Who Is Buying CRM?
Throughout all the high-tech development of the last 15 years, one trend clearly emerges: Technologies that increase business productivity are first adopted by large companies, while small companies reap benefits from the new technology as prices drop to commodity levels. The PC, Internet, broadband and wireless revolutions have all followed this trend. We believes that customer relationship management (CRM) software, used to help sales, marketing and service reps be more effective, is following a similar path.
The emerging consensus among the research community and the mainstream business press is that small and medium sized businesses (SMBs) in the U.S. are increasingly turning to hosted CRM (including sales force, customer service and marketing automation) solutions to improve productivity and lower costs. Another simple gauge of the market for hosted CRM with SMBs is the technology's adoption to date. Since the arrival of hosted CRM in Q2 of 1999, the largest providers support over 14,000 SMBs and over 200,000 subscribers. In June 2004, Gartner noted that these figures "are a leading indicator that the concept of using an application as a service provided over the Web… is now becoming acceptable by small and midsize businesses (SMBs) with basic customer relationship management (CRM) needs." Usability is a clear factor in driving adoption - in fact, many hosted CRM applications today, including Ours, are as easy to use as Microsoft Outlook and the Microsoft Office suite.
SMB buying trends indicate that several key segments are purchasing hosted CRM systems at a high rate, including insurance, financial services, high-tech and consumer goods. According to Gartner, of the SMBs that have deployed hosted CRM, 80 percent use the technology for sales force automation, 60 percent for service and support, and 50 percent for marketing automation and lead management. Attractive pricing has fueled the growth of hosted CRM, since previous options for the SMB were too simple and insufficient for their business, or too expensive and complicated to deploy and maintain.
Innovations from companies like Ours have made the benefits of CRM attainable to companies of all sizes. The ability to track customer interactions in a simple, yet robust way enables a uniform "best practices" approach to closing sales and service incidents, greater visibility into revenue forecasting, and measurable ROI from marketing campaigns.
Industry analysts agree that SMBs base hosted CRM purchases on seven key criteria: price, usability, feature set, ease of implementation, ease of customization, three-year total cost, and ease of integration. In addition, We is the only partner for SMB brandholders looking to expand their existing customer relationships via a powerful, flexible, affordable CRM suite, with very little risk. This is largely due to our contrarian go-to-market strategy that leverages existing relationship between SMB brandholders and their customers.
This approach offers many benefits to the SMB brandholder, including the ability to build additional recurring revenue streams from existing customers via a powerful, easy to use hosted CRM platform (branded by the SMB brandholder, if desired) with very little upfront cost and ongoing risk. Further, a partnership with Us facilitates a deeper monthly billing relationship, and further monetizes the SMB brandholder's current customer base.
We offers two different partnership options depending on the level of front-line support that We provides, each with flexible pricing, terms and hosting options.
For brandholders that provide products and services to small and medium-sized businesses (SMBs), finding new ways to monetize their current customer base is a key challenge. For example, Costco has expanded their offerings from discount warehouse goods to a portfolio of co-branded SMB services including payroll and credit card processing, banking, and conference call capabilities - even web hosting. In each scenario, Costco leveraged its brand and an innovative partnership to increase average revenue per member nationwide.
A similar opportunity exists for SMB brandholders in CRM. Like many other technology productivity tools before it, CRM's value proposition to the SMB has dramatically increased because of recent advancements and price drops. Further, new business attitudes enable the SMB brandholder to use a customized, branded CRM offering to build brand equity, closer customer relationships, and a lucrative recurring revenue streams around each customer.
Several top-tier media and analysts agree the SMB market poised for widespread adoption of hosted CRM. Refer to the following recent quotes:
AMR Research
Press Release
June 15, 2004
Small and Midsize Businesses (SMBs) will increase their IT spending by 6.6 percent in 2005, according to a recent study by AMR Research. The ongoing quest for superior customer management capabilities is the primary business driver behind this boost in spending intentions. "The enterprise software market is saturated, and technology vendors are seeking new opportunities," said AMR Research President and CEO Tony Friscia. "With twelve million SMB companies worldwide and enterprise penetration rates under 20 percent, this is the next big growth market for enterprise technology."
AMI Partners
Report: "2003 U.S. Enterprise Software Market Overview and Assessment"
June 3, 2004
SMBs have historically been underserved in the enterprise software market, with only about one-in-ten SBs and one in 4 MBs deploying CRM/SFA solutions, and less than 5% of SBs and roughly 20% of MBs using ERP/SCM solutions. However, increased SMB demand will be fueled by renewed vendor attention and the increasing availability of "pay-as-you-go" on demand hosted solutions tailored to SMB customer needs. AMI's latest surveys indicate that over 380,000 SBs and 27,000 MBs in the U.S. view implementing CRM/SFA/ERP/SCM solutions as an important strategic focus area for the next 12 months.
