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Right in the Midmarket Middle
The middle business market is ripe for the picking for CRM vendors as these companies look to purchase their first CRM systems.
Posted Sep 29, 2006
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Not too big, not too small. That's what CRM vendors should be thinking over the coming years, according to a new study by AMI-Partners. The medium business (MB) market is expected to become the next big battleground for CRM vendors, with spending on CRM by MBs expected to grow 9 percent over the next five years. Thanks to strong economic growth, bigger IT staffs and budgets, and more CRM end users, this market is ripe for the taking. While the enterprise market is saturated and the small business market is dispersed, the MB market is just right. Adding to this Goldilocks position is the fact that only 35 percent of U.S. MBs are currently using CRM solutions, according to the study, "Mid-Market CRM: Vendor Strategies for a New Frontier." "CRM vendors are making CRM solutions more accessible and affordable for MBs across this spectrum," says Laurie McCabe, vice president of SMB insights and solutions at AMI-Partners and coauthor of the report. The SaaS model is reducing upfront costs, minimizing maintenance, and providing familiar, Web-based interfaces. Companies like Entellium, Maximizer, and SugarCRM are targeting cost-conscious MBs with lower pricing. In terms of vendors that are offering strong solutions for this market, according to McCabe, Salesforce.com, by virtue of its strong growth, comprehensive solution, and marketing muscle, is the biggest brand in the space today, though Microsoft CRM, Sage Software, and RightNow are also strong brands MBs should consider. Because they're not as well known as their rivals, MB CRM challengers, which include Entellium, Maximizer, NetSuite, and SugarCRM, have a tougher time getting consideration, though McCabe expects that to change given the increased growth and attention the CMR market is receiving in recent years. These companies offer attractive alternatives thanks to competitive pricing, extra services, or other value-added differentiators, such as SugarCRM with open source. When selling to the MB market, McCabe says vendors should zero in on real MB product and service requirements, as opposed to "just fancy bells and whistles," when they attempt to differentiate themselves from the competition. They also need to communicate a unique value proposition. Although a couple of vendors will capture a large chunk of this market, most will need to position themselves to meet the needs of their best-fit MB segments. McCabe also recommends that vendors keep integration in mind to help MBs to figure out TCO. "Vendors should appeal to MBs' pragmatic nature with visible, transparent pricing and TCO data," McCabe says. "They should also strive for demand integration, because MBs are always going to need to integrate CRM with something else."
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