This white paper explores the Return on Investment (ROI) attributable to Customer Relationship Management (CRM) systems. It provides a discussion of the potential returns from such a system. Any organization attempting to analyze the ROI from a CRM solution must first complete a Situation Analysis (SA) to understand where the ROI may come from, as the sources of benefits relating to ROI vary from one organization to the next. Sources of ROI attributable to a CRM implementation arise from three general areas: 1.Creation of a long term knowledge asset or "corporate sales memory". 2.Increased sales revenue (by improving market share and/or customer share). 3.Decreasing sales costs through increased efficiency.
There are sometimes other down stream returns that result from the introduction of a CRM system. For example, collections may be improved or staff turnover reduced. Sources of ROI can be either hard or soft. Hard returns are easily attributable to the CRM system, are tangible and quantifiable. Soft returns are the obvious benefits that fail to pass the criteria for hard returns. A CRM system has the ability to create competitive advantages: by creating value for the customers, reducing costs associated with customer processes and creating time advantages. In any analysis of ROI, an organization should explore the cost of doing nothing. The business environment does not stand still and often carrying on without change can result in loss of revenue. In order to achieve these returns a company needs to invest in a CRM solution that provides a relevant, easy to use system, a rapid implementation life cycle and the ability to adapt to ongoing change. The understanding of the benefits and measurement of these results over time allows a corporation to formulate a plan for implementing a successful, long-term CRM strategy.
2. Situation Analysis
Before considering the ROI from a CRM system, an organization should first analyze it’s current situation. In an unregulated market it is unlikely that two organizations will be alike with regard to Sales and Marketing. This is because market forces dictate some level of differentiation. In this regard even two companies in the same industry are unlikely to receive the same benefits from a CRM system.
The following questions are designed as a guide to considering your own situation. They are only a sample and are not an exhaustive list. 1.Is the market that you are in growing, mature or in decline? 2.Who has the highest market share? Is it feasible to grow your market share? 3.What is your average customer share? Do your customers buy products from both your organization and your competitors? 4.Are there other products that can be sold to existing customers? 5.What is the cycle for repeat business? What is the value of each sale? 6.Is the 80/20 rule relevant for your customer base? How many discrete segments are within your customer base? 7.What is your market distribution strategy? Do you sell through distributors? Are your customer’s individuals or organizations? 8.Can information technology change or enhance the products and services that you offer? What is the information content of the products and services that you offer? What is the technology component of the products and services that you offer? 9.How do you interact with your customers? Does this vary according to task and customer preference?
Not every source of ROI may be relevant to your organization. Having a clear picture of how your organization is positioned in your market will help you to apply this discussion to your own organization.
3. Creating an Information Asset
The introduction of a CRM System allows for the capture of information about customers, prospective customers and their needs. This information captured in electronic form can provide a corporation with many downstream benefits. The establishment and ongoing use of this information asset provides significant value....