BusinessWeek
Small Business Report: "CRM: Trickle-Down Tech"
March 31, 2004
As customer-relationship-management (CRM) software emerged in the 1990s, major corporations gobbled it up, along with so many of the other "must have" products offered by IT vendors in those heady days. Amid promises that it would provide a 360-degree view of customers and their buying habits, CRM was mistaken by some for a magic talisman. If you listened to its wilder-eyed advocates and promoters, it could seem that the mere act of loading the software was enough to prompt a revolution in enhanced profitability.
Alas, reality intervened. After the hype came the disappointment, as outfits struggled to integrate CRM into their existing business structures -- all too often without success. Meanwhile, small and midsize businesses (SMBs) remained mostly on the sidelines, congratulating themselves for not getting caught up in the excitement in the first place.
How times have changed. Today, CRM is evolving, and SMBs are well-positioned to benefit this time around. When big companies shut their wallets after the tech bubble's rupture, IT vendors rushed to tap the underserved SMB market, with varying degrees of success. And, while SMB spending has helped keep the tech industry as a whole afloat, small outfits have remained reluctant to adopt CRM. Fewer than 28% of U.S. businesses with less than 500 employees used CRM applications in 2003, according to a Yankee Group survey.
Hosted applications also are on the rise, and they tend to attract SMBs more than larger players. With hosting, users pay…a monthly fee based on how many employees access the service. This approach gives outfits the flexibility to add or remove "seats" as their workforces expand and contract, while allowing them access to advanced CRM solutions they might not have the infrastructure to run out of their own offices. Hosting will account for 13% of the CRM software market by 2007, up from 3% in 2002. According to Tom Topolinski, a Gartner Research vice-president, this growth that will come largely from the SMB side of the market.
"The SMB market is now being catered to," says Topolinski. Worldwide, he estimates that SMBs will spend a total of $966 million on CRM in 2007, up from $741 million in 2002. (North America and Europe account for about 85% of the global CRM market; Gartner defines North American SMBs as businesses with under 1,000 employees, and European SMBs as those with up to 250.) At the same time, larger enterprises will reduce their CRM spending somewhat, from $2.07 billion in 2002 to $1.97 billion in 2007.
Gartner
Report: "SMBs Leverage Web Enablement for Hosted CRM"
March 14, 2004
Increasing numbers of small and midsize businesses (SMBs) will be assessing the benefits of using an application service provider (ASP) for customer relationship management (CRM). To ease the headaches of managing complex CRM software, or to avoid these headaches in the future by using a new style of software, SMB IT managers are increasingly becoming receptive to the "low-cost/good-enough mantra" that is at the heart of the ASP idea. This is primarily driven by price sensitivity as well as concerns about limited IT resources and total cost of ownership (TCO). Continuing tough economic conditions have also, unsurprisingly, aided ASP adoption. In 2002, 8 percent of SMBs chose an ASP for CRM; this will grow to 25 percent by 2006 (0.7 probability).
The combination of relatively low startup costs, few IT resources required for startup or maintenance, rapid deployment, ease of use and deep-enough functionality to meet the needs of many SMBs, as well as divisions of some large enterprises, has proved to be the right mix for many enterprises.
Yankee Group
Report: "Application Syndication"
November, 2003
CRM software is in the midst of a significant evolutionary shift to deliver applications as a service. These applications offer a lower total cost of ownership, while at the same time improving user adoption. Over the past year, the market for on-demand CRM has become more popular, primarily because of lower total cost of ownership and improved usability. We are now on the verge of a new trend called "Application Syndication" that is a direct result of the success of the service-based architectures. These applications pave the way for a new generation of OEM partnerships and extensions of applications by not only easily enabling the functionality to be embedded into another application, but also eliminating the management complexity of application and infrastructure in a way not possible before.
The preceding passages are by no means exhaustive, but rather a cross-section of the prevailing wisdom on the potential for hosted CRM in the SMB market.
A. Adoption to Date
For evidence on the market for hosted CRM in SMBs, simply look at the technology's adoption to date. Since the mainstream arrival of hosted CRM in Q2 of 1999, the largest providers support over 14,000 SMBs and over 200,000 subscribers.
