You don’t need me to tell you times are a bit tough right now. Buyer confidence is low, and that means that keeping the customers you have is even more important—let alone attracting new customers.

Can a customer relationship management system be the way to do this?

A white paper published by VendorGuru.com claims it is.

While everyone’s avoiding the R-word (recession), most businesses as well as consumers are tightening the purse strings. Customers are suddenly more valuable than just a short time ago.

CRM systems can help a company of any size ensure these customers keep returning—and it’s common knowledge that existing customers are cheaper to retain and more likely to buy than new customers.

“Businesses could find an effective CRM approach will give them an important competitive advantage under recessionary conditions,” states the white paper.

With an effective CRM system in place, businesses may retain profitability and grow even during a recession. Some view recessions as a bit of “natural selection” in the business world, allowing the fittest to survive and paring away those without the strength to weather tough times.

The white paper highlights three strategies for surviving—possibly prospering—during a recession.

Increasing customer penetration is the first. Customer relationship management tools can work to boost profitability as much as 70 percent, according to the white paper. Acquisition costs for new business tops the cost of servicing current customers; there are also opportunities for cross selling. CRM software guides your sales force by offering scripts for cross selling and showing the customers’ order histories.

Achieving efficiencies is second in line; streamlining a business from within is key during lean economic times, and unproductive salespeople can be identified and helped. In fact, CRM can help a company automate processes and develop greater efficiency throughout the entire sales cycle.

Finally, the white paper says CRM can help to use resources effectively. During slower times, keep your staff busy by trying new CRM strategies and solutions.

 

Within the complex world of customer relationship management, categories have emerged to further define the concept.

The first, simplest form is traditional CRM. This is a customer relationship management system that focuses on a “unidirectional” approach, according to InsideCRM. The basis of this method is the 360-degree view of the customer, a complete record of that consumer’s information. Data and processes factor large in traditional CRM setups

“Traditional CRM is driven by data and loves process. Sales process to sell to customers is king, not the customer,” says Paul Greenberg on InsideCRM.

Consistency of message throughout e-mail, direct mail, phone calls, TV and magazine advertisements is key in traditional CRM. Its limitations include a “wall” between customer and company; the customer may buy for value, but doesn’t establish an emotional attachment or loyalty to the corporation.

Under a traditional CRM system, if a customer is unhappy with service he receives from a company and—for example—decides not to complete a purchase online, that data would be recorded in the customer’s file. If other customers abandoned a purchase for similar reasons, that data would be correlated and flag an automated response asking the customer why the sale was dropped. The problem is it’s a reactive response rather than a proactive one.

Vendor relationship management is a whole different beast, at least when it comes to point of view. VRM “is the actions taken by the customer to control the business environment that they are apparently in control of,” according to Greenberg. It’s CRM’s mirror image, placing the power in the hands of the consume—which indeed it is.

“VRM … is the reciprocal of CRM or Customer Relationship Management. It provides customers with tools for engaging with vendors in ways that work for both parties … VRM immodestly intends to improve markets and their mechanisms by equipping customers to be independent leaders and not just captive followers in their relationships with vendors and other parties on the supply side of the marketplace,” according to Project VRM, which is run by Doc Searls and Harvard University.

Under the VRM model, an unhappy customer will tell friends, family and the World Wide Web via conversations, blogging, message board posts, e-mails and other conversations.

Enter CRM 2.0.

“CRM 2.0 is a philosophy and a business strategy — supported by a technology platform, business rules, processes and social characteristics — designed to engage the customer in a collaborative conversation in order to provide mutually beneficial value in a trusted and transparent business environment. It is the company’s response to the customer’s ownership of the conversation,” says Greenberg.

CRM 2.0 is the proactive approach to customer relations, recognizing that customers are ultimately in control of buying decisions and therefore the company’s future, and presenting to them an environment at least partially shaped by customer decisions and preferences.

In the event of an unhappy customer, when CRM 2.0 is in place a more immediate response would be generated by an abandoned sale. The company would enlist the customer’s feedback and work to eliminate the problem causing the dropped sale, while offering the customer some “leeway” to compensate him for his participation.

“If successful, CRM 2.0 helps the company and customers work together to use resources to benefit each other. When CRM 2.0 is done successfully, advocates are the result,” says Greenberg.

While such a collaborative effort seems like an ideal solution for both business and customer, the reality is a little more difficult and costly to achieve. With today’s increasingly interconnected world however, where a negative customer experience might be communicated to thousands, I see it as an imperative.

If you are a business owner or executive—regardless of the size of the company—customer relationship management systems are a good bet to help you maximize your sales.

CRM systems become even more valuable in today’s uncertain economy. Your customers are the reason your business exists, yet many companies forget to place the proper emphasis on building a relationship with their most valuable resource.

That’s where CRM software systems come in. Fostering a positive relationship with your customers is easier when businesses have a way to track communications, sales, promotions and other forms of contact with each client.

Knowing each customer’s purchase and payment history can be valuable. Use it to boost your company’s customer service level. Making customers feel like they matter—no matter how much they spend at your business—will keep them coming back, and it’s often said that keeping current customers returning is far more lucrative with fewer marketing dollars required than attracting new customers. The Pareto Principle, or 80-20 rules, says that 20 percent of your customers bring 80 percent of your revenue.

Yet providing above-average customer service will do both. No matter what industry you are in, word of mouth travels faster and farther than the best ad campaign. Your happy customers will refer their friends, family, neighbors, business associates, hairdresser, postman, dentist …

CRM systems allow you to provide this heightened customer service by having knowledge about your buyers near at hand and easily accessible for you to use to cater to their requirements and preferences. Throwing your best clients some extra-great deals is one way to keep them coming back, but remember how that will affect your bottom line in the long run.

However, there’s more to it than just having a CRM system in place. Learning to use it as effectively as possible is the other half of the equation. We’ll talk more about that later this week!