From the July 2002 issue of Entrepreneur

These days, entrepreneurs face a barrage of marketing messages trumpeting the latest and greatest CRM tools. CRM software promises to streamline customer service, simplify marketing and sales efforts, and help companies find new customers and generate more revenue from existing customers. Using software to record customer interactions with sales and customer service personnel, CRM applications can provide a 360-degree view of your business 24/7. The goal is to boost revenue and keep customers happy.

Recent studies indicate that growing businesses are the driving force behind the growth of this type of software in North America. Inspired by this trend, numerous software vendors have set out to develop CRM tools that aim to meet the needs of this segment. In fact, a study released earlier this year by Jupiter Media Metrix, titled "Enterprise Software Adoption in the SMB Market," found that spending on CRM software by small and midsized businesses (SMBs) would reach $651 million by 2006 and make up 19 percent of the entire CRM software market, up from 10 percent in 2001.

According to Jupiter analysts, as the relationships between SMBs and their customers become more complex, and as the number of customer touch-points increases, businesses will increasingly look to software and services to help them manage those relationships. But other analysts, such as Joe Outlaw, a research director at Gartner Inc., aren't so sure: "Most small businesses have a less-aggressive approach to CRM technology because they have other operational issues that are more pressing for them." So while every company wants to keep its customers happy, are these tools really the Holy Grail?

In-House CRM

CRM tools, which do exist on some level in many growing businesses, have yet to become the top priority among entrepreneurs. Case in point: UncommonGoods LLC in New York City. Founded in 1999 by David Bolotsky, the company sells unique, high-quality home accessories and gift items online. Its Web site (www.uncommongoods.com) went live in 2000, and 82,000 visitors log on each month. The company, which had 2001 sales in the single-digit millions, also sells its wares through a catalog.


A mere
29%
of consumers say they trust e-commerce Web sites, compared to the
47%
who claim to trust the federal government.
SOURCE: Consumer Web Watch

Currently, the company lacks a comprehensive multifunction CRM solution because, as Bolotsky explains, CRM isn't the most pressing need for the company right now. Instead, UncommonGoods is focusing on expanding its catalog business and dealing with the logistics issues associated with that. It is also gearing up to accept back orders, which it currently does not do. Says Bolotsky, 39, "These issues are a lot more important to me than CRM right now."

Despite conflicting priorities, though, Bolotsky does believe in CRM, and he uses CRM technology in various ways to manage client relationships. For instance, when UncommonGoods developed its Web site, it added a function that gave customer service employees quick access to customers' accounts, allowing them to view a customer's shopping history or customer service history. The company has also created an e-mail notification function that allows customers who request products that aren't in stock to sign up for e-mail notification when the company restocks the product.

According to Outlaw, this kind of bare-bones CRM strategy is common among growing businesses: "It is common today to find small businesses using basic, built-in-house solutions addressing particular business pain points or opportunities, as opposed to comprehensive multifunction solutions favored by larger enterprises."

Bolotsky does have a goal of expanding CRM functionality someday, though. In fact, he has planned to spend this summer evaluating CRM software and services that go beyond the basic CRM projects that his company uses now and making a move this fall.

Making CRM Work for You

Many entrepreneurs take their time in adopting CRM technology for various reasons-some feel they have more pressing concerns, while others insist their day-to-day interactions with customers are sufficient. "Small companies don't have to have sophisticated systems in place; it's easy to keep track of their customers and what they want," says Outlaw. "But once you have hundreds or thousands of customers, it's important to have technology in place, such as a centralized database with up-to-date customer information, [allowing] everybody in the company to understand what each customer wants and needs. This is really the key to CRM."

These days, there are a multitude of vendors to choose from, and all offer CRM solutions designed specifically to target growing businesses. Some companies offering CRM solutions include: Interact Commerce (www.interact.com), FrontRange Solutions (www.frontrange.com), Microsoft (www.microsoft.com), Multiactive Software (www.multiactive.com), Oracle (www.oracle.com), Salesforce.com and TriVium Systems (www.triviumsys.com).

Before rushing to adopt a technology, though, you should first make sure your company is a customer-focused organization. If not, a CRM program has a much higher failure rate. "The most difficult thing about CRM is not buying and implementing an application, but changing the focus of a company to be more customer-centric and more customer-focused," Outlaw says. "If a company is still very much product-focused, slipping in a CRM system may indeed offer some internal efficiencies, but it will not help a company receive the dramatic improvements it can get from CRM."