Social computing is becoming a significant customer relationship management (CRM) market trend and represents a disruptive force in this market – and Gartner predicts that, by 2010, more than 60% of Fortune 1000 companies will have some form of online community that can be used for customer relationship purposes.

"Social applications offer a great opportunity for CRM practitioners to improve customer experience and influence the customer, particularly in an economic downturn when companies are trying to keep customers and increase wallet share," says Adam Sarner, research director at Gartner. "Investments should focus primarily on the customer online buying process where it can offer a direct return on investment (ROI) in terms of sales, awareness and customer loyalty."
However, Gartner predicts that, by 2010, more than half of companies that have established an online community will fail to manage it as an agent of change, ultimately eroding customer value.
"Rushing into social-computing initiatives without clearly defined benefits for both the company and customer will be the biggest cause of failure," says Sarner.
Gartner recommends companies follow four steps when undertaking any social-software initiative:
* Define the initiative and its purpose – Many organisations have not taken the time to assess the business case for investment, tempted by the fact that many social applications are nominally free. Before an organisation begins a project, it needs to define a mutual, balanced purpose. The stated purpose must include a measurable business benefit for establishing the application, and a customer motivation for participating.
* Cede some control to encourage participation – For an application to be truly social, the community must have some element of ownership in return for the value it brings with it. Organisations need to determine the level of control ceded to the community, and understand how that affects the engagement between customer and company. Harnessing an application's community can be difficult, because it cannot be forced to contribute. In order to encourage participation and establish the right amount of ownership to cede, Gartner recommends that organisations follow five best practices that require them to accept the risk of criticism and use the valuable data provided to make real changes; apply ground rules to install self-moderation; solicit feedback to make users feel appreciated; enable company advocates to gain powerful allies, and lastly assign a community advocate to liaise with the community and to represent it to the company.
* Understand and reward different kinds of participation – Companies need to recognise and provide social applications for all levels of participants that can be categorised as: the creators ("I want to own this"), the contributors ("I want to be part of this"), the opportunists ("Since I'm here") and the lurkers ("I'll reap the rewards").
In addition, businesses must incorporate reputation mechanisms into their social-network initiatives to manage and get the most value from the four different groups. Social-reputation technologies allow users to rank the quality of input provided by contributors, filtering content and differentiating the best information – whether actively (by voting) or passively (by page views). "This is extremely important in high-traffic social networks, as well as for those where indicators of trustworthiness – such as names and job titles – are hidden behind online personas," says Sarner. "In addition to helping customers during their information-gathering phase, reputation systems also serve to recognise and reward your advocate groups."
* Acquire skills to build relationships online – Companies must acquire new skills that focus on influencing social interactions to encourage participation effectively. These skills will need to cover social sciences, such as psychology, to learn how customers interact, and how their changing needs can be met; anthropology, to learn how cultures grow, develop and interact; and game design, to create engaging virtual environments to manipulate "player" behaviour through rules, rewards and outcomes. Since many of these skills will be difficult to find internally, companies must allocate substantial budget to recruit these skills or outsource them to specialist providers. In a global recession, companies should prioritise the acquisition of these skills because of the direct benefits they can produce in customer loyalty and increased sales.
Sarner concludes: "Social networking has changed the way a critical mass of individuals behaves, including how they act as customers and prospects. Customers, not just digital natives, can no longer be adequately described by demographic information < the usual target for corporate CRM efforts."