Winning new markets | Jul 15

How a CRM can improve customer lifetime value for an SME

Winning new markets | Jul 15

How SMEs can use CRM systems to strengthen relationships, improve retention, and increase long-term customer value

Ian Wylie Journalist, broadcaster, educator

Reading Time 5 minutes

For some small businesses, customer relationship management (CRM) systems are viewed as little more than digital address books. They’re useful for storing contact details and tracking interactions. But used properly, a CRM can become a powerful tool for building stronger relationships, improving retention, and increasing customer lifetime value.

The oft-quoted 1990s research in this field suggests that increasing customer retention rates by just 5% can boost your profits by more than 25%. For Professor Ko de Ruyter, chair in marketing at King’s Business School, the real value of a CRM is surprisingly straightforward. ‘The biggest value of a CRM system is helping small businesses remember customers properly,’ he says. ‘And that matters because many SMEs begin life as highly relationship-driven businesses.’

In the early stages, founders know customers personally and so interactions feel natural and continuous. But as businesses grow, that relationship can become more fragmented. Conversations sit in inboxes, multiple employees interact with different stakeholders, and customers find themselves repeating information.

‘A CRM creates continuity and helps the business feel joined up again,’ de Ruyter explains.

Move from transactions to relationships

The biggest shift a CRM enables is the movement from reactive customer service to proactive relationship management. De Ruyter recalls working with a small agency that had only a dozen clients, but where each client required support from multiple departments. What looked simple on paper was actually a complex network of relationships. The CRM system allowed the business to track previous conversations, concerns, and opportunities, creating interactions that felt ongoing rather than transactional.

‘The real shift happens when businesses stop simply reacting to orders and start anticipating needs,’ he says. For example, if a customer typically reorders every six months, the CRM can trigger a reminder to check in before stock runs low. This removes friction for the customer and creates a more thoughtful, proactive experience.

Over time, those small moments add up. Customers stay loyal not simply because of price, but because the business becomes easy and familiar to work with.

Look beyond the obvious metrics

Many SMEs focus too heavily on headline figures such as recent spending or total revenue. While useful, those numbers rarely tell the full story about customer relationships. ‘The more useful signals are often behavioural changes that show whether the relationship is strengthening or quietly fading,’ de Ruyter says.

A customer taking longer to respond, placing smaller orders, or disengaging from communications may be showing early signs of drift long before revenues decline. Equally, increased engagement, more questions, or broader purchasing behaviour can indicate growing trust.

One small business owner we spoke to discovered through CRM analysis that their ‘best’ customers were not actually the highest spenders, recalls de Ruyter. Instead, the most valuable customers were those who bought consistently, referred others, and required little service recovery. That insight changed how the company prioritised support and follow up.

For SME leaders, spotting these patterns early is critical. CRM systems allow businesses to intervene before relationships weaken and to invest more effectively in the customers who create long-term value.

Use automation to improve consistency

CRM systems are particularly valuable when combined with automation. Antony Bellingall, co-founder of anti-money laundering compliance specialist Idenfo and Help to Grow: Management alumnus, sees this in highly regulated environments where consistency and accuracy are essential.

Idenfo’s CRM platform is designed to automate anti-money laundering compliance checks for clients such as legal firms, estate agents, and accountancy practices. The system uses automated workflows and risk scoring to determine how customers are handled. For example, low-risk customers may be automatically approved, while higher risk cases trigger additional checks or escalation to senior managers. This allows Idenfo’s clients to maintain compliance while reducing manual workload.

Although Idenfo’s context is specialised, the broader lesson is that automation helps SMEs create reliable, repeatable customer processes rather than relying on memory or inconsistent manual handling. Bellingall says CRM systems can also provide detailed insights into customer activity and workflow status, giving businesses evidence and visibility they might otherwise struggle to produce.

Avoid turning CRM into admin

Despite the benefits, many CRM projects fail because businesses treat the system as an administrative tool rather than a strategic one. ‘The biggest mistake, in my view, is treating a CRM as a record-keeping tool rather than a relationship one,’ says de Ruyter.

In some cases, SMEs adopt overly complex enterprise systems packed with dashboards, automations, and fields that employees simply do not have time to maintain. Staff stop using the platform properly because it feels like extra work rather than something that improves customer service.

‘The best CRM systems are often the simplest ones,’ de Ruyter says. If employees consistently capture a few meaningful pieces of information and actually use those insights in customer conversations, value quickly emerges. The cultural dimension matters as much as the technology itself. CRM only improves customer lifetime value when employees actively use it to strengthen follow-up, improve service recovery, and deliver better customer care.

Build a joined-up process

Bellingall highlights another common problem: fragmented systems. In the compliance sector, using multiple vendors and disconnected processes can create gaps and increase risk. Manual workflows also leave SMEs vulnerable to missed red flags or inconsistent processes.

The same principle applies beyond compliance. A CRM works best when businesses create a joined-up customer process rather than scattering information across spreadsheets, inboxes, and separate systems. That integration is what allows SMEs to move from isolated interactions to long-term relationship management.

Ultimately, a CRM is not just a piece of software. It is a business-critical tool that allows you and your team to remember customers, understand behaviours, and respond proactively.

Ian Wylie Journalist, broadcaster, educator

Ian Wylie is a journalist, editor, and broadcaster for the Financial Times, Guardian, BBC, Monocle, and others. For 16 years he was a staff writer, feature writer, and section editor at The Guardian newspaper. He also teaches on Newcastle University’s undergraduate and postgraduate journalism programmes.

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