Quantifying Your CRM Investment

Updated: April 30, 2009

So you've carefully selected a CRM vendor, partnered with a systems integrator and fully implemented the most appropriate CRM solution. Now, how can you be certain that the choices you've painstakingly made are delivering the financial returns you had hoped? Measuring a CRM solution's ROI (return on investment) can be a daunting process. Here are a few steps to ensure that you're getting the most bang for your CRM buck:

1. Although CRM is comprised of sales force automation , marketing automation and support/service, try not to tackle too much at once. Biting off more than you can chew in terms of CRM functionality only makes matters more difficult when attempting to quantify your investment. Said Tim Hickernell, an Info-Tech Research Group senior research analyst, "One of the biggest contributors to the perception of CRM failure has been trying to accomplish too much. When you try to get your hands around sales, marketing and service projects all at once for the whole company, it's almost impossible to really define any good value metrics." A piecemeal approach involving smaller projects, however, can allow companies to easily measure factors such as increased call-center efficiencies and improved sales response times.

2. Looking to realize a prompt ROI? Consider an on-demand solution. Said Hickernell, "There is definitely an edge for on-demand. You can get up and running faster, you have a lot more out-of-the-box functionality, and you can scale up or down quickly, as well as add new features without an upgrade to the system." In fact, according to research firm Gartner Inc., through 2010, when compared to on-premise software for moderately complex CRM deployments over a five-year period, an on-demand CRM solution will provide a total cost of ownership that's as much as 10 to 13 percent lower. While the price of an on-premise CRM solution can easily run upward of $500 per seat, companies can subscribe to an on-demand tool for as little as $10 per user per month. And a Gartner Inc. study found that 80 percent of the cost of deploying and maintaining on-premise applications is not due to licensing but to additional costs related to hardware and administration of the software.

3. When it comes to calculating ROI, be prepared: Metrics aren't always as cut-and-dry as "reduced headcount" and "increased percentage of sales leads." "These motherhood statements of ‘we're going to improve employee productivity and customer satisfaction' aren't very measurable," said Hickernell. "When you do measure them, it's almost impossible to figure out whether or not what you changed really made an impact because there are too many variables." This is all the more reason to factor soft benefits into your ROI equation. You may not be able to attach a cold, hard figure to "increased customer satisfaction," but there's no disputing that such a result is worth the investment in CRM.

4. Measuring ROI doesn't just entail looking for places where you've cut costs by introducing a CRM solution. Rather, reaping the rewards of CRM also means being careful not to inadvertently drive up costs through factors such as customization. Although sometimes a necessary evil, application customization can significantly boost the total cost of ownership of CRM and greatly add to integration headaches.

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