How to define the real benefits of CRM

Everyone is talking about return on investment (ROI) in customer relationship management (CRM), but what is really achievable?

Everyone is talking about return on investment (ROI) in customer relationship management (CRM), but what is really achievable?

Even before the economic downturn became apparent, companies were starting to review IT budgets in a much more stringent way than before. The importance of CRM technologies to today's customer-focused organisations cannot be over-estimated, but boards are no longer willing to sign blank cheques for systems without a clear understanding of when and where they'll make a difference to the bottom line.

For that reason, ROI is hotly debated since very few organisations have managed to demonstrate that the investment has actual benefits. Many firms are measuring performance using irrelevant and outdated metrics, such as call throughput in a contact centre. Others are using generic ROI models that do not match company objectives. Most models are about as accurate as informed guesswork.

It is time for the market to wake up to clients' real and contemporary needs, which are to reduce costs through more efficient processes, and to improve the value delivered by each customer to the business.

There are precedents for taking this approach. The shared risk and reward model adopted by IT services companies such as EDS requires the delivery of some very tight and measurable improvements to the business.

That goes part of the way towards creating a watertight ROI model. The other half of the process is identifying areas within a company that can be improved, such as sub-optimal sales and marketing processes where opportunities to provide extra products or services are being missed.

Taken in isolation, the value of one of these transactions may not be huge but multiply that by hundreds or thousands of customers and the number of transactions they make, and the amounts can add up.

Another way to look at this process is to identify the real difference between what a customer is spending and what they could be spending if the sales/marketing processes were not "broken".

It is just as beneficial for customers to be given the opportunity to buy relevant products as it is for companies to offer them. A company that offers me exactly what I want, at the time I want it, in an efficient and professional way is the one I'll choose to give my business to.

The key to this is information - about people, the products and services they have already bought and those they are likely to need in the future. The new approach to the development of ROI begins with identifying sub-optimal or broken sales and marketing processes:

  • Where could we improve information-gathering?

  • Are we giving customers the chance to buy all of the products and services they could buy from us?

  • Do we run the risk of losing customers to competitors who manage this process better?

  • Are we gathering the right information about our clients - do we know enough about them?

By answering these questions, organisations can begin to expose the gaps in the way they deal with customers and develop real ROI. Instead of justifying an investment in CRM technology on the basis of broad-brush goals that are little more than a stab in the dark, companies can begin to establish real, quantifiable business benefits.

Customers and their IT partners are looking for an easier way to calculate ROI - a toolset that makes the process of identifying potential cost savings and revenue enhancements through the effective use of IT more straightforward. In uncertain times, the idea of calculating widescale ROI to justify the introduction of big new systems across the business may not be feasible.

But analysing existing technology systems and processes to identify areas for improvement must be a key area for businesses to focus on today.

Ray Welsh is strategic marketing director at Xchange

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