John Ragsdale has an excellent thought provoking piece on what to expect and how to deal with this economic climate. One of the best things about John’s analysis is that it harkens back to the relatively recent economic crisis of 2001 and gives us the experiences learned the last time around. As the old saying goes, those who do not understand history are doomed to repeat it, so let’s avoid the traps uncovered last time around.

Here are some of these traps:

It’s a mistake to view Support as a cost center . The trouble is that cost centers invite an unfair proportion of cost reductions in bad times because they’re viewed as not driving revenue. Unfortunately, we increasingly live in an age where service matters and cutting service leads almost immediately to reductions in revenue. As Ragsdale points out, service is no longer a cost of doing business, but instead has become a primary value driver, especially for technology companies. Many have even created a Chief Customer Officer or similar role to underscore the importance.

It was a mistake to assume short term cuts won’t have long term impacts . The experience in 2001 as John points out was:

We tried every conceivable way to cut support costs 5-7 years ago, and customers voted with their feet. Maybe I’m naive, but I think C level execs today understand the link between customer satisfaction and customer loyalty, and I’m hopeful they won’t make knee-jerk cost cutting moves that drive away customers.

It’s a mistake to trust your Customer Service Experience to the lowest cost outsourcing bidder . This is just another cost cutting measure that was tried and failed in the last go round. The Customer Service from these vendors was so bad that many companies faced costly publicity about how bad it got. This even led some companies to pull back from some of their offshoring initiatives.

It’s a mistake to assume self-service will solve all these problems . Traditional thinking has been that self-service can be the silver bullet. Let customers help themselves by accessing a knowledge base and all will be well. The process is popularly called deflection. Unfortunately, Ragsdale just finished another blog post immediately before the one we’re writing about that shows how far from reality this assumption can be. Call incidents are up in 2008, but the success rate using self-service is down. In fact, there has been a steady downtrend in the success rates for the self-service approach:

That means costs to service customers directly have been steadily rising, and at a time where satisfaction matters and companies can least afford to pay through the nose to deliver service because of the tough economy.

What’s the answer?

John ends on a high note when he advises Customer Service departments to push communities. At Helpstream, we’re all about the advantages of integrating communities with traditional Customer service tools like case management and knowledge bases for self-service. We like to say that deflection is bad, but engagement via community interaction is good. This should come as no surprise.

Customers need service when they have a problem. There is seldom a lonelier time than when you have a problem and don’t understand how to fix it. Being greeted with a blizzard of knowledge base articles is one answer, and if you know getting to a person that can really help is going to be hard, time consuming, or expensive, it may beat that alternative, but it remains a lonely business. In many cases customers can help themselves successfully. A lot of questions can be answered fairly simply. But in other cases where the customer is really lost or confused, they need help from a real human being to get back on track.

Communities deliver that help. They let people feel a sense of participation, get help from a real human being, and in many cases, talk to someone just like themselves who has already seen the problem before and knows immediately how to fix it. The other big advantage of communities is they throw off more useful information for the Knowledge Base in a timely fashion. Answer a question once, and that answer is there for the next customer who has the same question to find. Waiting for a Knowledge Base to be brought up to date for the latest crop of questions often means the answers are too late.

Are you pushing your customers to try your community? Do you have a community? Try Helpstream. We’ll make it easy for you.

This weekend Helpstream adopted a fresh new look and expanded content on our website . Among all other things our primary objective in doing this is to engage visitors in a conversation about Social Customer Relationship Management (CRM) and discuss best practices in customer service. Why do this now? Because it’s clear the market wants to know more about the value of integrating social Web technology with CRM. We needed a more effective way to support the volume of interest in Social CRM.

Last week the SSPA’s John Ragsdale raised the question about community and customer service in his blog post What’s missing from the Web2.0 ROI story . Industry heavyweight Oracle has moved aggressively in this direction by merging Community and Sales and by partnering with Helpstream for self service and community case resolution. Salesforce isn’t waiting either. Their Community and IdeaExchange telegraph a shift from traditional focus on process-oriented CRM to Community.

Suffice it to say, there’s an active debate about the role of social media in the enterprise ranging from customer intimacy via messaging platforms to recent market research rating corporate familiarity with a range of technologies including social networking, wikis, blogs and message boards. If you are a customer service practitioner this can make for a bewildering number of positions to consider.

This brings me back to our new website. It’s the latest, but by no means the first or last word on the subject from Helpstream. We set out in 2004 with a group of former Remedy engineers to build an innovative customer service application, and we wound up developing a customer engagement platform driven by a whole new way of thinking about customer service ( try it for yourself ).

