Mid-Market Report: 5 Best Practices in Customer Strategies

By Elizabeth Bennett  |  Posted 2006-12-15

Midsize companies are chucking their spreadsheets, standalone databases, and pens and sticky notes. They're investing in software applications that keep track of every bit of customer information they can get their hands on, from contact information and sales activity to marketing campaigns, prospective customers and new product ideas.

Businesses with fewer than 1,000 employees will account for about one-third of the spending for customer relationship management applications in 2006, including tools that manage sales-force automation and assist with customer and marketing analytics, according to an October report by Forrester Research. Vendors like Microsoft and SAP are targeting mid-market companies, recognizing that tracking and analyzing customer data is no less important for a $200 million company than for a $2 billion one.

But buying a software package to help manage customer data is one thing; deploying it successfully and realizing bottom-line benefits is another.

Baseline spoke to five mid-market companies with annual sales ranging from $200 million to $700 million, as well as three experts on customer technologies, to find the technology best practices mid-market companies should follow to attract new customers, retain existing ones and anticipate future growth.

Next page: Consider Software as a Service

1. Consider Software as a Service

Four years ago, Harris Interactive, a $216 million Rochester, N.Y., market research company, decided to replace a customer tracking system that it was supporting on its own servers, according to Dan Chiazza, director of global sales operations. The Siebel software could only be used from behind the company's firewall, Chiazza says, which meant that salespeople in the field or those working from home had to install software on their PCs and log on to the network.

But as Harris's sales force grew and became increasingly global, Chiazza says the installed software model became inconvenient and too costly to maintain.

Harris replaced the Siebel system with Salesforce.com's customer relationship management software, a browser-based application that Salesforce.com hosts on its servers and is priced according to the number of users. Chiazza says the company saves about $250,000 a year in maintenance and administrative costs with the Salesforce.com software. And now, the global sales team can log on to the system via the Internet with a password from anywhere at any time.

Before, analyzing marketing campaigns in the Siebel system meant uploading response data into spreadsheets and analyzing it there. With the Salesforce.com software, tracking the return on marketing investments is easy, Chiazza says. For instance, a salesperson can quickly compute how many auto industry prospects sent an RSVP to an event invitation, and how many attended and signed up for the company's services. "We can see what the ratio was and what strategies we can use to attack different groups," Chiazza explains.

"There's a big trend toward software as a service, and the mid-market is adopting it most quickly," says Forrester analyst Liz Herbert. Packaged hosted software is low risk, she says, and a popular choice with smaller companies that have few I.T. resources to spare. The systems often include point-and-click "wizards" that require little training and can be used by non-technical employees.

Next page: Don't Rule Out Building Your Own

2. Don't Rule Out Building Your Own

Southwestern/Great American, a Nashville, Tenn.-based company with about $250 million in annual revenue, is a collection of 14 direct sales businesses. The Great American division provides an assortment of products, including magazines and Tasty Batters cookie dough, for schools and other organizations to sell in fund-raising projects. It also helps fund-raisers produce local-merchant discount cards.

One challenge: Great American wanted to more efficiently keep track of the production of the discount cards from inception to delivery, according to Ryan Tabor, a Southwestern/Great American business analyst. For a school fund-raising campaign, Great American works with the school to design and then produce the cards, which are purchased by the fund-raising group for resale at a markup of about 50%. The discount cards include the names and addresses of local merchants who agree to offer a discount in exchange for being listed on the card.

That's where custom-built software is making a difference.

Until about six months ago, 25 salespeople, graphics designers and project managers kept track of production of the plastic discount cards on paper, sticky notes and a 12-year-old database written in the Clipper programming language.

Today, those same people can download new custom-built production software written in the C# programming language on Microsoft's .NET framework, by clicking on a URL that triggers an automatic software installation on the employee's PC. Once a staffer logs in to the software—built by Southwestern/Great American's technology staff—and is authenticated, he can see which graphics will appear on the discount card, which merchants have been secured to participate in the discount program and how far along the card is in the production cycle.

Tabor says Great American had several requirements that led it to build its own software: The application had to be available to both Macintosh and PC users, and it would have to pull contract, order, inventory and master data from the company's SAP system, a difficult customization task for a commercial software package. Building the application in-house was the only way to meet all requirements, Tabor says.

The new application, called the Preferred System, saves workers time because they can check on progress themselves, rather than having to sift through paper files or call the graphics department for a status check. The technology also means a financial savings: Because anyone can download the application via a secure URL and receive software updates remotely, starting in January, all 25 salespeople will be required to work offsite, thus reducing workspace overhead.

Next page: Start Forecasting

3. Start Forecasting

Until recently, most midsize companies did not have the technology or finances to collect and analyze information to help predict sales. That's now changing as the cost of contacting customers and analyzing responses goes down, and companies are becoming more aware that they need to use technology to create or maintain advantage, says Dennis Gaughan, a research director at AMR Research.

Favorite Recipes Press (FRP), another division of Southwestern/Great American, helps raise funds for nonprofit organizations, such as Habitat for Humanity and Junior League chapters, with the production and sales of custom cookbooks.

When an organization signs up, it provides FRP's sales force with lists of potential cookbook buyers. Instead of printing a run of the cookbooks based on past customers, FRP "pre-sells," or estimates the number of books people are likely to buy based on the number that respond to marketing campaigns and sign up to receive an announcement when the books are printed. The number of pre-sales determines how many books are printed in each run.

