Back in March Wim Rampen posted a very readable article titled Value is Always Co-Created In Use. I must say that I agree with the main thought of value not being created by the companies that deliver a service or product  – but by the customer when using them. But then I regard a (business) world that decouples products/services from value as a kind of Utopia. Basic premises for this concept to work on a grand scale are that -       resources are readily available to everyone -        and/or everyone is created equal. Neither of them is fulfilled. We live a world of limited resources; everybody’s skills are different; negotiation powers differ as well. Additionally people and organizations do not always act rationally, or in the interest of a greater good. Instead they have their own interest in mind, which is often very short termed. I have a challenge to see the world embracing this thought of value being created in use, because it means changing the way business works – even the way humans work. The challenge is that, as long as an exchange of “something” is involved in a transaction of sorts, I as the customer) have to have a lot of trust into the other party (the vendor, service provider, …) that the good or service that I gets to create value is worth the expense that I incur beforehand – and often it is not. Now, our whole economic system is built around exchange. I would like to leave private interactions un-discussed here, as I believe that we have a different notion of “value” in private life than we have for business interactions. There e.g., regularly is no notion of a transaction in private life. In business life we are bound to a system that we cannot change on our own accord. There are transactions. In order to create value I give away something (money, time, labor, skills, knowledge, …) to get the something else that I need to create and realize my value. As I am not so altruistic I do not want to give more than I perceive to co-create/realize as value in use. Actually, I want to realize more value than what my “spend” is. Still I bear the risk because I must invest before I get a return, if any! After all I might fail in my venture of co-creating value: The tiramisu I want to make and bought the mascarpone for utterly fails; I suffer an accident during my Maldives vacation that prevents me from scuba diving, … possibilities are countless. As Maz Iqbal states in a reply to the same post: We are talking a paradigm change, and one on grand scale, of the whole economic system and of each and every human. Even companies like giffgaff, Build a Bear, or Threadless, that are undoubtedly applying value co-creation principles, still do this in a transactional world. Their only objective is the generation of income for their owners. They do this by “outsourcing” corporate processes in a way that (hopefully) makes their product/service more desirable and attractive or affordable to the customer than their competitors’ products or services. Just to not be misunderstood: This is not a bad thing! But still the foundation is laid upon goods dominant logic – because this is the context these companies operate in. After all value proposition, value creation, and its capturing are all interrelated and cannot be independently changed. And as long as there is only one human remaining to pursue a transactional logic, looking into the own advantage, this paradigm change is not going to happen. Where does this lead us? There are concepts. There are fairly small implementations of them, and there is research going on about how to make it all work on large scale, like the HAT project. In my eyes we are heading to a mix of goods dominant logic and service dominant logic implementations. Both have their justification. What do you think?

Some time ago my wife Nicole posted a small series of blogs about the topic of Loyalty on ciber.com. In these readable blogs she identified and summarised three main strategies of acquiring loyal customers, which are

• Every day low price
• Classic loyalty programs that base upon cash-back options or that are points based
• Hybrid models

To gain and retain loyal customers it is necessary for Retailers (or brands, or …) to get into a mutual engagement with the customers. In order to achieve this it needs something like a WOW!-factor. An important way to get this factor for Retailers is the usage of social media (or social CRM when being more advanced). Every day low price of course means plain ole price competition. No WOW!-factor whatsoever involved here. On top of that there can be only one competitor that actually has the lowest price. All the others go in from second place onwards. Given that, competition only on price is the surefire way to a Retailer’s death if the Retailer is not the one with the lowest price. Price competition kills margin, service levels, shopping experience, ability to gather and analyze more data on customers, as it needs an investment, which needs to be paid out of lowering margins. Every day low price works well for highly commoditized products and services, else it is dangerous. Customers will not see the real price of a good or service anymore but ask/search for a discount. It is extremely difficult to change this behavior once it shows up – and we consumers are already educated about the fact that the same product can come cheaper, so why pay the full price? How do Groupon or other, less known similar providers (like steals4all.com, an aggregator on Groupon, or 1-day.co.nz, to name but a few) fit into this – at various levels? Well, Groupon basically adds some WOW!-factor to price competition by adding a community feeling and some lottery atmosphere. But essentially Groupon is about low prices, which widely opens the road towards price competition, with all its risks. Having said that, Groupon has hit a nerve, as rising user numbers and soaring valuation show. There is a demand. Still it needs to be used wisely and as a part of a wider social strategy, or preferably by Retailers who follow low price strategies – with the caveat that Groupon, being a business, takes an additional part of the remaining margin for itself, of course. Leading Retailers who want to take real advantage of social environments (not social media, not social CRM) will get further. These Retailers will provide added value to their customers, be it via a consistent user experience in the different channels, ease of use, solutions to challenges that I, as a customer always have, co-creating it with their customers and so on. These Retailers will also successfully integrate their social media endeavours with their traditional CRM strategy and implementation, in order to learn and be able to act on the learning, to their customers benefits, which is the ultimate way to the Retailers’ nirvana. Mark Tamis , I and others have blogged about this before, so there is no real need to repeat possible value adding scenarios, but probably much scope to look into taking more advantage of value adding and possibly co-creation (I need to thank @grahamhill for a good discussion and links to this topic, which I still need to digest). Groupon and its likes are by far not the end of the road – merely only the beginning.

