Let me briefly remind you what is ROI in context of CRM:the extent in which it is necessary to implement CRM for business: how much will a company earn because of it.

But when we start to dive deeper into the topic, some difficult questions appear. In this post I`d like to show you, why this formula is quite difficult to apply when we think about ROI on CRM.

What are CRM Investments exactly?

Experts distinguish three major categories: 

  • IT costs: investments in IT infrastructure, database development, software 
  • People costs: during CRM implementation company desperately needs to have lots of narrow specialists: statisticians, analysts, and so on. After integration of a system business still need their expertise, besides, current workers, like sales persons, support, need to be trained. 
  • Process costs: changes in process also might be expensive and long, since CRM involves nearly all of company`s segments[1].

What is Return on the Investments?

Usually we think about success or fail of any initiative`s realization in terms of NPV: did we add value? But in case of CRM implementation it`s way more complex.

  • CRM has a lot of requirements to the company itself. So, even if the idea to implement CRM was justified, and a plan was well thought out, it`s realization might fail because of weak company culture, or uncompetitive products. It is also possible that it is too late to do anything – company that fallen behind a market beyond retrieve will never actually getReturn on the Investments.
  • This approach doesn`t consider latent benefits from CRM implementation[2].

What time period should we measure?

CRM is a long-term play: time gap between investment and first return might be a few years, and not every company can tolerate it.

CRM is not about getting information about customers and putting it in order – it`s the simplest stage. Of course, we will see some Return, while operational performance will increase – but to really benefit from it, we need to work with new information, new customers, create new offers – and it requires an upgrade to Strategic CRM – which is not easy for a company that just began to care about CRM at all. 

With all these limitations, how can we ‘sell’ top-management an idea to spend lots of money on such unpredictable matter? One of the possible solutions is ‘step-by-step’: we don`t invest this much right away but build limited infrastructures –to see how it works, what data can we mine. This way we won`t cause disruption among executives and will get an opportunity to introduce customer-driven company.

Step-by-step approach may be suitable for some cases, but I`d like to get your opinion on this matter – when it`s not?


Sources:

[1]Ang, L. and Buttle, F.A., 2002, December. ROI on CRM: a customer-journey approach. In Conference Proceedings of IMP Conference, Perth, Australia.

[2]Buttle F., Maklan S. Customer Relationship Management: Concepts and Technologies. — 3 изд. Routledge, 2015. — С. 341-344.

3 комментария

  1. Pavel! In fact, the step-by-step method allows companies to freeze a significant part of the funds in the system, which will pay off time, the scope of which is not so easy to determine. Different sources have different terms for implementing CRM, but if you are guided by this source (https://cyberleninka.ru/article/n/vliyanie-organizatsionnoy-kultury-kompanii-na-povyshenie-urovnya-strategicheskih-vzaimootnosheniy-s-korporativnymimi-klientami / viewer) and determine the implementation period of about a year, then in such a case payment step by step takes place to be.

    However, if the size of the company is not large, then the implementation can proceed much faster and here this method may not work. But it is worth considering that there are many CRMs that are not difficult to implement, but also have limited functionality. The costs of such a system will be minimal, if not absent, but it should be understood that when developing a business, it is inevitable for a company to introduce high-quality CRM, and at this point, you can start preparing in advance, developing a corporate CRM culture.

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  2. CRM implementation is not only one type of projects company hardly can estimate via ROI tool. Actually, every project with postponed effect, I believe, a company should not estimate in terms of ROI — effects can become noticeable in some years, but everyone wants to get all the benefits right here and right now.
    Moreover, as CRM implementation is a project, business should make it step by step so investments would be not so high and the result of stages can be controlled and fixed.

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  3. Strongly agree with the author: business is used to estimate expediency of CRM implementation, as any other novelties, via ROI calculation, but it doesn’t work. When implementing CRM a company should understand that it is long-lasting process with long-term effects, and to calculate ROI a business needs to predict not only costs connected to CRM, but also to predict profits it would bring in the next several years. For companies that didn’t have such a system before it is very hard – sometimes business even doesn’t know benefits CRM can bring.
    I’m really for implementing CRM step-by-step. Approaching CRM implementation as a project a business needs to do all necessary formal things the project goes through – and there are a lot of stages. Each stage has to end with post-launch review to understand how we can correct our actions to get wished result.
    I can’t imagine CRM implementation without using step-by-step approach, actually. Maybe it will work if there is very small service company that needs only to collect date about clients and use it in a very simple way: for instance, calling a name of a client in e-mailing.

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