1. Social Customer Relationship Management – shifting
power from the company to customers?
Course: BUSN32 Internet marketing, branding and consumers
Professor: Veronika Tarnovskaya
Program: International Marketing & Brand Management
Handed in by: Lea Henrike Engling
Date: 29.02.2012
Words: 3,000

2. Content
1. Introduction......................................................................................................................................... 3
2. Theoretical Framework ....................................................................................................................... 3
2.1 Customer Relationship Management ........................................................................................... 3
2.2 Social Media .................................................................................................................................. 4
2.3 Social Customer Relationship Management ................................................................................. 4
2.4. Customer Empowerment ............................................................................................................. 4
3. Case discussion .................................................................................................................................... 6
3.1 Deutsche Bahn............................................................................................................................... 6
3.2 Nestlé............................................................................................................................................. 6
3.3 X Factor .......................................................................................................................................... 7
3.4 Nutella ........................................................................................................................................... 7
4. Analysis ................................................................................................................................................ 8
5. Conclusion ........................................................................................................................................... 9
Bibliography........................................................................................................................................... 10
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3. 1. Introduction
With 800.000 million active members (facebook, 2012), the social network facebook is a major, if not
one of the biggest, opportunity for companies to interact with their customers. But for most compa-
nies, using social media still presents a challenge as they fail to understand how to manage online
relationships. At the same time, the concept of social customer relationship marketing has become
an important area of academic research as it alters fundamental assumptions about the customer-
supplier relationship. It has become obvious that by allowing a two-way or even many-to-many
communication, social media has changed the laws of customer relationship management. But while
it seems clear that customers gained some control over the management of their relationship with
companies, there is a controversy in academic literature on the extent and direction of this customer
empowerment. Thus, the purpose of this paper is to discuss the implications of social media on the
relationship between customers and suppliers. This will contribute to the field of social customer
relationship management firstly by providing an in-depth theoretical discussion of the power shift
and secondly by examining the empowerment of customers in practice through case studies.
2. Theoretical Framework
In order to understand social customer relationship management, this paper starts with a discussion
of the two underlying concepts, customer relationship management and social media. This is fol-
lowed by an examination of social customer relationship and its implication for the empowerment of
customer.
2.1 Customer Relationship Management
The emergence of relationship marketing and customer relationship management (CRM) radically
changed marketing research and practice (Bonnemaizon et al., 2007: 50) as the two concepts shifted
the focus from customers as a source of profit to the importance of long-term relationships (Payne &
Frow, 2005: 168). Even though both terms are similar and used interchangeably sometimes (Payne &
Frow, 2005: 167), CRM goes further by integrating all business activities (Askool & Nakata, 2011:
206). However, there is no universal definition of CRM and it has been discussed from many perspec-
tives, for example as a marketing, business or IT strategy (Askool & Nakata, 2011: 206-207). Based on
the major points discussed in literature (e.g. Payne & Frow, 2005; Askool & Nakata, 2011; Holland;
Greve, 2011; Schierholz et al., 2006), CRM can be defined as following: CRM includes all activities of
an organization to build a long-term relationship with its most valuable customers in order to in-
crease loyalty and retention. CSM software is used to gain a holistic picture of each customer and to
differentiate them to allow for individualization of the relationship. CRM demands a holistic ap-
proach and customer orientation in all business activities.
However, many studies show that companies struggle to implement CRM (e.g. Fournier et al., 1998;
Bonnemaizon et al., 2007; Greenberg, 2010) and its success seems to depend on a variety of techno-
logical, cultural and structural factors (Askool & Nakata, 2011: 207). One common mistake is to treat
CRM as a means to “access customers’ wallets” (Fournier et al., 1998) without creating additional
customer value (Bonnemaizon et al., 2007: 51).
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4. 2.2 Social Media
Web 2.0, social media and social networks are some of the terms that are being used interchangea-
bly to describe the same phenomenon of interactive communication on the internet. Thus, a more
distinct differentiation is necessary.