In June of this year, Gartner noted that:
These statistics are a leading indicator that the concept of using an application as a service provided over the Web… is now becoming acceptable by small and midsize businesses (SMBs) with basic customer relationship management (CRM) needs.
B. Leading Segments
Some SMB segments have already shown a strong preference for hosted CRM. Yankee Group describes this trend is inevitable and "the next step." Customized hosted CRM offerings now exist for the following segments:
- Banking/Commercial lending
- Advertising/Media Sales
- Insurance
- Life Sciences
- High-tech
- Manufacturing
- Hardware
- Software
- Networking
- Electronics
- Telecommunications
- Consumer Goods
- Financial services
(1) Gartner
(2) SearchCRM, "Hosted CRM goes vertical"
June 2004, http://searchcrm.techtarget.com/originalContent/0,289142,sid11_gci969812,00.html
C. Breakdown of SMB CRM Market by Price Point
Prior to the mainstream adoption of hosted CRM, the SMB market was underserved - the only options being either expensive on-premise systems (such as Onyx and Pivotal) or low-end contact management systems like (ACT! or Goldmine).
As the following graphic shows, a "sweet spot" for CRM systems in the $500-1300 range has clearly emerged, a category dominated by hosted CRM systems. Already, 8 percent of the SMB space has deployed a hosted CRM application. Furthermore, Gartner forecasts that by 2006, SMB demand for hosted CRM will more than triple, to 25 percent.
A. Motivation
With the advent of easy to use, fully featured hosted CRM, the benefits of customer relationship management are now attainable to companies of all sizes. These benefits are derived from being able to have defined repeatable processes within a sales, customer service, or marketing team. Having the ability to institutionalize best practices means an entire sales team's performance can be more objectively measured, not just by the number of closed sales, but by the level of activity (cold calls, appointments, proposals, etc.) leading to those sales. Sales managers gain a window into the details of each sales opportunity, enabling them to coach their team and impact a sale at its most critical moments
On the customer service side, institutionalizing best practices goes a long way towards achieving higher customer loyalty because service level standards can be monitored on an individual rep basis to ensure company standards are being met. For small and midsize businesses, hosted CRM enables SMBs to have the same definable, repeatable processes larger corporations have been using for the past 10 years to get greater visibility into revenue forecasting and monitoring of customer attrition.
(3) Gartner, "SMBs Leverage Web Enablement for Hosted CRM", March 2004, Page 1
According to Gartner (4) , small and medium sized businesses are increasingly turning to hosted CRM because it delivers real-world results, including:
- Consolidation of all sales activity in a single system improving sales visibility by more powerful:
- Lead development
- Account management
- Opportunity management
- Team collaboration
- A 360-degree view of the customer for key employees
- Simple marketing automation, including:
- Built-in Sales Force Automation
- Automated lead capture from the corporate Web site
- Automated lead routing to people or queues using simple rules
- Campaign management allowing marketing users to define and track campaigns and activities, and the costs and revenues associated with each campaign for return-on-investment analysis
- Some list creation, extraction and importing giving marketing the ability to manage leads that are related to individual campaigns
Other SMBs are adopting hosted CRM simply because their business has outgrown the basic contact management features in software like Microsoft Outlook or ACT! Most packages, including Us, combines the affordability and ease of use associated with these products with key features that improve sales and service while lowering cost, including:
- No Database or IT hassles
- No Upgrade Costs or Maintenance Fees.
- Contact, Lead, and Opportunity Management
- Scalability
- Offline access
B. Trends
Different market segments will utilize their CRM systems in different ways. For example, a software company is likely to have more help desk and service related needs, while an ad rep is more likely to rely on sales force automation. That said, some broad trends can be identified. According to Gartner , of the SMBs that have deployed hosted CRM, 80 percent use the technology for sales force automation, 60 percent for service and support, and 50 percent for marketing automation and lead management.
C. CRM for the SMB with Less than 20 Employees
Every small business needs to keep customer contacts and account activities up-to-date. Microsoft Excel and Outlook meet basic needs, but as business and customer contact activity grows in complexity, both programs fall short. And even for companies with two to four employees, the Total Cost of Ownership can add up over the long term, diminishing ROI.
As more employees are added, the benefits of this approach shrink and inefficiencies grow. Thus, migrating to an affordable CRM solution often makes practical sense at an early stage. In fact, the hosted CRM industry market has reacted to this market, as several companies have aggressively targeted this segment, rolling out editions for companies with five CRM users. There is a resounding need among small businesses, particularly as they add employees, to have the ability to not only manage centralized customer information, but to share and collaborate on that information across the organization. A company may be small, but its need to span a broad geographic area or to access centralized information remotely can still be significant. At this point, companies require a solution that shares data across the organization and helps employees coordinate sales and service efforts.
