EXPERT RESPONSE
CRM software should focus on solving a specific sales issue, such as improving response rates, implementing self-service or automating forecasting and accuracy. Projected benefits should be twice the expected cost, to assure success the solutions should take less than six months to deploy. If more time is needed, phased roll-outs will drive a steady-state of success. Solutions should provide a positive payback on the investment in less than 12 months from deployment. A pre-project and post-project ROI analysis including net tangible benefits, intangible benefits and risk measurement is essential to ensure success.
The business case for CRM and CRM upgrades should include:
1) Tangible net benefits: A clear and precise cost-benefit analysis which tallies all of the planned project costs, quantifies each of the tangible benefits and calculates key financial performance metrics such as ROI, NPV, IRR and payback period. Costs should be less than 50 percent of the benefits (because of inevitable cost overruns and typical benefit adoption schedules) and the payback period shouldn't exceed 12 months.
2) Intangible benefits: A total of the expected intangible benefits including key performance indicators that will be used to measure success or shortfalls.
3) Risk assessment: A listing of the people, process and technology risks in order to proactively mitigate their probability and manage its impact on project success.
When creating a cost-benefit analysis, assessing three main categories including implementation costs, benefits and risk helps establish a business case for pre-project planning, and post-project success measurement. Implementation costs are often split between IT costs and business unit costs, where the business unit costs are typically equal to the IT costs.
Implementation costs include:
• CRM software licensing and maintenance/support contracts
• EDI, database, operating system and other software licensing and maintenance/support contracts
• Hardware purchases and maintenance/support contracts including servers, storage and network upgrades (as required)
• Software integration and customization, including design, development, test and on-going maintenance
• Implementation labor
• On-going administration and support labor
Business unit costs include:
• Planning and requirements meetings
• User training and learning time
• Process change management
Benefits include:
Benefits typically include increases in staff productivity, cost avoidance, increased revenue and margin, and reduced inventory through the elimination of errors.
These are a handful of areas of improvement that should be considered:
• Key benefit area
• Key improvement
• Reduce cost of sales
• Enable self-service sales channels, changing the mix of direct sales, tele-sales, channel/agent sales, and self-service the most effective/- least costly channel in order to reduce costs and improve satisfaction
• Reduce sales administrative overhead
• Reduce the time spent on sales administrative overhead tasks such as commission calculations, forecasting and reporting enabling increased selling time
• Improve leads to sales closure rates
• Increase the percentage of leads which are converted to sales
• Increase customer retention
• Reduce customer churn rate and eliminate replacement expenses
• Improve customer satisfaction and loyalty
• Improve customer lifetime value
Risks:
Instead of taking on a large risky project or full implementation, start with smaller, more focused CRM solutions, targeting a specific sales or services business function or group of users. Some of the obvious risks include:
• Over budget and behind schedule: According to CIO magazine, 49 percent of CRM projects are now targeted for completion in less than 12 months, and 70 percent within 18 months. Companies are significantly reducing project scope and implementing projects with tighter schedules and more reasonable budgets.
• Poor user adoption: Ease of use and training are essential for users to understand and adopt the solution.
• High maintenance and support costs: Maintaining CRM applications can be 40 percent of the original implementation's labor and services. Weak or incomplete training almost always raises support costs.
• Isolation: Failure to use CRM data across multiple groups can severely hamper the achievement of key benefits.
• Garbage in/garbage out: Because CRM systems require so much data entry, users often put in placeholders, misguided estimates or inaccurate information – leading to poor analytical results and decision-making errors.
Before upgrading to a newer CRM system you should understand and measure the strengths and weaknesses of the current CRM system. If possible try to quantify the ROI on the current system. This will give you the benchmark needed to make better decisions for the overall upgrade to the new system.
|
