Evaluating the ROI of a CRM initiative

Turnkey Ventures’ Manal Syriani studies elements involved in calculating and evaluating the return on investment for the implementation of a CRM system

Investing in a CRM is much more than the installation of an IT solution. The concept of CRM is at the heart of an enterprise ability to derive value from its customers, partners and employees.

The CRM helps to achieve a positive ROI, through reduced costs and increased profitability, while also increasing customer satisfaction and loyalty in the sales, marketing, and customer service fields. To achieve these results, ROI calculations must be made from the very beginning of a CRM initiative. Measurement processes must be built into the CRM project, in order to collect ongoing and continuous metrics.

While investment costs are easy to identify as they involve direct expenditure in systems, personnel and processes can be easily calculated, potential returns are more difficult to quantify especially when it comes to “soft” benefits.

Material costs associated with the implementation of the CRM

Application software and related installation fees.

Updating business operations and processes (including consultants fees).

Cost associated with interruption of business during the installation phase (opportunity cost).

Time and resources needed to get the system ‘up and running’.

Training for team members.

system

In addition to the "hard" benefits that are easy to pinpoint, there are always "soft" benefits that don't show up directly on the balance sheet, but nonetheless represent real benefits to the business, and have a direct effect on the bottom line.

Hard benefits cover direct savings to operating that are apparent on the income statement, such as: incremental revenue, reduced administrative costs, lower operating costs and reduction in operation averages.

Soft costs on the other hand include improved: Customer loyalty due to better customer understanding; this makes it easier to upsell your customers by knowing their needs and preferences, in addition to increased conversion ratio of regular customers to loyal customers.

Decision making and upgrade in internal processes, from having refined and timely information (customer intelligence). As a result the company will be able to explore other sources of business, therefore increasing the potential for revenues.

Productivity resulting from reducing inefficiencies costing the operation money; decrease in the time spent on analysis of data, to come up with informative decision-making.

In cases reviewed, sales increases due to advanced CRM technology implementation have ranged from 10 percent to more than 30 percent

Harvard Business Review