Gartner has just been published its latest edition of "Magic Quadrant for Social CRM" -- and with it, the challenges facing vendors in this space have finally been articulated. Not least of those problems is the need for vendors to demonstrate the economics of deploying these Social CRM systems in multiple customer relationship management use cases, including marketing, sales and customer service.
Social CRM Magic Quadrant
What is interesting about the Magic Quadrant for Social CRM is that it is one of the only MQs researched and published this year where the Niche Players vastly outnumber both the Leaders and the Challengers, while only two companies made it into the Visionaries quadrant.
The Leaders, as might be expected, include Salesforce, Jive and Lithium, while Oracle -- surprisingly enough -- only made it into the Challengers Quadrant, along with Bazaarvoice.
Whether the low number of Leaders is due to the fact that Social CRM is still an emerging market remains to be seen. But, Gartner notes, one of the key characteristics of the market over the past year has been a burst of acquisition activity as vendors jostle for position.
Today we will take a look at the market itself as well as emerging market trends. On Thursday, we will take a look at the Niche Players -- who constitute the vast majority of players in the Quadrant -- to see whether this situation has evolved because individual vendors develop a single product in a niche area and stick to that, or whether there are other reasons.
If the "niche product" trend is indeed the case, then next year it will likely be dominated by more acquisition activity, with the larger vendors seeking to fill holes in their own portfolios by buying up what they don’t have already.
Gartner Defines Social CRM
How does Gartner define Social CRM? According to the MQ, it is a business strategy that generates opportunities for sales, marketing and customer services, while also benefiting online communities.
To succeed in the market, vendors need to provide ways for the customer to manage their relationship with the enterprise. The result is that Social CRM applications need to provide a number of different customer engagement levels. Gartner says that all Social CRM applications should:
- Encourage many-to-many participation with customers
- Share user-generated content and data
- Provide communities with high levels of autonomy and engagement levels
- Provide the community with balanced purpose
It only works if users participate of their own accord -- and generally, they will only do so if there is some kind of reward system in place. However, enterprises also need to be able to see measurable benefits, or they will not be inclined to invest in Social CRM technologies.
Value and profitability are provided by:
- New customer insights
- Products and services differentiators
- Pushing sales
- Building brand trust
- Improving customer experience
Overall the, Social CRM applications should:
- Provide customers with the feeling that they are involved in making decisions of their own accord -- as opposed to feeling forced into something by the enterprise producing the product.
- Give customers more control in their dealings with the enterprise, particularly in the customer’s online presence and their online reputation. It should also give customers control over what personal information is used.
- Provide customers with the feeling that they belong to an identifiable community.
There are other tools outside of the Social CRM space that are used by marketing, sales and customer service -- like multichannel campaign management, e-commerce, and web content management -- but Gartner has not looked at those in this MQ.
Again like all other MQs, Gartner recommends that any company considering investing in this space should look at all the products in all the Quadrants before making a decision. They point out that needs will often be best served by products that do not fall into the Leaders Quadrant -- especially in an environment where there are so many Niche Players.
Social CRM Market Context
But before looking at the Leaders it is necessary to place them in the context of the market as it stands at the moment. As a market space, it is relatively new, with the first Quadrant developed only three years ago. It was developed, Gartner says, because of the explosion in the use of social tools by enterprises looking to develop a competitive edge in marketing.
Gartner anticipated a rapid series of mergers in the space and the subsequent emergence of a number of Social CRM applications that would support multiple CRM use cases -- but it seems that this prediction was a bit wide of the target.
In fact, according to Gartner, the expected mergers didn't happen in the two years that followed the emergence of the first Social CRM MQ. Instead the market remained fragmented -- and it is only in the last 18 months that consolidation began to happen. Notable acquisitions include:
- Salesforce bought out Radian 6 in March 2011. This finally produced the Salesforce Marketing Cloud product that was launched at the recent Dreamforce conference.
