Customer Relationship Management : Return on Investment
Using information to make great decisions.
Most people understand that for a business to be successful the customer needs to be at the heart of every decision we make. That is simple when you have a handful of customers but as your business grows the task of keeping your view of the customer clear becomes more complicated. Customer relationship management (CRM) software solutions were designed to address this need, and correctly implemented they can give your business a critical tool in delivering what your customers value.
At its simplest, it is a customer list with contact details. You don’t need a new system for that so what functionality can a CRM deliver that a contact list doesn’t? A well-implemented CRM allows you to have a 360-degree view of your customers throughout their relationship with your business. Moreover, once you have that view of all your customers, you can start to analyze how you interact with them in a way that delivers impressive value for your customers, and your business.
Historically CRMs were expensive, slow to roll out, and required your business to adapt to the CRM. New configurable SaaS solutions have changed the face of this software vertical. CRM capability that was beyond the reach of small business is now easily accessible with the right support in your implementation. This low cost of implementing a CRM, aligned with the modular rollout capability makes it a much easier ROI decision.
So, what value can a CRM deliver to your company?
- A hotel has all visitors in a CRM allowing reservations, reception, concierge services, and more to all have instant access to information about returning visitor requirements and preferences.
- A sales organization has every contact in their CRM. Sales staff have a clear view of the customer’s acquisition, all correspondence and discussions, all prior sales and inquiries, and any other information critical to the customer relationship. This information is readily available to sales staff that are new to the account in the same way as a team member who has worked on the account since the first contact. Reminders for scheduling calls and follow-ups are built-in. Best practice tips for moving the customer down the sales funnel can be provided at the right moment.
- A marketing company executes a mass mailer campaign. Their email list is up to date, and the marketer knows precisely which customers are open to an email offer. Open and response rates are tracked and recorded allowing easy reporting to make the next decisions on actions for individuals and groups. All the information is recorded against individual customers to allow future campaign decisions to be made with the best possible information readily to hand.
What are the key capabilities that a CRM can offer your business?
As you can see from the examples above, a CRM gives your team the power to put the customer at the heart of every decision they make. Your business, your process maturity, your team capability and your implementation partner are all factors in what capabilities offer the most value to your business, your team, and your customers.
Here are some of the most commonly used features :
Calculating the CRM ROI in 5 steps
While the benefits of a CRM can be easy to see, they can be harder to quantify. So, can you calculate the return on investment (ROI) of your CRM? Yes, but it takes some effort.
Step 1 : Define your key indicators
The critical step here is to identify the business problems you are trying to solve with your CRM implementation before the implementation.
I want to maximize sales volumes.
I want to minimize sales costs and overheads.
I want to attract top tier talent to my organization.
I want to lower my cost per lead.
I want to outsource a business function effectively.
I want to report on customer contact frequencies.
I want to increase order volumes for targeted customer groups.
I want to segment customer groups for tailored marketing campaigns.
I want to increase my customer satisfaction rating by 10%.
I want to decrease my unsubscribe rates from my email marketing campaigns.
I want to increase my lead conversions.
I want to decrease my customer attrition rates.
I want to increase the visibility of my customer acquisition channel volumes.
I want to report on sales representative activity.
I want to reduce staff onboarding time.
I want to increase staff retention rates.
Once you have a clear view of your desired outcomes, you can start to apply values to those metrics.
Here are two examples :
Goal 1 : Increased customer volume. If your goal is to increase customer intake by 10 customers, your calculation could be to take the average profit per customer per year and multiply by an average client lifespan. That total customer value multiplied by the 10-customer target gives you your revenue increase.
Goal 2 : Reduce staff onboarding time. If your current onboarding process is 6 weeks and you aim to reduce this to 4 weeks your calculation may use the revenue potential of two weeks of a staff member. This is to be multiplied by the number of staff you onboard annually multiplied by the number of years you are using for your ROI calculation.
Step 2 : Establish a time period
Have a clear record of the metrics you are going to use to calculate ROI before the rollout of your solution as a baseline.
Define the time period after which you’ll judge the ROI. Be realistic about how long the cultural changes that are needed will take to become a part of your way of doing business.
Step 3 : Calculate the costs of the CRM implementation
For the total cost of ownership, you may need to include some of the following.
Cost savings from any retired software/systems.
- Software license fees.
Implementation consultancy costs.
- New equipment requirements
Productivity loss for training and return to business as usual.
Step 4 : Do the math
Your ROI is a ratio that is calculated as follows:
(Return – Investment) / investment.
A positive ROI means that as a result of the change you have generated an increased return greater than your investment over the period.
A negative ROI means that as a result of the change you have generated an increased return less than your investment, or a decreased return, over the period.
Note : This ratio is obviously dependant on the time period you use to calculate the return.
Step 5: Consider the less tangible factors.
This simple formula delivers a number that takes some interpretation to bring to life.
You’ll need to consider some outcomes that are harder to assign a cost/benefit but are still crucial to your organization. These are very specific to your organization but here are some ideas to start your brainstorm.
Company culture may include:
- The implementation allowed staff to focus on higher value tasks, increasing productivity and staff job satisfaction.
- Higher visibility of consistent data allows the company to reach decisions faster and more harmoniously.
- Senior management visibility of key information allows timelier decision making.
- High level and drill down data levels allow a companywide strategy to be effectively defined.
Futureproofed organization :
- Sales operation flow and data quality enable future changes to be made more effectively.
- Your professionalism is more easily demonstrated the key opinion leaders, vendors, customers, or investors.
If the selection and implementation of a CRM system are delivered with clearly defined success factors and a well thought our plan it can be transformative for business large and small. The ability of SaaS solutions to be implemented as required and to be scaled as requirements change. This means that the time and money requirements for a CRM implementation has dropped to levels that make the ROI arguments for even small businesses compelling.
For any investment having a clear view of how your effort will deliver value to your business should be clear to you before you start any project. We hope that this information will help you to take the steps that will drive your business forward.