The term Web 2.0 describes a new form of Internet, which encourages users’ interaction, collabora-
tion and engagement (Askool & Nakata, 2011: 207). This stands in opposition to the preceding con-
cept of Web 1.0, which was dominated by company created content with no or few possibilities for
user interaction. The term social media refers to a collection of online platforms, for example blogs,
wikis and many more, that allow customers to express their opinions, share content and build rela-
tionships online (Scott, 2011:37). It is thus a major part of Web 2.0 and it could be argued that the
majority of online content today can be classified as social media. As a part of social media, social
networks are systems of online relationships, connecting people, companies and groups (Askool &
Nakata, 2011: 208). However, the distinction between social networks and other social media tech-
nologies like the picture sharing platform flickr1 is fluent as they provide many similar features.
2.3 Social Customer Relationship Management
With the spread of social media in recent years, the concept of social customer relationship man-
agement (social CRM) has emerged. Many authors (for example Askool & Nakata, 2011: 208; Greve,
2011: 268) still understand social CRM as merely an integration of social media into traditional CRM.
However, to fully understand the concept of social CRM, one has to appreciate the differences in
communicating through social media. Traditional communication was one-way (Parsons et al., 1998:
32), pushing the messages into the market (Rowley, 2004: 25-26) and thus perceived as intrusive by
customers (Armelini & Villanueva, 2011: 33). Communication on social media, in contrast, embraces
interaction and is two-way or even many-to-many between customers (Parsons et al., 1998: 37; Row-
ley, 2004: 26). As customers have to actively engage, most social media is non-, or at least less, intru-
sive (Winer, 2009: 110).
As communication is a major part of building relationships, traditional and social CRM have to follow
different approaches. Indeed, social CRM proposes that instead of managing the relationship through
operational excellence, companies should engage in a dialogue with customers (Baird & Parasnis,
2011: 30; Woodcock et al., 2011: 52). Furthermore, it adds social features (Greenberg, 2010: 414)
that facilitate interaction between customers and the company, but also between customers and
their peers. Thus, social CRM overcomes the lack of interaction that makes so many traditional CRM
strategies unsuccessful.
2.4. Customer Empowerment
The customer-centered definition of social CRM signals one of the major paradigm changes in current
marketing research and practice: a shift of power from the company to the customers. Whereas
companies used to manage the relationship, customers are now taking over control (Baird &
Parasnis, 2011: 30). Four factors influence this customer empowerment and will be discussed in the
following: voluntary participation, information control, personal marketing and increased choice.
1
www.flickr.com
4

5. As mentioned earlier, social media is not intrusive but consensual (Armelini & Villanueva, 2011: 33).
In practice, this means that not the company but the customer decides with whom to interact (Par-
sons et al., 1998:35, 45) and that they only share data in exchange for tangible benefits or an emo-
tional experience (Baird & Parasnis, 2011: 31). Parsons et al. (1998: 35-37) thus propose five steps to
build a relationship with customers via social media: attract, engage, retain, learn and relate. Key of
this framework seems to be offering relevant content to the customers. However, this is a challenge
as many companies do not know what their customers want (Baird & Parasnis, 2011: 31).
In the past, companies’ power depended to a large extent on their control over company and prod-
uct information (Greve, 2011: 268) via their marketing and PR activities (Scott, 2011: 3-12). In social
media, however, customers are in control of the information flow. Firstly, the Internet enables cus-
tomers to access and understand more information, increasing their knowledge (Pires et al., 2006:
937). But furthermore, customers also become the creators of information by sharing their blogs,
tweets etc. (Greve, 2011: 268). Once created, the content is much more difficult for companies to
control (Langheinrich & Karjoth, 2010: 52), or even uncontrollable. Customers can thus generate
their own brand meaning online with little influence from the company (Morrissey, 2005).
