What is ROI for customer relationship management (CRM) systems?

The first step is to estimate how investing in a CRM solution will help grow revenues, cut operating costs, and boost IT efficiencies:

• Power up the revenue engine. You need to define the objectives associated with increasing revenue. Can you capture more of our current customers' spending on your product category (capturing larger wallet share)? Can you improve your product mix value by encouraging more sales of higher-margin products? Can you improve price realization by better matching discounting policies to the appropriate customer groups? Will your CRM initiative help you increase the average length of our customer relationships by reducing irritants that cause attrition? Will you be able to attract profitable new customers?

• Cut the cost of generating and servicing revenues. You need to estimate how expenditures to capture and service revenue will decrease. Will you reduce exposure to unprofitable customers through more accurate analysis of customer profitability? Can you reduce your direct selling costs, for example, by reducing unproductive administrative time spent by salespeople? Is there an opportunity to cut back on marketing expenditures, for example, by decreasing expenditures on campaigns to nonresponsive customers? Can service costs be slashed by encouraging more self-service via the Web?

• Improve IT efficiencies. There are several areas in which to look for efficiencies when replacing an old IT tool with a modern one. Ask these questions: Can you achieve efficiencies on your vendor contracts to lower software license costs? Can you reduce ongoing CRM application customization, support, and maintenance costs? Will this system be easier to use for end users, and will it promote adoption? Will training times for end users come down?

On the cost side of the equation, estimate the costs of software, deployment, maintenance, and support:

• Dig into hardware, software, and subscription costs. These costs are often the most visible to decision-makers but are only the tip of the iceberg. What is the initial purchase price for server and software licenses? What hardware is required? Will there be ongoing subscription fees charged for using the application? What extra data and file storage fees will surface as usage grows? Are there specific license fees for individual user types (i.e., mobile)? What are the costs for upgrades? What discounts are available from the vendor, under what conditions? What happens to our costs if we add or reduce the number or users?

•  Dissect deployment costs. The biggest costs associated with CRM, or any software-centric business improvement initiative, are often the expenditures associated with selecting, configuring, and deploying the new technology. What are the costs for internal and external staff to deploy the software? How many integration points require consideration? Can integration work be staggered or delayed? What are the costs to maintain and support users during the initial evaluation period? How do we account for the out-of-pocket costs of training users to use the system? How do we account for the lost employee productivity associated with the training time required? How long will it before users are fully proficient and fully productive using the new system?

•  Factor in ongoing maintenance costs. Given the often-steep upfront costs associated with deploying on-premises perpetual licensed software, the ongoing maintenance costs for the software can be overlooked. What is the annual vendor maintenance fee associated with the license? Is there adequate support built into the vendor subscription fees, or are there extra charges for premium support? What ongoing application maintenance and user help desk support is required? How will maintenance costs grow over time? What is the cost of internal staff to maintain the solution on an ongoing basis? Is third-party maintenance a viable alternative? 

• Don’t get blindsided by administrative and infrastructure costs. Implementing technologies and solutions into an existing IT infrastructure can spawn hidden costs you should account for. What is the impact of deploying new CRM capabilities on the costs of your firm's enterprisewide IT infrastructure? Do hidden effects lie outside the primary user group sponsoring the project? What is the impact of the new project on the budget and resources of these other groups?

Measuring the ROI of CRM can be difficult without any historical data.

To measure CRM ROI you need to take into account the cost of the software, training costs, maintenance costs, costs to migrate the system, and the time it takes your development team to get it up and running.

To measure if your performance has improved, you need to look at the time it saves your employees to update the system, and you can look at increases in sales, better customer satisfaction, and better performance from marketing campaigns.

By comparing your performance metrics and overhead costs from before you implemented the CRM and after, you’ll be able to see if you’re getting a good ROI from your CRM. You can find a spreadsheet here and a web tool here to help you calculate your CRM ROI.

If you’re looking to get a greater ROI from CRM, then you may want to consider a multi-purpose CRM solution that includes other features such as accounting and project management. You’ll be able to cut the costs of other solutions and increase productivity even more by being able to manage every aspect of your business from a single location.

CRM is so useful because it can be easily implemented into any business and can be used in any aspect of that business. One of the reasons for this is that good CRM services recognize how difficult tasks can be within a business and they create their software to be as user-friendly and efficient as possible.

• By streamlining business processes through using one software solution. With one CRM solution there is only one software license to pay for each year per user.
• Using a CRM solution means that accounting and quoting is made much easier. Outstanding accounts can be highlighted faster which means they can be chased sooner.
• Time is saved by using one CRM contact management program as users do not have to keep switching between different applications just to complete certain tasks. This could even be shown by tracking all time spent via time and billing software. Now users can create a custom profile, generate a quote for the customer and fill in sales form – all through one program. That means that each user can take more orders each day and increase the business’ profits.
• Providing salespeople with more data to better serve potential customers and increasing close rate and deal size.
• Automatically score and assign leads to sales teams.

These are just a few of the ways in which using CRM can help a business to increase profits. But their overhead can be drastically reduced by just by paying for one software program and through increased efficiency that using such a program brings. Employees will no longer waste time juggling between different software applications, they can do everything to one single easy to use and easy to manage solution.

Now that you can see just how easy it is to increase profits and reduce overheads it should be time to use a CRM solution.

No matter how good the processes, people or intentions, no store can get it right 100% of the time. If you’re in business, customer concerns are a fact of life. But the cost of issues that leave customers dissatisfied is huge.The customer doesn’t expect us to be perfect. They do expect us to fix things when they go wrong. This is where CRM become handy to address the concerns promptly. This result in retention of the customers and these customers can be identified, measured the satisfaction level after the concerns addressed and that is what Return on Investment for CRM. Yes! Customer is profit when everything else is overheads.

THE IMPORTANCE OF ROI All businesses value their bottom line and are all concerned about their overhead costs. It doesn’t matter how much revenue you’re generating if you’re overhead costs are cutting into the profits. MEASURING CRM ROI Measuring the ROI of CRM can be difficult without any historical data. To measure CRM ROI you need to take into account the cost of the software, training costs, maintenance costs, costs to migrate the system, and the time it takes your development team to get it up and running. To measure if your performance has improved, you need to look at the time it saves your employees to update the system, and you can look at increases in sales, better customer satisfaction, and better performance from marketing campaigns. By comparing your performance metrics and overhead costs from before you implemented the CRM and after, you’ll be able to see if you’re getting a good ROI from your CRM. You can find a spreadsheet here and a web tool here to help you calculate your CRM ROI. OTHER FEATURES THAT CAN IMPROVE CRM ROI If you’re looking to get a greater ROI from CRM, then you may want to consider a multi-purpose CRM solution that includes other features such as accounting and project management. You’ll be able to cut the costs of other solutions and increase productivity even more by being able to manage every aspect of your business from a single location. CRM is so useful because it can be easily implemented into any business and can be used in any aspect of that business. One of the reasons for this is that good CRM services recognize how difficult tasks can be within a business and they create their software to be as user-friendly and efficient as possible.

I agree with mr. Vaiyapuri's submission regarding ROI of CRM. However; it is important to note that CRM must be effectively, efficiently & strategically aligned to the organisation's goals & objectives in order to maximize RIO.

Thanx for the invitation

Thanks for the invite ............................ agreed with Mr. answers through SHAHZAD Yaqoob