The Crucible of Recession: CRM’s Role

One of my friends passed along this excellent article written by Richard Barrington that I think does a great job of defining the need for a solid CRM solution in todays economic climate:


 


The Crucible of Recession: CRM’s Role


A recession is a critical test of any business. In a recession, a business model must be resilient enough to maintain profitability or at least liquidity. A sales organization must prove persistent and effective enough to continue to find new business in a lean market.


For the best-run businesses, a recession does not present a challenge of survival so much as an extraordinary window of opportunity. In a recession, stronger companies can pick up market share at the expense of weaker competitors—who either go out of business or have to reduce capacity to cut costs. Picking up market share during downturns allows the stronger competitors to emerge more profitable than ever in the subsequent expansions.


A recession, therefore, is the survival-of-the-fittest crucible of business. CRM’s role in this crucible is two-fold: to help a business achieve efficiencies to survive the profitability/liquidity challenge, while enhancing sales productivity to capitalize on the competitive opportunity.


 


What follows are three CRM strategies that can help recession-proof a business.


Recession-Proof Strategy #1: Increase Customer Penetration


 


In a recession, customers become especially precious. A company must protect customer relationships in what is bound to be a more fiercely competitive environment. Considering that acquisition costs for new business greatly exceed the costs of servicing existing customers, the ability to protect customer relationships is a key to maintaining profitability in lean times. In fact, estimates suggest that improving customer retention by just 5% can boost profitability by 25% to 95%.


Increasing customer penetration goes beyond simply retaining existing customers to getting more business out of them. For instance, a CRM-based strategy to cross-sell to incoming service callers turns service efforts into sales opportunities. A CRM system can alert customer service personnel to past ordering histories and to potential add-on sale opportunities, while providing tailored scripts to guide the service staff through this cross-selling process.


Increasing customer penetration also involves outreach. A CRM system can be used to analyze and coordinate with customer buying cycles and orchestrate targeted offers. In a recession, when new customers are hard to come by, getting more out of existing customers is one way an organization can continue to grow.


 


Recession-Proof Strategy #2: Achieve Efficiencies


 


Identifying cost efficiencies is another way to protect profits in a recession. Sales database information can help management improve sales force productivity. Using automation to help institutionalize a consistent sales discipline has been shown to increase average sales per rep by 30% over a three-year period. A sales database can also help management more readily identify and weed out unproductive sales people.


Because a CRM system can reach beyond the sales/customer interface to track orders through the delivery and billing processes, it can achieve cost efficiencies throughout the order cycle. Finally, CRM can help customers achieve efficiencies by providing a platform for electronic ordering, real-time order tracking, and automated reordering. When companies can provide time or cost savings in a recession, customers will be less likely to shop around for alternatives.


 


Recession-Proof Strategy #3: Use Resources Effectively


 


In a recession, sales databases or any other new CRM initiative might seem like a luxury better saved for fatter times. However, slow business periods can be the best times to launch such initiatives. In dealing with CRM vendors, buyers are likely to find their bargaining power greatest, and installation times the shortest, when business is slow.


Within the organization itself, slowdowns create excess capacity, and one way to use this excess capacity is to devote it to training on a new system. The most difficult time to change sales practices is when new business is coming in fast and furious. Conversely then, a recession might provide enough of a break in the action to thoroughly implement a new CRM strategy.

ABOUT THE AUTHOR

Scott Weber

Scott Weber is CRM Practice Manager and Senior Consultant for Customer FX Corporation.

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