There is a resounding need among small businesses, particularly as they add employees, to have the ability to not only manage centralized customer information, but to share and collaborate on that information across the organization. A company may be small, but its need to span a broad geographic area or to access centralized information remotely can still be significant. At this point, companies require a solution that shares data across the organization and helps employees coordinate sales and service efforts.
(4) Gartner, "SMBs Report High User Satisfaction With CRM Software"
November 2003, Page 3
(5) Gartner
D. SMB hosted CRM selection criteria
Gartner suggest that SMBs base their hosted CRM purchase on the following criteria:
- Price
- Ease of use
- Feature set
- Ease of customization
- Ease of implementation
- Ease of integration, particularly with Microsoft Outlook and Microsoft Office
- Three-year total costs
A. New business attitudes toward CRM
We is the only partner for SMB brandholders looking to expand their existing customer relationships via a powerful, flexible, affordable CRM suite, with very little risk. This is largely due to our contrarian go-to-market strategy that leverages the existing relationship between SMB brandholders and their customers.
Many hosted CRM providers tout the "disruptive" nature of their business, and how they enable their customers to manage sales, service and marketing efforts in new and innovative ways. Indeed, many aspects of this story ring true - lower cost, reduced IT burdens and usability that come with hosted CRM have changed the market to some degree. But many of the companies treat their customers the same way that the larger CRM providers do - costly integration and customization, charging extra for key features, cluttering the user-interface with screens they don't need. But the most striking similarity is the insistence on the idea that "Our brand is king".
This way of thinking is fundamentally flawed and damaging the CRM industry as a whole. In our view, more SMBs can enjoy the benefits of a CRM application (i.e. interact with their customers more effectively) much faster, and for a better price if existing SMB brandholders can offer powerful, easy to use CRM. This idea goes against the traditional way software has been marketed and distributed since the industry's inception - but it is the most effective way for SMBs to attract, retain and service better customers with affordable CRM tools.
B. The Upside
We empowers our partner's service portfolio to include a robust, flexible, affordable CRM platform with very little risk. This approach offers many benefits to the SMB brandholder, including:
- Increase revenues on your existing customer base and secure greater customer loyalty by bundling CRM services your customers are likely to purchase anyway.
- By partnering with Us, you'll be offering your customers the most powerful, easiest to use, flexible hosted CRM solution available.
- Offer a premium hosted CRM solution to your customers within weeks, with virtually no start-up costs or risk.
- Your new hosted CRM solution can be a sustainable competitive differentiator with new customers.
- Build a lucrative recurring revenue stream on every seat sold - with our mix of powerful features, ease of use, and flexible pricing with no capital outlay, it's an easy sale.
VI. The Opportunity to Partner
A. The Difference
We are the first CRM company to incorporate the powerful workflow features associated with multi-million dollar on-premise CRM solutions, with the fast deployment times and low capital requirements characterized by hosted applications. We've even taken it one step further by building our products from the ground up to be far easier to use and customize, making them the ideal solution for companies of any size. We're also committed to value by offering our sales, customer service and marketing modules for less per month than most people spend on their cellular phone.
- Fully customizable with true workflow functionality.We are is #1 at helping customers institutionalize their business processes to ensure consistently high levels of performance in closing sales, servicing customers, and executing marketing campaigns. That's because we are the only hosted solution to contain a workflow processing engine that allows companies to fully automate their business processes, rather than merely routing information from one person to another. We believe workflow is so critical to every business that we've included in all our products at no additional cost. Our solution is also customizable to take into account the unique business process needs of each customer.
- The only complete CRM suite.
B. Partnership Options
We offers two different partnership options, each with flexible pricing, terms and hosting options.
The first option is to become a Strategic Alliance Partner (SAP), where we build a custom, fully branded (or "private labeled") CRM platform for your customers, provides internal training and support, as well as marketing materials. In this scenario, front-line support for customers is usually the responsibility of the SMB brandholder. For partners that desire to simply co-market a custom, branded CRM application to customers, without training or support, we offer the marketing partner option. Here, we would field all support calls.
Small and medium-sized businesses are turning to hosted sales force, customer service and marketing automation solutions to increase productivity and lower costs. For SMB brandholders interested in generating greater revenues by marketing a hosted CRM solution, and actively looking to further monetize their current customer base by offering CRM, we presents a unique partnership opportunity. Further, both of partnership options allow SMB brandholders to enter the booming hosted CRM market quickly, at low risk.