Managing Customer Relationships

Kern Lewis, Published Forbes.com

Just as your seventh-grade English teacher told you to "keep it simple, stupid," so should you apply the same K.I.S.S. principle to managing customer relationships.

Not that you'd know it by all the customer relationship management, or CRM, software being peddled in this tough economy. To wit: In its most recent quarter, Salesforce.com (nyse: CRM - news - people ) reported record revenue of $276 Million, up 43% over the same period a year earlier.Even small firms, desperate to keep as many paying customers as possible, are ponying up $25,000 a year for systems from the likes of Salesforce and SugarCRM.

What a waste for small companies. I can't help but think of my uncle Tim, owner of Central Sales and Leasing, a mid-sized vehicle leasing company in California, with whom I had a recent chat about how to win customer loyalty. Tim's simple answer: "We just call everyone regularly," he said. "They seem to prefer that to our newsletter."

Simple enough.  But how did he figure that out? "We asked them about the newsletter while we were on the phone with them," added Tim.

There's more to it, of course. Fourteen years ago, Central spent a few thousand dollars to build its own in-house software tracking system, fondly dubbed the "Customer Keeper." It doesn’t cost five figures each year to use, and it keeps the sales team organized by automatically reminding each person which client needs a call that week. Tim did concede that his newsletter still had connective value, but we decided he should explore the idea of converting to an e-newsletter. He planned to run that concept by his customers--over the phone.

Expensive CRM packages are good for something: They make big companies look like small ones that stay close to their customers and solve their problems quickly. There's a reason "Don't worry, I know the owner" is a common boast in American society; it means the customer is connected and valued, and can get a favor done or a problem fixed without fuss.

Small companies that forget this do so at their peril. Service is their single most potent competitive advantage over larger companies. Consider that Citibank has 200 million customer accounts, according to its Web site; American Express (nyse: AXP - news - people ) claims to have 87 million "cards-in-force" and hundreds of thousands of merchant partnerships. With so many people and multiple points of contact to track, these behemoths desperately need to organize their customer service operations with nifty software.

The good news is entrepreneurs don’t need to invest in expensive systems to stay connected with their clientèle. Central Sales and Leasing has thousands of customers--a healthy list, but not millions. Calling everyone monthly "just to check in" was a simple matter of dividing up the list among company employees, logging the call results in an Excel spreadsheet and solving any problems that came to light.

Before you shell out for a new CRM system, try these inexpensive customer management tools first:

--A database of your customers, in ACT, Excel or wherever, that can be sorted and updated and includes a comments section.

--Follow-up steps, including "Thanks for your time" letters or e-mails.

--An inexpensive e-mail vendor such as ConstantContact, SwiftPages or any other similar online service that can cost as little as $15 per month to manage up to 500 contacts.

--A solid communication schedule, with a customer feedback loop that captures and logs in the customer contact history.

--Buy-in from every employee in your company to execute the strategy.

All of this might amount to an initial investment of $1,000--less if you already have a database up and running. As you grow and have more money to invest, consider an automated Contact Management System (a stripped-down CRM for small-business software) that can be had for a lot less than full-boat CRM packages. The cheapest I have seen, from AppShore in California, would organize your contacts and communications for about $2,300 per year for a staff of 10. Other reputable vendors sell solutions with price tags from $3,600 to $15,000 per year.

Remember, once you start down the road to offering great service, there's no going back. Your customers will continue to demand it. And that's not a bad thing.