Reinforce Customer Loyalty and Safeguard Long-term Success

October 13, 2004 by admin

“Purely economic factors alone dictate that small and mid-sized companies cannot allow themselves to lose good customers,” says Michael Stender, CRM expert at the Fraunhofer Institute for Industrial Engineering (IAO). The individual relationship with the customer as the “main feature that distinguishes SMBs from large enterprises” is on the wane, and “increasing competition is forcing SMBs to focus more on caring for their existing client base,” is the verdict of the market study “Customer care in SMBs” by business consultants schwetz consulting. This is because, according to estimates by Gartner analysts Joseph Outlaw and James Browning, it costs ten times more to win a new client than it does to retain an existing one. The analysts claim that increasing customer loyalty by around five percent boosts cost-effectiveness by around 25 and 125 percent.

Boosting CRM potential

This fact lies at the heart of the high growth predicted for the CRM software market for SMBs. But, as Tony Friscia, CEO of AMR Research also explains, the “CRM market in large companies is now saturated.” There are, he adds, around 12 million SMBs that are still to embark on the CRM journey, since, according to studies undertaken by the US business consultants, fewer than 20 percent of SMBs have customer loyalty systems in place. The Schwetz study cited above identified that more than 38 percent of those questioned in the market survey already deploy a CRM system, and just under 22 percent are currently planning to do so. “The representative average of SMB CRM users in the German-speaking countries is, however, far lower at around 20 percent,” explains Wolfgang Schwetz. This is confirmed by a recent study by the META Group. According to this survey, 25 percent of German SMBs with under 500 employees use a CRM software solution.
Market researchers and business consultants expect the total expenditure of SMBs on CRM software to increase sharply in this and following years. According to AMI-Partners, 26 percent more small US firms now deploy CRM applications than in 2003. Gartner analyst Tom Topolinski also believes there is considerable untapped CRM potential in the SMB market. SMBs are expected to spend a total of $966 million on CRM software in 2007, reports BusinessWeek magazine.

CRM projects require careful planning

However, CRM expert Michael Stender warns SMBs that they should not regard CRM in purely IT terms, as “CRM projects impact directly on marketing and sales processes and thus have key strategic significance for a company.” For Stender, however, “today’s CRM projects are unimaginable without IT.” Technological development has given rise to new services and channels of communication and, without corresponding software support, too much information about the customer gets lost, even in small organizations. This is where CRM software comes in, providing the requisite transparency by supporting and accelerating internal workflows.
The company’s management must regard CRM as an integral component of its future business strategy. Companies that attempt “a shot in the dark” will inevitably fail, believes Frank Naujoks, consultant at Naujoks & Collegen. He advises against quick fixes when implementing a CRM system. “Simply using the technology doesn’t automatically make you a customer-oriented organization,” Naujoks says. “The successes don’t come until a company adopts CRM as its philosophy.” So careful planning is required even before a CRM system is implemented. This includes a detailed analysis of the situation before the implementation and “must include an economic feasibility study of the goals a company wants to achieve with the CRM software,” explains Michael Stender. Mistakes made in the run-up to a CRM project often cause acceptance issues with users, and it is not uncommon for the success of the entire project to be jeopardized as a result. That is why careful alignment of internal sales and service processes and support from appropriate software functions are particularly significant.

Phased CRM introduction

According to Michael Stender, SMBs need to standardize and improve both their internal communication processes and their channels of customer contact and bring these into line. Since SMBs have more limited financial and staffing resources than large enterprises, any bad decisions when selecting and implementing CRM systems can hit SMBs hard. Stender recommends implementing CRM in stages, not least due to the tight staffing situation in SMBs. “Sometimes a company doesn’t realize what its exact requirements of a system are until the project is up and running,” says the expert.
“Whatever else is the case, SMB-oriented CRM software must be flexible and adaptable and be focussed on supporting customer processes,” says Wolfgang Schwetz, summarizing the key requirements of SMBs. The software should cover everyday business with customers and optimize internal business processes. SMBs have the task of finding a workable middle way between the highest possible customer orientation and acceptable customer management costs. With SAP Business One, SAP provides customer management tools designed specifically for small businesses with less complex processes. These tools can be used to manage and extend a company’s customer relations. With mySAP CRM, the company from Walldorf provides a comprehensive and scaleable solution with predefined processes for various industries that supports companies in marketing, sales and service, and also enables marketing success to be quantified and analyzed.

Systematic customer management

As products and services are becoming increasingly similar in terms of quality, price and scope, an important feature in distinguishing a company from its competition is the way in which it supports its customers. The increasing pressure of competition, new customer-supplier relationships, changes in consumer buying behavior and the use of different channels of communication are forcing SMBs to use new instruments to react to the rapid changes in the marketplace. Yet CRM can only be successful “if customers notice the trouble taken over them and associate this with a clear personal benefit,” writes Professor Herrad Schmidt from the Institute for Information Systems at the University of Siegen.
It is therefore worth finding out which products and services customers concentrate on, how the profitability of these products can be categorized, what their future sales potential is, and which contact channels are preferred. Systematic customer relationship management is essential to this end. To achieve this, employees in marketing, sales and customer service must be able to access complete customer files containing all relevant customer data – extending from the customer address, complete correspondence (including faxes and e-mails), ongoing work, memos, dates and appointments, and reports of visits right through to data derived from merchandise information systems (such as quotations, order confirmations, delivery notes, invoices and open items).

Optimal use of information

SMBs will often hold a large amount of information about customers, but they frequently lack a central database and an efficient method of combining the customer data effectively and evaluating it using a structured approach. A consistent and up-to-date database is essential to this end. “An integrated database enables a uniform view of customers, as, in the ideal case, it depicts the entire customer life cycle, such as contacts, sales, preferences or complaints,” Michael Stender explains. It is the starting point for the coordinated control, execution and monitoring of all sales and service processes.
SMBs work more efficiently and ultimately more cost-effectively in this way than with stand-alone solutions, as customer data only needs to be recorded once and duplications (and the subsequent time-consuming purging of these) become a thing of the past. This also removes the need for laborious reconciliation of data between stand-alone solutions and also dispenses with the need to switch media. “A consistent CRM strategy requires a lot of work and long-term thinking on the part of SMBs,” Stender holds. “But that’s what characterizes a successful CRM project – they develop gradually and thus benefit from a constant cycle of improvements.”

Further information:

General: www.crm-a.org/resources.html (list of further links from the CRM Association), http://crm-daily.newsfactor.com, www.crmindustry.com, www.destinationcrm.com
Studies: www.amrresearch.com, www.gartner.com, http://www.metagroup.co.uk/, http://www.vis.iao.fraunhofer.de/en/1home/index.stm
SAP AG: http://www.sap.com/solutions/business-suite/crm/ and http://www.sap.com/solutions/smb/

Dr. Andreas Schaffry

Dr. Andreas Schaffry

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