01 Apr' 15

Measuring ROI on CRM systems

Measuring the ROI of CRM

Customer relationship management, or CRM, systems help businesses organize their customer and potential customers data in a single platform. Employees can quickly access that customer data while providing customer service or during the sales process. The value of these types of systems, which seems fairly obvious to most businesses, can be complicated to measure accurately. When comparing the cost to the ROI of these systems, you have to consider financial and non financial factors. You then select specific metrics to make your ROI calculation.

Annual Revenue
An improvement in annual revenue following installation of a CRM system means a positive return on investment – although a number of external factors unrelated to the CRM system, such as economic changes and industry conditions, can impact revenue.  For that reason, specific revenue indicators help provide more accurate ROI figures. Businesses with detailed historical customer information can use that information to measure specific and more reliable financial ROI metrics. You can track the number of sales per customer, as well as the changes in number of orders per customer. In principle, a CRM system should help to encourage additional sales though better and more consistent contact between the customer and your business. You can also track the total revenue per sale per customer, which increase as a result of better customer relationship management.

Reduction in Costs
CRM systems also provide a number of avenues for the reduction in costs through efficiency improvements in customer service, reduction in administrative activities performed by non-administrators and reducing marketing to customers with low response rates. By setting benchmarks in these areas and performing quarterly or annual reviews, cost reduction figures can provide another means of assessing your ROI for a CRM system.

Customer Retention
Customer retention constitutes a nonfinancial measure, though one with financial implications. As CRM systems should improve the overall quality of customer experiences and customer service, customer retention should improve with the introduction of a CRM system. You should temper expectations of customer retention improvement with an understanding of the typical customer life cycle in your industry. Where some businesses, such as retail outlets or hair salons, can retain customers for years, businesses that deal in high-ticket products, such as home builders, may conduct only one transaction with a customer.

Peter Carr

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