Managing Customer Relationships: What's Cheap vs. What Works

Summary of the paper by Aberdeen Group (download it here)

Many businesses feel the need to automate and streamline their customer interactions as their customer base grows and as their customer data gets more spread out across the organisation. Once a business has identified that they need to do things differently they typically start to look at ways they can organise their customer information more efficiently and develop more solid sales processes.

Businesses that are in this stage will typically come across three solutions that will help them manage their customer information...

1. Spreadsheets and Email
When businesses start up and invest in computers and software office productivity tools (such as Microsoft Outlook and Excel) are usually near the top of the list and hence become the foremost method of managing customer information. When a business is looking into better ways to manage customer information, they may start to look into how they can use these existing applications more effectively. However, using spreadsheets and email to manage customer information poses a number of issues for businesses:

• Labour intensive: Staff will find they spend a large part of their day entering, re-entering, organising and searching for information. This can become frustrating and difficult for salespeople to respond to customers in a timely manner, and the organisation may begin to suffer from “information overload” as the number of contacts and complexity of information grows.
• Not conducive to collaboration: When using email programs communication resides in one salespersons inbox (and in their head!) making it difficult to access and share. As a result staff will spend more time discussing and swapping customer information, and if a salesperson leaves most of the customer information will leave with them. This can become a huge time waster and can negatively impact customer relationships.
• Limited functionality: Spreadsheets and Emails are not designed to support more complex sales and marketing tasks such as email marketing, opportunity management and customer analysis (reporting).

2. Freemium
“Freemium” software refers to any software that has a “free” version and a “paid” version - where the free version will offer limited features and functionality. One of the attractions to this solution, particularly for small businesses, is the ability to try before you buy. Freemium solutions offer a low-risk way to enter the contact management market without investing heavily in software and infrastructure required for a full-blown CRM. However the pitfalls of these solutions are often overlooked by decision makers including:

• Who owns the data? Businesses should be careful to investigate how easy or complex it is to migrate the data to another system. Many solutions will enable you to export basic contact data to Excel, but extracting sales opportunities, notes and activity histories can be much more difficult.
• Will it support scalability? At what cost? Most freemium solutions will have a cap on the functionality and/or the number of contacts a business can have. Once a business reaches these caps they will have to make a decision: do we invest in the paid version, revert back to the way we use to do things, or research alternative paid solutions? In each case the business must evaluate the cost vs. benefits taking into account the time investment that has already been invested in the freemium solution.
• What about support and training? Business must also investigate whether the freemium solution will provide adequate resources to train staff and deal with support issues, or if this is provided at a cost. If they are provided for free the business must then evaluate the time investment required to learn and apply the correct techniques.

3. Fully functional contact management (CRM)
Compared to the other solutions fully functional Contact Management requires a higher investment (either initially or through ongoing costs). As such it is important that businesses spend the time researching and deciding on which solution to choose as the cost to change will be much higher. Despite this, Contact Management overcomes many of the barriers that spreadsheets, email and freemium solutions create. A good Contact Management solution will support collaboration, scalability and customization, and will typically come with a free trial period.

Overall the cost of a solution will often influence a business' decision when choosing to improve the way they manage their customer information - and many businesses choose freemium or lower cost solutions in order to reduce their investment risk. However, many businesses are not aware of the non-financial costs associated with their decisions such as time, productivity, resources, and impact on customer relationships. What is free now may become more costly later on.