Know-How Exchange : Research/Metrics

well, now, it depends....

CRM is a strategy... and companies usually buy the software first and foremost. [mistake - software is a means to an end, not an end in itself]

If an organisation lives & breathers crm (customer relationship management = formally managing the proscess of looking after the long term value of customer realtionships, maybe even one at a time), then it's bound to create a competitive advantage.

Is it a sustainable advantage?

Only if you do it better than the next guy.

hth

Will Rowan
https://www.thecustomer.co.uk

One way of measuring ROI on a CRM implementation is to measure the effect it has on sales closure rates and customer retention. If CRM is helping with opportunity tracking then the closure rate on new opportunities should improve against your current level. Less leads should fall through the cracks, because somebody forgot to follow up, if the lead is being captured in the CRM system and it is being reported to management each week via the CRM system.
Apart from opportunity tracking CRM systems should also help with (a) integrated customer communication and (b) provide a 360 degree view of the customer to all your staff that deal with the customer. If this is working well your rate of customer retention should see a measurable increase over the current level. Better integrated customer communication and 360 degree view of the customer via the CRM system should also result in increased sales through better customer service/account management and more cross selling opportunities. In the long term this increases the lifetime value of the customer.

These are all metrics that can be measured "before" and "after" and thus you can calculate the ROI of the CRM system.

Regards
Pat Divilly
CEO MarketWare International

From a macro perspective, you need to identify the various benefit streams of CRM (retention rate, win rate, cross-sell, up-sell, etc.), which will depend on the flavor (call center, SFA), and the cost reduction (benefits) streams (productivity, etc.), and then multiply the benefit streams by the operating margin, all over the various costs along your investment horizon (3-5 years, generally). You would discount your cash flows at the appropriate hurdle rate + some marginal increase for project risk. The key is to document all your assumptions and make it so you can test some sensitivities ("What if ..."). It's the same procedure as any capital budgeting process, except many of your revenue benefits would be considered "soft" v. "hard" cost reductions. Some CFOs only "believe" the cost reduction components.