How Recession Proof is CRM?

Calling this recession an economic downturn is akin to calling an avalanche a snowfall. While the label is irrelevant, the continued hemorrhage from corporate bottom lines is bloodying us all. Businesses everywhere are rushing to stop the bleeding. The best tourniquet found so far is CRM.

“During a recession, it’s much more difficult to acquire new customers, so many companies are looking to their customer base for additional revenue opportunities,” said Steve Chipman, CEO of Lexnet Consulting Group Inc. “This means that a CRM system automatically becomes a more valuable tool for segmenting existing customers and scheduling the appropriate follow-up actions, whether those actions are phone calls, site visits, emails or a combination.”

Desperate Times Call for Smart Measures

But like most makeshift tourniquets, CRM was initially designed for a different task. It is now pushed to a new use by the urgency of disaster. In the beginning, CRM was designed to cut costs in handling customer queries and services; now companies use it to safeguard a dwindling customer base and to patch debilitating budget cuts.

“Companies are cutting staff and cutting budgets, and marketing budgets at that,” said Ashley Leckey, spokesperson for Guest Relations Marketing, an advertising and marketing agency based in Atlanta. “But wise companies understand the importance of CRM as a part of smart business practice.”

Leckey said savvy companies are finding the zealots for their brands, those that are passionate supporters. “Nurturing their relationships with these most loyal supporters will give them the advantage over those in their competitive set,” she said. “CRM is all about the relationship, and in today’s world very few people discount the value of a strong relationship.”

Looking for Trouble

Even the hardest-hit industries are finding relief in CRM. “In addition to increasing our budget investment in CRM, we are utilizing even more functionality,” said Holly Allison, vice president of marketing at Vico Software, a firm that designs software for the commercial construction market. “Particularly in the commercial building market, we need to see where the economic brick wall is. Will our pipeline dry up? Will existing orders be put on hold?”

Allison said Vico is diligently tracking each and every opportunity in terms of the value, the bookings and revenue. In Q4 of 2008, Vico increased its investment in Salesforce.com CRM by 25 percent. “We do have excellent visibility for 270 days, which brings cautious optimism to the management team and board,” she said. “But we know better than to relax. Knowing that our numbers are in place, we have the time to devote to developing new products and service offerings to have in our back pocket in case the downturn comes at us hard and fast.”

As much hope as companies find in new CRM uses, the technology can’t save everyone. “There is nothing inherent in CRM that will change a company’s experience in a recession,” said Denis Pombriant, founder of Beagle Research. “CRM is good at helping to move business processes like sales along or even accelerate them, but it has no power to create demand in a situation where demand has been destroyed by lack of credit and low cash flow.”

Cuts Hitting CRM?

Business is so bad that even salespeople are taking pink-slip hits. Might CRM soon face the chopping block as well? Not likely, according to the experts. New CRM program sales are likely to increase, especially in the SMB (small- to medium-sized business) market. Add-ons and plug-ins are likely to increase as companies seek to quickly punch up their existing CRM, but CRM vendors are likely to be pushed hard to ante up more in the way of features, functionalities and support to aid their ailing customers in the mutual quest of survival.

“The economic challenges of today will force companies to look for trusted vendors and turn them into partners, not only to help them through the current challenges, but to allow them to focus on long-term quality improvements,” said Chris Tranquill, managing director of ACS Communications and Consumer Goods. “This should free up money for companies.”

There will likely be an increased call for open-source in CRM as companies seek to integrate even more of their business into a single system at a smaller cost. In short, CRM will be in higher demand, but it will also be subjected to more stringent demands.

“During the last economic slowdown, industry growth continued despite tighter budgets in the commercial and public sectors — largely because business-process outsourcing and service offerings were valued and sought after,” said Tranquill. “Once again, there is a sense that enterprises have not only a hunger — some say even desperation — to look for ways to save money in this economy.”

Sector Trends

The recession is prompting new trends to emerge in the use of CRM. “The key trend we have been seeing is that companies are relying on automation more than ever to achieve their CRM objectives,” said Peter Grambs, vice president of the Customer Solutions Practice at Cognizant Technology Solutions. “As budgets get tighter and they try to wring every possible dollar out of current processes, many companies are constrained in terms of sales resources and see automation as a cost-effective method to improve sales performance.”

Grambs said this is particularly true within the life sciences industry, where there is a significant reduction in the number of sales resources. “Life sciences firms are leveraging CRM, using a combination of SFA, CDI/MDM and analytics to increase sales performance, and consequently, getting more output per sales person,” he said.

“In two other key industries — health care and insurance — firms are leveraging CRM to help them adjust as their business model is transforming to a more direct-to-consumer model,” added Grambs. “In the media and entertainment space, we are seeing these firms utilize CRM to enhance social-networking capabilities in order to reach out directly to their customer base.”

But one big trend is flashing across all sectors: the customer is now in total focus — at least while everything else is in a total state of flux.

“Business rules are going to be softened in favor of the customer, and options are going to increase,” said Esteban Kolsky, vice president and practice leader at eVergance. “Retention scripts are going to be improved and tested every day for efficacy and the ones that don’t work will be quickly discarded. All this requires CRM.”

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One Response to How Recession Proof is CRM?

  1. tboehm30 says:

    Like you said ‘Savvy Companies’ and ‘Smart Business practice’.

    Let’s hope that American companies have smart enough people to figure that out. Many places I have been have people who will cut costs and then cut more costs. Implementing better CRM processes would be too far away from their comfort zone.

    I agree with your assessment of the situation. The best companies will come out of this recession stronger than ever.

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