The control over information becomes especially crucial as customers have become more trusting of
the opinions of friends and the social community (Hanna et al., 2011: 267; Baird & Parasnis, 2011: 33;
Armelini & Villanueva, 2011: 32). In fact, customers have built a whole social media ecosystem
around them with billions of connections (Hanna et al., 2011: 267-269), which may tarnish even long-
standing brand-customer relationships (Pires et al., 2006: 937). Customers are furthermore building
online brand communities and brand tribes, again to create their own brand meaning (Muniz &
O’Guinn, 2001). Thus, the “future of advertising is personal” (Langheinrich & Karjoth, 2010: 51) in the
sense that product recommendations and endorsements come from friends and peers and not the
company.
Lastly, customers have access to an increased number of choices via the Internet (Pires et al., 2006:
937). Customers expect personalized products and communication (Rowley, 2004: 34) and marketing
strategies such as “customer-centric marketing” empowers customers as it lets them create their
own products (Pires et al., 2006: 934). Once more, this holds the challenge for companies to know
exactly what their customers want.
These trends clearly show the empowerment of customers. Newell (2003) even talks about CMR –
customer management of relationship - meaning that customers are controlling the relationship with
no influence from the company. They for example choose the type of information, level of service
and frequency of communication they would like from the company (Pires et al., 2006: 944). Howev-
er, there is a discussion in academic research on the extent of this customer empowerment.
Reis et al. (2002: 365-370) found that there is a widening quality gap and customers are less satisfied
with products. This occurs because the buyer-supplier relationship has become depersonalized over
the centuries due to the increase in production and thus number of customers. These empirical find-
ings conflict with customer empowerment theory, which suggests an increase in the personalization
of products and communication. Reis et al. (2002: 370-371) suggest that in the web-economy mod-
ern technology allows companies to calculate the costs and profits of each customer and thus choose
their customers according to their profitability. In fact, segmenting customers is mentioned as one of
the key factors for efficient social CRM (Aljukhadar & Senecal, 2010: 429) and IT and database man-
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6. agement is becoming increasingly “intelligent” (Bonnemaizon et al., 2007: 54), providing profound
insights into customers’ behavior and attitudes (Greenberg, 2010: 417).
Also, it is argued that companies determine the type of power customers obtain, thus “controlled
empowerment” (Pires et al., 2006: 393). As an example, Pires et al. (2006: 943-944) mention Self-
Service: even though customers can control the value creation process through self-service, the
company is still partly in control as it establishes the degree of self-service. Thus, involving customers
in the production process is often merely an action to regain power (Bonnemaizon et al., 2007: 54).
Lastly, as customers’ empowerment comes from their increased knowledge and choices, the extent
of their empowerment depends upon their ability to make use of this, for example the number of
choices available and their ability to gather, access, understand and act upon this knowledge (Pires et
al., 2006: 939). Consequently, customers with no or limited access to social media, for example elder-
ly or illiterate people, might not get empowered.
3. Case discussion
In the following, several cases will be presented and discussed regarding the influence of social me-
dia on the company-customer relationship.
3.1 Deutsche Bahn
In 2010, the German train operator “Deutsche Bahn” (DB) launched its first facebook page aimed at
selling cheap tickets. The page backfired as the fast growing number of users used it as a platform for
complaints. DB reacted by ignoring and deleting comments and a major wave of negative publicity
followed until the page was eventually deleted (Taz, 2010). Surprisingly, the campaign had no direct
negative effects on online sales (Schutzmann, 2011). One year later, DB started its second facebook
page. This time it was built as a communication tool, questions were answered quickly and critical
comments encouraged. (Buggisch, 2011) The launch of the second fan page received a positive feed-
back from users, social media experts and mass media and negative discussions stayed at a minimum
level (Vielmeier, 2011).
This case shows the dangers of ignoring the empowered customer. DB did not understand their cus-
tomers and how to efficiently use social media. Instead of making their page about their customers,
they used it as a mere sales channel. However, they did learn their lessons when launching the se-
cond fan page. It enabled an active dialogue between DB and its customers as well as between cus-
tomers. It had a long term focus and was tailored at customers’ needs. Yet, DB did not lose complete
control over the relationship. Firstly, by being actively involved in the discussion, they are able to
show the company’s position and determine the direction of the discussion to some extent. Also,
through additional features such as videos and interviews, they can use traditional marketing tools to
spread information. But instead of being interruptive, customers actively decide to use them, thus
the content becomes highly relevant. Lastly, DB can find about customers’ problems, needs and
complains - this knowledge is the basis for developing the relationship.