Today, FRP develops direct mail, e-mail and Web marketing campaigns to pre-sell books, and it tracks the success of those efforts in spreadsheets and a Microsoft Access database. "The tracking and analysis is done manually," Tabor says. But starting in January, FRP expects to analyze marketing efforts in a new customer relationship management software package, Microsoft Dynamics CRM 3.0. The browser-based application, which can be used offline through Microsoft Outlook, will run off a server in the company's data center and keep track of information such as names and e-mail addresses of potential customers, and the marketing campaigns sent to each one.

Tabor expects the $50,000 investment to "greatly" reduce the length of time between the receipt of a customer list and the tracking and analyzing of marketing campaigns: "It's virtually real time, and it will cut out all the manual analysis."

Still, when it comes to analyzing customer data, smaller companies haven't quite caught up to their big brothers. According to CIO Insight's November Customer Strategies Survey, 40% of the customer data collected by companies with less than $500 million in revenue is used to understand customers better. That's compared to 49% in companies with annual revenue greater than $500 million.

Next page: Help Customers Help Themselves

4. Help Customers Help Themselves

Progressive medical is a kind of medical matchmaker: Working with a network of 1,500 medical equipment providers and 50,000 pharmacies, it helps customers—claims adjusters at insurance companies—track down and arrange delivery for medical supplies such as crutches, wheelchairs and medication, and it also schedules doctor's appointments for insurance claimants.

The $140 million Westerville, Ohio, business wanted a way for customers like Liberty Mutual to gain access to claimant and medical support information without having to call Progressive's customer service center, according to CIO Angelo Mazzocco.

To improve customer service, the technology staff developed the Online Information Exchange (IFX), a Web portal written in Perl programming language on Sun Microsystems' Java 2 Platform, Enterprise Edition, a software development platform.

The secure portal allows claims adjusters to view information about injured claimants recorded on Progressive's own Oracle database servers. Plus, adjusters can use IFX to track down medical supplies, such as a wheelchair for an injured claimant in South Dakota, or a pharmacy within a few blocks of a Cleveland apartment.

Mazzocco can't say exactly how much the portal has boosted revenue, but it is able to keep pace with the 48% growth the company has experienced in the last three years.

Midsize companies like Progressive are under pressure from customers to establish online service offerings. AMR's Gaughan says that for some customers, a well-designed system for interacting with a company is a requirement for building customer satisfaction.

Still, businesses can succeed at using self-service tools to attract new business—and limit operating costs.

Five years ago, Pacific Coast Feather adjusted its customer strategy to adapt to the changing marketplace. The $320 million company was selling its line of pillows, comforters and other home products primarily to large retailers such as JC Penney and Linens 'N Things, says CIO Gwen Babcock. But retailer consolidation and an increasingly competitive environment prompted PCF to focus on attracting smaller distributors, which were plentiful and offered higher profit margins.

In 2002, the company launched the first of four business-to-business Web sites. Each one is targeted to a different customer segment, such as hospitality (hotels and motels) and small retailers (fewer than a dozen locations), and allows customers to place and replenish orders online. Over the course of about six months, nearly all of PCF's 700 small and medium-size customers moved from faxing or calling in orders to placing them on the sites.

"We've doubled revenue in this channel over the past four years," Babcock says, adding that at least 20% can be attributed to the business-to-business sites. And eliminating nearly all call-center ordering has cut costs significantly: Despite steep customer and revenue growth among small and medium-size customers, PCF has not had to add sales staff.

Next page: Put the Customer First

5. Put the Customer First

There is a big difference between trying to serve customers better and turning an existing business model on its head in response to customer needs. Farm Credit Services of America has more than doubled its revenue—to $700 million—in the last eight years by doing the latter, according to vice president Jim Greufe.

For six months in 1998, the senior management of the Omaha, Neb., financial services company, along with 20 employees, reengineered its business process to boost its size and revenue by better serving customers, Greufe says. Farm Credit, which sells financial products and services to farmers, ranchers and other agricultural businesses, experienced zero growth in the 1990s. Surveys and feedback from customers showed that Farm Credit was not meeting basic service needs; customers liked to conduct banking business on their own properties, and they complained that getting loan approval and processing took several days, longer than competitors.

The six-month project prompted some significant changes. Farm Credit decided to close more than half of its 90 branch offices to increase the number of employees at each branch and free up its then-200 financial officers to visit customer sites more often. Today, they spend roughly two-thirds of their time in the field, versus one-third prior to the reorganization, Greufe says.

The next step: find a technology to support the company's new customer-focused business model, Greufe says, because an existing Microsoft Outlook contact management system was not sufficient for housing the customer information the company planned to collect, and it was not connected to any other systems that held customer information. Farm Credit sought a commercial software package that would keep track of all customer transactions and interactions with salespeople and be able to communicate with back-office systems, such as databases that processed insurance and loan requests and software applications that kept track of customer account information. So in 2001, at a cost of $1.5 million, Farm Credit implemented a CRM software package from Pivotal, now owned by CDC Software.

The technology staff integrated about a half-dozen financial applications and databases with the Pivotal software so that today, when financial officers log in to the browser-based software application that is installed on every personal computer in the organization, it takes one click to view a customer's most recent transactions and a complete history of all phone and in-person interactions with the company.

The application also shows a list of the products a customer has not purchased, such as an insurance policy. And with that information, Greufe says, salespeople can intelligently cross-sell and up-sell products to customers. And if a customer inquired about a product the last time he talked to Farm Credit, it will be in the interaction history. "Customers often say we remember more than they do," he points out.

Farm Credit's revenue has grown 250% in the last eight years and the customer base has grown 40% to 69,000. Greufe won't attribute the growth entirely to technology, but he says the company saw a return on its investment in a matter of months: "It would have been impossible to serve that many customers without the CRM system."