in-Class are more inclined to allow this capability aligns with their need to grow market awareness and utilize consumer feedback in the development of new products and services. Industry Average companies must begin to view consumer-generated content as an opportunity to learn and grow.


Customer 2.0


Best-in-Class Steps to Success • Develop an enterprise-wide commitment to promoting,

maintaining, and utilizing consumer-generated content. Twenty-seven percent (27%) of Best-in-Class companies indicated that they are currently committed to promoting, maintaining, and utilizing consumer generated-content. While an additional 57% plan to instill this commitment at an organizational level in the future, it is important for companies to promote content posting amongst their consumer base now. Over three-fourths (77%) of companies surveyed agree that Web 2.0 will be a lasting channel for years to come; therefore, it is crucial for Best-in-Class companies to promote their entrance into this space and utilize the insights they receive.

• Embrace social media monitoring and analysis. According to a recent Aberdeen survey conducted for the Social Media Monitoring and Analysis: Generating Consumer Insights from Online Conversations Benchmark Report, 75% of Best-in-Class companies improved their ability to predict customer behavior after implementing a social media monitoring and analysis solution, compared to 11% of Laggards. While Best-in-Class companies are more likely than all others to utilize external-facing Web 2.0 applications to harvest consumer insights, they must remember that the internet is a sprawling landscape of information. There are numerous blogs, wikis, and online forums where consumers can post feedback on a particular company’s products or services; therefore, it is necessary for companies to monitor this activity as a way of supplementing the consumer insights they generated through their own efforts.

Aberdeen Insights — Summary

The internet has done more than simply change the way people access and share information. It has succeeded in developing a new breed of customers. These customers expect to interact with peers and businesses when they want, how they want, and in the channel of their choosing. Rather than turn a blind eye to the emergence of a new consumer base, savvy companies are providing an assortment of Web 2.0 touch points for consumers to provide feedback. While the current adoption of customer-facing Web 2.0 applications is low, even among Best-in-Class companies, the substantial planned adoption rate suggests that businesses understand the value of providing more than just a website to consumers, but an experience. As solutions like blogs, wikis, and social networking become commonplace online, businesses will succeed in creating a closed-loop process with their customers. One where the insights gleaned from consumer-generated conversations drive product development and marketing decisions.





Customer 2.0


Appendix A: Research Methodology

Between March and May 2008, Aberdeen examined the use, the experiences, and the intentions of more than 360 enterprises using, or planning to use, Web 2.0 technologies in a diverse set of enterprises.

Study Focus

Survey respondents completed an online survey that included questions designed to determine the following:

√ The degree to which Web 2.0 technologies are currently deployed and the financial implications of leveraging customer-facing social media applications.

√ The level of priority companies place on Web 2.0 in 2008 and beyond.

√ The groups within the organization that harvest and use consumer-generated insights.

√ The organizational processes and metrics in place to support Web 2.0 technology implementation.

The study aimed to identify emerging best practices for Web 2.0 usage in a variety of industries, and to provide a roadmap by which readers could assess their own capabilities.

Aberdeen supplemented this online survey effort with interviews with select survey respondents, gathering additional information on social media strategies, experiences, and results.

Responding enterprises included the following:

• Job title / function: The research sample included respondents with the following job titles: senior management [CEO, COO, President] (26%); director (23%); manager (20%); vice president (12%); other (19%).

• Industry: The research sample included respondents from the following industries: high technology / software (33%), publishing / media (11%), finance/banking (7%), education (6%), retail (4%), other (39%).

• Geography: The majority of respondents (66%) were from North America. Remaining respondents were from Europe (18%), the Asia-Pacific region (11%), Middle East / Africa (3%), and South / Central America (2%).

• Company size: Fifteen percent (15%) of respondents were from large enterprises (annual revenues above US $1 billion); 22% were from midsize enterprises (annual revenues between $50 million and $1 billion); and 63% of respondents were from small businesses (annual revenues of $50 million or less).

• Headcount: Fifty-seven percent (57%) of respondents were from small enterprises (headcount between 1 and 99 employees); 20% were from midsize enterprises (headcount between 100 and 999 employees); and 23% of respondents were from large businesses (headcount greater than 1,000 employees).

Solution providers recognized as sponsors were solicited after the fact and had no substantive influence on the direction of this report. Their sponsorship has made it possible for Aberdeen Group to make these findings available to readers at no charge.


Customer 2.0


Table 8: The PACE Framework Key

Overview Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows: Pressures — external forces that impact an organization’s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competitive) Actions — the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product / service strategy, target markets, financial strategy, go-to-market, and sales strategy) Capabilities — the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products / services, ecosystem partners, financing) Enablers — the key functionality of technology solutions required to support the organization’s enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management)


Table 9: The Competitive Framework Key

Overview The Aberdeen Competitive Framework defines enterprises as falling into one of the following three levels of practices and performance: Best-in-Class (20%) — Practices that are the best currently being employed and are significantly superior to the Industry Average, and result in the top industry performance. Industry Average (50%) — Practices that represent the average or norm, and result in average industry performance. Laggards (30%) — Practices that are significantly behind the average of the industry, and result in below average performance.

