Marketing and Sales executives want to know one thing about any new initiative: “What’s the Return On Investment, ROI?” Today more than ever, every dollar invested must be justified, and any technology acquired must deliver positive and tangible results.

CRM technology must show clear links between its capabilities, marketing success, and bottom-line financial performance. And today more than ever, CRM is moving to the center of most companies’ operating models. Why? A recent Accenture report indicated “CRM performance accounts for 28-60 percent of the variance in companies’ return on sales.” (July, 2001)

A recent Insight Technology Group research study indicated large rewards for 21 percent of CRM projects which had ‘met all expectations’. This group saw revenue increases of up to 42 percent, sales costs decreases of as much as 35 percent; selling cycle length reductions of 25 percent; margin improvements of 2 percent, and customer satisfaction rating increases of as much as 20 percent.

So how do we go about calculating the ROI on CRM?

In calculating ROI for any project you have to compare the dollars invested with the potential return on those dollars. For example, if you buy a new piece of equipment, you determine the costs savings and efficiencies the new equipment will bring over the life of the equipment, and compare that with the initial outlay for the equipment to determine ROI. For example, if you paid $100,000 for the equipment, and it produced savings and efficiencies of $200,000 your ROI is 200 percent.

Successful investments in CRM Technology produce increased sales. For example, if a new Lead Management system is implemented, and the new system produces an increase in sales leads by 20 percent, and that increase in turn enables sales to increase by 10 percent, then the ROI can be calculated by comparing the gross margin of the increase in sales by the cost of the CRM system over the life of the project.

For example, if the CRM Technology investment for the new Lead System was $40,000, and the increase in sales (gross margin) as a result of the system was $30,000/year, and the initiative was put in place for 2 years, the total return would be $60,000 and the ROI would be 150 percent.

Now I'm not saying that calculating ROI is always as simple as described above. Certainly there are other factors in play, there are also "soft" returns that can not be easily quantified. Better customer relationships, brand loyalty, etc. which can not always be put into hard dollars. The return on investment for a CRM Technology system can pay for itself if properly implemented, with the right systems, and with the expertise of a CRM firm that has experience in achieving these goals.

Bob Bartel, CPA MBA MCP
Consultant, MarketWare Software