Crisis is one of the most important moment of the truth. Dr. György Bőgel

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1 CRM Role in increasing competitivness of domestic SME s Dr. Bianka Parragh Óbuda University Keleti Károly Faculty of Business and Management Institute of Enterprise and Management Crisis and reality Crisis is one of the most important moment of the truth. Dr. György Bőgel We must cut down costs and incomes We must dismiss workers We must introduce radical changing We must take back previous promises or still not? Have we got perhaps other opportunity? What kind of challenges does this new situation bring for the management? 1

2 The role of CRM in the crisis The financial-economic crisis period resulted into increasing the role and value of CRM. Those enterpreneurs who were not very familiar with the methodology and implementation of CRM solutions start to overthink their customer approach to handle properly such a key issue. Today s rapidly changing dynamic environment requires contineous adaptability and renewal capability which often does not work without making radical changes. Cost reduction or even retrenchment became one of the major objectives of domestic SME s making a real challenge retention of existing customers. The role of SMEs in the economic Most of the active enterprises are small and mediumsized companies (more than 99,9 %) Nearly three quarters of all employees work in the sector of small and medium-sized companies Even in the years before the outbreak of the economic crisis the lack of domestic demand, the tight financial resources, the inordinately heavy burden of administration, taxes, and costs of employee benefits made the micro-small and medium-sized companies daily activity extremely hard. The role of the SME sector is extremely important in our country, for they provide percent of Hungarian jobs. 2

3 The reasons for differences between the small and medium-sized companies in Hungary and in the other European countries In our country there are a lot of enterprises created under pressure More than half of small and medium-sized companies involve family members and relatives. A great proportion of enterprises can be characterized by short-term orientation. Small companies are very exposed to changes in the economy, legal system, and society. In the SME sectors the problems that have existed for several decades can be summarized as follows: Insufficient supply of capital, hence chronic underfinancing, Low efficiency and productivity, Lack of entrepreneurial skills is rather common, Lack of channels of suppliers, A significant dependence of domestic consumption, Competition from the black market economy. 3

4 The Role of CRM in the activity of small- and medium-sized companies The world and market are changing continuously. The CRM has become one of the most determining strategies of the company, so this strategy has become critical to a company s long-term competitiveness, especially in the economical crisis. BUT: However, many companies in our country have not yet understood the significance of this functional strategy. The existing procedures are not integrated to the company strategy in most cases..there is no HR professional as an independent position. As a consequence of today s constantly-changing market conditions basic functions are complemented with change management the results of which can be seen in the changing of corporate culture 4

5 Even in the years before the outbreak of the economic crisis the lack of domestic demand, the tight financial resources, the inordinately heavy burden of administration, taxes, and costs of employee benefits made the micro-small and medium-sized companies daily activity extremely hard. The role of the SME sector is extremely important in our country, for they provide percent of Hungarian jobs. in 2009 the GDP fell by 6,2 %, consumption dropped by 6,7 % and investments by 6,5 %, in parallel with a significant reduction of reserves, the volume of industrial production fell by 17,7 %, more than the European average of 14 %, and similar to that of Germany, the production of the construction industry decreased for the fourth consecutive year, GDP in the commodity sector of the market dropped 14,4 %, and in the service sector 2,3 %. What is the necessity of CRM system? Nowadays most of the companies have invoicing programme or ERP(Enterprise Resource Planning) system. We can have lot of useful information from this product-focused system about the product of company incomes, costs, logistical processes. However we have got lot of information data from our customer day by day, that is never ever used. 5

6 Lack of information in the invoicing system From the accounting/invoicing programme do not give us clear assessment what happened befor retail, who influence on supplier. There is no clue, what are the reasons to come convinience to choose the product or services of the given enterprise. (satisfying, reklamation). Without any further more information we can conclude only how much is our income and how much is our expenditure. Company leaders are not informed and thus not naledagable about key issues, that largely influence success and effectiveness of the company. Marketing orientated use for the increasing competitiveness Never ever seen avalance of product and services has been had overwhelning impact on hungarian consumers, Supply is higher than solvent demand that can efforded. Competition is becoming more and more intensiver among products and services that provide similar quality claim, To increased competitiveness there are mor and more initiatives and efforts to improve, respond to special demands. Emphasized is on effective marketing communication. 6

7 Competitive and effective CRM system Customer and marketing oriented policy, Marketing environment data information about of competitors, Information abouttargeted market of preliminancy steps and activities of chronological documentation inventory, Sales project: Field Sales Management Process FSMP and support marketing campagnes, Különböző szempontok szerinti piac-szegmentációval az értékesítés sikeresebbé tétele, Promotes follow up of customers (measuring of customers satisfying, reklamation threatment). Inthe focusof of policy are theold customers It costs 6 times more to sell to a new customer than to sell to an existing one A company can boost profits by 85% by increasing annual customer retention by only 5% The odds of selling a product to a new customer is 15% while the odds of selling to an existing customer is 50% 70% of complaining customers will do business with the company again if the company quickly resolves the problem 7

8 Hierarchy of the goals To kepp/attain customers loyalty Re-gaining use to be but recently disinterested customers Tosalenewproductsforwell established standard clientelee To obtain new customers What is CRM? CRM is not magic-word! Customer relationship management (CRM) is a business strategy that uses technology to implement strategies aimed at helping companies acquire new customers, sell more to existing customers, analyze the the effectiveness of marketing activities, and provide better service to increase customer retention. CRM software provides greater access to customer information via a centralized database. CRM is a customer orientated guiding principle that should mark all the processes from the very first contact until to gain the customers as a steady customer. 8

9 Benefits of CRM system More staisfied customers Increasing work capacity Increasing success Decreasing costs Problems for the SME s Problem concering not selecting the right CRM package SME s are the most dynamical growhing customer segment, Some of the new suppliers calculate short-term presence on the market, Softwares for big companies are not suitable for small businesses/companies, False advertisements can be dangerous, The referencesof the supplier can be false, too. 9

10 Crisis and CRM solutions CRM is a growing asset. Items particularly to important in economical crisis situation that should be focused on economical and financial criris, Attaining maximum number of customers could/should not a major and only goal, Resourceful data mining for identifying valuable costumer group and risk evaluation. CRM is the code to survival the crisis? In crisis those actors of the market will have the greatest chance for survival who use the most possible information sources. Besides they operate with a data base which focuses on an effective costumer policy how to keep or leave clients. Costumers have re-gained their power because companies have to fight for each and every client, as there is no OTHER customer! With the reduction of costs it is more and more difficult to keep clients. 10

11 The most important strategic questions How can we keep our existing customers? Clients should be motivated and should have an interest in staying loyal! How can we obtain new customers? How can we seduce them and gain them from the competitors? Costumers should have an interest in coming to our company! How can we pay attention to the suppliers? How can we make employees' activity more effective? After the crisis In this specific economic crisis period the equilibrium will be achieved while demand and supplywillcompensateeachother. As a consequence fewer customers means less backup supporttoenterprises, whichis a danger for passive firms and opportunity foractiveones. 11

12 Thank you for your kind attention! 12