Dears,
Many firms have spent millions pursuing CRM, but most have blindly thrown money away. When proper economic planning occurs, controlling CRM investments by spending to achieve specific benefits is practical in any economy. So, if an enterprise has leaped into a CRM initiative without having armed itself with an adequate plan for achieving ROI and analysis of the ultimate benefits of CRM, it should backtrack (but not cancel current initiatives) and complete the following 10 steps. This will then properly position the enterprise to forecast and achieve ROI, and prioritize projects within the initiative while continuing to pursuing CRM, even in tight economic times.
The 10 steps to forecasting and achieving ROI from CRM investments include:
1) Determine the costs and benefits for business operations.
An enterprise must understand its cost and benefit metrics before it can make improvements. This should include sales, marketing, customer service and support cost and benefit metrics. It will also need to identify benchmarks and continuing measurements to ensure that it meets its metrics.
2) Establish realistic goals.
To do this, an enterprise compares its metrics against the enterprise’s business goals and its own customer service standards, and benchmarks these against competitors. Benchmarking should be done with care, as each competitor most likely has its own (different) strategies. Business goals should be stated in the form of a future desired state (e.g., to achieve an overall sales margin of 30 percent within the next 12 months).
3) Define objectives for each project in the program.
Each objective should consist of activities, start and end dates, costs for each step, and a measurable result. It is important to be certain that each objective is achievable and becomes the measure of whether the projects are on track.
4) Define the necessary changes in enterprise wide activities.
With clearly defined objectives, the enterprise can describe how marketing, selling and servicing activities must change to achieve the desired goal. Armed with this knowledge, the enterprise can begin to define strategies, processes and tactics for its overall CRM initiatives, and then “drill down” to the specific functionality requirements that it desires to be technology-enabled via its tactical implementations of sales, marketing and customer service and support systems, the three domains of CRM. The enterprise must also realize that not all processes or tactics will be able to be technology-enabled, nor should they. Therefore, it should be expected and planned that some manual processes may benefit from the redesign of the process in conjunction with some technology, but they will not be supported or replaced by technology.
5) Establish the functional and architectural requirements.
When determining functional requirements, involve the whole enterprise, including the IS organization,finance, sales and marketing, and support business unit end users. The critical steps are identifying and prioritizing the system functionality that will best enable the desired marketing, selling or servicing activities. Defining the accompanying architectural requirements is primarily the responsibility of the IS staff, in that each tactical implementation must fit within the enterprise’s overall CRM IT architectural strategy. These requirements should be based on the knowledge of future enterprise architecture strategies, enabling technologies and the requirements to interface with enterprise systems. With the emergence of CRM suites , there are options to a best-of-breed approach and, in tough economic times, the functional trade-offs may be appealing, as these suites continue to emerge.
6) Define and calculate the TCO.
An enterprise should then build a full understanding of what the cost (e.g., fixed and recurring costs, over three years) will be to provide the functionality needed to achieve the CRM strategy, for each of the domains of CRM. Total cost of ownership (TCO) should consider not only the technology costs (i.e., hardware and software), but also the people and process costs. People costs include education and skills training for the internal project team as well as for internal employees outside the project team. Change management and knowledge transfer costs from integrators are examples of process costs that must be included in the TCO.
7) Forecast the program and project ROI.
An estimate of project ROI should then be calculated based on an understanding of what the return (i.e., achievement of goal) will be given the investment (i.e., TCO). To forecast overall program ROI, an enterprise must forecast the ROI for each CRM domain and pull these together into one overall program ROI. As a caution, it is best to work with the enterprise’s financial organization to complete this, and be
wary of vendor’s models as they usually do not consider all the costs and benefits specific to “your enterprise.” In addition, they may be too general to provide the real picture. Many of the ROI models Gartner has reviewed do not include, for example, the detailed TCO that is unique to the organization across the people and process components, and benefits are generally “averages” based on assumptions which may not hold true for all enterprises.
8) Implement the pilot and measure it.
The pilot is intended to implement the system functions as defined earlier in the planning process. This system functionality should enable the future enterprise wide CRM processes that will help achieve CRM objectives. In tight economic times, rather than implementing “big bang” projects, attempt the tactical,
smaller projects first that fit within the overall plan to achieve quick ROI.
9) Adjust the strategy and plan the rollout.
The CRM program and project manager, or chief CRM officer, should be confident that the pilot results (i.e., for each implementation) can be duplicated during the rollout. If not, adjustments in system functionality and training will be required. Pilot length always should depend on the project team’s confidence level in achieving the projected benefits.
10) Achieve ROI throughout the rollout and continue measuring.
ROI within CRM projects will be realized when the entire organization is fully trained and competent with its new marketing, selling and servicing paradigm. In most organizations, enterprise wide behaviors must change to ensure the project delivers ROI. Technology alone will not produce the benefits projected in any ROI calculation. Project break-even points occur after full rollout, when new marketing, selling and servicing behaviors and activities allow the enterprise to realize its goals. A fast rollout and high system adoption rates enable ROI to be realized as quickly as possible.
Bottom Line: Many forecasts of ROI are not realized in CRM projects. Today, Research Analyst estimates that 80 percent of enterprises pursuing CRM are not performing business justifications. This partly due to incomplete ROI calculations and because no plan was developed to accurately measure the effects of CRM projects on ROI. Thus, it is important to establish a plan to achieve a measurable ROI through all phases of CRM initiatives.
