Customer relationship management (CRM) is all the rage. More and more vendors are offering CRM solutions to a wider range of corporate clients. Businesses are getting on the bandwagon and utilizing CRM dashboards to learn more about their customers and their purchasing histories at a glance.
However, there are some good questions attached to a lot of these modern IT upgrades. Simply put, how do you determine the “value for cost” of your CRM solutions? How do you figure out what your return on investment is?
The short answer to this question is that it can be exceedingly difficult to figure out ROI for CRM, and that it's definitely something you have to pursue on a case-by-case basis. One implementation is very different than another, and there are a lot of factors to go through in figuring out the value that you actually get for the cost of your CRM services. With that in mind, here are some of the strategies that companies commonly use to determine early ROI signs of CRMs.Use a “Before and After” Comparative Approach
One simple way to start putting together a snapshot of ROI for CRM is to look at both historic data and data that is accumulated after implementation. In other words, compare the “before” numbers to the “after” numbers. Correcting for other mitigating factors, you can start to get a clearer picture of what kinds of value the CRM solution has produced. However, it's important to make sure that the system is working efficiently and contributing to revenue before doing this rather simplistic research.
Others suggest using a simple ‘baseline’ to put together CRM numbers. Again, this could involve looking at what the business did before the upgrade, versus how CRM has changed the average revenues and expenses well after implementation.Define Current Revenues and Costs
Another major building block for getting CRM ROI is to put together a list of applicable revenues and expenses. On the revenue side, core items might include greater sales volumes, assistance with new sales initiatives, and all of the other help that new CRM gives to salespeople and others.
On the cost side, you have the cost of vendor services, but you also have training and litigation costs. You have hardware/software/subscription/labor costs, but you also have the costs of getting staff used to the changes. It's crucial to factor all of these costs into the overall equation.
“My clients ask for help quantifying the financial impacts of implementing a CRM technology solution.” Band begins. “CRM initiatives must not only be technically sound but must answer the question ‘What will we get for our money?’”
In “Power Up the Revenue Engine,” a section on revenue, Band puts together some interesting principles, for instance, capturing more “wallet share” or putting together a better “product mix” (that’s ultimately important in growth) – he also talks about building better discounts. If CRM helps to identify customers who will go for certain discounting, that should be built into its value, too.
In addition, Band talks about “the cost of generating and servicing revenues” for example, ditching unprofitable customers, and generally making deals easier, as well as fostering efficiency in IT.
On the costs side, Band shines a spotlight on two important components: deployment costs, which are mostly immediate, and maintenance costs, which are ongoing. One good example is where CRM actually requires more oversight in the form of an additional job title or a “cabinet level” executive member. All of this can, and should, go into CRM ROI calculations.Factor In Those Elusive Extras
In addition to the greater sales volume that CRM's help companies accomplish, it's also a good idea to take a look other less tangible sorts of value (in addition to Band’s values detailed above). For example, this resource from Chron has CRM users looking at customer retention, and how that eventually adds to revenue. That's no small potatoes, as customer loyalty is one very important metric for long-term sales. Another resource from CRMSearch suggests measuring customer satisfaction is also a good return on investment, the value that the company gets from business intelligence coming from a CRM solution. Writer Rick Cook suggests that knowing more about the company’s “pain points” and vulnerabilities can actually provide hidden value, where acting on that information can boost efficiency and productivity.
“Even a semi-successful CRM software implementation can show a positive return on investment.” Cook writes. “The advantages of CRM to the enterprise are so great that assuming you meet only part of your goals you should see a financial payback. But are you getting as much ROI out of your system as you can? That's a different question…”Look for Other Areas of Potential ROI
Another good tip for CRM users is to recognize that you don't have to settle for the actual/immediate ROI that you're getting -- in other words, doing some of this research might guide executives and leaders toward better uses of CRM that can mean even better return on their investment. For example, check out this post from Business2Community suggesting CRM can help free up data, and that it should do so if it’s being used correctly. Writer John Cheney warns businesses not to “replace old silos with new CRM silos” - this resource also provides another great tip, which is to make sure that leaders translate the data that they're getting into action. Even the best CRM dashboard doesn't mean anything if there's nobody at the helm taking that information and strategically using it.Use an ROI Calculator – Or Other Vendor Tools
For those who don't want to go through any of the above work, there's the potential of using simple ‘ROI calculator’ tools to zero in on the value of CRM (Here’s one from IBM for its Microsoft Dynamics CRM). Obviously, though, these are not very precise tools and again, they don't address that very delicate case-by-case reflection of revenues and expenses on how much CRM implementation costs. This is just another way to tackle the general task of figuring out how much value a company gets from its CRM.
By using the above strategies, companies can get closer to pursuing smarter use of their CRM and other new technologies. Experienced leaders will tell you that the correct implementation and application of CRM is often the difference between a big boost and an epic fail.