How SMEs can drive growth from connected customers

Small businesses must embrace new technology or risk being left behind.

Recent technological advances, while enabling companies to be constantly connected to their customers and suppliers across a range of channels (driving both cost and productivity benefits), have also radically changed how consumers view firms. In one of the more obvious manifestations of the trend, a recent First Direct report found that over 44 per cent of adults now use the web to share grievances about products. As communications consultant James Frayne wrote in City A.M. in 2013, after a disgruntled airline passenger bought a promoted Tweet to complain, “ordinary people are becoming the primary voice determining what the outside world thinks about modern business.”

This can easily look like an impossible burden. Companies of all sizes are expected to provide more rapid turnaround, more customised services, and quicker responsiveness to complaints. And this creates organisational and infrastructure challenges. Chief information officers, for example, are increasingly discovering that it’s marketing personnel and those working with customers who have the biggest data needs. To quote IBM’s Savio Rodrigues, developers have become “kingmakers”, since IT has shifted from back-office support to delivering essential frontline services.

For the nimblest and most progressive firms, however, the demand for total customer responsiveness is a huge opportunity. And this is no less true for small to medium-sized enterprises (SMEs). Those that look at customer relationships holistically, and from a business perspective, can maximise long-term customer value and drive growth. But there are risks (beyond cost) involved in innovating with customer engagement.


Customer loyalty can directly impact a business’s profitability, not least because it is less expensive to sell products and services to existing customers than it is to find new ones. Previously, companies emphasised “touchpoints” – the moments when customers would interact with them. Today, organisations need to manage the entire customer journey, while remaining constantly connected.

A recent McKinsey study found that firms able to skilfully manage this customer experience (as opposed to just customer service) reap big rewards: enhanced customer satisfaction, reduced churn, increased revenue, and greater employee loyalty and productivity. But to do so, businesses need to utilise all available channels, both old and new, to communicate with customers effectively.

One such method is social media. The likes of Facebook and LinkedIn offer manifold benefits to smaller companies, including a low cost of entry and potentially high return on investment. A recent LinkedIn report found that, of the 81 per cent of SMEs using social media regularly, 94 per cent use it for marketing purposes.

But the challenge is for SMEs to ensure that they don’t just pay lipservice to the likes of social media. The most progressive companies are feeding the customer insights it can deliver back into their service and product development. Take First Direct’s firstdirectLab – where crowdsourcing enables customers and prospects to tweak the bank’s products and services. But this sort of approach means that accounts, social media and customer relationship teams can’t operate in silos. It must be possible to share information rapidly across the company.


Consequently, SMEs will face infrastructure challenges in building these approaches into their business models – not least in ensuring that they have sufficient communication flexibility to constantly stay in touch and respond to customer demands, while also breaking down internal business barriers.

But there is another technology area, customer relationship management (CRM), that could bear fruit. Gartner’s latest enterprise software forecast predicted that CRM technology will be a $36bn (£26bn) market by 2017. Indeed, CRM (methodologies and software programmes that enable companies to get to know their customers better, and manage customer relationships in a more organised way) is leading a shift away from a product-driven view of business growth.

Previously, some argue, sales and market share were the main objectives of customer care. As a result, firms could find themselves in the situation where employees working within vertically integrated silos were competing as much against other silos within their company as against marketplace rivals.

But today, more are understanding the value of integrating accounts, IT and marketing teams. Take the example cited in McKinsey’s report. “A major airline revamped its sales and customer care functions, in part by implementing an integrated customer relationship management (CRM) system.” It boosted customer service and “increased revenue by 10 to 15 per cent.”

And a recent study by the Boston Consulting Group found a clear correlation between aggressive adoption of new technologies by SMEs and strong business performance. In the past three years, tech-savvy SMEs in the US, for example, grew revenue 15 per cent faster than those using little technology. CRM applications – from Salesforce to Microsoft Dynamics CRM – are both affordable and maturing.


Yet small businesses are often reluctant to embrace enterprise technology. “SMEs are continuing – and even prefer – to solely use technologies like telephone,” says Pauline Trotter of Ovum. Partly this is a response to current demand. Have a nice day!, a report by Vodafone, found that 46 per cent of people still prefer to interact with firms over the phone, meaning that a core focus on the basics is still important. But there could also be operational challenges (CRM applications are nothing without skilled administrators to manage them), or concerns around disruptions to business as usual. Yet as Deloitte research points out: “with their larger competitors embracing this customer-centric, business-driven, technology-enabled CRM approach, there is a real risk of being left behind.”

Nonetheless, SMEs should avoid any hasty investment in specialist tools before the operational and staffing requirements are fully understood. Acquiring enough data is rarely a problem: the trouble begins in acquiring the skills to work with it.

But despite a reluctance to embrace enterprise technology, implementation could be easier than many SMEs realise. As highlighted by The Connected Future for SMEs, a recent report by Vodafone, although SMEs may lack the dedicated resources and IT budgets of large enterprises, they’re also unencumbered by legacy infrastructure and complex organisational structures, meaning they can incorporate more technology into the business processes quickly and easily. Rob Smallbone and Tan Gill of Deloitte suggest focusing on the simple ways that technology can enhance sales and service teams – rather than looking first at complex integrations. “A major benefit of cloud-based technologies is that they can be very cost-effective.”

And mobility solutions are giving SMEs the flexibility to be always-on, enabling them to be more responsive to customers. “SME staff can stay in touch with all the relevant information while pitching on the road. Senior management can readily obtain a comprehensive, at-a-glance view of each customer. And SME staff can collaborate in real time to source key information to close deals,” Salesforce’s Steve Garnett recently wrote.


But driving business growth through customer responsiveness doesn’t need to  be a lonely job. SME and big business collaboration is on the rise. Already, around 3.2m UK smaller companies are collaborating with an average of 16 businesses each to share skills and expertise. Why? Closer cooperation across the supply chain can be mutually beneficial: SMEs want to sell their products to big name retailers, for instance. And larger companies are seeking access to new products created by entrepreneurs.

“In the telecoms sector, larger firms are starting to offer SMEs better services (such as security, e-commerce, and advice on search optimisation and flexible working), and often for free,” says Trotter. Research by UCL professor Tomas Chamorro-Premuzic has shown that, by supporting small companies, larger firms can encourage an entrepreneurial spirit among their own workforce.

Yet resources and support – both at government and corporate level – remain crucial for SME growth and productivity. The Growth Accelerator scheme, delivered by a consortium of growth specialists in the private sector (among them Grant Thornton), provides coaching to address business needs, including commercialising innovation effectively. The government’s Growth Vouchers scheme, meanwhile, gives small businesses matched funding of up to £2,000 to help finance specialist business support (including advice on marketing, attracting and keeping customers). Tailored advice could make all the difference.

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