Companies are failing to fully grasp the opportunities to get closer to their customers through social media, according to research from the Economist Intelligence Unit.
The EIU was commissioned by business software firm SAS to look at how firms were taking advantage of social media, and the EIU said they are coming up short.
Report author Neil Baker said: “The emergence of social media has transformed the potential for companies to build deep and profitable relationships with their most valuable customers. However, by and large, the emphasis remains on the potential.”
Baker said many organisations have experimented with new forms of customer engagement. He said they have increased sales, reduced service costs and improved innovation.
“Yet few – if any – have moved out of an experimentation stage to implement the kind of enterprise strategy changes necessary to fully realise the business opportunities offered by the spread of social media,” said Baker.
The EIU said companies able to grasp social media’s potential to transform the way organisations function will secure a significant competitive advantage over their rivals. To benefit most, companies should use new forms of valuation to shape their customer engagement strategies, it said.
The “Re-envisioning customer value” report said traditional measures of customer worth “are at best incomplete and at worst misleading”. It said just measuring how much a client spent with a company in the social media arena was wrong.
The EIU said the market influence a social media customer had was just as important, with social media participants able to provide “deep insight” into wider customer preferences and valuable product feedback.
The report said organisations must learn to distinguish “between noise and valuable business information” in order for novel forms of customer valuation to significantly enhance their profitability.
Fresh insights can be drawn from the widely distributed customer behaviour that takes place in social media, and from the digital trails within company systems by using “rigorous analysis”, said the EIU. However, many current metrics do not necessarily yield actionable intelligence, it said.
“Senior executives should holistically integrate customer engagement across their company’s departments to capitalise on new insights into customer valuation,” said the EIU. This requires organisational flexibility and the relinquishing of some measure of control, it said.
To achieve this, social media needs to be understood and employed as a tool in the service of wider business aims, not siloed as a discrete functional area, says the report.
Organisations must “tread carefully” though when extracting value from social media engagement, to avoid “appearing intrusive or inappropriate to the customers in social networks in which they are trying to interact with”, the report stated.
Firms also had to contend with “widespread inadequate formal governance policies” when interacting with social media, to address reputation hazards, legal compliance issues, and the protection of their intellectual property.