- Oracle took over Right-Now Technologies, but remains this year in the Challengers Quadrant
- Visible Technologies took on Cymfony
- Oracle also took on Vitrue
And there were others that we also covered. Gartner says this process has still not finished and it is expecting more merger activity in the coming year. The original predictions of the emergence of multiple-use Social CRM applications is starting to happen now, albeit two years late, Gartner says.
In this MQ then, Gartner has been quite tough with its inclusion criteria to reflect this idea of multiple use cases for Social CRM. While the revenue bar has been fixed at US$ 10 million in order to distinguish vendors that are viable from those that it says have poor viability, vendors hoping for inclusion were also asked to provide four or more Social CRM uses cases.
Social CRM Magic Quadrant Leaders
The result is that vendors who focused solely on social media monitoring, social intelligence, or ideation were excluded -- this meant that IBM’s Coremetrics, Spigit and NM Incite didn't make it into the MQ report due to their single-use focus.
The objective of the MQ, Gartner says, is to identify the vendors that have sufficient financial muscle to survive in this very turbulent market. Vendors need to assure their clients that they can purchase these products, safe in the knowledge that they will not have to purchase 20 other technologies as well.
In this market then, the Leaders are those who provide technologies that benefit both the company and the community -- and also benefit enterprises by demonstrating ROI. They must also demonstrate support for multiple CRM processes.
To even get into the MQ at all, vendors must:
- Cover at least two of the three main areas of CRM -- sales, marketing, customer support
- Must have references from at least five clients who actively using the product in 2011
- Must have shown at least a 20 percent revenue growth in 2011
- Include functionality for marketing, sales or customer service departments -- such as tools for social monitoring, managing customer communities, fostering customer interaction and and managing integration with traditional CRM applications.
In the Leaders Quadrant this year (in alphabetical order):
Jive has remained in the Leaders Quadrant as it continues to gain enterprise-scale customers through its broad use of Social CRM and its substantial market visibility.
- Strengths: Now a public company, it continues to experience strong growth, with revenues of US$ 78 million in 2011. Its partnership program is one of the most developed and has a strong and broad vision for the development of social tools. It goes beyond CRM, enabling it to embrace major new use cases. Jive is making a big shift to packaged solutions and has had a number of new releases this year.
Lithium is still in the Leader Quadrant because of the breadth of its Social CRM use cases, continued strong growth and focus on measurable Social CRM outcomes.
- Strengths: Continued strong growth in 2011 -- Gartner says this is one of the top five (in terms of revenue) of Social CRM. It provides hosted peer-to-peer communities with advanced reputation/moderation functionality as well as support for external social networks like Facebook. It has a wide range of use cases in customer service workflow, such as prioritization and escalation. It offers ROI models for clients and benchmarks have been written into contracts for clients.
- Cautions: Its analytics do not suggest prescriptive actions when elements in customer behavior changes. It should also continue to strengthen marketing use case vision within and outside of Facebook including integration with marketing applications like multichannel campaign management. There is also limited evidence of social sales and product review use cases.
Salesforce is still in the Leaders Quadrant by continuing to place big bets with aggressive acquisitions as well as pushing to unlock new use cases.
- Strengths: Gartner says it has the second highest level of social revenue in this year’s MQ with acquisitions likely to make it the lead vendor in terms of revenue within the next 12 month. Its vision for Social CRM is broader than CRM, but also includes it, and has the broadest number of Social CRM use cases in the market. Salesforce also continues to develop Chatter for more use cases.
- Cautions: Aggressive acquisitions means it still has to integrate all for a coherent whole, but it is working on this. It still does not have its own platform for managing communities, which it will have to do to build out a more complete offering. It needs to add more advanced forms of social analytics, instead of relying on a number of partners at the moment to fill this gap.
And that’s the Leaders. Later in the week we will take a look at the Niche Player segment, which has a much wider range of vendors.