2/6/2014 | Erik Sherman

The success of any business ultimately depends on the quality of its customer relationships. To paraphrase baseball great Yogi Berra: If the people don't want to come out to your business, nobody's going to stop them.

In other words, to grow beyond a mid-market size, a company must do more than create great products or services, offer competitive prices, and run enticing marketing campaigns. It must establish relationships with people so that they remain customers and provide effective positive referrals that organically grow the business. CRM tools provide a way to do all that and more.

CRM is a common buzzword in business. While large corporations were the original target for the software, middle market companies can now use a cloud-based system, as well. There are reasons, however, that midsize businesses might benefit most from customer relationship management.

Your middle market company may have moved beyond a small firm's focus on individual customers in one-to-one relationships. Such companies will have experience trying to maintain relationships with many customers simultaneously, and will understand processes for doing so.

At the same time, middle market companies can successfully avoid a downfall of large-scale CRM: data overload. With the volume of business, extensive transactional history, and disparate systems brought by acquisitions, the implementation of a relationship management system tends to be fraught with difficulty and often fails.

Middle market companies are in an optimum position. Joining sophistication and a modest scale allows such companies to take full advantage of CRM tools. Midsize companies can improve relationships with customers in a number of ways, including the following:

  • Increased lifetime value. One of the goals of any management team is to improve profitability. A proven strategy is to find ways to increase the lifetime value of customers, or the amount of money consumers or companies spend with you over the course of doing business. Data can illuminate the characteristics of customers who are particularly valuable and help create a template for future prospecting.
  • Identify customers who are about to leave. Related to increased lifetime value is customer retention. The sooner customers stop doing business with you, the lower the value. Data analysis can show patterns that developed before customers left. Noting the danger signs in advance means having the chance to remedy the causes for departure.
  • Discover customer interests through their actions. Customer relationships are ultimately human relationships. You maintain close relationships with other people by understanding their interests and needs. Maintaining close personal connections with a growing customer base is difficult. After all, you only see the customers when doing business. But observing their actions and patterns of activity can illuminate what they are experiencing, whether they're consumers or companies.
  • Segment customers. Customer relations are important, but not all customers are equal. Some will be high-maintenance, driving down profitability with demands for attention. Others might be your most valuable, or have the potential for joining that rank. CRM data, aligned with related information you have, can help a company segment customers into groups to better understand where to direct attention and resources.
  • Evaluate your marketing. Nineteenth-century retailer John Wanamaker famously complained that half of his advertising was useless, but that he didn't know which half. By relating customer information with marketing data, it becomes more possible to see which campaigns have the biggest impact in the long run.
  • Treat customers with respect. You can capture information and look at existing data to better understand customer preferences and needs. When you understand people, even in an automated fashion, you are better able to treat them well.

It doesn't happen by magic, but with work and attention to the data you already have, CRM tools can help a middle market company improve its performance and develop strategic advantages.

Erik Sherman is an NCMM contributor and author whose work has appeared in such publications as The Wall Street Journal The New York Times Magazine Newsweek, the Financial Times, Chief Executive, Inc., and Fortune. He also blogs for CBS MoneyWatch. Sherman has extensive experience in corporate communications consulting and is the author or co-author of 10 books. Follow him on Twitter and circle him on Google+.