There can be little doubt that businesses that fail to identify, generate and subsequently manage potential new customers ultimately pay a heavy price. But despite this, many small-to-medium businesses have resisted investment in CRM systems designed to help them manage customer relationships – perceiving them to be both expensive and unnecessarily sophisticated. Ten years ago there would have been a grain of truth in the reasoning. But today there doesn’t need to be.

It is an interesting paradox: the long-term cost of a failure to develop new business is potentially fatal, but the up-front cost of technologies that can help companies avoid the abyss is often considered to be prohibitive. In the current economic climate, where organisations are seeking to increase productivity whilst at the same time find operational efficiencies, making a long-term commitment to a technology that may demonstrate ROI tomorrow but will consume valuable resources today, is unlikely to be considered sensible.

But the common alternative for many small businesses – managing prospective customers using paper-based systems or spreadsheets – is equally ill-advised. And so the paradox perpetuates. Where next for small businesses in a hostile economy?

The cold climate does not spell the end for CRM systems. In fact it could facilitate a new beginning for a mature technology in what has now become a commodity market. In an austere business environment where growth is most likely to be fuelled by nurturing new customers, companies that operate without an effective system to develop and manage the prospect pipeline, as well as their existing customers, will invariably struggle.

Far from being an expensive luxury, a simple CRM system is an essential tool for any aspirational small business. The challenge is to go back to basics, assess genuine business needs and work with a CRM supplier that can build a simple solution that meets them.

The evolution of CRM

The age-old cost paradox has been built upon historical myths that began when CRM was first introduced in the 1990s. The original promise of Customer Relationship Management –the philosophy that holistic business intelligence, and therefore business strategy, would be driven by the capture and analysis of every interaction a company had with its customers- never truly materialised.

Instead CRM gained a reputation for being over-hyped, over-priced and under-used. Vendors took the ‘bells and whistles’ approach and developed sophisticated solutions that ultimately solved little of value – with functionality that was neither required nor used. And the vagaries of on-premise systems, chiefly issues around access, speed and reliability for remote users in the field, merely added to the problem.

In recent years, the philosophy has been redefined and CRM has re-emerged as a vital business application. CRM is no longer about the big promise of managing customer relationships, but is instead more clearly aligned with the most primitive commercial needs of a modern business; how can sales people manage their prospects? How can marketing teams communicate with their existing customer base? And how can customer service teams support and satisfy customer needs?

Companies are increasingly focusing on improving their sales processes, being more efficient with their marketing campaigns and able to measure response and activity quickly and effectively. These are indeed basic needs, but in a competitive environment bedevilled by a global economic downturn, they are the key priorities that matter to every single business. And simple needs require simple solutions.

Although many vendors continue to develop sophisticated solutions, the most effective CRM tools have stripped away complex and unnecessary functionality that plagued (and in many cases continue to plague) early systems, and have become leaner and more user-friendly. Where this has taken place, individual usage is growing rapidly, data sets are expanding and management teams are better placed to develop commercial strategies based on meaningful information. And the approach is yielding true competitive advantage.

From evolution to revolution

Technology is, of course, only an enabler that can help enhance business processes, so it is perhaps ironic that recent advancements in technology have significantly enhanced the CRM cause. The emergence of cloud computing has revolutionised CRM and – at a time when they need it most – put it comfortably within the reach of small businesses.

Not only has the cloud removed long-standing challenges such as access and reliability, it has also helped lower the cost of delivery and reduced support requirements. Implementation is quicker and less intrusive, and ‘real time’ data access has substantially increased the value for the user.

Buoyed by the benefits of the Cloud, CRM systems have become a commodity offering. Subscription-based models are at last giving smaller businesses, previously deterred by the daunting up-front capital expense of on-premise systems, the opportunity to sample CRM with significantly reduced levels of risk. In some cases, where easy to use ‘freemium’ products are providing companies with free access to basic entry-level software, there is no risk at all.

Risks and rewards

In a new era for CRM systems, perhaps the greatest risk for small businesses is to do nothing. At present, a worrying number of small-to-medium organisations continue to rely on Excel to manage their lead generation activity – taking the ‘back-to-basics’ concept just a step too far!

This not only stifles the agility and responsivity of the commercial effort, but it runs the even greater risk that when a salesperson leaves a company, their list of customer prospects mysteriously leaves with them. At a time of financial uncertainty, where businesses are under pressure to control costs and improve productivity, that alone seems too high a price to pay.

A reliance on old methodologies is unlikely to remain sustainable for small businesses as the economic climate continues to bite. The ability to nurture relationships with potential new customers will be a critical success factor for companies of all sizes across every sector. Implementing a simple system to manage existing and prospective customer interactions should therefore be a key consideration for all small businesses. The cost of doing nothing could well be expensive. But the cost of introducing a simple CRM system that supports your core business objectives no longer needs to be.