According to research and analysis firm Gartner, Inc., only 50 percent of Fortune 1000 companies will receive a worthwhile return on investment from their social customer relationship management (CRM) initiatives by the end of 2012.

"For the 50 percent of Fortune 1000 organizations not determining, or even measuring, ROI, ignorance will mean failed projects," said Adam Sarner, research director at Gartner. "Among the companies who will not see a worthwhile return, only 20 percent will even have the data to evaluate where their social strategy is falling short. These organizations will be unable to justify future funding."

Looking for Measurable Results

Gartner predicts the worldwide market for social CRM software licenses and subscriptions to total $2.1 billion in 2012, up from $850 million in 2011, and that social CRM revenue will represent 10 percent of the overall CRM market.

Despite the uptick, Gartner sees the success of social CRM over the next two years depending on how well companies and social CRM technology providers can make these projects more than just social objectives by tying them to clear and measurable business objectives. Three-quarters of new social CRM initiatives that receive funding will have a business case incorporating measurable ROI by the end of 2012, Gartner predicts.

"Social data, such as numbers of fan pages and weekly Tweets, is not enough to correlate with the contribution of top business objectives," Sarner said. "ROI, measurable business value and budget justification for social projects are becoming unavoidable topics for many organizations."

Differentiating Social CRM

Although social CRM was mostly at first a marketing concern, it has trickled down to other areas of the enterprise , from marketing and sales to customer service and support. Social CRM, for example, is of growing importance to lead generation and cross-selling and up-selling capabilities, as well as other sales functions. With this is mind, Gartner predicted business-to-business applications for sales use will have the fastest growth and will account for 30 percent of social CRM spending by 2015, up from 5 percent in 2011.

In the current landscape, social CRM vendors differentiate themselves based on functions, analytics, ease of use, and professional services. Over time, however, social CRM providers will find it harder to gain an advantage without providing unique core functions, showing quantified business cases, and delivering repeatable social CRM processes, Gartner said.

We caught up with Rob Enderle, principal analyst at the Enderle Group, to get his take on the ROI lag with social CRM. He told us it's difficult to measure the ROI with any new technology, but with social technologies, metrics are perhaps even more limited.

"You may actually be getting returns before you are able to see them," Enderle said. "The benefits of social CRM are typically higher customer loyalty, which addresses customer turnover and customer retention costs. But unless you are really measuring those costs, you are not going to pick them up, and typically it's a benefit that occurs over a long period of time."
 

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