CRM Buyers Guide
Background
Why Get CRM Software for Your Business?
CRM is a vital component of an end-to-end business strategy, one that can handle the sales process that begins with the first inquiry from a new prospect and can grow to an established customer relationship with continuing product and service requirements.
There are three important components in an integrated CRM business application strategy: operational, collaborative, and analytical.
- Operational CRM helps your frontline staff deal with customers and their product or service needs.
- Collaborative CRM assists with customer communications.
- Analytical CRM lets you analyze customer behavior with the aim of servicing them better.
Historically, CRM applications grew out of sales force automation practices. These make it easier for business sales representatives to track interactions with customers and gain more sales. Lead tracking, sales quotation management and contact management are important components of sales force automation. However a full-fledged CRM system is more than just sales force automation.
A CRM implementation will often start out as the collected customer records in an ERP (Enterprise Resource Planning) database, but it will ultimately include more customer relationship data that is unrelated to financial and accounting records.
Getting Started with CRM
Introducing a new CRM system isn’t just a matter of installing and integrating new applications software. The human factor is more important to CRM than in many other business applications. It requires a commitment from company personnel who interact with customers to make CRM work.
In order to get this CRM buy-in from your staff, you’ll need to persuade them the new application(s) will work better than your current system.
The rest of this guide will help you understand what CRM can do. Then you can decide if it’s right for your business.
Specific Benefits of CRM Software
The feckless Willy Loman in Death of a Salesman might have been satisfied managing customers using a file box stuffed with business cards. But that’s not enough to succeed in today’s competitive sales environment. If you’re ready to trade in tattered Rolodex cards for something that’s more efficient and delivers better value, customer relationship management (CRM) applications can help you out.
There are a number of tangible business benefits to be obtained from a good CRM system, including increased revenues and decreased costs.
CRM software can also help you retain existing customers and gain new ones. Key elements of CRM allow a business to: collect and maintain valuable data such as customer contacts and history of purchases; maintain profiles of customer preferences; improve customer communication channels; and identify new selling opportunities.
An improved response to customer queries and a better understanding of customer needs helps builds customer loyalty and reduces churn. It’s much less expensive to retain an existing customer than to acquire a new one. CRM lets you keep closer to your current customers so you can keep them as customers.
CRM can also reduce operating costs. You may be able to handle some customer queries by less expensive Web or e-mail communications instead of through a call center. If your business struggles to maintain multiple mailing lists for different groups of customers and prospects, CRM can help you better organize your customer communications.
CRM can open up more cross-selling opportunities with a single contact point. This will let you sell more products and services to existing customers.
CRM can help turn prospects into new customers. It can help you close orders quicker due to improved handling of requests for information and leads. A good system will ensure that sales leads aren’t dropped due to lack of follow-up.
CRM isn’t the only business application that deals with customers. An Accounts Receivable application will track sales, payment and credit information regarding a customer. Valuable information is contained in these customer, sales and accounts receivable databases.
But CRM goes beyond these financial matters and includes tracking of other non-financial interactions with customers, such as phone calls and e-mails. CRM software can help you reap future value from this historical information.
Quick Reference
CRM Terminology
Analytical CRM
Uses data mining of information gathered by operational CRM to research and then predict typical customer behavior with a view to enhancing the customer’s relationship with the business.
Back Office
Employees of a business who are not in regular contact with customers. This generally includes finance and administrative staff.
Churn
A measure of the loss of customers during a period of time; this is particularly relevant for regular service or subscription customers. Usually the number of customers lost is expressed as a percentage of the average number of customers in the period indicated. One objective of CRM is to increase customer loyalty and reduce customer churn.
Collaborative CRM
Focuses on providing information and facilitating efficient communications with customers and prospects by e-mail, Web, telephone, postal mail, fax, etc. It can also help customers communicate with one another, such as related product recommendations and product reviews on an e-commerce site.
Cross Selling
Selling additional, and usually different, goods and services to existing customers. See also Up Selling.
