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• Social networks are “unstructured conversations” than can yield valuable data to generate sales and reduce costs.

• Unstructured conversations are gaining currency for leading CRM companies.

• Social CRM or CRM 2.0 rests on the interplay of customer interaction and company rules.

In flush times, social networks are a hard sell. In hard times when companies have little money to spare, selling social networks is even more difficult. That’s why I want to return to the subject of a previous posting about social data mining.

Social networks can yield rich customer data that companies can use to reduce customer support costs and increase sales.

It’s a compelling argument but I gather it’s still new. Few of the social networking companies I spoke with this past fall at the Web 2.0 Expo in New York highlighted social data mining, and even fewer were building applications to support it.

But times they may be a changing. CRM giants like Oracle and SAP are now building tools to help companies take advantage of social networks’ “unstructured conversations.”

Oracle (blog) has built a suite of tools that “leverage the collective knowledge of the broader sales community” to help a company complete sales rather than merely tracking the sales pipeline. The net result Oracle claims is higher productivity, better leads, a shortened sales cycle and increased sales.

Mark Woollen, Oracle’s VP of CRM Strategy explained to me about how social CRM is “giving context to unstructured conversations.” Especially in this economy where growth is hard to come by, Woollen believes that social CRM can help drive business and improve margins.

SAP is using CRM to map relationships with their customers. They gave me an online demonstration of how they are leveraging the social network Twitter to improve customer support. Their software tracks key words in tweets for content and sentiment to help service reps resolve issues before they become problems.

Both Oracle and SAP acknowledge a transfer of power is taking place. Unstructured conversations between customers are redefining relationships between customers and companies and challenging companies to look at data in different ways. In creating new applications, they are grappling with issues of standardization and monetization.

Michael Thomas, director of CRM and social media strategy at Neighborhood America and national president of the CRM Association believes “larger corporations are getting interested but are still getting their arms around the ROI. They can’t do effective CRM without collaboration. It’s a bi-directional flow. You have to be in position to react.”

This game change in managing customer relationships is central to what CRM expert Paul Greenberg addresses in his presentation -”What the Hell is CRM 2.0?” According to Paul, the difference between CRM 1.0 and CRM 2.0 s the difference between:

• Businesses producing products and services for the customer, and businesses aggregating experiences, products, services, tools and knowledge of customers.

• Focusing on customers and focusing on all iterations of the relationships (company, partners, customers), specifically on identifying, engaging and enabling the influential nodes.

• Technology focused around operational aspects of sales, marketing, support and technology focused on both the operational and social/collaborative which integrates the customer into the entire enterprise value chain.

It’s one thing to identify the elements of CRM 2.0; it’s quite another to implement it. As Greenberg recognizes, CRM not cheap, and it’s hard. “Not a lot of companies are doing well in tying the pieces together.”

And what about concerns about privacy? All this data mining raises the question of privacy and how your data is being used. It’s what Derek Grant, vice president of sales at the web marketing automation firm Pardot (blog) calls the “creepiness” factor.

Greenberg makes a distinction between trust and privacy. Companies can act responsibly even if they mine data. While I don’t support the sale or transfer of personal information to a third party, I generally subscribe to Greenberg’s contentions about user participation in a social network.

• They have no inherent right to be a member.

• There are risks associated. There is no complete, guaranteed privacy.

• While they retain ownership of their profile, by signing up, they are providing a limited license to the social network to use that profile as an asset.

• That profile well may be used commercially with their permission.

Beyond addressing issues of privacy and trust, CRM 2.0’s success rests on an understanding of the interplay of social customer interaction and company rules as Paul Greenberg points in his discussion of HelpStream (blog).

Their approach involves distilling key points of an online conversation, applying recognized company business rules and workflows to address them, and then notifying appropriate personnel to solve them. It’s the follow up that often gets lost. What’s the point of mining data, if the data is not put in the right hands to address the issues that are raised.

I know that I have only touched the surface of CRM 2.0. And I recognize CRM is far a field from corporate communications. But I feel that highlighting CRM’s role can help legitimize the tools that PR professionals are trying to implement. It also is a recognition that PR professionals need to appreciate the value of data in measuring success.

Let me get back to you.

Technorati Tags: CRM; CRM 2.0; Paul Greenberg; Social Networks; Data Mining; Oracle Social CRM; SAP; Helpstream; Michael Thomas; Neighborhood America; CRM Association; Derek Grant; Pardot;

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