Even a semi-successful CRM software implementation can show a positive return on investment. 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 and the answer, all to often, is "probably not".
The fact is that most CRM implementations tend to leave money on the table because the business doesn't focus enough attention on getting the best possible ROI.
The standard definition of ROI is: Return / Investment
In other words, the amount of money you make divided by the amount of money you had to spend.
Installing a CRM system is going to require an investment. In addition to the cost of the application software, there is the cost of converting business operations, the cost of the time and resources needed to implement and the additional costs, like consulting fees, to get the system up and running. Even with software as a service (SaaS) CRM systems, the costs associated with implementation and business interruption during the deployment period are material. These costs are usually pretty straightforward to calculate since its money out of the organization's pocket.
The returns are all the ways that the CRM system contributes to top line revenues, cost savings or cost avoidance. In a well-implemented business system these benefits tend to be extraordinarily diverse. Returns come from nearly all income categories, such as incremental revenue, margin, lower costs and improved productivity.
In addition to the "hard" benefits there are almost always "soft" benefits that don't show up directly on the balance sheet, but nonetheless represent real benefits to the business. Classic examples include improved customer loyalty due to better customer service, improved decision making from having better and more timely information and improved transaction throughput resulting from decreased cycle times.
Note the key word "can" in the following five factors. In practice CRM software is about consistent execution, improved automation and better information. Just purchasing and installing the software isn't enough. You have to design and apply the technology to improve user productivity, automate business processes and achieve slated business outcomes.
CRM can increase revenues
This is the most obvious way CRM software helps achieve ROI: Increasing the top line of the business. Quite simply, CRM can help you sell more by improving your selling processes and opening up new avenues based on the comprehensive view and customer intelligence available from CRM analytics.
"Basically you're looking to create something that will make your clients' lives simpler and easier," says Robert Gorin, senior director at Getzler, Henrich and Associates, a consultancy based in New York City. By making it easier for customers to do business with you, you will increase the amount of business your customers choose do with you.
One of the ways CRM software can increase your revenues is to let you, and your staff, track more closely where in the sales cycle each customer is. "When you review the sales pipeline you can see what's coming up," says Ray Simon, principal of ENPIO, a San Francisco, CA, consultancy. "You can see the deals you've already done 80% of the work to win. When your sales staff can clearly see this they can put in the last 20% of the effort on those people and drive them home."
CRM can reduce costs
CRM software is a powerful tool for reducing inefficiencies that are costing your business money. For example, CRM systems can reduce your customer acquisition costs in several ways, such as making your sales force more efficient, and allowing them to call on more customers with more relevant messaging.
"Say you have two people making sales calls in the Boston area," says Nancy Keddy, CEO of Touch Ahead Software, a Boston, MA, CRM vendor, "and they both call on the same company in the same day. Not only it that a waste of effort, but it makes your company look foolish to a potential customer."
With CRM, "you can easily see all the information about an organization at the organization level," Keddy says. "If you're selling 17 different types of widgets you need to be able to look at the organization and see everyone in your organization who is communicating with that organization."
CRM can increase margins
One of the most powerful benefits CRM software offers is a complete view of your customers and customer relationships. That includes their needs, preferences and buying patterns. Among other things this makes it easier to upsell your customers by knowing their needs more intimately.
Gorin cites the example of a web site he bought a couple of ink cartridges from. "I got an email from the supplier that said it seems you have this type of printer. Here are some other cartridges you can use, here's some specials on related equipment, here's some cable suggestions."
"It was easy to collect the data," Gorin points out, "but someone had to look at the data and say 'what does it mean?'" In this case it meant the opportunity to upsell and cross sell to a customer using the kind of data CRM software easily collects.
CRM can help you identify and eliminate operational pain points
One of the most obvious benefits of successful CRM software, in retrospect, is that it helps to identify places where your operations are unacceptably inefficient. Not only will this make the operation better, it can be an important factor in obtaining the vitally important employee buy-in
"You can almost always make life better by doing something that's no skin off anyone's back," says Sean Clemmons, vice-president of consulting at Piraeus Data LLC, a Seattle, WA consultancy. "At the outset you want to get everyone's top thing they like. But what's the thing they hate most? If you keep that in mind you can reduce their pain and give them some goodies, and they'll buy in."
CRM can increase customer satisfaction and retention
By using your CRM system's data you can better understand your customers and meet their needs more effectively. This includes making sure that promises to the customer are kept, schedules are met (or the customer is alerted in a timely fashion if they won't be), and the customer's needs can be anticipated.
Again, this is a function of the 360-degree view of the customer relationship that a successful CRM system gives you. The result is increased customer loyalty as the customer feels you understand them and their needs—and in direct contrast to "the bank that sent my three-year-old son a credit card yesterday," says Gorin.