Many firms have spent millions pursuing CRM, but most have blindly thrown money away. When proper economic planning occurs, controlling CRM investments by spending to achieve specific benefits is practical in any economy. So, if an enterprise has leaped into a CRM initiative without having armed itself with an adequate plan for achieving ROI and analysis of the ultimate benefits of CRM, it should backtrack (but not cancel current initiatives) and complete the following 10 steps. This will then properly position the enterprise to forecast and achieve ROI, and prioritize projects within the initiative while continuing to pursuing CRM, even in tight economic times.
The 10 steps to forecasting and achieving ROI from CRM investments include:
1) Determine the costs and benefits for business operations.
An enterprise must understand its cost and benefit metrics before it can make improvements. This should include sales, marketing, customer service and support cost and benefit metrics. It will also need to identify benchmarks and continuing measurements to ensure that it meets its metrics.
2) Establish realistic goals.
To do this, an enterprise compares its metrics against the enterprise’s business goals and its own customer service standards, and benchmarks these against competitors. Benchmarking should be done with care, as each competitor most likely has its own (different) strategies. Business goals should be stated in the form of a future desired state (e.g., to achieve an overall sales margin of 30 percent within the next 12 months).
3) Define objectives for each project in the program.
Each objective should consist of activities, start and end dates, costs for each step, and a measurable result. It is important to be certain that each objective is achievable and becomes the measure of whether the projects are on track.
4) Define the necessary changes in enterprise wide activities.
With clearly defined objectives, the enterprise can describe how marketing, selling and servicing activities must change to achieve the desired goal. Armed with this knowledge, the enterprise can begin to define strategies, processes and tactics for its overall CRM initiatives, and then “drill down” to the specific functionality requirements that it desires to be technology-enabled via its tactical implementations of sales, marketing and customer service and support systems, the three domains of CRM. The enterprise must also realize that not all processes or tactics will be able to be technology-enabled, nor should they. Therefore, it should be expected and planned that some manual processes may benefit from the redesign of the process in conjunction with some technology, but they will not be supported or replaced by technology.
5) Establish the functional and architectural requirements.
When determining functional requirements, involve the whole enterprise, including the IS organization,finance, sales and marketing, and support business unit end users. The critical steps are identifying and prioritizing the system functionality that will best enable the desired marketing, selling or servicing activities. Defining the accompanying architectural requirements is primarily the responsibility of the IS staff, in that each tactical implementation must fit within the enterprise’s overall CRM IT architectural strategy. These requirements should be based on the knowledge of future enterprise architecture strategies, enabling technologies and the requirements to interface with enterprise systems. With the emergence of CRM suites , there are options to a best-of-breed approach and, in tough economic times, the functional trade-offs may be appealing, as these suites continue to emerge.
6) Define and calculate the TCO.
An enterprise should then build a full understanding of what the cost (e.g., fixed and recurring costs, over three years) will be to provide the functionality needed to achieve the CRM strategy, for each of the domains of CRM. Total cost of ownership (TCO) should consider not only the technology costs (i.e., hardware and software), but also the people and process costs. People costs include education and skills training for the internal project team as well as for internal employees outside the project team. Change management and knowledge transfer costs from integrators are examples of process costs that must be included in the TCO.
7) Forecast the program and project ROI.
An estimate of project ROI should then be calculated based on an understanding of what the return (i.e., achievement of goal) will be given the investment (i.e., TCO). To forecast overall program ROI, an enterprise must forecast the ROI for each CRM domain and pull these together into one overall program ROI. As a caution, it is best to work with the enterprise’s financial organization to complete this, and be
wary of vendor’s models as they usually do not consider all the costs and benefits specific to “your enterprise.” In addition, they may be too general to provide the real picture. Many of the ROI models Gartner has reviewed do not include, for example, the detailed TCO that is unique to the organization across the people and process components, and benefits are generally “averages” based on assumptions which may not hold true for all enterprises.
8) Implement the pilot and measure it.
The pilot is intended to implement the system functions as defined earlier in the planning process. This system functionality should enable the future enterprise wide CRM processes that will help achieve CRM objectives. In tight economic times, rather than implementing “big bang” projects, attempt the tactical,
smaller projects first that fit within the overall plan to achieve quick ROI.
9) Adjust the strategy and plan the rollout.
The CRM program and project manager, or chief CRM officer, should be confident that the pilot results (i.e., for each implementation) can be duplicated during the rollout. If not, adjustments in system functionality and training will be required. Pilot length always should depend on the project team’s confidence level in achieving the projected benefits.
10) Achieve ROI throughout the rollout and continue measuring.
ROI within CRM projects will be realized when the entire organization is fully trained and competent with its new marketing, selling and servicing paradigm. In most organizations, enterprise wide behaviors must change to ensure the project delivers ROI. Technology alone will not produce the benefits projected in any ROI calculation. Project break-even points occur after full rollout, when new marketing, selling and servicing behaviors and activities allow the enterprise to realize its goals. A fast rollout and high system adoption rates enable ROI to be realized as quickly as possible.
Bottom Line: Many forecasts of ROI are not realized in CRM projects. Today, Research Analyst estimates that 80 percent of enterprises pursuing CRM are not performing business justifications. This partly due to incomplete ROI calculations and because no plan was developed to accurately measure the effects of CRM projects on ROI. Thus, it is important to establish a plan to achieve a measurable ROI through all phases of CRM initiatives.
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