In the following categories: Process — What is the scope of process standardization? What is the efficiency and effectiveness of this process? Organization — How is your company currently organized to manage and optimize this particular process? Knowledge — What visibility do you have into key data and intelligence required to manage this process? Technology — What level of automation have you used to support this process? How is this automation integrated and aligned? Performance — What do you measure? How frequently? What’s your actual performance?


Table 10: The Relationship Between PACE and the Competitive Framework

PACE and the Competitive Framework – How They Interact Aberdeen research indicates that companies that identify the most influential pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute those decisions.



Customer 2.0


Appendix B: Common Web 2.0 Technologies

For the purposes of this benchmark report, the term “Web 2.0” is used to refer to a set of technologies that promote the exchange of user-generated content and information in a manner that simultaneously begets collaboration and individuality. Common Web 2.0 technologies include:

• Blogs. Short for “web log,” a blog is an online journal of sorts. Blogs are typically used by individuals to share information and insights with both acquaintances and strangers alike. Blog entries are often kept in chronological order of when they were posted; furthermore, a majority of blogs allow readers to post feedback or comments regarding the content of the entry. Nowadays, company executives use blogs as a way announce a new product release, respond to an industry issue, or simply share some insights with their customer base.

• Wikis. Wikis, which share their name with the Hawaiian word for “fast,” are web pages that allow anyone who visits it to modify or contribute content. The overall purpose of a wiki site is to create a shared online community around a particular topic area. As more companies have become comfortable incorporating Web 2.0 technologies into the enterprise, wikis have been utilized to facilitate knowledge sharing within the organization. Common examples include a dynamic glossary of company-specific terminology, company-wide memos and notices, and a repository of information used for onboarding and training purposes. While security and credibility may be an issue for companies looking to create an online wiki around their brand, general security measures, such as mandatory logins, exist to curtail someone from editing another’s entry.

• Social networking sites. Social networking sites have become a popular place for people to interact with others who share similar lifestyles. By creating an online profile, users can search for people they know personally or who they may share common interests with. In addition to unique user profiles, social networking sites often share other common features, such as: messaging, blogs, photo and video sharing, searchable fields, and, in some cases, add-on applications. The large number of users on popular social networking sites has caused some organizations to reach their audience in these social forums through marketing campaigns or specific add-on applications.

• RSS feeds. The growing number of online customers turning using the web as their primary source of news and information has resulted in the need for a streaming feed of “fresh” news information. RSS feeds automate the traditional process people

Customer 2.0


relied on for receiving updated content, namely daily checks of particular sites. By aggregating the content from several different web sources, such as online journals, blogs, and newspapers, RSS feeds allow people to customize what information is fed through to them and the mode by which they receive it.

• Mashup. The term “mashup” typically refers to a web application that integrates data from various third-party sources. Furthermore, inherent to the phrase “mashup” is the ability for the end-user to configure the look and feel of the web tool in which they receive their information. For example, a consumer may use a “mashup” to feed his or her RSS feeds, local weather reports, sports scores, and top headlines of interest directly into a particular homepage. Ultimately, “mashups” are designed to collect and present various forms of data in a format that the user dictates and customizes.

Customer 2.0


Appendix C: Related Aberdeen Research

Related Aberdeen research that forms a companion or reference to this report includes:

• Protecting the Brand by Using Social Media Monitoring As an Early Warning System (March 2008)

• Social Media Monitoring Proves Its Worth to the Product Development Department (March 2008)

• CRM Shakeup: Oracle and SAP Break New 2.0 Ground (March 2008)

• Active Engagement with Online Consumers Maximizes Returns from Social Media Monitoring Solutions (February 2008)

• The Rise of Social Media Integration: Monster and Wal-Mart Lead the Way (February 2008)

• Social Media Monitoring and Analysis: Generating Consumer Insights from Online Conversation (January 2008)

• Social Media Becomes a Key Factor in the Quest for Return on Marketing Investment (December 2007)

Information on these and any other Aberdeen publications can be found at www.aberdeen.com.

Author: Alex Jefferies, Senior Research Associate, Customer Management, [email protected]

Since 1988, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter — the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.2 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500.

As a Harte-Hanks Company, Aberdeen plays a key role of putting content in context for the global direct and targeted marketing company. Aberdeen's analytical and independent view of the "customer optimization" process of Harte-Hanks (Information – Opportunity – Insight – Engagement – Interaction) extends the client value and accentuates the strategic role Harte-Hanks brings to the market. For additional information, visit Aberdeen http://www.aberdeen.com or call (617) 723-7890, or to learn more about Harte-Hanks, call (800) 456-9748 or go to http://www.harte-hanks.com.

This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.

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