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Once the consumer world shifted primarily online, the business world followed. The move to relating to the customer who absorbs and shares products and information in 140 characters or less culminated with the rise of social customer relationship management (CRM). The market for social CRM, and the applications it has produced to track customer habits, relationships and activity via social media platforms, has drastically orbited into relevance in the past year.

Everyone is abuzz about social CRM, and social CRM applications are now a must have. The market for social CRM is decidedly up, while the global business market is learning how to operate within it. The results so far have been positive, but one glaring issue has come to the surface: Not all businesses are making a return on investment (ROI) with their social CRM strategies.

“For the 50 percent of Fortune 1000 organizations not determining, or even measuring, ROI, ignorance will mean failed projects,”

If the social CRM applications a business is using, whether they’re to monitor customer activity or manage cross-selling, aren’t earning that business money, then what is the point? Vendors and buyers in the social CRM market are wrestling to find the answer now, since social CRM has proven worthwhile otherwise. For example,

  • Productivity in sales teams using social CRM increased by more than 25 percent.
  • Sales representatives have a better picture and understanding of the customer via insight into their online profiles.
  • Businesses seem more “in touch” with their consumer base when they are interacting with them in the same social media community.
  • Business-to-business (B2B) social CRM applications allow sales teams to share pertinent information about consumer habits and organize them into a more clear database.
  • Sales teams can better track a customer’s satisfaction post-purchase.

Clearly, social CRM strategies are worth keeping. Now, the market is moving to hone the much-talked about trend into a more stable, money-making venture. Afterall, a trend only becomes a permanent strategy once its ROI prove to be continually beneficial.

Information technology research group Gartner looked into the ROI of social CRM applications earlier this year and discovered that only half of the Fortune 500 companies using social CRM will receive a worthwhile ROI from their social initiatives. Essentially, the research results elicited the proverbial shout of, “Not so fast!”

As much as the findings were surprising, they didn’t cast a failing grade on the social CRM experiment. Instead, it highlighted the holes in the social approach to customer management and sales. In short, it found that social CRM needed to be more comprehensive in tying improved customer relations to an improved ROI.

“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.”

The report highlighted that companies have yet to determine how to properly track the ROI gained from social CRM, as well as implement RIO strategies. Success of social CRM strategies had to be linked to actual dollars as opposed to the number of retweets a company received, according to the report.

“ROI, measurable business value and budget justification for social projects are becoming unavoidable topics for many organizations,” Sarner said.

Although the ROI for companies using social CRM is hanging in balance, the market for the social applications is going up, up and up. The market for social CRM is expected to surpass $1 billion by year-end 2012, according to Gartner. The predicted is a jump from the previous year, where revenue reached about $820 million. The market is expected to continue to grow with 30 percent of social CRM spending coming on the business-to-business side, too, according to Gartner.

However, much like the factors needed to improve ROI, the social CRM market will only continue to grow if vendors can prove that their social applications tie to actual ROI. Businesses understand the customer relationship benefits of social CRM, but now they need to be sold on money-making end of the market.

Vendors who can show their social CRM applications go beyond improving customer relationships will be most successful in the future, according to Gartner. Ideally, Sarner argues that social CRM applications need to evolve into a three-dimensional business tool focused on customer relationship, B2B sales and marketing to survive.

Often, businesses differentiate the use of social CRM instead of taking a comprehensive approach to the trend, Sarner says. For example, one department might use a social CRM application to track customer satisfaction, while another department uses a different application to market new products to its customers. Instead, companies should search for the social CRM application that is all-inclusive.

“Until recently, many companies have treated social CRM as a series of experiments and tactical purchases. Few have a social CRM strategy or established metrics to measure its effect on hard business results. Different departments, employees and managers implement different types of applications for different purposes,” Sarner said.

The inconsistencies on how the social CRM product is used has resulted in a market fragmented into typically three segments: sales, marketing and customer service, Sarner says. Small social CRM vendors then approach their product in the same way by focusing on one major component of the strategy as opposed to several. In the future, the sellers who offer tools to address all aspects of social CRM in one application that is applicable across a variety of departments will survive, according to the report.

“Vendors that can assemble a full set of social CRM functions and make progress in two or more areas, such as marketing and customer service or sales and marketing, will be best-positioned for success,” Sarner said.

B2B vendors are also positioned for success in the market, according to the report. B2B applications for sales use should experience the fastest growth in the social CRM market by accounting for 30 percent of the total market in 2015. In 2011, B2B applications accounted for just five percent of the social CRM market, according to the report.

Read more: Not Just an Address Book: 4 Hacks to Turn a CRM into a True Sales Tool