How to Measure-and Boost-ROI of CRM Systems

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FINANCIAL ANALYSIS

The use of pricey customer relationship management (CRM) systems is increasing, but only a handful of companies measure ROI before they buy. Reason: They claim crunching the numbers is too hard.

This is startling, because a large CRM setup can easily rack up a TCO (total cost of ownership) into eight figures over a five-year period. In today's world of increased accountability, we urge companies to make more of an effort to not only measure ROI before investing, but also monitor and track ROI performance once the system is up and running. Also, there are some ways companies can reduce the TCO of these systems and boost ROI.

Not Brain Surgery

Recent research from the Gartner Group (Stamford, CT) reveals that of over 250 companies implementing CRM, only 1 7% claimed to calculate ROI and build solid business cases for the initiative. Result: The companies often become disenchanted with their CRM efforts because they're in the dark about whether they are getting the appropriate bang for their buck.

True, there are some aspects of CRM that may appear to be difficult to quantify. But if you sit back and spend a little time on it, quantification is usually possible.

At some companies, the IT people may do the ROI analysis to justify their spending. Then, it's even more important for you to understand the nuts and bolts to troubleshoot their analysis. After all, they may be painting an overly rosy picture just to get the nod on project approval.

Key point: Whoever "sponsors" or "owns" the CRM project must be held accountable for it. That is, they must be held responsible for the achievement of the stated benefits that are spelled out in the ROI analysis. This means you must require regular reporting against the project plan, cost, and achievement of benefits. This should be done monthly. At least every year, the sponsors and owners of the project should be required to present an analysis that compares projected ROI to actual ROI. How they are doing must also be reflected in performance evaluations.

Analysis in Action

Gartner, one of the leading IT consulting firms, has put together an ROI analysis of what a typical large CRM project might look like, based...