Benefits of CRM
The most frequently stated benefits resulting from CRM include:
Better Sales/Marketing Information— For example, customer names, customer background, customer needs, competitive positioning, etc. are just some of the information collected as a result of inputting a CRM system.
Improved Productivity— For example, effective target market identification, reduction in the number of cold leads, and the ability to provide accurate and on-the-spot quotations, look up inventory availability quickly, enter orders directly from the field, etc., all of which help shorten the sales cycle.
Enhanced Customer Care— For example, more time to spend with customers due to a reduction in the sales administrative workload, an ability to monitor customer service levels, and ability to highlight existing or potential customer service problems and to react more quickly to customer needs, etc.
An increasingly important objective, and area that is related to each of the aforementioned benefits, is improved customer retention/loyalty. Corporations in the U.S. lose approximately half of their customers within five years. If the CRM system really focuses on the customer and the above benefits are realized, a company can expect to retain more customers over time. It has been shown that the longer a customer is retained, the greater the profitability will be for the retained customer.
For those who prefer hard numbers, studies by ISM and by Insight Technology Group concerning CRM systems confirm that the following level of benefit can be achieved:
A minimum 10 percent per annum increase in gross sales revenue per sales representative during the first three years of the system. This gain occurs because field personnel improve both their efficiency (e.g., more batting time to call on customers and implement strategy) and their effectiveness (e.g., improved quality of their sales call in that field because personnel are more knowledgeable about their customers).
A minimum 5 percent decrease in the general and administrative cost of sales during the first three years of the system. This takes place because field personnel (and the company) no longer need to send out costly literature and information in a shotgun approach to all existing and potential customers; rather, field personnel (and the company) can decrease their cost of sales by being selective in terms of which customers receive specific promotional materials.
A minimum 5 percent increase in win rates for forecasted sales during the first three years of the system. This gain results because field personnel select their opportunities more carefully, drop out of potentially bad opportunities earlier on, and concentrate on those opportunities with a high likelihood of closure.
A minimum 1 percent margin improvement in the value of a deal over the lifetime of the system. This gain occurs since field personnel are working closely with a carefully selected group of customers who place as much emphasis on value selling as they do on discounts, and field personnel thus tend to discount less often.
A minimum 5 percent improvement in the quality rating provided by customers. This gain results from happier customers who get the information that they need more quickly, who receive better service, and who enjoy building on the relationship marketing approach that field personnel are now able to offer.
Prior to deciding whether CRM is for you and your firm, ISM recommends that you review all potential benefits of CRM in detail. Our experience over the past 17 years in successfully helping companies to automate customer-facing functions is that senior management wants to see a list of detailed measurable benefits by which they can justify what may amount to a large capital investment, plus an investment of time, resources, and staff.
The good news is that there are a growing number of detailed tangible and intangible benefits associated with CRM, and there are ways to measure these benefits. For each of the following measurements, we have assumed that similar and valid measurement information is available today in some format within your company, or that similar and valid measurement information will be available by the start of any CRM project within your company.
Tangible Benefits
We define tangible benefits as those benefits that can be measured in hard numbers.
Increase in time spent by sales personnel with existing customers per day
To determine this benefit, consider measuring the number of service calls made per day by sales personnel or the number of hours spent by sales personnel in face-to-face contact with existing customers.
Increase in the number of new customer prospects pursued by sales representatives
Remember that most representatives prefer to call on their existing customers, with whom they have an ongoing relationship. But new customers spearhead future growth. To determine this benefit, consider measuring the number of new prospects versus existing customers contacted by the sales representative per day, per week, per month, or per quarter.
Increase in time spent by sales managers in contacting customers and working with sales representatives on customer issues
“Coaching” sales personnel is critical, and managers never seem to have enough time for this. To determine this benefit, consider measuring the number of hours per day which sales managers spend in contact with customers and prospects, and with sales representatives discussing customer issues.
Increase in customer service efficiency
Customer service may well be the key differentiator between those companies that lead and those companies that wonder what happened! To determine this benefit, consider measuring the turnaround time for customer service issues, as well as the number of customer service errors made as a result of misinformation.
Increase in timeliness of follow-up correspondence to customers/prospects
To determine this benefit, consider measuring the number of days between the date the customer/prospect was contacted and the date that the customer/prospect follow-up information is sent.
Increase in revenue per month per sales representative
This is an important benefit of CRM, though careful management is required to ensure that time saved as a result of automation is used productively to deliver more sales. To determine this benefit, consider measuring the increase in base revenue generated per month per sales representative.
Increase in overall business results
In one company that ISM worked with, the sales manager set up a competition between sales personnel based on their use of the CRM system. The results were overwhelming as healthy rivalry between the sales force led to a significant increase in overall business results (as well as a nice seven-day cruise for the winning salesperson and spouse). To determine this benefit, consider measuring the percent of dollar increase over budget for the entire sales team per month.
