CRM's ROI -The True Picture

The return on investment (ROI) from CRM implementation is essential and needs to be measured as it provides a yardstick for success.

CRM ROI can be termed as any of the following:

cost reductions or efficiencies created by the CRM implementation
customer retention or customer loyalty
possible customer value in the future that has been created due to CRM implementation

Most organizations have varied opinions about the measurement of CRM ROI. However it is often not as assumed. ROI is not as fluctuating or unpredictable as expected. Following the right guidelines and ensuring that the utmost effort is made to ensure that it is implemented the right way, will go a long way in stabilizing ROI and ensuring that it meets with the expected results. It is absolutely essential to measure ROI and organizations should have established their own measurement criteria. The analysis of ROI in the call center or distribution system benefits is simple. However in analytical CRM, ROI measurement is harder. Despite the fact that some companies are not used to the metrics involved, measuring ROI is a perquisite.

What can Industries expect in terms of ROI?

There are always different opinions. Some analysts state that the return on investment (ROI) from CRM implementations is bad with almost 70% of the CRM projects failing. This is again vehemently contradicted by those who feel that almost 70% of projects succeed.

Why is there such a huge disparity in the results? The answer lies in the wrong measurement or sometimes even failure of organizations to adequately measure ROI. Aside from this of course low ROI is generally the resultant of poor CRM implementation and wrong CRM strategy. The staggering statistics show that less than 30% of companies actually measure ROI the right way. Metrics should be established and companies should use yard sticks -starting off with a business plan to avoid CRM failure.

Let's look at the positive side - According to surveys above 80% of companies have found that CRM is profitable, has met with their benchmark estimations and overall satisfied them. Aside from costing them less than what they had estimated in the first place the time taken for the implementation was also less and resulted in promoting customer retention and loyalty. This shows that a positive and relatively high ROI can be expected if implementation and measurement is carried out the right way.

What you should know about CRM ROI:

Benchmark estimates need to be twice the total cost of CRM implementation
Implementation should be kicked off within 7 months after conception to get positive ROI results. If this is not possible then phased implementation is the next step.
ROI should start showing evidence within a year of implementation, failing which implementation processes need to be scrutinized
Pre-project and post-project ROI analysis should be compulsorily undertaken

Step Stones to Achieving Higher CRM ROI

Establishing a business plan
Establishing clear cut CRM objectives
Correct estimation of costs involved
Proposed financial metrics that are going to be used to measure ROI etc are to be set out
The time allotted for the return on investment (ROI) should be stated - which should not exceed a year.
Costs of implementation need to be half of the amount of ROI expected
Non monetary and intangible benefits should also have a benchmark for success
An allowance for risk should also be made and the measures that will be adopted in case risks should befall the company should be laid out

If the above steps are followed organizations can ensure that their return on investment will meet expectations. Pre-estimation of CRM ROI as well as its post implementation measurement should be compulsorily adhered to for organization success.