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Calculating ROI

Is there an established norm for calculation of ROI for CRM? What's the best way of arriving at a figure for ROI for a majority of the verticals? Figures would help. Thanks.

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ROI is part art, part science. The "science" part is fairly straight forward. Add all the CRM costs; add all the CRM benefits (as measured by money saved, added revenue, etc.), and then perform some calculations -- such as time to break even (cost/benefits), and rate of return (benefit/cost). ROI can become a very complicated and confusing concept. Finance people might look at other factors, including the cost of capital and opportunity costs. Other ROI assumptions can become daunting...

What are CRM's true costs? (hardware, software, training, human resources, ongoing maintenance)
What are the costs for not implementing CRM? (savings of not implementing CRM, costs of doing business "the old way", the expected return of competing projects, etc.).

Other CRM assumptions to consider when performing ROI calculations include increased sales-closing ratios, better sales & marketing information/analysis, more efficient organization, and the ability to attract and retain key sales people. Arriving at cost and benefit dollar amounts for these (and other) items is where the "art" comes into play.

So, do standard ROI calculations exist? -- yes. Do I trust them? -- no. Why? -- they are subject to interpretation and the "art" of ROI. Short answer: do your ROI calculations, but only use ROI as one factor in determining if you should go forward with CRM. Remember, CRM is more than a corporate asset, it's a method of doing business.

For more information about CRM ROI, check out searchCRM's Best Web Links on Measuring ROI.


This was first published in June 2001

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