Smart Money Small Business Site Author: Diana Ransom March 31, 2008 Starting Up: What's CRM?

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BARELY SIX MONTHS after starting New York chocolate company Sweetriot in 2005, Sarah E. Endline reached an organizational impasse.

"We kept current customer info in QuickBooks and prospective customers' information everywhere else," Endline says. Between going back and forth between Microsoft Outlook and Excel to get contact information and keeping tabs on updates via other employees' spreadsheets, the office was a mess. Tracking the company's progress was next to impossible, too. "We needed a unified system. We wanted a place to not only put contacts but also a place for notes and reminders," she recalls. And most importantly, "we wanted to track the lifecycle of a customer."

Enter customer-relationship-management (CRM) software, which aims not only to organize even the most hapless of offices but also help companies cultivate customer relationships. At its most basic level, CRM software is a more comprehensive Microsoft Outlook. While Outlook may be used for managing appointments and emails, CRM lets multiple users collaborate and manage a customer's overall contact history and essentially make notes in the margins. The technology also helps businesses design targeted marketing campaigns, suggest complementary or add-on products based on previous purchases, track customers' purchase behavior overtime and assess what's not working, too.

Indeed, says Jennifer Shaheen, president of Technology Therapy Group, a computer training company in White Plains, N.Y., one of the chief benefits of CRM is being able to develop a better pipeline. For example, "I know [in general] how many phone calls and emails it takes to follow up before a sale is made," she says. "If you know it takes you a month and a half to close [on a project] you can start planning when to bring on other projects as well."

CRM is ideal for start-up businesses that want to grow their contact lists and plan significant email marketing campaigns. "If people have better intelligence about their customers, they can better cater to them," says Peter Marston, an analyst at Forrester Research in Foster City, Calif. "It is about having better info about people you want to target, cultivating leads and managing those prospects."

As CRM software can either be downloaded to an individual computer or accessed via a web-based platform, the cost and capabilities of various options will differ. Here are a few considerations:

Usability
You should first consider your respective business's needs, says Ramon Ray, a technology consultant and editor of Smallbiztechnology.com. For instance, a small business with a lot of clients, but not a lot of products, might look into "baseline" —
that is, less powerful — contact management tools that have CRM capabilities such as Microsoft's Business Contact Manager and GoldMine. In contrast, businesses that are product-heavy and use multiple vendors and distributors might want to consider more robust services such as those provided by market leaders including Entellium, Maximizer and NetBooks, which also offers financial-management services.

If you have employees, make sure the application is user-friendly, says Shaheen. It's a good idea to check product reviews on CNet.com, or ask other businesses in similar industries what works best. If it's difficult to use, employees may reject the CRM and go back to Outlook. "If you're comfortable and they're not, then there will be a fight," she adds.

Mobility
It's also important to factor in your mobility needs. If you purchase an "on premise" solution, such as those downloaded to individual PCs, you're tied to your desktop. "If you leave your computer at home, you have your info at home," says Shaheen.

In contrast, says Ray, "if you are using a hosted web application you'll have access to the tools immediately." Business owners like Endline who spend a good chunk of time away from the office, and want the flexibility to work from their laptops, wireless devices and smartphones from more than one location, often prefer a web application.

Compatibility
As you're considering which type of product to use, consider the technology that you already have. Shaheen notes that some of her clients were decidedly upset when they realized that their iPhones weren't compatible with their CRM provider. For that reason, make sure you can synchronize various applications with the devices you or your employees like to use, she says.

Also, if you have a Mac make sure that your CRM product is compatible. And be aware that even if you opt for an online CRM tool, "not all web-based products work with all browsers," Shaheen says.

Scalability
"No matter if you go web-based or local," says Shaheen, "make sure the application you choose can be used by multiple people." For companies that intend to grow, scalability of your CRM product is particularly important. For example, Shaheen's company is readying for a switch from one CRM provider to another because she recently hired another employee, making six users in total. Not every CRM product will let you continually add on more people, she says.

The Cost
As more employees are added, the cost plays a more prominent role, since web-based platforms typically charge a monthly fee per user. Web-based platforms, according to Marston from Forrester, ring up to roughly $1,500 a year for about five employees. Salesforce.com, a big provider of the web-based CRM options, charges between $20 and $199 per user per month. The higher-end offering allows users to access an unlimited number of applications and management tools.

The price for some on-premise products is falling, according to Michael Dunne, a CRM research analyst for Gartner in Stamford, Conn. Microsoft's Dynamic CRM product, for instance, now costs less than $700 for the software, plus an additional 20% maintenance fee each year. The tech bellwether will soon come out with a web-based CRM product called "CRM Live" in the next month or so.

Endline of Sweetriot ultimately chose Salesform.com's web-based CRM platform for her five employees to use when communicating with their 1,500 client stores. The CRM tool also unifies all of the company's contacts. "It is so hard when you have limited resources to find the quickest and most efficient solutions," says Endline. The best part of the new technology is that it helps "keep the business organized," she says.

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