ROI on a CRM Purchase

By Gene Teglovic
Updated: February 17, 2011

Any company considering upgrading or investing in a new Customer Relationship Management (CRM) product can save money, increase revenue, and improve customer satisfaction over time, given proper levels of planning, communication, and coordinated agreement on the specific CRM business goals.

Planning for CRM

A carefully planned strategy for realizing return on investment (ROI) for a new CRM product is necessary before making any decisions to proceed, for several reasons:

  1. Predicting customer responsiveness and employee adoption curves for a new CRM product is difficult and unique, based on enterprise specifics.
  2. Partnerships between the new CRM product vendors and a company’s operational leadership are critical.
  3. Business objectives, customer metrics, operational cost metrics, and technology release planning goals regarding CRM product investment are all factors that require careful consideration.

Best Return on Invesment

The biggest payback from a CRM product investment is increased revenue from better-targeted selling and customer retention, as opposed to cost savings. However, since the cost savings factor is probably the easiest to quantify in terms of CRM product ROI, this article explores some ballpark costs and ROI timeframes for them.

Investments needed to implement a highly functional new CRM product vary widely depending on a number of variables, such as:

  1. Size of the enterprise: number of CRM users on sales and support teams, current customers supported, administrative users, and facilities.
  2. Types of products developed, services supported, customer base, and target markets.
  3. In-house versus external consultancy expertise related to legacy systems integration and implementation.
  4. Whether the implementation is an upgrade or a new installation.
  5. Staff skill levels in CRM products in general and the new CRM product specifically.
  6. Dedication of staff regarding the new CRM product and related operational processes modification.

Ballpark CRM Costs

General CRM product investment cost categories include software (licenses and support), hardware (laptops, desktops, mobile devices, printers, etc.), customizations, consultancy, legacy systems integration, staff training, telecommunications, and technical support.

In looking across a number of industries, studies, solutions, and other heuristics for estimating, a new CRM product implementation in an enterprise environment can generally cost from $8,000 to $17,000 per user. Upgrading from an existing system could result in lower costs, as could implementation of a new CRM product in a small business.

General Timeframes for a CRM product ROI

As with CRM costs, timeframes for a new CRM product ROI are widely varied. Accurately estimating them can be as big a challenge as estimating up-front costs (if not greater). For example, some costs are one-time, and others are ongoing. Some returns are realized soon, while others are realized over years.

Increased revenue due to an improved CRM product investment is the biggest payback. Factors such as speed of the sales force’s expertise in adoption of the new CRM, improved sales numbers, better customer retention, and more up-selling drive the CRM product ROI numbers.

In addition, ROI on an enterprise CRM purchase is not always directly measurable in a dollar-for-dollar payoff. For example, improved efficiencies, competitive advantage, customer satisfaction, and staff morale are CRM product ROI factors that are not easily measureable.

Given all these variables, most enterprises see ROI on a new CRM implementation within one to three years.
 

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