Some days ago Bob Thompson interviewed Graham Hill about his take on Social CRM. The interview covered a lot of topics, most notably the future of Social CRM about which Graham has a particular view and led Bob to ask the question whether it is necessary to have a CRM system to have Social CRM. On a first glimpse this question sounds simple, but it really isn’t. From a business perspective it only matters that CRM is executed upon, if CRM is a topic. This is totally independent of systems, as are the possible paths into the future of Social CRM that Graham sees, which is a deviation from this post that I likely will look into in a later post. My answer to Bobs question is a clear No – but Yes! Sounds odd, doesn’t it? So let me explain. CRM is a business strategy; so is Social CRM. In an earlier blog titled CRM vs. Social CRM – what is the difference? I discussed differences as I do saw them at that time. My view has slightly evolved since, but this is another side track. Let’s have a look at good definitions of CRM and Social CRM. Wikipedia defines CRM as “a widely-implemented strategy for managing a company’s interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business processes—principally sales activities, but also those for marketing, customer service, and technical support. The overall goals are to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service. Customer relationship management describes a company-wide business strategy including customer-interface departments as well as other departments.” The most widely used definition of Social CRM is the one of Paul Greenberg in his Stake in the Ground blog: Social "CRM is a philosophy & a business strategy, supported by a technology platform, business rules, workflow, processes & social characteristics, designed to engage the customer in a collaborative conversation in order to provide mutually beneficial value in a trusted & transparent business environment. It’s the company's response to the customer’s ownership of the conversation." Both definitions have some themes in common:

• They look at CRM and Social CRM as business strategies
• Technology is an enabler

So: No, you do not need a CRM system to have Social CRM. In fact you do not even have to have a system to do CRM! But, and this is important: There is no Social CRM without CRM. A CRM strategy is the foundation for a Social CRM strategy. If you don’t do CRM, where is the point in going social? Proof in point: My wife and I spent some time searching for a bank to run the account of her new company. We chose to go to three banks, one of them being the bank we have our private accounts at. The experiences were extremely different and can be grouped into two categories: CRM in action and, well, you get the point... In the first bank we were directly shown into the business section and introduced to someone to answer our questions and to recommend a package of services to fulfill our needs. He didn’t know everything but knew how to find out fast. CRM in action. At the second bank, which happened to be our home bank we stood there for a while in front of empty desks, observing the staff, including the branch manager running back and forth, without even acknowledging the presence of customers – and we were not alone. Finally a team member who knew us approached us and we ended up with a number of brochures and the recommendation to make up an appointment, because she couldn’t help us. Now, the appointment turned out to be only geared towards making the deal, totally unprepared to answer questions first. Customer relationship management at its worst – with the notable exception of one individual. Now, at the third bank, we approached them slightly differently by making an appointment right away. The people were prepared and able to answer, what they didn’t know they found out fast, as with the first bank. They came forward with their views on our needs and even talked us out of something we thought we need. Needless to say that we went with that bank. The positive impression got on even then, as the setup of internet banking happened well in the evening hours, still executed by the persons we interacted with at the branch. Again: CRM in action. Well, bank two also lost us as private customers (but this is a deviation again) … What do I want to tell with this story?

• CRM is not dependent on systems. It is about persons interacting with each other. All persons we interacted with worked within their priorities, which are defined by the corporate strategy. At two banks this meant that relationships and CRM have a high priority.
• Social CRM works without a CRM system. There was no system involved in the whole process, except the system that got our account data. One could say that CRM in itself is social.

Another point, that is interesting is in how far we have a kind of co-creation going on in this process. If co-creation is about joint creation of value by the company and the customer then we might be close to it in this case. In any case the third bank provided me with I think is an outstanding service, as compared to the other two banks. I will dig into the topic of value co-creation in a later post. Having said that a system is not a precondition for pursuing a CRM strategy it is very beneficial to support a CRM strategy with a number of systems, or in other terms, a solution to the problem that the implementation of a CRM strategy is. CRM works only if various departments are orchestrated via common processes and common data, and there are lots of data. A part of what makes CRM so powerful is having a complete view on the customer and the customer base. This makes implementing a working CRM strategy complex and complicated, which in turn calls for an enabler: Technology, a system, a solution to put it in business terms. I cannot emphasize enough on it: The technology, the system, is an enabler only; if a company installs and runs a CRM system it does in no case mean that it does CRM. On the contrary, it just added to the cost of making business. Pursuing a Social CRM strategy adds complexity to an already complex strategy, especially if the strategy also extends into the social web, and there is no way around doing so. This has some implications:

1. CRM systems are needed to efficiently execute on a CRM strategy
2. There is a need for Social CRM systems, and we see them emerging
3. Social CRM systems need to be integrated into the existing CRM systems

In conclusion: Yes one needs a CRM system to successfully pursue a Social CRM strategy, unless one is working on a very small scale. This means that in practice there is no way around having a number of (sub) systems that closely interact with each other or, even better, deeply integrate into each other. To be able to effectively and efficiently execute on a Social CRM strategy it is very helpful to have a number of additional systems integrated to the core CRM system. Which systems these are depends heavily on the state of implementation of the strategy, but they will very likely cover listening abilities, measurement abilities, engagement abilities, as well as pieces of software that make it convenient for customers to interact with the company. This of course includes mobile applications.