Small to midsize enterprises (SMEs) want to develop good customer relationships for the same reasons that larger companies do. Across the board, according to Robert Desatnick, in his book Managing to Keep Customers, “The cost of landing a new customer is more than five times the cost of retaining an existing one.” And business philosopher Craig Jon Anderson says, “If you’re running a small- to midsized enterprise and you can retain an additional 5 percent of your current customer base each year, you will increase your annual revenue by much more than that. A good customer should always have priority over a new prospect.”
Differentiating with quality customer relationships and service can be a strong, profitable strategy for SMEs that know their customers and value their business. The days of “if we build it they will come” are long gone. And for SMEs, competing on price is particularly risky since low prices mean low profit margins.
In addition, many of today’s increasingly technology-savvy customers have high expectations for companies’ abilities to serve them well and to meet commitments on time every time. Such customers don’t have patience with sloppy service, bungled orders, or missed deadlines. So the challenge is plain for SMEs that want to succeed: make customer focus a priority.
Knowing what’s on customers’ minds may, in fact, be the smartest thing a company can do. It takes the guesswork out of giving customers what they want. Two industry studies reveal a significant reality underscoring the importance of this commitment.
ACNeilson reported that “only two percent of unhappy customers complain, while thirty-four percent of all dissatisfied customers penalized the manufacturer by quietly switching brands.”
Bain & Company last year asserted that most companies think that they are delivering what customers want, but “usually they’re kidding themselves.” Their report titled “Closing the Delivery Gap” reported: “When we recently surveyed 362 firms, we found that 80 percent believed they delivered a ‘superior experience’ to their customer. But when we asked customers about their own perceptions, we heard a very different story. They said that only 8 percent of companies were really delivering.”
Making the customer king
Good customer relationship management is potentially an area of great opportunity for SMEs to distinguish themselves over their larger rivals. This is because it’s possible for them to be closer to customers than larger companies can be. This strength can be the foundation for ongoing differentiation if SMEs can balance growth with ongoing customer connection and support.
A trouble spot for many SMEs lies in trying to operate on multiple disconnected software applications, such as contact managers and accounting software, without the ability to access the full range of information they need to be proactive about customer relationships.
Two major hurdles loom especially large for SMEs:
- The ability to identify and focus on high-value customers
- The ability to see a single view of all aspects of customer activity
Clearly this is an area in which SMEs can improve. Market research firm Gartner claims, in fact, that only two percent of small businesses and only 20 percent of midsize businesses are currently using CRM (customer relationship management) solutions.
The landscape is changing, however. AMR Research expects “robust growth in 2006 CRM budgets. 50 percent of companies surveyed plan to increase their customer management software budgets in 2006 and total customer management budgets will increase 8.2 percent on average from 2005 to 2006.”
Those companies that will profit most are the ones that are willing to leverage the benefits of integrating all their business processes, including marketing, sales, service, and operations. They know that technology can provide a single customer view, decision support, convenience, speed, and ways to measure success.
Challenges specific to midsized companies
In a recent study titled “Thinking Big: Midsize companies and the challenges of growth,” commissioned by SAP, the Economist Intelligence Unit highlighted several challenges midsized companies experience related to growth and customer relationships. It says, “… as midsize firms grow into larger entities, the advantage of speed, flexibility and customer intimacy that they hold over larger firms will tend to erode. 44 percent of global respondents – and 50 percent in the US and Asia-Pacific – say that the ability to execute strategy quickly is the attribute most likely to weaken as they grow. Another 36 percent say the same for their ability to maintain deep customer relationships.”
More than 60 percent of the respondents to the Economist survey see investments in IT to be vitally important to their ability to improve customer relationships.
Key considerations for choosing a solution
When considering solutions to support customer focus, it’s common for SMEs to put affordability, pre-integration, and the ability to customize easily to meet specific requirements high on their priority lists. It makes sense not to re-invent the wheel. SAP Business One has the tools that can provide SMEs with bigger, broader arms to embrace customers and deliver what they want and need. It offers the same advantages available to larger companies, priced and sized in such a way to fit SME’s resources and demands for fast results.
SAP Business One helps businesses streamline their operational and managerial processes by providing a single view of the business, with robust and fully integrated financial and sales management capabilities. Embedded CRM is a vitally important module available in SAP Business One. Native CRM functionality enables people to manage sales opportunities, view the opportunities pipeline, manage activities with customers, and have full visibility into customer information including gross profit and inventory levels. SMEs can use this information to help optimize sales opportunities, manage service engagements and SLAs, to track customer cycles and preferences, and identify high-value customers. And if they do it well they can increase their bottom line.