You’ll be hearing more about the social Web and Helpstream soon as we launch our own community this Fall. This community will provide you insights directly from practitioners including our customers to whom we owe a debt of gratitude for their innovative spirit and financial support. Moving forward the Helpstream website will provide a gateway to this community. It will help you sort through the alternatives and select winning strategies to build your own vibrant customer community. You can be first to receive notice when the Helpstream community is launched by registering for your workspace today.

In the meantime you can join the conversation live. Please visit us at Oracle OpenWorld , the SSPA Leadership Conference , and Dreamforce where we’ll be talking with customer service practitioners in person to continue this lively conversation.

The Trough of Disillusionment represents dangerous waters, but like the southernmost reaches of Africa and South America, making it through those waters opens the doorway to very profitable business. In fact, I see the Trough of Disillusionment as nothing more than the period during which real customers get real ROI’s going (or not, you may not get back out of the Trough) that prove the point. Indeed, a careful look at the Hype Cycle above shows that one of the things that happens is generic technologies like Web 2.0 are separated from actual solutions with an ROI, like Corporate Blogging and Wikis.

This brings me to the subject of this post: Where Does Web 2.0 Make the Most Sense?

First, let’s be clear about the meaning of “Web 2.0.” I’m using it here to refer to collaborative technologies on the web. Pretty straightforward, and there are a lot of things that fit—blogging (collaboration is via comments), Wikis (collaboration on documents), Social Networking, Forums, and all the rest that many of us have come to enjoy using on the World Wide Web.

So what makes for a successful Web 2.0 application? Which ones, in other words, will emerge from the Trough of Disillusionment to enter the Slope of Enlightenment? What makes sense for businesses?

Pretty clearly it is those Web 2.0 applications that can deliver a real ROI. In fact, as we read about how today’s economy is already impacting IT spending , we can see that ROI is more important than ever. I will add that delivery along SaaS lines rather than On-premises software is likely also critical to ensuring fast ROI during a tough economy.

One fruitful source of such applications is the very same markets and products that have produced significant ROI in the past. Beyond this, we have to look at what Web 2.0 brings to the table and choose those markets which can benefit most from a Web 2.0 spin. As Krissy Danielsson suggests , not everyone needs Web 2.0 all the time. Which categories thrive on collaboration? What are reasons to collaborate that will bring people back time and again for more?

At Helpstream we see this collaboration opportunity as being strongest for Customer Service and CRM. There are several reasons for this. First, these are inherently collaborative exercises. Having a “Customer Relationship” implies collaboration, doesn’t it? The same is true for Customer Service. Second, that collaboration has the ability to produce tangible benefits if done well. Everyone understands the value of high customer satisfaction through good customer service, and it’s hard to imagine a sales cycle going smoothly if the collaboration between seller and buyer is not going smoothly. Customers and prospects also get something out of the collaboration. In fact, we see this type of Community as a destination community that can help build participation for other sorts of communities over time.

How does Web 2.0 help? Pretty simple. First, it puts a lot more power in the hands of the customer. They tend to like that. It’s Genuine, and in this overly homogenized and highly produced world, Genuine is hard to come by. Second, it enrolls multiple customers and employees to work together. Whether that work consists of coming up with new best practices, helping one customer with a problem overcome it, or helping a prospect to understand their needs better, collaboration really works, especially when you can bring customers to that table and not just the folks doing the selling. It’s reference selling at its best and hard to beat.

In the social web applications space there is Politics4all. I suspect they’ll help redefine the meaning of grassroots politics – at least here in the US. Delver is here with a fresh way to explore your social network. Want to analyze your blog? Watch out for Statzen. CTO Jackson Miller gave me a quick demo that rocked!

But there were also interesting companies and conversations outside of the realm of social computing. For example, Flypaper demoed their flash-like content generation tool. I’ll be taking it for a test drive very soon. Technology enthusiasts were everywhere -- Mark Cuban even stopped by the Helpstream booth and gave us a thumbs up for our brief demo.

It’s interesting to see here the number of ways people communicate electronically – blogging, chatting, emailing, texting, and tweeting to name a few. A few years back, we’d just send email and when we were on the road, we’d log on at the end of the day to check our inbox. Now, the inbox, messages, and tweets travel with us on smart phones. The PDA for the most part has come and gone, devices and communication channels have merged.

