Cost Justifying CRM
When launching a visible and wide-ranging program like CRM it's only a matter of time before a high-ranking executive inquires, "So how much money have we spent on this CRM thing, and what have we gotten in return?" The degree to which your CRM program has been deliberately planned and executed is the degree to which you'll have a slam-dunk answer to this question.
There are three possible financial outcomes for any CRM program:
- Increased profits
- Lost revenue
Unfortunately, it's difficult to quantify how much additional profit is generated or money saved via CRM. Unlike more straightforward operational systems that deliver both defined outcomes and quantifiable improvements, CRM often fosters unprecedented business practices that are by their very nature not measurable. Comparing new sales channels like the Web to traditional channels invites apples-to-oranges debates. Furthermore, unlike its more technology-specific counterparts, CRM often delivers ROI that is both hard and soft.
From a soft return standpoint, CRM can deliver significant payback that's nevertheless difficult to quantify. Enhanced employee satisfaction, cultural and workplace improvements, perceived technology leadership and amplified market reputation are examples. Even concepts such as customer loyalty and customer satisfaction, both crucial to business success, are difficult to measure. A March 2000 CRM study conducted by META Group/IMT revealed that ninety percent of the fifty largest CRM user companies admitted being unable to quantify a return on their CRM initiatives.
For some companies, simply knowing that after deploying CRM their sales figures exceeded the industry average is enough. For others, the inevitable executive questions loom large--large enough to mandate tangible benefits.
From a hard ROI perspective, CRM can truly result in revenue or cost savings via the following quantifiable metrics:
A. More efficient customer-focused business processes
B. Decreased customer attrition
C. Increased sales
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This was first published in May 2005