Increase in frequency that your company's name is in front of your customers and prospects
The “out-of-sight, out-of-mind” syndrome can be quite harmful to your sales efforts. To determine this benefit, consider measuring the number of pieces of correspondence sent to customers and prospects by sales and marketing personnel.
Increase in customer satisfaction
To determine this benefit, consider using a customer satisfaction survey rating and hanging these ratings in a location for all personnel to review.
Improved communications within your company
As more and more personnel spend time in the field with customers and prospects, there is a growing need to secure effective communications between personnel. To determine this benefit, consider measuring the time spent giving and getting information between the field and regional or headquarters offices.
Increase in “close” rates
In other words, an increase in the percentage of business orders closed.
Reduction in “close” time
In other words, a reduction in the speed of bringing new business orders to a close.
Intangible Benefits
We define intangible benefits as those benefits that can be measured by using “soft” criteria. Management may prefer the hard numbers but increasingly is learning to appreciate the soft criteria as well.
Overall smoother functioning within your company
To determine this benefit, consider measuring the time spent looking for needed information versus time spent utilizing information and getting on with your job. It can be shocking to learn how much time is spent by sales personnel on unnecessary administrative matters, or the amount of time a new salesperson spends getting up to speed in a new territory!
Increased employee motivation and satisfaction
While this may be difficult to measure, consider measuring feedback from those employees who use CRM. An alternative measurement is employee turnover rate for those personnel who use the CRM system.
Better trained and more skillful sales, marketing, and customer service personnel
CRM can provide an excellent training ground for personnel to quietly spend time learning facts and figures about your products and services. To determine this benefit, consider measuring the ability of sales personnel to quickly access needed facts and figures, including the implementation of required sales and marketing business procedures.
Improved use of mobile access devices
This benefit is important given that each of us has a different technological assimilation learning curve that impacts our future use of equipment and technology. To determine this benefit, consider measuring the comfort level over time of field personnel who use the mobile devices.
More up-to-date information and easy access to this information
Up-to-date information and easy access is a subjective measurement made by end-users. To determine this benefit, therefore, consider measuring the timeliness of needed information and ease of accessing this information based on end-user standards.
Improved responsiveness to customer and prospect requests
ISM worked with a domestic pipe manufacturer whose sales and marketing manager used the firm's automation system to “staple” himself to each customer request until the request got resolved. To determine this benefit, which may be tied in with customer service, consider measuring the time it takes to respond completely to a customer or a prospect request.
Improved image of your company
Automation can play a leading role in building your company's image in the eyes of your customers. To determine this benefit, consider measuring the reaction of existing and future buyers to your sales and marketing professionalism.
The ability to differentiate your company from the competition
It should be noted that many studies have tried or are trying to measure the competitive advantage resulting from CRM (one Danish company has tried to mathematically model this measurement). Consider measuring increased customer loyalty as well customer perception of your company versus the competition.
Support for organizational change(s) within your firm
ISM worked with an airline that significantly downsized its organization and needed increased support for the remaining sales and marketing personnel. To determine this benefit, consider measuring time lost training new sales and marketing personnel.
Improved understanding and eventual control over expenses
CRM can assist in this effort, assuming sales, marketing, and customer care expenses are tagged to individual sales personnel and/or accounts. To determine this benefit, consider measuring expenses per sales and marketing personnel and/or per account.
Based on this list of tangible and intangible benefits, it would not be inappropriate for one to conclude that the rewards of automation can indeed be great. For example, ISM conducted a sales and marketing audit for a copying machine manufacturer that measured both the impact and potential of automated systems on sales force productivity.
The audit determined that automating activities such as lead tracking, time scheduling, and account profiling would result in an average time savings of one hour per day per salesperson. This equated to an additional 26 days of work time a year per sales representative. Similar measurements for customer service representatives and top management showed savings of 30 minutes and 20 minutes per day, respectively.
But time saved isn't the only reward. Proposal generation, an arduous task for both sales and marketing departments, becomes far more user friendly, because many proposal components—such as standard proposal paragraphs, online pricing information, and customer information (names, addresses, discounts, etc.)—can be automatically incorporated through CRM system functionality.
This copier manufacturer also incorporated an external, third-party prospect database into their CRM system and supplemented this new database with a data entry function which permitted users to enter new prospects from a variety of sources including cold calls, telemarketing, trade shows, etc. The end result was more and better prospects that could then be sorted and assigned according to predefined criteria.
Most dramatic of all, however, was the ability, through automation, to deliver a 14 percent increase in sales force productivity by the end of the first year of operation, which as a result of careful management translated into a healthy contribution to the bottom-line.
By analyzing and identifying both the tangible and intangible benefits, you will be in a position to determine whether or not automation is for you, and to prepare your justification to senior management based on viable facts and figures.
While the list of benefits is impressive, those firms that have realized these benefits also have successfully overcome the problems typically associated with CRM.