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Hannah Smalltree, Editorial Director
To gain initial and continuous funding for CRM projects, the discussion must be framed in terms important to senior management: costs, profits and competitive advantage. This will require enterprise-wide education and marketing, and ongoing measurement throughout the CRM journey. Many predictions of ROI and EPS are not realized in CRM projects because of incomplete ROI calculations and the lack of a measurement process. We recommend tying these predictions to an ongoing measurement process. An enterprise-wide process should be developed to ensure that the metrics created in the evaluate phase of CRM projects are accurately measured. Without this measurement, CRM project managers will find it difficult to proceed with later phases of projects, and enterprises will find it difficult to achieve the benefits projected. The CRM benefits will not be achieved simply by implementing a technology.
A key point to remember is the difference between benefits and ROI: benefits are measured, ROI is calculated (ROI = Benefits - Costs). ROI is a financial analysis of how a project affects an enterprise's financial statement. To fully appreciate the ROI expected as a result of CRM, a full business case analysis must be completed prior to undertaking any initiative. The focus should be on understanding both the total costs and benefits of undertaking CRM and the factors that may affect attainment of the expected return.
The business case should include the following:
1) Business-as-usual analysis, including cost calculations, capital and depreciation detail, expense and capital spending detail, and a complete base case business-as-usual P&L.
2) Business as a result of CRM analysis, including cost calculations, capital and depreciation detail, expense and capital spending detail, and a complete business-with-CRM P&L.
3) Comparison of the above P&Ls, including an analysis of the period expenses, annual expenditures, depreciation and amortization. An ROI analysis (IRR, NPV or EPS) must be understood.
4) Spread period costs and expenses over the workplan and indicate key milestones and decisions to gain a full appreciation and understanding for the magnitude and timing of expenditures as planned.
This was first published in May 2003
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