04 Mar 09 Why CRM Is the Right Investment in a Bad Economy

In difficult economic times, companies often pull back from technology investments. However, many top companies apparently believe that postponing or cancelling a CRM upgrade is shortsighted, according to a recent survey conducted by the market research firm Gartner. That survey, conducted with nearly 90 business and IT leaders revealed that more than three-quarters of respondents are planning to enhance their investments in CRM initiatives in 2009, rather than de-commit resources.

Why the increase in investment rather than cut costs? Simple. Top firms see these projects as a way to focus on improving customer retention and increasing wallet share during hard times. According to Selling Power publisher Gerhard Gschwandtner, companies facing a down economy must go on the offensive. “This isn’t the time to hunker down,” he explains. “If you get on the defensive you’re dead, so get aggressive and set aggressive goals.” The key to being aggressive effectively is to select better targets, he adds. “You need to improve your methodology so that you don’t waste time on customers who aren’t going to buy.” 

And that’s exactly what CRM upgrades are intended to accomplish, according to Gartner analyst Chris Pang. “Some budgets for CRM initiatives were negatively impacted, but, the latest survey results showed that earlier budget allocations for CRM initiatives largely remained in place,” he said. “It was clear that many projects such as implementation of direct marketing tools, customer analytics, and customer service and support capabilities are too strategically or tactically important to be suddenly abandoned.” 

The simple truth is that improving the performance of the sales team takes on added importance in a downturn because the cost and effort needed to sell to existing customers is often less than that for acquiring new ones. Not surprisingly, the only area that saw a notable change in emphasis from the two surveys conducted was an increase in efficiency and reducing cost. 

In other words, top companies are investing in CRM to enhance cross-selling or upselling of products and services, to increase customer satisfaction and to increase sales revenue. Gartner estimates that CRM spending in 2009 will not decline as dramatically as it did after 2000, although growth will be more moderate than in previous years. In fact, Gartner is forecasting that the European CRM software market alone will reach an impressive $3.5 billion in 2009, an increase of 4 percent from 2008. 

In terms of their CRM technology focus, the majority of respondents indicated that they were not currently looking to select new CRM technologies (40 percent) and were reviewing existing technologies (32 percent). Many organizations have gone through their first or second-generation CRM technology implementation and are looking to optimize or move to a newer product to benefit from new functions and business process support for their CRM strategies. 

“CRM projects are still of high interest for 2009 and that key concern during this economic downturn is ensuring that approved CRM initiatives are considered a technical and business success,” said Pang. In short, the rough economy has turned CRM – especially the latest set of sales-oriented tools – from a “should have” into a “must have.”

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How to Turn Social Networking into a Sales Tool

Social networking services have an enormous potential to help companies develop new customers and increase revenues, but only if sales professionals are included in the mix. 

According to the market research firm IDC, more than half of U.S. consumers with Internet access use social networking services (SNS), such as Facebook and MySpace, and that penetration is expected to grow to include nearly everyone online. This is important in B2B sales environments because SNS is rapidly moving from a consumer-oriented technology into a pervasive technology. People who use SNS in their non-work life are increasingly adopting it inside a business context. 

Therefore, the best way to understand how SNS would work in a B2B environment is to look at the patterns of usage that are already developing in the wider SNS environment. According to IDC, consumers are also spending ever greater amounts of time on SNS, a fact that has advertisers “drooling over the opportunity.” However, despite the interest, it appears that SNS sites are not very useful for generating revenue from advertising. 

Not that people aren’t visiting the SNS sites! IDC found that consumers who use SNS also tend to visit the services often and spend a lot of time per visit. More than three-quarters of SNS users visit at least once a week, and no less than 57 percent visit at least once a day. During each session, 61 percent of SNS users spend at least 30 minutes on the respective site or stay logged in permanently, and 38 percent spend at least one full hour per session or simply stay logged in all the time. That’s a lot of Internet traffic, so no wonder some “drooling” is going on. 

However, the SNS environment does not lend itself well to advertising. Turns out that consumers use SNS primarily to connect and communicate, in response to peer pressure, for entertainment, and for work-related purposes. But advertising does not factor into consumer motivations and, in fact, users are less tolerant of SNS advertising than other forms of online advertising, probably because they find it intrusive to what they believe should be a purely social interaction. 