Customer Profile
Details about a customer, used to associate the customer with a customer segment.
Customer Segments
Groups of customers that share certain common characteristics, often highlighted in a customer profile. Customer segmentation is usually used in CRM to identify particular selling opportunities most relevant to that segment.
Data Mining
Analysis of business data that is often maintained in a data warehouse, conducted to identify patterns of customer behavior or trends that may lead to new sales opportunities.
Data Warehouse
Searchable database(s) of customer information that can be analyzed using data mining techniques.
Distribution Channels
Differing methods of selling products to the consumer or end-user. For example, a business may sell direct to consumers in one distribution channel; the business may also sell to wholesalers or retailers who then resell to consumers, which constitutes another distribution channel.
Distribution Channel Conflict
The result of using more than one distribution channel to sell to the same group of customers.
Filtering
A process typically used in data mining to highlight a group of customers with certain behavior in common, e.g. all new customers who purchased service contracts for a product.
Front Office
Employees of a business whose jobs put them in regular contact with customers. This will include sales, customer support, and service and call center personnel.
Operational CRM
Provides automated support for front office personnel in their dealings with customers, such as a maintaining a history of customer purchases and interactions.
Up Selling
Selling additional related products or services to customers, either as an add-on or as an upgrade to a more expensive model.
Packaged vs. Hosted CRM Programs
CRM packaged software
Many CRM packaged applications are closely related to accounting and ERP (Enterprise Resource Planning) systems. Some ERP systems feature optional add-on modules that tightly integrate CRM capabilities. Alternatively, there may be complementary CRM applications from the ERP developer, such as those offered by Microsoft and Sage, that are designed to work with selected applications in their ERP family.
Some ERP developers have purchased CRM developers to gain an established user base. One recent example is the acquisition of Siebel Systems by Oracle, early in 2006. However, there are still some good, independent CRM developers left, such as Surado.
Your decision to go with either an independent CRM vendor or one related to an ERP developer will depend upon your CRM requirements and the ERP application you currently use. The path of least resistance will often lead you to consider a product in the same vendor family. However, beware choosing an ERP vendor with a CRM application that’s too simple or too complex for your requirements.
Packaged CRM applications allow you to install the software and maintain it on your own hardware. A packaged CRM application may offer more flexibility for customization, including report design. Packaged software may also be easier to integrate with other packages you rely upon, such ERP and e-mail applications. Some packaged CRM applications also allow you to set up Web access, which is useful if you have a mobile sales force.
Example: Microsoft Outlook with Business Contact Manager
MS Outlook with Business Contact Manager (BCM) is an entry-level CRM solution aimed at small businesses. If you do not now use a CRM application and currently use Outlook, adding BCM to it could be a good low-cost way of dipping a toe into CRM to see if the water is fine for your business.
Included in some MS Office 2007 suites, Outlook with BCM is a single-user contact manager with some sales opportunities capabilities, particularly when it’s integrated with Microsoft Office Accounting 2007 (formerly called Microsoft Office Small Business Accounting). As you might expect, this combination is also designed to work well with other MS Office applications, such as Word and Excel.
Outlook with BCM isn’t the most capable CRM system out there, so you probably won’t consider switching to it if you now use a high-end CRM system such as Siebel. However, if you do implement Outlook with BCM and eventually outgrow it, you can upgrade to Microsoft Dynamics CRM and import your data into the more capable application.
CRM hosted online services
If you don’t want the hassles of updating packaged software and performing regular backups of your CRM data then hosted CRM online services could be just what you need.
A hosted service lets you access the CRM service over the Internet, using a Web browser to enter transactions. Reports are prepared on your local printer. The CRM applications software, along with your company’s CRM data, resides on a remote server.
This can be the perfect solution to provide access to all front office personnel if your business has a distributed or highly mobile sales force.
The company providing the software as a service will update the CRM software at its end. The process will appear seamless to you. Usually, you’ll just notice a few more options after each update. Similarly, your CRM records will be automatically backed up on a regular basis.
