Half of Fortune 1000 won't see ROI with social CRM, analyst predicts

Gartner predicts only half of Fortune 1000 companies will see return on investment from social CRM.

Half of Fortune 1000 companies run the risk of not seeing a return on the investment in their social CRM initiatives because they will fail to tie their use social networks to clear business performance objectives.

But, taking a glass-half-full perspective to his study, Gartner Inc. analyst Adam Sarner points out that the other 50% can serve as good examples because their initiatives will see a payoff.

“Social is breaking down the old silos of CRM,” Sarner said. “This is the future. But if you’re doing it because it’s social and cool, that will never bring any gain.”

The social media phenomenon reminds Sarner of the dot-com boom of last decade, when every business needed a Web presence without necessarily understanding how to make the most of it. “People don’t want to get beat out; they want to be on social,” he said. “But after you’ve hired the college grads to do it, there has to be some sort of reckoning: ‘We have a million (Facebook) ‘likes,’ but what are we going to do now?’ ”

Sarner believes the success of social CRM hinges on how well companies and technology vendors can make it more than just an ordinary social objective. By the end of this year, he said, companies will have a guidepost to gauge just where they are because about 75% of social CRM initiatives will be attached to business cases that incorporate measureable return on investment (ROI).

“You won’t have success unless you know what it is,” Sarner said. A company must ask what direction it is headed with social CRM, create a strategy, and determine which tools it will use, he said.

Social CRM ROI may come slowly
A Gartner study on social CRM asked several hundred companies that have spent money on social media if they have seen ROI.

Around 56% of those surveyed replied they hadn’t, Sarner said. Some companies said it was too early to tell. Others said it was too difficult to measure. One company responded that it didn’t know ROI was possible with social CRM.

Many of the surveyed companies simply didn’t know what to do with the customer information they had collected through social media, Sarner said. For instance, companies asked Gartner what they can do with the fans of their Facebook pages, what value those fans have and what kind of leads can be generated from those connections.

Among the companies that will not see ROI on social CRM by the end of the year, only 20% of them will have the data to evaluate where their social strategy fails, he said.

The call to make more of social CRM comes at the right time because social media “couldn’t get any hotter,” Sarner said. Indeed, Gartner analysts expect the worldwide market for social CRM software licenses and subscriptions to total $2.1 billion this year -- up from $850 million last year. Gartner also predicts social CRM revenue will represent 10% of the overall CRM market.

“But we’re already seeing some cracks in the armor,” Sarner said. For example, Facebook’s stock declined because of doubts about its ability to generate revenue. Similarly, using social media channels for the sake of joining the crowd won’t deliver ROI if companies don’t mesh it with thought-out business strategies, he said.

“We have all these social metrics, so how do we turn them into business metrics?” he said.

Get more departments on board 
Marketing can no longer be the only department to handle social CRM, Sarner advised. Social CRM must also become a tool for sales, customer service and support through lead generation, cross-selling, up-selling and other business functions, he said.

But social CRM won’t amount to much if companies don’t ask the right questions and plan accordingly, Sarner said. In other words: What purpose does social CRM serve, and what should be done with it?

“How does it help the marketing mix? How does it make calls into the call center go from 700 to seven to make it a peer-to-peer community?” Sarner said.

Businesses aren’t the only ones on the hook for maximizing social CRM; vendors also need to improve, he said. Right now, social CRM vendors differentiate themselves through functions, analytics, ease of use and experience. But as time passes, vendors will find it harder to gain an edge by selling unique core functions, he said.

To stand out, Sarner said, social CRM vendors will have to tout quantified business cases and deliver repeatable social CRM processes that are not yet broadly available. Those that offer a full set of social CRM functions and make progress in two or more areas -- such as customer service and sales -- will make the leap forward, he said.

“Some of these self-service vendors have to start monthly calls to check in with their community,” Sarner said. “They need to develop a mutual process.”

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