Avoiding the ROI Pitfalls of CRM

Nucleus Research has found that one in eight CRM deployments fails to achieve a positive ROI, and the biggest barriers to a positive ROI are launching a project without attainable business objectives and investing too much time or money in a solution but your company doesnt have to be a victim. Nucleus has identified some simple strategies and calculations companies can follow to be on the right track for a positive ROI from a CRM investment.

It costs too much

Unfortunately, many applications are priced based on vendors internal revenue targets and not on the value the solution provides. Nucleus recommends users calculate the potential ROI from their CRM project before buying any solution or application but this quick calculation can help you determine if the cost of the solution could keep you from achieving your ROI goals: Can you identify direct benefits from the potential application? What is the potential annual magnitude of those benefits? Does the total initial price of software and consulting amount to more than 70% of the estimated benefits? If so, its highly unlikely you will achieve a rapid ROI. If you want to continue, you should calculate the overall potential ROI to have a basis for negotiating a reasonable discount on price.

It takes too long to deploy

The CRM technology market is rapidly evolving, and new technology advancements in personalization, e-mail response, data management, business intelligence, and profiling are happening all the time. Resist the temptation to build the perfect CRM solution by the time youve finished, it will be out of date. Instead, focus on key areas where you can achieve returns, and set an aggressive timeline for rolling out those areas and training users to take advantage of them. Youll achieve a more rapid payback, reduce the risk that the system youve invested in is obsolete by the time you get it up and running, and be able to evaluate your CRM needs and business processes effectively to move forward in the future.

Although some CRM applications have significant out-of-the box functionality, you should expect to spend some time and effort on customization. On the other hand, extensive development will slow deployment and likely increase the cost of making changes in the solution over time. Defining requirements and selecting a vendor for your CRM deployment should take fewer than 4 months. For actual deployment, you should expect to see some returns in fewer than 6 months. Youre unlikely to get a positive ROI if consulting costs are more than two times the cost of software.

Its too expensive to maintain

The number of IT staff needed to support a CRM deployment will depend largely on the size and scale of the project as well as the user environment. A mid-sized company should not need more than one full-time IT person to support the average CRM solution. Companies should also consider the need for future development and bug fixes (particularly if theyre working with a relatively new solution or version of an application) when thinking about the ongoing cost of maintaining their CRM

project. For some companies, using an ASP or outsourcing some management and support components of the solution may be the most cost-effective option.

The data is unusable

Knowing your customers is critical to overall CRM success; however, just gathering customer data is not enough. A lot of CRM applications are good at demanding that customer sales reps, customers, customer support personnel, Web agents, and others enter data about customers and products into the system. The big challenge is in managing, using, and leveraging that data in a cost-effective way to keep customers happy while reducing the cost of managing relationships. Before investing in databases to support CRM, or other tools to support data profiling and mining, users should consider the following:

  • How can the data support a business goal?
  • How will it be accessed and used effectively by the application user?

Its fine to collect good data as part of your CRM goals, but dont count on it for returns unless its clear how you will use it effectively.

It doesnt meet user needs

A CRM solution should support the business needs of the company. That sounds like common sense, it but can be a challenge when a number of different groups have different CRM objectives. Review your CRM project plans against the following measures of ROI potential to determine if an application is likely to deliver a high ROI:

  • Breadth. The greater the number of people or groups a CRM project involves, the greater its potential return.
  • Repeatability. The more frequent the activity or transaction supported by the application, the greater its potential return.
  • Cost. The greater the cost of the task being replaced or supported by the solution, the greater the potential ROI.
  • Collaboration. Many CRM activities span across groups in the organization such as finance, marketing, customer support, and product support. CRM applications that support collaboration across groups are likely to produce a higher return.
  • Knowledge. CRM applications that support knowledge transfer and information sharing will likely produce higher returns than those that dont.

Conflicting management objectives and individual users reluctance to use the system can also add risk to your CRM deployment. Before buying a CRM solution, you should have a clear view of how much time it will take to train users for successful adoption. You are unlikely to achieve a high ROI if initial training demands require more than 4 hours per user.

Achieving a positive ROI from CRM isnt hard it just takes a little homework. Look beyond the ideal solution and the product demos to ensure the application meets your needs and doesnt take too much money, time, or training to deploy. Following these simple strategies enables you to manage the cost and risk of your CRM deployment and gets you on the way to an impressive return from your CRM investment.

Quick calculations for a positive ROI from CRM

  • You should spend less on software and consulting than 70% of expected annual direct benefits.
  • Defining requirements and selecting a vendor should take fewer than 4 months.
  • You should deploy and achieve some returns in fewer than 6 months.
  • Consulting costs should not be more than twice software costs.
  • Training users should take fewer than 4 hours.

Copyright © 2002 IDG Communications, Inc.

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