3.2 Nestlé
Also in 2010, a viral video criticizing Nestlé’s use of uncertified palm oil led to a heated discussion on
Kit Kat’s facebook page. The protest was intensified as Nestlé did not only delete comments, but also
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7. posted prohibitions and other insulting statements. (Langheinrich & Karjoth, 2010: 52) Even though
the company was able to calm the discussion by admitting their mistakes and starting a dialogue with
customers, this incident is still considered to be one of the biggest social media crises. (Hillenbrand,
2010) However, it had no detectable influence on volume sales either (Phillips, 2010).
This case shows the power customers have through creating content. Nestlé was not able to control
their fans’ criticism by deleting it, but rather intensified the confrontation. Also, Nestlé lost the con-
trol over the relationship by using the page as a one-way communication tool, destroying relation-
ships they had built over years. The example also shows that customers had the power to force
Nestlé to admit to their mistakes and implement changes. Lastly, Nestlé was forced to change their
social media communication strategy and allow interaction to calm the discussion, highlighting the
importance of understanding social CRM.
3.3 X Factor
For the last years, the winner of the British talent show “X-Factor” has always been number one dur-
ing the prestigious and lucrative Christmas week due to a “well-oiled marketing machine”
(Langheinrich & Karjoth, 2010: 52). In 2009 however, a group of critics founded a facebook group
with the only aim of pushing an alternative song. Indeed, they managed to motivate so many fans to
actually purchase the Indy song that it did surpass the X-factor song on Christmas. (Langheinrich &
Karjoth, 2010: 52)
This case shows the power customers have through their social media ecosystem. Firstly, by inviting
friends, who invited friends, who invited friends to join the campaign, critics were able to build a
huge fan base that was stronger than the multi-million marketing campaign of X-Factor. Secondly,
the Internet enabled the campaign to begin with by making it possible to purchase a song that was
not available in stores.
3.4 Nutella
Ferrero started their own social network centered on the Nutella brand called “my Nutella The
Community”2 to strengthen the online brand community. Customers are encouraged to share their
stories, thoughts, pictures etc. about Nutella, but also about the product’s values, and thus become
“architects of [the] relationship” (Cova & Pace, 2006: 1096). The website also facilitates communica-
tion between customers to spread the Nutella myth and to encourage personal marketing. However,
Ferrero controls the type of interaction by giving a limited choice of features, for example offering
Nutella-centered profiles but not chat rooms (Cova & Pace, 2006: 1098), thus keeping the focus on
the brand.
By building an online community, Ferrero is following a rather offensive social media strategy. On the
website, the company tries to strike the balance between acknowledging the power of customers by
encouraging interaction, but also to control customers by restraining interaction features. It is no-
ticeable that there is very limited communication from Ferrero itself, leaving customers to shape and
develop the brand. This shows the importance Ferrero puts on brand communities and tribes.
2
www.nutella.it (only available in Italian)
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8. 4. Analysis
The cases clearly show the empowerment of customers in the buyer-supplier relationship. They not
only pressure companies into actions, but also manage the relationship with them.
Firstly, the four factors empowering customers already discussed in literature are confirmed by the
examples. It has become evident that customers’ participation in a relationship is voluntary and using
a fan page as a mere sales channel does not work as it fails to offer relevant content to the custom-
ers. Even though tangible benefits might initially work as a motivation for interaction, customers
require further experiences to engage and retain a relationship with the company. Similar findings
have been made by Baird & Parasnis (2011: 35). Also, companies cannot control customers’ access to
and sharing of information. As shown in the cases, not only will customers always find a way to share
information within their social media ecosystem, but furthermore trying to restrict customers’ inter-
action leads to a storm of protest that has the potential to destroy a long-lasting relationship. In addi-
tion, the power of personal marketing has been demonstrated as recommendations within the social
ecosystem can beat even expensive marketing campaigns. Only the power gained by the increase in
choice has not become completely obvious through the cases, possibly resulting from the limited
number of cases.
