Calculating ROI for CRM is trickyand it may not always be meaningful.
What company doesn't want to know more about their customers, or make them happier? But when it comes to defining value to the business or to the customer, users are finding it's very difficult to nail down how predictably a CRM initiative can bring home the bacon.
Part of the difficulty comes from a lack of reliable metrics. Not many companies, for example, can say precisely what a percentage-point rise in customer satisfaction means in terms of sales.
And too often, business and IT are looking at very different methods for justifying costs. The few tools available for calculating CRM's value are provided by vendors, which inevitably tilts the field in their favor. "Every mid-level [business] manager we've talked to relies heavily on vendor-provided ROI tools to help justify the payback of the product," says Saugatuck's Guptill. "[But] every CIO we've talked to laughs at the very narrow nature of these vendor tools."
Finally, inflated expectations about what CRM can deliver too often result in a letdowneven if the software runs as advertised. Says Gartner's Nelson, business customers tend to think that customer analytics are like "something from a Steven Spielberg movie. 'I'll put it in, and suddenly I'll get all this magical information that will tell me what to do.'" Yet organizations continue to move forward with CRM projects. "Every senior executive we've talked to sees these types of implementations as necessary for the company's strategy," says Guptill.
Ask Your Business Users:
Exactly what kind of business results do you want from our customer-related initiatives?
Ask Your CFO:
Can you help me define as many concrete methods for assessing CRM's business value as possible, even if we can't guarantee clear metrics in every case?
Ask Your Vendors:
Can you demonstrate objectively that your application will produce these results?
This article was originally published on 11-02-2002