The Challenge for Small and Mid-Size Companies

The global downturn has brought about a dramatic increase in business failures over the last six months, and nowhere has this been more apparent than in the case of small and mid-sized businesses (SMBs). Unlike bigger companies, where more cash on the balance sheet provides some degree of insulation, SMBs have seen a rapid decline in cash flow as a result of slowing customer demand and evaporating lines of credit.

There has been a sudden rush to cut spending as companies use every means at their disposal to restrict or eliminate activities that will not improve sales or the bottom-line in the near term. While this has been understandable, cost reduction on its own will not steer a business safely through the economic downturn.  Businesses also need to examine how they can safeguard revenues and profitability, and particularly within their own customer base. Otherwise, they are just delaying the inevitable: more painful cost reductions and the very real possibility of sliding into an irrevocable decline.

What Can You Do?

Cutting costs while maintaining growth is a formidable challenge at the best of times, but during a downturn, it can seem almost impossible. To meet these goals, companies like yours will need to look for practical solutions that will help them to drive productivity and increase effectiveness across their operations. 

Increasingly, companies like yours are turning to business software and Customer Relationship Management (CRM) applications in particular, to drive through the kind of operational improvements needed to survive and accelerate out of the downturn. By optimizing revenue-generating activities at a lower cost to your company, CRM is uniquely positioned to assist you during the most challenging market conditions.

Why CRM?

First and foremost, CRM helps you to protect revenues from your current customers by ensuring that you are delivering exceptional service and safeguarding their loyalty notwithstanding increasing cost pressures. Additionally, by providing deeper insight into your customers, CRM enables you to unearth latent revenue opportunities within your customer base for complementary products and services. It allows you to leverage these opportunities and proactively grow your revenue share through highly focused business development programs which replace sporadic interaction with true customer lifecycle management. CRM, therefore, helps you deliver exceptional and personalized service consistently to your customers during these challenging times.

Selling more to existing customers may be the first priority during a downturn, but the important task of acquiring new customers cannot be overlooked. Without growth in customer numbers, any business runs the risk of exhausting its revenue base over the medium term. Selling to new prospects, however, is generally regarded as being five to ten times more costly than selling to an existing customer, so improving sales and marketing efficiency will be vital for growing your customer numbers during the downturn. CRM, and the latest generation of CRM products from companies like Sage in particular, have an important role to play in this regard. In times of recession, CRM solutions can allow you to extend the reach and effectiveness of your new business sales and marketing programs through on-going process improvements, productivity enhancements and significant cost savings.

In a downturn, therefore, CRM enables you to:

Grow your revenue share within your existing customer base

• Understand the true cross-sell and up-sell opportunity of every one of your customers in order to maximize the profitability of every relationship

• Dramatically reduce your cost-per-lead by delivering highly targeted marketing communications to specific customers or customer segments.

• Cut the amount of time and cost it takes to resolve service issues without compromising an exceptional service experience that keeps your customers loyal.

• Provide decentralized empowerment to your customer-facing staff in a way that will drive their productivity and effectiveness while still retaining central control over headline resource, performance and budget management.

Capture new businesses at a far lower cost-of-sale than was possible previously

• Lower your cost-of-sale by always ensuring that your sales team is focused on the opportunities that are most likely to close.

• Dramatically reduce your cost-per-lead by delivering highly targeted and consistent marketing messages to specific prospects or market segments.

• Introduce marketing accountability, so you can ensure that you are getting the right level of return from every marketing dollar that you spend.

• Ensure consistent processes are followed, with clear key performance indicators (KPI) which create solid discipline and greater predictability for sales and service personnel.

• Strip administration out of your organization, so there’s less paperwork, errors and task repetition, and less cost as a result.

• Provide decentralized empowerment to your business development staff in a way that will drive their productivity and effectiveness while still retaining central control over headline resource, performance and budget management.

Why Now?

Your customers are looking for even greater value for their money, and being far more discerning about potential purchases and potential suppliers. As a result, you will need to work a lot harder to earn their business during the downturn. This challenge, coupled with the fact that cost inefficiencies are even more pronounced in a downturn, means that businesses are likely to experience significant and growing trading pressures.

One of the biggest potential mistakes a company can make is to continue with a ‘business as usual’ mode. The ‘cost of doing nothing’ is significant. The table below highlights the potential cost of inaction through a series of practical examples. It also examines some of the underlying issues which may be affecting a company like yours and discusses how CRM can help to address them.