Moreover, an additional factor empowering customers has been found that has, to the author’s best
knowledge, not previously been discussed in literature. There seems to be spill-over effect from so-
cial to traditional media: important failures, but also successes, of social media campaigns are also
covered in traditional media, reaching a broader audience including customers not active on social
media. Thus, social media does not only affect the online but also the offline relationships between
customers and suppliers, also empowering customers with no access to social media.
Nevertheless, the empowerment of the customers is not as strong and uncontrolled as literature
might suggest. In fact, companies can still retain some of the power in regards to managing online
relationships. Similar to the Self-Service example, companies can control the power customers get by
deciding which interaction features to offer. However, this does only work to some extent as cus-
tomers find other, uncontrollable, ways to communicate. Rather than trying to control customers, as
suggested in literature, companies can manage the relationship by actively participating in a dia-
logue. They can influence the direction of the discussion by represent the companies’ opinion, an-
swering questions and reacting to criticism. Furthermore, companies can also make use of traditional
marketing in social media to spread information. Tools like advertisements, videos etc. might even
work better online as they reach a more targeted audience. Social media marketing thus is “highly
fine-tuned brand management” (Cova & Pace, 2006: 1102) that has to take into consideration all
factors of customer empowerment.
There was no evidence supporting the argument that companies have the power to choose between
customers. Rather, it has become evident that problems in a relationship with few customers can
affect the relationship to many other customers through the social media ecosystem. Further case
discussions would be necessary to research this contradiction.
The most striking finding is the lack of financial consequences of a social media crisis. Even though
the brand and the relationship with customers were clearly damaged, no direct effect on sales was
detectable. This could be a sign of an attitude-behavior gap studied by Carrigan and Anttalla (2001:
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9. 568ff), which describes the phenomenon that customers express an attitude against unethical prod-
ucts but that this attitude has no influence on their behavior. This attitude-behavior gap might be
even bigger when comparing online attitudes, heavily influenced by the perceived opinion of the
social media community, and individual offline behavior at the point of purchase. Also, it could be
that the protest seems immense online, but that the majority of customers are offline and thus not
influenced by the online discussion (except through coverage in mass media). In fact, studies have
shown that most online users only interact occasionally with brands (Baird & Parasnis, 2011: 31).
However, these reasons are entirely speculative and require further research.
5. Conclusion
Social media has heavily influenced the customer-supplier relationship and led to a shift in power
from the company to customers. Factors such as voluntary participation, information control, per-
sonal marketing, increased choices and a spill-over effect to traditional marketing have given cus-
tomers the power to manage the social relationship. However, companies are not without any influ-
ence. They can strengthen the relationship by actively participating in a dialogue with customers and
by encouraging interaction.
Social CRM presents a major opportunity for companies to connect to their customers and under-
stand their needs and attitudes. This means that companies have to offer customers an integrated
social media strategy that facilitates social CRM. By following the “attract, engage, retain, learn and
relate” framework (Parsons et al., 1998) companies can offer a meaningful experience for customers
– key for building a relationship (Bonnemaizon et al., 2007: 51). Emotional experiences, together with
the access to recommendation, will make customers less reluctant to share their data with compa-
nies (Baird & Parasnis, 2011: 33-34), creating an experience-data-cycle: the more valuable the expe-
rience to customers, the more the company will learn and be able to improve the experience. As
customers gain more power, they also have to be included in the value creation process
(Bonnemaizon et al., 2007: 55). However, this should not be used to control customers, but be part
of a dialogue in which the company engages with its customers. Simultaneously, companies have to
bear in mind the risks associated with using social CRM, not only online but also offline. As shown in
the cases, social media holds the potential to destroy relationships that have taken years to build.
This paper is based on a thorough literature review and case discussion. However, more cases would
make the findings more reliable. Also, interviews with customers could be included to analyze social
relationship management from the customers’ perspective.
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