A New Way to Reach Small Businesses

Continuous relationship marketing (CRM) is widely used in business-to-consumer marketing, where it has proved effective in a variety of industries including financial services, telecom, healthcare, and media? Yet most large companies have only recently begun to apply the technique in marketing to small businesses, even though there are more than 5.5 million firms of 500 or fewer employees in the United States. Annual sales between large and small businesses reached $9 trillion (or two-thirds of the nation's total commerce) in 1996, and small businesses are often a large company's most profitable customers, with a lifetime value three or four times that of the average consumer. Until recently, firms had legitimate reasons to overlook CRM as an approach to small business marketing. The data often needed to drive a CRM program was poor or unavailable, and conflicts arose between the personal relationship sales and service channels that have long dominated business-to-business marketing and the new alternative channels that are frequently used to capture the full value of a CRM strategy. Resourceful and determined marketers are only now finding ways to overcome these obstacles (Exhibit 1). Exhibit 1 Disappearing obstacles to CRM Barriers to implementing Forces breaking down barriers business-to-business CRM Dominance of personal Superior economics of direct channels selling Customers increasingly comfortable using direct channels such as telephone and Internet Poor or unavailable Client server and data warehouse customer information implementation Salesforce automation and contact; management tools Intranet and extranet connectivity Inability to coordinate Diminishing role of intermediaries channels and manage Need to create cooperative conflict multichannel approaches tailored to customer needs Improved data management capabilities What is CRM, and who uses it? CRM is a data-driven approach that enables companies to assess each customer's current needs and potential profitability and tailor sales offers and service?(**) It often involves using multiple channels - the Internet, direct mail, telesales, and field sales - to improve effectiveness and efficiency. A company can make contact with prospective customers through relatively low-cost direct mail or telesales channels, for example, then close sales using a higher-cost field salesforce. Alternatively, customers can browse a Web site for product information before calling a telesales representative who will answer detailed questions and execute the transaction. Measures of these interactions are then fed back into a database to determine what does or does not work and what improvements need to be made. Industries characterized by the accessibility of transaction data and by ongoing customer relationships of varying profitability - such as telecommunications, banking, insurance, utilities, computer hardware and software, pharmaceuticals, and package delivery - are well suited to CRM [ILLUSTRATION FOR EXHIBIT 2 OMITTED]. Banks, telecommunications providers, and insurance companies in particular often possess detailed customer information and transaction histories. As a result, they have been among the earliest adopters of the technique. These types of company typically augment their customer files, or a sample thereof, with publicly available information from a provider such as Dun & Bradstreet or ABI. The data, which includes contact details, estimated sales, industry code, age of business, number of employees, payment histories, recent major purchases, and credit scores, can enable companies to develop lifetime-value models of customers, profitability scores, and behavior-based segmentation models. …