CRM: A Race to the Bottom
Customer Relationship Management (or CRM which helps businesses streamline the internal business processes that impact sales execution and customer service) is booming. So much so that new companies and products seem to pop up like mushrooms on a moist afternoon. This is because the cost of entry into this space is very low. Anyone with a PC and some development skills can put together a basic contact manager, buy a website template and a URL and compete in the CRM sector. The market sector has become so competitive that new vendors, and some established ones that are struggling to build a customer base, will do almost anything to get you to use their product including giving it away for free.
It’s created what I call a “race to the bottom” and it’s bad for customers and for the CRM sector. Here’s why.
CRM software is now considered a commodity particularly among small to mid-size businesses whose requirements are often not as complex as larger organizations. When consumers consider any product a commodity, price often becomes a significant factor in the decision process. CRM vendors that service the SMB sector are well aware of this and have cleverly offered a free version of their product with limited functionality, hopeful that customers will upgrade to a paid version in the future. I suspect that the majority of customers who select these solutions will be perfectly happy with the free one and live with the limitations they have encountered for as long as they can. I am also fairly confident that the companies offering a free or low cost solution will quickly realize that this is not a sustainable business model.
This past month two examples of this occurred both of which will significantly impact the customers using these products.
First Highrise, a popular low cost CRM solution sold by the company Basecamp, announced that they are discontinuing the sale of their CRM product to new customers. The company indicated that were stretched thin and that they needed to refocus their resources on their main project management software instead. I think what they are really saying here is that they can no longer afford to invest in and support this low cost offering.
The second company and product is LogMeIn, a popular service that allows users to remotely access their computers from other PCs or mobile devices. They announced that they were discontinuing their free service, LogMeIn Free, and giving customers a grace period of seven days to upgrade to a paid version. It appears that the idea that getting people hooked on the free version then charging them for an upgrade just didn’t work. Now customers have no choice – pay up or stop using the product.
For both of these companies the race to the bottom is over. Their low cost and free offerings were just not sustainable and as a result they have left their customers “out to dry” as they say.
“More fallout expected in this competitive software sector.”
I suspect that we will see more of this in the months ahead which should make anyone considering these offerings a bit leery about doing business with these companies. In the CRM sector as mentioned previously there are a myriad of these product offerings and implementing any one of them knowing that there is the potential for them to be discontinued could have a significant impact on your business and your staff, but here is something to think about. When comparing the cost of more established CRM firms that have been in business for many years the difference is often just a few dollars per user per month. Understanding this, does it make any sense to consider a freemium or low cost solution? Probably not.
In my next article I will outline several of the key functional and operational differences between the low cost CRM and freemium products and today’s established CRM solution providers.
About the author
Larry Caretsky is the president of Commence Corporation, a leading provider of CRM software and best business practices for improving sales, marketing and customer service. Caretsky is considered an expert in sales automation and has written numerous articles on the subject of CRM. These may be viewed on the company’s web site at commence.com.