Web services require you to have more faith in the vendor compared to packaged applications running on your in-house computer hardware. You depend upon the vendor to not only develop the application and keep it up to date, but also to maintain a server that delivers a high degree of availability and safeguards your vital company data.
You also must have a reliable broadband Internet connection. Broadband is cheap and easy to get in most major population centers, but rural users may balk at hosted online CRM services, given the higher cost and sometimes the lower reliability of their Internet service.
A Web-based CRM service may be more difficult for you to integrate with a packaged ERP application. If integration is important for you, be sure to investigate pre-built integration links and other options before you commit to the service.
Example: Salesforce CRM
Salesforce CRM is a comprehensive suite of online CRM services. The application is one of the most successful examples of SaaS (Software as a Service). The company’s CRM services are now used by more than half a million subscribers.
Salesforce is available in several editions, depending upon your requirements. The entry-level Team Edition includes capabilities for Account, Contact, Opportunity (also called lead) and Activity management. More capable, and pricier, editions add such goodies as a product catalog, territory and contract management. Salesforce CRM is used by small, mid-sized and large businesses.
Salesforce has an active development community which has created many useful extensions to the core applications, such as a link to Intuit’s QuickBooks small business accounting. There are more than 400 third party add-on applications listed on the Salesforce AppExchange site.
Advanced editions of Salesforce permit customization so you may link it with other applications you use, such as ERP.
The annual cost starts at $995 per year for the Team Edition with five subscribed users. A free 30-day trial is available.
Setting Up Your CRM Program
Setting up CRM can be painful, laborious exercise if you need to enter information about each customer directly into the application.
If you’re like most businesses, you already have some computerized form of customer list, even if it’s just a Word mail merge file or a spreadsheet-based listing. Often the most accurate customer data will be in the accounts receivable database of an accounting or ERP application.
In most cases you will need to spend time to evaluate and “scrub” the data added into you CRM system to ensure it is relevant for future use.
To maximize your reporting and analytical options, look at the export capabilities of the CRM application. If you can’t create precisely the report you want in the CRM application, you may be able to do that work by exporting the data to a spreadsheet and massaging it in that application.
Recommendations
Essential CRM Features for Small Businesses
The contact database is the key component of any CRM system, no matter how rudimentary. It should allow you to enter and maintain information about customers and prospects, such as name, address, telephone number, and e-mail address.
If you sell to larger customers that typically have several contacts, look for the ability to manage a group of related contacts at one customer. This will allow you to quickly change information for all related contacts when the customer’s address or other details change.
Reporting and analytic capabilities show wide variation among CRM applications. At a minimum, look for the ability to generate standardized reports that list customer and prospect contact information and sales lead opportunities organized by customer representative.
Another important tool is a report writer that permits you to design your own CRM reports. Most CRM solutions provide a report writer, but it may not be that easy to use unless you’re a technowizard. If your front office staff has to contact your IT department every time they need a new report, you haven’t found software that improves your operations. I recommend you attempt to create a custom report or two when you evaluate the software to check out its ease of use.
Good CRM analytics will let you slice and dice your CRM data to answer important questions:
- Which customers are highly profitable? Which customers are most loyal?
- Which sales representative has the best lead conversion rate?
- Is it better to get any new customer, no matter how small, and up-sell later or are small customers largely unprofitable?
Look for good analytic tools that will answer these and other questions that will give you insight into how to improve the performance of the business.
Supplemental and Advanced CRM Features
The more advanced CRM capabilities — beyond the features that are essential to any sales operation — fall into two categories: integration and analysis.
CRM Integration Features
In a large business, front and back office personnel may work in different locations and have little face-to-face interaction. In this case, integrating customer relationship management communications through software becomes critical to ensure that customers are handled with care and treated consistently across your business.
For good integration between front and back office systems, consider CRM and ERP solutions from the same vendor. This will help ensure that customer credit checking, product pricing and inventory stock lookups are handled through the same system to ensure consistency and eliminate unnecessary delay.
