When a company is considering the purchase or upgrade of a CRM system, there is often a disconnect between the perceived value and the real value of CRM solutions. Because CRM does not directly lend itself to easily quantifiable analysis, it is often difficult to determine the ROI from using CRM software. The true ROI for the use of CRM software is not always readily apparent, and must be measured over a span of time. It cannot be measured by a standard cost analysis alone. Nor can it be thought of in purely mathematical terms. That being the case, what are some factors to consider when trying to calculate ROI for CRM solutions?
As with any ROI calculation, the basic premise is to consider the gain of investment divided by the cost of investment. How does this apply specifically to CRM?
First, you must define a way to measure the gain of your potential investment in CRM software. In order to successfully calculate ROI, you must clearly define measurable financial objectives and then design a method of assigning value to each defined objective. Everyone in the organization must have a solid grasp of what it takes to find, acquire, and retain a customer. To do this, you must establish a baseline by which to measure. Once that baseline is established, you can compare overall results prior to CRM implementation to those after CRM implementation. This will at least give you an idea as to whether your CRM software is working for you as anticipated. Some of the key factors for comparison for pre-CRM implementation and post-CRM implementation are:
- Overall revenue
- Revenue per lead
- Cost per lead
While these figures can be culled from reports you likely already generate, CRM gains include some things that are harder to measure objectively. For instance, one goal for using CRM software is to increase productivity of your sales force. It is difficult to assign a number value to increased productivity, because it is hard to prove what affects the speed with which a person completes a task. Though you may have a system in place for measuring productivity in some way, using that metric for calculation of ROI for the CRM solution is problematic at best. Some measurable productivity standards might be:
- Number of sales calls made
- Number of sales calls made to close a sale
- Amount of time it takes to close a sale
- Incidence of cross-selling or up-selling
- Customer retention rates
Measuring gains in all the areas mentioned will give you one side of the ROI equation. The other side, of course, is the cost of your CRM. These costs include:
- Cost of hardware, software, and subscriptions
- Cost of implementation itself
- Cost of any ongoing maintenance
- Cost of any administrative functions
- Cost of employee labor while using the software
- Cost of any recurring fees associated with the system
In order to get a real picture of ROI, you must also set a consistent time span to compare your estimate to actual expenses. True ROI calculation is a continuing process. And using any actionable intelligence you receive from the metrics you capture, you can increase the profitability of your business by a wider margin, thus affecting your ROI positively. Looking at the entire picture of how your CRM is impacting your business includes measuring differences in key areas that you have designated before initial implementation begins.
When all is said and done, however, the real ROI for CRM software is determined by looking at the bottom line of your business. Your CRM should be working to benefit your clients by giving them a better customer experience and improving communication across your entire enterprise. This, in turn, will lead to increased revenue, sustained customer loyalty, and reduced operational costs.
If you would welcome further discussion about the advantage of CRM solutions for your business, please contact us. With years of experience in customer management software solutions, we will be glad to demonstrate how CRM software can work for you.