Why should a micro-enterprise be enthusiastic about CRM?

A small start-up often has a limited customer base and familiar customers, which means that service customisation and customer communication can be handled using hand-written notes, without more extensive systematisation. As the number of customers increases, however, the business should recognise the benefits of conscious customer relationship management to enable it to respond to increasing customer numbers and maintain a good level of service quality. This is why growth-seeking companies, in particular, should familiarise themselves with the concept of customer relationship management and find out about the potential of its conscious use for the company.

You often come across the abbreviation CRM in the media. While large companies have made use of effective Customer Relationship Management (CRM) since the 1990s, in smaller businesses it has often received less attention. In the media, CRM is sometimes referred to as a process and sometimes as a strategy, while at other times the emphasis is on CRM technology.

CRM is a comprehensive approach to creating, maintaining and expanding customer relationships. Basically, the purpose of CRM is to provide customers with optimal product or service quality. CRM can be seen as a process that seeks to maximise the company’s productivity by establishing and maintaining customer relationships, in which each customer is treated as an individual through multiple interfaces, maximising the productivity of individual customer relationships. This takes place through marketing, communication and service. Studies show that CRM deployment has the greatest positive impact at the stage in which a company seeks to maintain its customer relationships. Loyal customers are indeed a huge resource for the company, and typically, companies have not accounted for the potential costs of losing a customer.

Rather than something that only concerns sales, customer service or IT, customer relationship management in a broader sense is relevant to every area of the company. The CRM strategy should be an action plan that sets out the people, processes and technologies through which customer-related goals are achieved. The CRM strategy includes analysing and segmenting the customer base. It is important to know which customers are the most productive and desirable for the company. The strategy should also pay attention to what the company sells, how it brands itself, how well-known the company is, and how the customer benefits from the company. Attention should also be paid to how distribution is organised, what the most efficient distribution channel is, and how competitors handle their distribution. This can alternatively be examined from the conventional 4P perspective (product, price, place and promotion).

CRM can also be seen as a value generation process, in which

1. the company determines the value it produces to the customer,
2. the company identifies the value the customer generates for it, and
3. the value is exchanged, maximising the value of the customer relationship to the company.

As the method of classifying customers and a metric for the value of customer relationships, such figures as the Customer Lifetime Value can be used; it indicates the profits generated from the customer over time and the expenses spent on the customer.

Systematic customer relationship management naturally requires resources. When does investing in CRM technology pay off? Many IT companies use the term CRM to describe computer software for the automation of marketing, sales and service functions. A high number of solutions is available, and you should take your time to consider which technology would be best suited for your company. Rather than being over-reliant on the actual technology, companies should use it as a tool. Studies have found that CRM technologies are not directly linked to the company's ability to improve its financial performance through CRM processes. In fact, companies that saw CRM as a mere technology achieved poor results with it. This is why it is important for companies to take a comprehensive approach to CRM and to integrate it into their other business processes and customer service. The purpose for which the company's management is looking for a solution is more important than the technology itself. Studies indicate that the management’s interest in CRM correlates to the company’s ability to achieve good results through its deployment.

Authors:
Mirja Väänänen, postdoctoral researcher in the Microentrepreneurship Centre of Excellence at the University of Oulu Kerttu Saalasti Institute.

Jaakko Schroderus, student of MSc. Tech. in Industrial Engineering and Management, wrote his Bachelor's thesis on CRM in Finnish SMEs.