The data is clear, according to IDC. Ads on SNS have lower click-through rates than traditional online ads. On the Web at large, 79 percent of all users clicked on at least one ad in the past year, whereas only 57 percent of SNS users did. Those clicks also led to fewer purchases, with the larger Web generating a 23 percent purchase rate while the SNS sites only won 11 percent. 

All of this is vastly disappointing for companies hoping to sell products and services online, according to IDC program director Karsten Weide. “The thinking has been that the popularity of SNS will attract a big audience and generate a lot of traffic, which in turn will produce enormous amounts of user-generated content and therefore advertising inventory – without any expenses for editorial staff or content distribution deals,” he says. “All of the above has proven true – except that almost invariably, SNS have had a hard time selling this inventory.”

One of the potential benefits of SNS that the advertising industry has discussed is whether people’s connections (i.e., whom a user knows or is linked to) could be used for advertising. For instance, publishers could show a car manufacturer’s ads to a user’s contacts because that user’s online behavior has indicated that she is interested in a particular brand of cars. Anecdotally, there has been some indication that this “social advertising” might be more effective than behavioral targeting. However, that idea is stillborn, according to Weide. Of all U.S. Internet users, only 3 percent would allow publishers to use contact information for advertising. 

IDC expects that lower than average ad effectiveness on SNS will continue to contribute to slow ad sales unless publishers get users to do something beyond just communicating with others. In other words, the only effective way to sell a B2B offering through SNS is to use the contact information as a form of lead generation, rather than expecting advertising to generate traffic that converts into customers.

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How to Make Sales Professionals More Mobile

Sales professionals are relying more on mobile technology to develop opportunities and close business, according to a recent survey by Selling Power magazine. The survey revealed that four out of five sales professionals spend at least one day a week away from the office and that one out of five sales professional spends four days a week on the road. 

These mobile sales professionals use a combination of laptop computers and smart phones for a wide variety of tasks. In addition to using smart phones for phone calls and laptops for creating documents, sales professionals used mobile devices for checking and responding to email, working on documents, giving presentations, accessing the Internet, working with CRM, and accessing company-specific databases and tools. 

The survey also revealed that 43 percent of mobile sales professionals aren’t carrying a laptop any longer. Instead, many are now using a smart phone (most often a BlackBerry) to do much of the work they once accomplished on their laptops. In fact, of the major smart phone and mobile phone vendors, BlackBerry dominates usage among sales professionals with approximately 42 percent of the market. 

The popularity of smart phones among sales professionals is not surprising, considering the way that smart phone functionality has encroached upon traditional computing, according to Dale Hagemeyer, a research vice president who studies CRM for the market research firm Gartner. “What a phone can do in terms of memory, functionality, and computation is quite amazing compared to a phone from five years ago,” he says. 

Email is the most common application that’s migrated from the laptop to the smart phone. “Today’s smart phones are more than capable of sending and receiving the kind of short messages that are the bread and butter of sales communications,” says Hagemeyer. 

An increasing number of sales professionals are using smart phones to access the Internet and company-specific databases. CRM is also becoming more popular as a smart phone application, with an increasing number of CRM vendors offering CRM access on a smart phone device. While mobile CRM access is still dominated by laptops, there’s no question that its popularity will continue to make it more widely used on smart phone platforms. 

Gerhard Gschwandtner, Selling Power publisher, believes that the current economic downturn is fueling the migration to the smart phone platform. “To make sales in today’s environment, sales reps need to be able to connect with customers and colleagues as quickly as possible,” he explains. “They don’t have time to hunt up an Internet hot spot in order to conduct productive business.” 

Smart phones appeal to sales managers, too, who see them as cost savers when compared to traditional laptops. Consider; a smart phone with a telecom contract can cost as little as $100, and may be available for free in large quantities. By contrast, even the tiny netbook computers cost around $400 new. 

Smart phones are safer, too. Thieves target sales professionals because they’re known to carry top of the line laptops with a high (illegal) resale value. Let’s face it: a sales rep carrying a $2,000 laptop is far more likely to get mugged than a rep carrying a $400 smart phone. 

“Smart phones both cost less and are more convenient than laptop computers,” explains Gschwandtner. “It’s a combination that makes them uniquely suited to help sales professionals make their quotas during difficult economic times.”

Tags: crm, economy, investment