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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 CRM’s ROI — and ultimately reduce the risk of a failure to deliver.

Before you do so, we recommend checking out this Quantify the Value of CRM business case by the analysts at Forrester Research, which includes some advice you may find useful. You may also want to read recommendations from analyst William Band which address specific issues when it comes to calculating CRM 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 working out the ROI of CRM

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1. Revenue Ambitions

What objectives have you defined related to how your CRM investment will help you to achieve higher revenues? The more specific you can be, the more accurate your forecast is likely to be. Some of the things you will want to look into include:

  • 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
  • Assessing the impact of applying discounts to different customer groups

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 exactly?

  • Improved sales management: CRM 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: Salespeople will know more about their customers and make increasingly targeted sales, improving lead conversion rates.
  • Existing customers become more valuable: As salespeople are able to target existing customers with more informed and relevant offers, they will become more valuable.

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2. Cutting Costs

Where will you be able to reduce your exposure to expenditure, and how much will you be able to save? Some typical targets for cutting costs include:

  • Unprofitable customers
  • Unproductive employee time
  • Online self-service possibilities
  • Marketing campaigns that wastefully target non-responsive customers

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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.

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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 CRM ROI calculations.

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5. The Real Cost Of Your Investment

Choosing the right supplier can be a minefield, with common stumbling blocks including:

  • Forced upgrades
  • The unexpected expense of additional features
  • Varying licence costs
  • Mysterious discount plans
  • The need to modernise the business’s IT infrastructure

Be sure of your outlay before you make your CRM ROI calculations.

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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 CRM ROI calculations.

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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 the system is meeting business needs.

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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. It will help transform the way your business operates, win more customers, and keep the ones you have, boosting revenue. CRM will reduce — if not remove — inefficiencies across the organisation, while increasing profits and improving the working lives of your employees…

All it takes now is for you to begin building the business case and calculating the CRM’s ROI.

 

About the Author: John Cheney

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A Software-as-a-Service (SaaS) pioneer, John Cheney launched one of the first software as a service companies back in the late 1990s. He is a successful entrepreneur with over thirty years experience in the IT industry; twenty of which have been running IT companies in Europe and North America.