I get the sense from seeing so many new social computing solutions here that companies and innovators are trying to figure out what this trend in ubiquitous communication means for core elements of the enterprise. As individuals continue to evolve the way they communicate, organizations must follow. That’s what makes some of the innovations I’ve seen here so interesting. They have profound implications for the way marketing, sales and service teams will need to operate in the very near future.

But all this talk of conversation, or as I like to think of it: participation, has gotten me thinking about Customer Service. The reason is that conventional Customer Service is the moral equivalent of shouting those messages at our customers. We let them try to find the answers in a Knowledge Base, which is what passes for self-service in this industry. If that fails, and if they paid for the right level of service, we then let them open a case and talk to a real customer service representative. Of course this still is barely at the level of a conversation. Typically that customer service representative doesn’t know enough to help us, and they are trained in the art of what the industry calls deflection. They want to keep us away from the real experts as much as possible.

How should this process work in the new Web 2.0 world? What is participation, and what should the Customer Service experience be in order to delight our customers?

R. Todd Stephens tells the cautionary tale of HSBC’s attempts to quit providing overdraft protection for recent students. It seems they made the unilateral announcement they were doing this only to be greeted by a storm of discontent organized by a national student union on Facebook called “Stop the Great HSBC Rip-Off!!!” It drew 2,500 students in just a few weeks. As Stephens puts it, this is no longer 1985 and customers don’t have to sit around and put up with whatever they’re handed. An important quote right at the end of the article is this one:

Social media simply breaks down the discontinuous nature of relationships and bonds us together, not by means of geography or family linage but one of interest.

This actually puts a finger right on the essential issue—communities joined by shared interests. That is exactly what customer communities ought to be, and it goes to the reasons why they are so important for Customer Service. If you want to maximize the Customer Service experience, wouldn’t it help to let customers interface with others who have a shared interest? Is there any better match than your other customers? If you’re seeking help, do you prefer to talk to the usual customer service representative on the phone, or would you rather talk to someone like you who already got through the problem and can tell you how to fix it? Rather than force a decision, why not offer both?

This is exactly what Helpstream is all about. We provide both a Community-based Customer Service experience that enhances contact between customers, as well as a traditional Case Management approach that has customers talking with customer service agents.

There’s no easier way to poison a relationship that to try to manage it like a process, and customer relationships are no exception. Process derails intimacy. It deflects authenticity. And it’s often very offensive.

So here we are, 10 years after the dawn of CRM, and we’re still struggling to figure out how to effectively engage with customers. With most CRM systems in place today, the only relationships being managed effectively are the relationships between sales reps and their quotas . Talk about a fleeting relationship!

It’s time to move forward. Driven by the Web, we’ve entered an era when more effective customer engagement is a strategic imperative. Customers don’t want to be managed, they want to be served. The Web has raised their expectations. Customers vent on the Web and the world hears about it. They find each other and collaborate on the Web without any interaction with the company providing the product or service. For many companies, the Web is beginning to disintermediate them from their most valuable asset of all—their customers .

It’s time to stop deflecting and start truly engaging with your customers . Helpstream is the world’s first truly social customer engagement system that allows you to do exactly that. It’s more than a product, it’s a whole new way of thinking about CRM.

If you’re trying to reinvent your customer relationships, we’d love to hear from you.

Moran lists 3 reasons the sites fail: too much focus on technology, too little focus on the people (30% of online communities are run by part-time employees or just a single PR person), and measurement of the wrong metrics for success. On the measurement front, sites are chasing eyeballs instead of building interaction and creating a level of comfort that incents your most loyal users to evangelize products for you.

ReadWriteWeb’s Marshall Kirkpatrick picks up the thread with, "Corporate Social Networks are a Waste of Money." They reference the original study, done in conjunction with Beeline Labs, and some of the results don’t look so bad. For example, communities can increase revenue per customer by 50%, they can increase the likelihood of a successful product introduction, and they can reduce costs for a lot of other activities.

Looking at all this, the answer seems pretty obvious: many of the companies in the study did not provide a compelling incentive for customers to get involved with their communities. Many of these communities are set up with the idea that people want to come hang out in a community just to chat about a brand. As RWWeb puts it:

Let's face it, though. Social networks where a brand name product is what everyone rallies around are a dumb idea. They are stupid. No one should submit themselves to the indignity of creating a user profile and friend connections based on cola or cat litter. We have written before about the never ending market for niche social networks and we're down with that. Hell, we like to read about countless niche social networks on the Ning Blog just for fun. If brand-centered social networks are failing, though, it's probably because they are brand heavy and stupid.

