“Customer Relationship Management is now a major consideration in the B2B sector,” says Heiner Lasi, CRM expert at the faculty for Business Studies and Information Management 1 at the University of Stuttgart (Prof. Hans-Georg Kemper), speaking after a review of CRM activities in the industrial midsize sector. “Companies have perceived the trend and are increasing investment in CRM systems.” His comments come on the back of analysis of SMEs in the mechanical engineering, supplier, building materials and electrical engineering sectors conducted by the faculty for Stuttgart’s Chamber of Industry and Commerce. 31 percent of the companies surveyed already use a CRM system, while 52 percent are currently in the process of introducing specialized customer relationship management software or have definite plans to do so.
For the vast majority (75 percent) of companies, the purpose of adopting a CRM system is to retain and strengthen relationships with existing customers. After all, it is far more cost-effective to reinforce existing ties than establish and build new ones.
Pinpointing profit potential
Companies who want to strengthen existing customer relationships generally have to focus on those customers who offer long-term profitability and potential. However, according to CRM expert and co-author of the analysis, Heiner Lasi, this is one of the central problems facing industrial SMEs. “Many companies have difficulties identifying which customers offer the greatest potential.” Lasi offers a specific example: A company in the building materials industry noticed that its service costs were extremely high. This was down to the large number of lengthy telephone calls with customers who were having problems using or processing special products. After introducing a CRM system, the company realized that these service queries were mainly from customers who had not even bought these products from the company recently. Further research revealed that the customers had imported the products from cheaper suppliers and were only taking advantage of the building material dealer’s service.
As this shows, a company can provide customers with different levels of management if “details are available about the entire life cycle of the customer relationship,” says Heiner Lasi. All information about all customers must be available from all company divisions – Sales, Marketing or Service – and it must be accessible, with customer contact details, to all employees. “Of course, for this to be the case, the CRM software must be integrated in the existing IT infrastructure.” According to the analysis by the University of Stuttgart, this is precisely where industrial SMEs have a lot of catching up to do.
Integration as a success factor
Many companies base their choice of CRM software purely on factual criteria – the so-called “best-of-breed” approach. IT-specific considerations such as the ease with which the CRM system can be integrated in existing infrastructures are pushed down the list of priorities or even overlooked. More than 50 percent of the industrial SMEs surveyed had installed separate databases to improve management of customer contacts – but these were standalone solutions without interfaces to existing systems. “If the CRM and ERP systems are not integrated, it is practically impossible for the ERP system to deliver objective analyses, such as the value of a customer’s contribution margin,” says Lasi, outlining the consequences. “If field staff are not armed with this information, subjective analyses and evaluations are made of customers in the B2B sector. Often, these don’t paint an accurate picture.”
Failure to integrate the two systems also detracts from data quality. Data from new customers has to be entered several times over. Errors may arise as a result of incorrect or missing inputs, or there may be duplicate entries in the system. This costs time and money. Every CRM project should therefore be based on a central database containing all the information the company has at its disposal about customers and prospective customers. Yet even full and integrated customer data is no guarantor of success. If this information is not analyzed comprehensively, individual customers or customer groups may repeatedly be confronted with irrelevant marketing campaigns. Unfortunately, the predominance of CRM systems focussed on operational needs means that analytical CRM systems are still extremely rare among SMEs. Market research into customer management among SMEs by schwetz consulting found that there is an ongoing reluctance among SMEs to introduce analytical functions.
Creating a continuous information flow
Another ramification of failing to integrate CRM software in the existing software landscape is that key data, such as the price, configuration and availability of a product, cannot be called up directly in the CRM system. This has a negative effect on the information flow. Some employees, such as field staff, are then prevented from utilizing various system functions. This results in acceptance problems among users. However, integrating the CRM system in the company’s existing IT landscape at a later date takes time and money. “In our opinion, companies still don’t fully recognize the need to integrate the CRM system into their IT infrastructure,” says Heiner Lasi, summarizing his conclusions from the survey. CRM consultant and analyst Wolfgang Schwetz attempts to explain this by pointing out that, in addition to the purely technical difficulties, many SMEs are daunted by the complexity of this kind of project. As a result, they often cut back on customer care to include just sales and administrative tasks such as contact management. However, customer focus is a major factor in increasing sales and profit.
mySAP Customer Relationship Management (mySAP CRM 2005) is an integrated solution based on SAP NetWeaver technology. The CRM components ensure the information flow across all channels – from the field (SAP Mobile Sales) to the office (Interaction Center and customer relationship management system from mySAP CRM) and the customer (SAP Internet Sales) – and provide the basis for integrated CRM. Since each sector also has special requirements and expectations of a CRM solution, SAP also provides specialized CRM software for companies in automotive, manufacturing, consumer goods and supply and for financial service providers and high-tech firms. As part of the mySAP Business Suite, mySAP CRM can be integrated immediately into an existing system landscape, thereby cutting down on procurement costs. In particular, smaller companies can benefit from the CRM functions integrated in SAP Business One. They can use the functions to create cost-benefit analyses of sales and marketing activities or to assess sales opportunities – taking account of details such as source, potential, completion date, competitors or activities. Thanks to open interfaces, external applications such as the switching software klickTel can be integrated easily.
Integrated CRM improves value added
The advantages of an integrated CRM solution for SMEs are clear. On the one hand, it enables companies to provide accurate, targeted information across a variety of channels to ensure customer-specific sales approaches. On the other, it helps companies to optimize and accelerate their processes – by improving services and enabling fast reactions to queries or complaints. A CRM system also gives manufacturing companies access to customer knowledge, which is invaluable in helping them develop new products or improve existing ones. “Integrated CRM solutions provide clarity when targeting customers and increase value added,” says Heiner Lasi. “They play a major part in increasing profitability in relationships between customers and suppliers.” However, new technologies will change the interfaces that exist to customers and the nature of sales approaches. Read the second part of the article to find out how companies can manage customer interfaces successfully in the future.