Think CRM is too expensive and complicated for small businesses? Think again.
By Laura Preslan, Research Director, AMR Research, Inc.
Every lead is precious, yet interviews with small businesses conducted by AMR Research reveal that small businesses do not follow up on up to 70 percent of all leads, representing as much as 14–22 percent of annual revenue. This is because there is often no centralized place to track customer, account, and contact information.
Technology can help solve these issues. In fact, the revenue gained from following up on three of those previously lost leads often covers the cost of a contact, lead, account, and case management system.
The Benefits of CRM Technology
The functionality required to address lead leakage falls into the category of Customer Relationship Management, or CRM. Unfortunately, CRM has developed a reputation as making for large, often unwieldy software solutions for large companies that often do not deliver real business benefits.
The truth is that CRM technology has been specifically designed for small businesses. There are elements of CRM systems, such as contact, lead, account, order, and case management, that are fundamental to small businesses and deliver tangible business value.
The benefits of CRM technology stem from increased revenue and decreased costs. Increased revenue primarily comes from more satisfied customers, the ability to upsell and cross-sell, and higher acceptance rates on marketing campaigns. Reduced costs are attained through a reduction in administrative time used to track down information, improved reporting, and quicker issue resolution.
Small Businesses Can Afford CRM
With costs in the $500–750 range per user, customer management technology is definitely more affordable for small business than in the past.
Choosing the Right Functionality
Successful CRM projects address an acute pain felt by salespeople, customer service agents, or marketers. Functionality should be purchased in priority order to address the highest pain points. Small successes are then built on to keep momentum going.
The top 10 small business pain points are:
| # | Pain Points | Functionality |
| 1. | Leads are lost or are not followed up on by sales | Lead management with follow-up workflow |
| 2. | Marketers do not know what products and services to sell to prospects | Campaign management |
| 3. | Salespeople and sales managers do not know the status or next steps required for an opportunity or case | Opportunity management, workflow, and case management |
| 4. | Customer information is not available in one centralized place | Case management and contact management |
| 5. | Employees do not know what products or services customers have purchased | Account management |
| 6. | Employees do not know who to contact when a customer issue arises | Contact management |
| 7. | Customer issues are not resolved in a timely manner | Case management with follow-up workflow |
| 8. | Reports are not available that tell employees how the business is performing | Analytics and forecasting |
| 9. | Orders are often taken on paper or by fax | Order management |
| 10. | Lack of inter-department coordination | Work flow management |
Decision-Making Factors
Small businesses should consider four key decision-making factors when embarking upon a CRM project: business process change, vendor selection, timeline, and cost.
Business process change:
The goal is to introduce common processes, not to fundamentally change the way the company does business. Small businesses should choose ease of use over complex functionality that requires major business process adaptation.
Vendor selection:
It is often necessary to make two vendor decisions: software vendor and implementation vendor. Implementation partners are chosen based on their ability to work well with business and IT teams and their understanding of industry-specific requirements.
The software vendor selection is based on functionality, ease of use, implementation time, referenceability, and company viability.
Timeline:
Implementation timeline varies from two weeks to two months with an average of thirty days.
Cost:
The cost is typically $500–750 US per user per year. Maintenance and support typically represent 20–24 percent of the implementation cost (17 percent of software, plus support personnel) for licensed applications. Many software companies offer financing options to make this more digestible to small businesses.
How to Purchase Technology Tailored for Small Businesses
Software companies have developed solutions specifically targeted for small businesses. These are not simply stripped-down versions of software for large companies. Rather, they have been tailored for the unique needs of small businesses: they are integrated, simple to use, and less expensive than their enterprise brethren.
There are two key methods for purchasing software: licensed or hosted.
· Licensed applications:
Companies purchase user licenses and implement the software, hardware, networking, and personnel to support the system. Customers pay a yearly maintenance fee as well. This is also referred to as on-premises, onsite, or internal software.
· Hosted software:
Customers purchase licenses and have a vendor support and manage the application. Some vendors offer the ability to host their solution and then bring it in-house at a later date. Others are only offered as hosted solutions.
Cases in Point: Customer Success Stories
The following case studies were collected by AMR Research. These three companies use Microsoft Business Solutions CRM.
| Company | Users (Total) | Costs | Time | Benefits |
| Mortgage financing company | 40 (42) | Software: $30K
Hardware: $4K Maintenance: $6K Customization: $40K Total: $80K |
3 weeks | § Increased revenue from improved lead follow-through
§ Lower costs through improved productivity § Increased customer satisfaction from faster issue resolution |
| Field service | 18 (38) | Software: $16K
Hardware: $4K Maintenance: $3K Customization: $7K Total: $30K |
4 weeks | § High user adoption due to ease of use
§ Streamlined lead management with higher close rate § Improved revenue from well-defined sales cycle |
| Software | 16 (23) | Hosted: $63/per user per month, or $750 per user per year, or $12K per year total | 1 week | § Increased customer satisfaction from improved access to data
§ Increased revenue from increased campaign success § Decreased costs from reduction in administrative time |
Summary
The right CRM technology investments help small businesses to sell more to existing customers, acquire new customers faster, and better manage the business. CRM solutions pay for themselves by capturing the business that would have otherwise been lost.
Laura Preslan is Research Director of AMR Research, where she is responsible for initiatives in the customer management market, with a focus on maximizing the business value of CRM initiatives. Laura has spent her career helping organizations tackle the business issues of technology projects, including strategy development, business/IT alignment, change management, and business process redesign. Her past experience with CRM includes enterprise-wide CRM strategy development, creation of ROI-driven, metrics-based business cases, package evaluation, and selection of integrated CRM suites.
© 2005 AMR Research, Inc. All rights reserved. January 2005.
This document is the result of research performed by AMR Research that was underwritten by Microsoft Corp. AMR Research believes its findings are objective and represent the best analysis available at the time of publication.
AMR Research provides practical, decisive research and actionable advice for more than 5,000 executives who seek to improve business process performance and cut costs with technology. These companies rely on AMR Research to support their most critical business initiatives, including supply chain transformation, new product introduction, customer profitability, compliance and governance, and IT benefits realization. For more information, visit the AMR Research Web site www.amrresearch.com.