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Finding ROI under CRM rocks

Finding a return on investment (ROI) for a CRM project is crucial to the project's continuation. But ROI doesn't always make itself obvious.

In these times of lean budgets, finding a return on investment (ROI) for a CRM project is crucial to the project's continuation. But ROI doesn't always make itself obvious, according to consultants.

One of the challenges of CRM is avoiding the stigma that enterprise resource (ERP) can create, where companies think they're buying utopia in a box, only to have the initiatives fall flat, said Mitchell Nelson, senior vice president at Sykes Enterprises Inc., a CRM consultancy based in Tampa, Fla.

A common mistake is looking for a formula, when CRM is just like any other IT expense, said Dave Hauer, director of emerging technologies at Bloomington, Minn.-based Orion Consulting.

The fastest and easiest spot to look for ROI is in internal efficiency, effectiveness and operational excellence, if a baseline is created before the CRM initiative is implemented, Nelson said.

Then, the company looking for ROI should take performance snapshots at various intervals to find out where the business has become more efficient. Companies also need to check the levels of customer satisfaction and assign a monetary value to customer satisfaction, he said.

Once the internal benchmarks are set, companies then need to look externally to find ROI. For example, increases in sales revenue, cost per sale and upselling and cross-selling opportunities can all be measured to find ROI, Nelson said.

The cost of retaining a customer is a good place to start in a CRM project. Companies need to measure what each customer acquisition costs, he said. Amazon, for example, had an average customer acquisition cost of $70 per customer. The average order size was $45, and most customers were not repeat customers. This led to a loss for Amazon.

"Companies don't figure out the cost of marketing and customer service and factor in the cost of a customer," Hauer said.

Another way to find CRM ROI is cost reduction through operational efficiency and elimination of redundancies.

For example, duplications can occur in software that is purchased by several different departments. "The application has other benefits that may not be realized. If you're making an investment in technology, take advantage of the full capabilities of the investment," Nelson said.


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