Customer relationship management (CRM) platforms for small and medium enterprises (SMEs) form a sub-segment of the larger CRM market and cater to smaller companies (less than 500 employees). These SME-focused CRM platforms (offered mostly by relatively small vendors) are differentiated by their more affordable pricing and many free features, focus on essentials, basic customization, and simplicity. Some SME CRM vendors also provide social media integration, automation, and extensive customer support.
Considerable market opportunity remains for SME CRM providers because SMEs account for more than 99.9% of all businesses, 45% of economic activity, 47% of the labor force in the US, and have a comparatively lower market penetration. SME CRM penetration for SMEs stands at around 44% versus around 91% for regular CRMs for all enterprises with more than 10 employees.
CRM user penetration among employer SME firms in the US has jumped to 50% by September 2020 (from 35% a year ago).
This faster adoption comes from the increased rates of remote work, with more companies relying on online marketing and sales. These factors demand a ramp up of digitalization to manage client relationships, which businesses can achieve through the adoption of Small and Medium Enterprise Customer Relationship Management (SME CRM) platform adoption.
Further, 40% of SMEs are focusing on investing on marketing while 20% of SMEs are looking at increasing employee strength to improve customer interaction and service. This provides a positive outlook for the SME CRM market in the short to medium term.
However, with the second wave of the pandemic in full force, nearly 14% of SMEs are planning staff reductions, while 74% are seeking further government assistance, which could partially offset the positive impact coming from the rising SME adoption rates.
Majority of the incumbents focus on the collaborative segment and have entered the SME CRM space through in-house development. While most of the disruptors are pure plays, there are a few that operate in multiple segments, such as Pipedrive and Insightly. Overall, the majority of the players are involved in the operational and collaborative segments, as these are areas in which SMEs would require the most help.
Among small and medium enterprise customer relationship management (SME CRM) vendors, Womply lead in terms of active users (between 0.45 and 0.50 million users), mainly due to their strategy of offering a core CRM service for free. The other disruptor companies also differentiate themselves in terms of product strategy or target market. Some are either focused on local level interaction only (e.g. Podium), targeting non-employer SMEs engaged in professional services (e.g. Keap) or including additional features such as lead generation tools and modern designs (e.g. Pipedrive).
HubSpot offers a freemium CRM platform that consists of five “hubs,” featuring sales, marketing, customer service, operations, and content management (CMS) tools. By October 2021, the platform had integrated with more than 900 third-party applications, including Salesforce, SugarCRM, NetSuite, and Microsoft Dynamics CRM. In addition to the direct client acquisitions, HubSpot relies on its solutions partners to drive customer base growth. As of December 2020, HubSpot’s solutions partner network represented ~35% of HubSpot’s total customers and accounted for ~43% of total revenue. HubSpot was listed on the New York Stock Exchange (NYSE) in 2014. By October 2021, the company had over 121,000 users across more than 120 countries.
HubSpot’s Free CRM suite only allows users to access basic tools in HubSpot’s Sales Hub, Marketing Hub, and Service Hub, while all the tools in the CMS and Operations Hub are only available for paid plans. The free version includes features such as (i) forms, email marketing, contact management, and social media management under the Marketing Hub; (ii) deal and task management, email tracking, meeting scheduling, quotes, and Gmail and Outlook integration under the Sales Hub; and (iii) ticketing, live chat, email templates, and reporting features under the Service Hub. HubSpot’s Starter CRM suite is priced starting at USD 45 per month, the Professional suite is priced starting at USD 1,600 per month, and the Enterprise suite is priced starting at USD 4,000 per month as of October 2021. HubSpot also launched a beta version of HubSpot Payments (in October 2021), which is a B2B-focused payments solution built into HubSpot CRM. HubSpot Payments accepts all major credit cards and ACH payments and allows users to create unique payment links that can be embedded on websites, emails, or chats to collect one-time or recurring payments.
HubSpot launched a venture capital fund in 2018 called HubSpot Ventures with USD 30 million in capital. In October 2021, HubSpot Ventures announced the launch of its USD 100 million CRM Platform Fund to invest in early and growth-stage startups with the potential to deliver value to HubSpot’s existing customer base. In February 2021, HubSpot acquired “The Hustle,” a business news provider specializing in delivering content to the scaling needs of startups and entrepreneurs for around USD 17.2 million. Using Hustle, HubSpot aims to offer its customers a wide range of premium news content related to education, business, and tech topics.
In 2020, HubSpot reported revenue growth of 31% to USD 833.0 million from USD 646.3 million in 2019. Revenue growth in 2020 was supported by a 32% YoY rise in subscription revenue and a 5% increase in Professional services and other revenue. Non-GAAP operating income came in at USD 74.9 million, up 36% YoY from USD 54.9 million in 2019, while the operating margin increased to 8.5% in 2020 from 8.1% in 2019. Non-GAAP net income also edged up by 10% to USD 64.5 million compared to USD 58.4 million in 2019.
The incumbents consist of leading enterprise customer relationship management (CRM) players Salesforce Essentials, Microsoft Dynamics, Oracle, and Zoho. The incumbent list also includes Hubspot, one of the leading and oldest SME CRM system providers, which had a user base of nearly 121,000 as of November 2021.
Although user data from the incumbent operators is not readily available, it appears that Microsoft Dynamics and SalesForce Essentials have a considerable user base within the small and medium enterprise (SME) CRM market. This is evident from these two products being ranked No. 1 in the 2018 and 2019 SME CRM awards, respectively.
One of the leading enterprise players, SAP, entered the SME space in 2018 by launching the SAP Sales Cloud platform, which was formed by combining three acquisitions made by SAP since 2013—Hybris in 2013, Gigya in 2017, and CallidusCloud in 2018. However, in September 2020, two years after launch, SAP announced it would be exiting the CRM space, conceding it’s 5.3% market share to existing leader Salesforce.
In-house product development
Founded in 1999, Salesforce is the largest player in the global CRM market, accounting for around 19.8% as of 2021. In 2018, it launched Salesforce Essentials—a CRM platform for businesses with up to 10 employees. It’s more affordable for SMEs at USD 25 per month, while the enterprise package starts at USD 75. Salesforce Essentials combines contact management with configurable reports and dashboard features, activity tracking, and collaboration tools, all of which can be managed via a mobile app. In July 2019, Salesforce partnered with Deluxe, a tech-enabled solutions company with 4.8 million SME customers, to offer the Essentials product to Deluxe’s customers.
In May 2021, Salesforce partnered with UK-based Neobank Revolut to offer Salesforce Essentials as a product in Revolut’s “Business Rewards” platform. The platform provides solutions for SMEs in areas of customer management, finance, and communications. Under the partnership, Salesforce’s SME solution will be offered at a discounted rate to Revolut’s Business Rewards platform users.
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