CRM ROI - Far from Expectations

Does the ROI from CRM implementations meet expectations? This seems to be the question on everyone's mind. The answer? Despite the fact that the estimations of the return on investment from CRM projects are high, the actual results seldom match up. Most CRM experts feel that the ROI is sufficient while many others think the opposite.

What's the real picture? According to statistics almost 75% of CRM projects had a negative ROI. Astounding? That implies that more than half CRM projects undertaken have failed. Here again there is a wide disparity in views. Countering that, experts advocating CRM have vehemently stated that the exact same number of CRM projects has succeeded. Why the difference? Improper and most often than not lack of measurement is the reason. This results in vagueness and ambiguity in the actual statistics. Most often than not organizations are unsure of whether or not they have achieved their targeted ROI. Establishing the right metrics is absolutely essential and is yet to be followed.

What contributes to Inadequate CRM ROI?

• Failure to measure or inadequate measurement of ROI.
  
  
• Organizations tend to adopt a one time plan, invest a huge deal of money in it and ultimately find that the returns seldom match their expectations, fail to cover their costs and ultimately give up the CRM project.
  
  
• Companies fail to budget properly and find that they have far exceeded their intended costs. This is because they plan and implement budgets that are far from realistic.
  
  
• Organizations do not see that the time they have allotted for the completion of their CRM projects is often irrational and inadequate. Poor ROI is often the result in this case. The unhappy statistics indicate that almost ¾ th of projects tend to fail.
  
  
• Companies are also more than content to sit back and use other intangible benefits as an indicative measure of success. Herein lies the problem. These intangible benefits themselves do not have proper metrics with the result that there is absolutely no proper yardstick for success.
  
  
• Employees who are ill equipped will not deal with CRM the right way. Improper training facilities available to employees lead to inappropriate handling of the CRM strategy and ultimately poor ROI.
  
  
• Companies seldom view ROI as a priority. They feel that there are other yardsticks that are equally important and that can be used as a measure of success. Why is this? This is because ROI as an offshoot itself is a difficult component to measure. In addition to this companies with their 'offhand attitude' toward it serve to contribute to its failure.
  
  
• Another factor that needs to be taken into consideration in the poor CRM ROI scenario is the fact that most organizations do not have any clear idea about how much ROI they are actually expecting. Having a vague idea about how much of ROI the said CRM implementation can yield, is faulty and more often than not contributes to the fact that the ROI is low. Very few companies, in effect, statistics show that less than 20% of companies actually bother to undertake an in-depth study or look at the actualities of what ROI to expect. Most of them do a mere baseline study and content themselves with knowing just the basics of CRM's return on investment.

What can be done to avoid Inadequate ROI?

Alleviating the problem of low ROI is possible provided companies make a sincere attempt to do so. Following are some of the efforts that can be made in an attempt to increase the return on investment:

• The cost involved in sales, marketing and service efforts should be considerably reduced in an attempt to hike ROI
  
  
• Administration and operation overheads need to be mitigated as much as possible
  
  
• Increased focus on customer retention and customer loyalty
  
  
• Establishing a clear cost - ROI analysis is essential. ROI goals and estimates need to be clearly set out. This implies setting out clearly and methodically the intended costs and possible unforeseen costs along with the resultant benefits that are expected
  
  
• One aspect to pay attention to in this regard is the fact that costs should not exceed 50% of the expected ROI. Provisions also need to be made for elements like IRR, NPV, and payback period etc
  
  
• It is also imperative to ensure that the payback period stays at 12 months
  
  
• Measuring intangibles is a necessary task and one that needs to be done if negative ROI is to be avoided for ex. aspects like customer satisfaction need to be compulsorily measured. Merely ensuring measurement alone will not suffice. It is mandatory that the right metrics also be used
  
  
• Risk assessment is also equally essential and needs to be done. In every company the element of risk is ever present but estimating as rightly as possible the risk likely to occur, will go a long way in alleviating poor returns
  
  
• A business plan should also be undertaken prior to the implementation, which clearly states out all three aspects, tangible benefits, intangible benefits and the risks involved.

Adhering to the requirements of good CRM implementation and taking the necessary efforts to minimize and deal with organization pitfalls will go a long way in ensuring that CRM ROI meets with expectations.

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