However, even acquiring CRM and ERP systems from the same vendor provides no guarantee of compatibility. Many developers have recently grown by acquisition, so software integration links may still be under development.
Many CRM specialty developers have packaged links to market-leading ERP and accounting systems. If you use a popular small business accounting program, such as Intuit’s QuickBooks, you will find a large selection of CRM choices.
Also, consider integration with your key customer communications methods. If e-mail is an important way to maintain contact with your customers, see how CRM can integrate with your e-mail system, including e-mail client software. For better or worse, Microsoft Outlook has the largest number of CRM integration options among e-mail clients. CRM solutions that integrate with Outlook are available from both Microsoft and third parties.
Similarly, for a CRM application used in a call center, see if integration with your telephone system is possible. Can Caller ID information such as the number for an incoming call be passed to the CRM system? If so, the CRM application might then retrieve the customer information linked to that phone number, so it’s instantly ready for your customer agent’s review when answering the call.
Extra CRM Analytical Features
The demand for more analytical CRM capabilities is usually tied to the number of customers and distribution channels your staff manages. If your business sells to a few dozen large customers using one distribution channel, then you probably have straightforward analytical requirements and may not require anything special.
On the other hand, if your business sells to thousands of customers, using several distribution channels, then you need top-notch CRM analytics that are up to the job.
If your contact list is large and complex, look for the capability to profile customers. Profiling can then be used to segment customers into groups with different buying patterns and distribution channels. You can then use data mining techniques to analyze the behavior of these different customer segments. Your business may be able to better serve a customer segment by developing new products or services or by creating a new distribution channel.
If your products and services have a complex sales process, then you may need to manage the workflow of sales opportunity leads. Look for CRM workflow capabilities that will allow someone to pass leads on to others in your business who are involved in the sales process. A good workflow system will allow your opportunity leader to keep on top of overall progress and ensure that no one drops the ball handling an important sales lead.
If you have a mobile sales force, consider how they will use the CRM system while on the road. Can they access it using a smartphone? Will they be able to synchronize data using a notebook computer, which then updates their diary and allows them to view appointments? Mobile users need to be able to access the key components of a CRM system, otherwise it will not work.
Shopping
Shopping for CRM Applications
If all you need is basic management of contacts, activity, and sales leads for a dozen users, then virtually any CRM application will handle your requirements. However, if you need to serve a hundred or more users, require remote access, or have special workflow needs, selecting the right CRM software will require more homework on your part.
Shopping for CRM can be far more complicated if you require integration with other applications. Not all CRM applications can be easily linked with all accounting and ERP applications — the most common integration that companies want.
If you’re fully satisfied with your current ERP application, then it may make more sense to ease into CRM by first investigating CRM applications that easily integrate with your current applications software. If you can’t find CRM software that’s suitable for your needs, then you may broaden your search to include CRM applications that do not already have pre-built integration capabilities but will let you add these on. However, don’t forget to factor the time and cost for CRM integration work into your purchase decision.
More complex CRM applications can be more costly to implement since they take longer to configure and install. You’ll likely need help from the developer or an authorized reseller to get a complex CRM system up and running. The quality of support you receive from a reseller can make quite a difference to your overall satisfaction with the solution.
Check local references to find out about the support levels of the vendors you’re considering.
Some CRM applications are sold in modules, while others are sold as integrated applications. For modules, check that all the capabilities you require are included in the modules you plan to purchase. There are no industry standards for the capabilities included in each module, so they will vary by developer.
Module-based CRM systems let you pick and chose which customer relationship functions you wish to automate. You may purchase just the modules you require now, and add others at a later date.
When you’re evaluating integrated CRM, see if you can switch off menu items that lead to capabilities you do not intend to use. It’s easier to train your staff if they aren’t confused by superfluous options.
Finally, determine the maintenance and support charges for the CRM applications. Typically, they will run about 10 to 20 percent of the initial license cost each year.
