Assessing ROI for CRM initiatives can be a daunting task and attempts to offer a framework for helping a business manager measure ROI of CRM systems is difficult to do.
Part I – Challenges, notes that there are many reasons why CRM systems defy easy ROI calculation, most of them stemming from just how vast and far-reaching the benefits of CRM are; and goes on to discuss six key reasons why assessing ROI is so challenging
Part II – Investments, notes that Simply stated, ROI = Returns (cost savings or incremental revenue) divided by Investment (the total cost of ownership). The key steps in assessing ROI will be to breakdown Returns and Investment into smaller measurable elements and define a metric to assess each of them. The article goes on to discuss how to break down the Investment components into one-time and on-going costs.
Part III – Returns, notes that measuring Returns for CRM systems is most complex because there are so many tangible/intangible benefits. The most important aspect of any measurement is correct benchmarks. Organizations should define various metrics which they want to measure ROI of CRM systems upfront and make benchmark measurements before the system implementation starts. This will ensure that benefits are correctly attributed to changes by the CRM system (to maximum extent possible). Thr article goes on to dicuss how to identify and break dowb the return components into revenue enhancements, margin enhancements, cost reductions and other benefits.
The Conclusion of the Measuring ROI of CRM systems series notes that:
Cap Gemini Ernst & Young published a CRM Index based on a survey of nearly 200 European companies concluding that over 66% of companies cannot identify the ROI from their CRM investments. This is not that there is no ROI but that these companies have not put in place metrics to measure the ROI.
The Total Cost of Ownership (one-time and ongoing costs) should be measured to understand the investment in the CRM system. For analyzing returns, a detailed benchmarking study should be carried out. Once the system is implemented, a study of benefits in all four domains (revenue enhancements, margin enhancements, reduction in costs and intangible benefits) would reveal the true benefits of the CRM system.