Calculating the ROI of CRM
Before you even think about calculating the ROI of CRM you need to ensure you understand the desired business outcomes and the improvements you would like to make to your business then work out what needs to change in order to achieve those outcomes.
Once you have the basic justification for your investment in place, you will be in a much stronger position to calculate your ROI – and ultimately reduce the risk of failure to deliver.
Forrester analysts have written a report, Quantify the Value of CRM, which includes some advice you may find useful. Before you start, you may also want to read recommendations from analyst William Band addressing specific issues when it comes to calculating ROI – all of which will ultimately help you cut costs and boost sales.
But for now, let’s review the key elements you need to consider when calculating the ROI of CRM.
1. Revenue Ambitions
What objectives have you defined in relation to the expectation that your CRM investment will help you to achieve higher revenues? The more specific you can be, in terms of capturing customer spending on different products, working out the potential to increase higher-margin product sales, cutting out obstacles that threaten the continuity of customer relationships or assessing the impact of applying discounts to different customer groups, the more accurate your forecast is likely to be.
Set your target. Imagine that your CRM project will generate five additional sales per month - or 60 per year. If your average sale is worth £1,000, CRM could bring in an extra £60,000. How?
- Improved sales management
Makes salespeople more effective and productive, because they have access to better information and can react instantly to client requirements.
- New lead conversion rates improve
As salespeople know more about their customers and make increasingly targeted sales.
- Existing customers become more valuable
As salespeople are able to target them with more informed and relevant offers.
2. Cutting Costs
Where will you be able to reduce your exposure to expenditure, and how much will you be able to save? Unprofitable customers, unproductive employee time, online self-service possibilities and marketing campaigns that wastefully target non-responsive customers would be typical targets here.
3. Time Saving Benefits
Your sales team is best employed in the field, selling and talking to customers - gathering more information and generating revenue. So why are they spending their time manually capturing leads from your website? If six people are spending 10 minutes each just on this task, that’s a whole hour of potential selling time that could be saved using the automatic lead capture functionality of CRM.
4. Steamlined IT
Can you pinpoint specific efficiency goals? Reduced maintenance and licence management costs, more effective support for users and simpler development paths should all feature in your ROI calculations.
5. The Real Cost Of Your Investment
Choosing the right supplier can be a minefield, with forced upgrades, the unexpected expense of additional features, varying licence costs, mysterious discount plans and the need to modernise the business’s IT infrastructure, proving common stumbling blocks for the unwary. Be sure of your outlay before you make your calculations.
6. The Price of Disruption
What will the real cost be in terms of training, project team commitments, possible delays in implementation and impacts on productivity while CRM beds down in the business? You’ll need to make some firm estimates and factor contingency plans into your calculations.
7. Ongoing Overheads
Implementing CRM is just the start. What are the long-term cost implications for maintenance and management? Even cloud-based CRM requires an internal commitment to ensuring that the data is up-to- date, and that the system is meeting the business’s needs.
8. The Ripple Effect
Integrating CRM with existing infrastructure and business systems will always have unexpected consequences. Have you accounted for the impact on the efficiency and productivity of departments beyond the immediate focus of the implementation?
The potential rewards of CRM are great. CRM will transform the way your business operates, it will help you win more customers, and keep the ones you have, boosting revenue. It will reduce if not remove inefficiencies across the organisation. It will increase profits and improve the working lives of your employees…
All it takes now is for you to begin building the business case and calculating the ROI.