It’s a bit hard hitting, but essentially true.

The problem here is not unlike the one retailers face when siting their storefronts. Are you a "destination" retailer, or do you rely on other destination retailers to bring traffic past your store? As it turns out, a lot of the value and benefits around community for marketing are not "destinations." It isn’t that people don’t want to talk to you about your brand, it’s just that they don’t get out of bed to do that, especially if they don’t have any kind of relationship with your company to start.

So how do you jump start the demand? How do you get your customers to attend the party? Much like a shopping mall involves anchor tenants to drive destination traffic that a lot of other interests can benefit from; the same analog exists for communities.

The destination need for corporate communities is not marketing or sales, it’s customer service. Build your community around customer services. That’s the reason for customers to get signed up and start interacting. Show them a great service experience and that gets them coming back to the community. Once you’ve got a destination community, you have the opportunity to expand the experience. Marketing and Sales can then begin to add value and receive benefits.

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Seth Godin writes a great piece about how the Internet doesn’t care what businesses want to use it for.  If business wants to use the Internet, it has to provide a value that customers want to receive.  That’s exactly my point in using Customer Service as the destination for your community.  It’s a value customers want to receive.

R. Todd Stephens over at the Collaborage writes:

Online communities seem to struggle when there is no real business reason to get involved. Focusing on the business environment, people need a reason to come to the community. This reason may include customer support, tips, techniques, best practices, news, or simple sharing of information. Communities that try the open end or "anything goes" approach will struggle to stay afloat.

My simple answer to that question is that a Web-based business is a business or organization that would be seriously crippled if the Web were to suddenly shut down overnight.  Sort of like if we suddenly lost electrical power.

Like electricity, the Web has become a neccesity.   We assume it’s there, we leverage it to innovate and to create sustainable competitive advantage, and it impacts everyone and everything we do.  Our dependence on the Web and its impact on how we do things wasn’t planned in advance.  It just happened.  Kind of like our dependence on electrical power.  This super-utility we call the Web connects so many things—people, ideas, data, systems, information, processes, organizations, social structures, languages, and cultures—that the methods by which organizations will maximally leverage the Web going forward are still evolving.  All we know for sure is that the 3 pillars of business—people, process, and technology—will be assembled in radically different, Web-leveraged ways to create value for customers.  The only thing that won’t change is the need to have happy customers.

That’s right, at the end of the day business is all about creating happy customers.  Except for a few monopolists, that has always been true.  Yet it’s striking how, even after organizations have discovered ways to leverage other parts of their business through the Web, we live in a time when customers are less happy than before.

Because of this, very few organizations are satisfied with the state of their customer service processes today. When you dig into the problem, you quickly discover that a lot of the blame lies with the current customer service systems.  The applications the companies are using haven’t been able to keep up with the fundamental challenges companies face when they move the bulk of their business to the Web.  SaaS was a good first step, but the early SaaS vendors just took the old way of doing customer service and put it on SaaS.  Fixing the Web-enablement problem requires a clean sheet approach.   Customer service business processes need to be re-engineered for the Web, with applications designed and architected specifically for the Web.  The user experience has to be re-rengineered to fit the new and evolving expectations of Web-enabled customers.  That’s exactly what we’ve done at Helpstream, providing real advantages to organizations that recognize that the Web has changed things.

Think about it. Old-style customer service is such an “us” vs. “them” proposition.  Customers of Web-based businesses won’t stand for that.  They don’t tolerate having their problems deflected, they need partners. They expect collaboration.  They want two-way conversations.  They want the crowdsourcing of knowledge and they want to participate in a community.  Savvy Web companies, for their part, recognize that their customers often know more about their products and services than they do and that customers want to participate.  They want to tap into the Voice of the Customer.  They want to invite their customers to engage. Leveraging the Web, we’ve enabled all of this and more with Helpstream.

But that’s only the first step.  It’s very easy to see that once a company starts broadly engaging with its customer base using the Web and really learns how to listen, the next big step is figuring out how to take those insights and make them actionable across the entire organization.  The strategic operational challenge becomes getting customer engagement activity more tightly integrated with business systems and processes.  Leading organizations want to get insights derived from collaboration with their user community turned into actions that yield real, positive results.  For them, Web-leveraged customer service is only the beginning.  Helping these organizations turn the Voice of the Customer into automated, actionable insight is the next big step for us here at Helpstream.