Why Vertical CRMs Trump Horizontal CRMs for SMBs

February 13, 2019 | by: Nica San Juan | CRM Trends

CRM Industry: A Humble Beginning

Over the years, customer relationship management (CRM) software has undergone a sea of changes that have seen it burgeon into a thriving global industry. What started as a simple ledger has over time evolved to keep up with technological changes, resulting in CRM solutions as we know them today. The industry has grown through the years to embrace digitization, integrate the customer into sales strategies and move to the mobile device.

In the present day, CRM solutions have taken cloud-based and Software as a Service (SaaS) approaches to integrate countless features. As a result, they have seen the focus shift from transactions to interaction with customer value at the core of the concept, rather than customer acquisition. Big data has made it possible to transform plain information into knowledge and actionable insights. At the same time, mobile CRM has facilitated rapid adoption of the technology as more and more people increasingly become dependent on mobile devices.

Thanks to these benefits, businesses can effectively run targeted promotional campaigns, increase customer loyalty and predict customer response. Little wonder that the industry is growing in leaps and bounds every passing year.

An Impressive Growth Pattern

According to statistical data from Gartner, CRM software worldwide was worth $23.4 billion in 2014, up from the 2010 value of $13.9 billion. By 2015, it had registered a 12.3% growth to rise to $26.3 billion. In 2016, the value went up again, reaching $36.5 billion, with projections that it would exceed the $80 billion mark by 2025.

Notably, by the end of 2018, the sector had overtaken database management systems (DBMS) to become the leading software market globally. Revenue from CRM software globally reached $39.5 billion in 2017 while DBMS was significantly lower at $$36.8 billion during the same period.

Demand for the software is expected to keep growing as the focus of business entities continually shifts to prioritize the customer. A Gartner survey revealed that for 73% of SMBs, the CRM is the most critical technology. One reason for this is because such software forms are the center of sales and marketing functions. It allows for the proper management of customer data and offers optimal customer experience. At the same time, it keeps everyone in step with regards to sales and marketing data.

One Objective, Varying Approaches

CRM solutions all have the main objective of streamlining customer service, increasing the level of retention and managing the sales pipeline. However, the approach it uses to achieve this goal varies depending on the nature of the business.

There are two main types of CRM software solutions:

  • Horizontal CRMs – designed for use in any given industry
  • Vertical CRMs – tailor their solutions to suit specific industries

Due to the differences between these two frameworks, many small businesses (SMBs) are torn between getting an industry-specific solution and a general purpose one.

Why the Difference between Horizontal and Vertical CRMs Matters

Choosing a CRM tool and adopting it for specific business needs is a process that is often riddled with uncertainty. Data from Merkle Group Inc. reveals that up to 63% of all CRM projects end up failing. Another interesting statistic is that 40% of businesses have shifted from their original CRM software. While some are running on their second generation options, others have gone as far as the third one.

This underscores the importance of taking time to understand the most suitable software for your line of business before implementing any one of the two options. Essentially, knowing the difference between horizontal and vertical CRMs can mean the difference between success and failure in the adoption process. But how can you tell which solution is best for your business?

The Advantage of Vertical CRM for SMBs

Purchasers often have a tendency to buy bigger and better even when logic dictates otherwise. Consequently, many SMBs have fallen into the trap of spending hefty sums for the customization of a general-purpose CRM in situations where a ready-made solution would have been a more sensible option. However, it is never too late to take advantage of industry-specific solutions for your SMB.

For small businesses, vertical CRMs offer notable merits over their horizontal counterparts. These include:

  • High Optimization to Suit Specific Business Needs

As mentioned in the introduction, vertical CRMs are tailored to address the needs of a specific industry. Many times, industry experts are involved in the design and development process, leading to the creation of highly optimized systems.

Their horizontal counterparts feature a host of generic features, some of which you may never even use. Fine-tuning these to suit specific business needs requires an additional investment of resources.

  • All-Inclusive, Cost-Effective Solutions

When it comes to horizontal CRMs, the most outstanding aspect is the fact that their design can address the demands of any standard business in any given industry. In most cases, providers will offer basic features at a low price and then add customizable options for a higher price. As such, though the purchase cost could be lower than that of a vertical option, it might require extensive customization to suit individual needs. What makes customization costs high is because the solutions are designed to target the masses.

Vertical CRMs, on the other hand, might have a higher initial cost but will save you both time and money that you would have spent in the customization process. At the end of the day, a comprehensive, vertical CRM could be the most cost-effective solution for your SMB.

  • Easy Implementation

Vertical CRM solutions come prepared to cater to the needs of a given industry. Therefore, instead of having countless features, they have a high degree of custom features for the specific industry in question. If, for instance, it has the real estate industry as its target, it will have the capacity to schedule viewings, manage numerous properties and handle long-term and new clients.

Consequently, they are easy-to-implement plug and play systems that have what it takes to cover the unique needs of your industry while speaking your industry’s language.

Though horizontal solutions might at first glance seem easy to install and use, they have extremely limited functionality out-of-box. They subsequently take more time and manpower to implement.

  • Can Support Further Customization

A majority of vertical CRM solutions are cloud-based. This makes it possible to customize them further if and when the need arises, to accommodate any extra feature required. As such, it rules out one of the most highly touted benefits of horizontal solutions – extensive customization.

Using a cloud-based approach offers a highly flexible solution that a small business owner can adapt to changing needs as the SMB gradually evolves. This makes it possible to future-proof the software and to keep evolving in tune with the ever-changing commerce landscape.

  • Less Time-to-Value

Superfluous features on horizontal software solutions become a nuisance to users when they have no relevance to the business. As a result, managers may get frustrated as workers seem to spend more time on the software and less time selling.

However, verticalization means access to built-in best practices as well as fine-tuned workflows that facilitate productivity, improve service and drive sales.

  • Focusing Resources on Differentiation and Innovation

It takes considerable expertise and resources to tailor a horizontal CRM solution to fit specific business needs. For SMBs, such resources are often scanty. Therefore, the possibility of getting a ready to use tailored approach offers matchless benefits. Among these is the opportunity to focus the existing limited resources on innovation. In turn, this makes it possible for the entrepreneur to differentiate themselves from the competition and possibly, get an edge over them.

  • Higher ROI

Tailor-made CRMs consider specifics in the industry of application such as sales formulae and general marketing principles. Acquiring a solution created with your industry in mind is likely to drive up efficiency and productivity. This, in turn, typically translates to an increase in potential and a higher ROI.

Find Your Niche in Vertical CRMs

If you have been weighing options over the kind of CRM that best suits your SMB, these useful insights should help you make the best decision. Even though generic horizontal CRMs can do so much more than vertical, industry-specific solutions, the latter contain specific insights that target a single industry, increasing the odds of positive performance.

Considering the above advantages of tailored solutions, SMBs have the right arsenal of weapons to inform their choice of the most suitable CRM. Regardless of the industry in which you work, it is best to get a niche product that addresses your unique needs.

CRMs like PipelineDeals are addressing this vertical CRM market by designing their customer relationship management software to be highly customizable and easy to use for the construction and manufacturing industries.