This document discusses justifying a CRM investment through a strong business case and ROI analysis. It provides examples of CRM performance metrics and considerations for CRM implementation planning. Key factors for a successful CRM justification include tangible benefits like increased revenue and cost savings, strategic alignment, and linking the decision to other strategic and infrastructure factors.

1. The business case for CRM How can you get the investment for CRM? Thom Poole Managing Consultant February 2007

2. Paths to competitive advantage Customer satisfaction Operational excellence Revenue & margin enhancement New Customer Acquisition New & More Personalised Products & Services Customer Profitability Return on Customer & Partner Investments Cross-Selling & Up-Selling to enhance margins & deal size Streamline & Automate Administrative Processes Lower Operational Costs Reduce inventory Integrate “Stove Piped” Systems & Relationships Reduce Cycle-time Determine Unique Requirements of Customer Segments Adapt to changing customer needs and market trends New products & services Provide Customers with Excellent Service, even when components come from partners

3. Sample CRM Performance Metrics Average revenue/person Number of accounts/person Average revenue/employee Average revenue/contract Increase average deal size Average growth/territory (%) Cost of sales & marketing Expressed as % of revenue Marketing campaign response rates Customer Lifetime Value (CLV) Average commission/person Quota attainment for new rep’s Forecast accuracy Improve predictability/planning Improve closing % Win/loss analysis Number new contracts/quarter Revenue & Margin Enhancements

4. Sample CRM Performance Metrics Average time to market for new product development process New product development expense as % of Revenue Gross profit by product line Order fulfilment cycle time % On time deliveries % Returned products Cost per customer contact First contact resolution % Number of customer complaints Revenue per employee % Ordered parts filled immediately from warehouse shelf Number of cancelled orders Number and cause of credit memos issued Operational Excellence

5. Sample CRM Performance Metrics % ‘ On-Time ’ deliveries Mean response time to customer service incident Customer complaints Customer satisfaction index Share of key customers ’ purchases Customer Lifetime Value (CLV) Number of repeat customers Shopping cart abandonment rate Number of referrals to other customers % Revenue to new versus existing customers Customer Satisfaction & Retention

6. The corporate requirement Individual view of each customer Increase the customer interaction Increase cross-sell and up-sell opportunities Improve direct selling performance and efficiency Develop/source products that are relevant to your customers

7. CRM implementation teams Team member selection Political lubrication Dedicated resources Task delimitation

8. Justification Tangible factors Customer retention Market penetration Cross-selling opportunities Strategic factors Competitive pressures Loss of core product differentiation Strategic fit Linked decision factors Resource allocation Salesforce automation Finance system integration or replacement

9. CRM justification key Linked decision factors Strategic factors Tangible factors Infrastructure Strategic Competition Market Increased revenue Cost savings Clark, M; Smith, B & McDonald, M. 2003

10. A CRM results measurement system The primary building blocks of CRM results measurement

11. Are you ready for CRM? Targeted business users display an understanding of CRM & accompanying benefits Management displays an understanding of CRM & accompanying benefits CRM applications opportunities are identifiable A business sponsor exists for each discrete CRM opportunity Obvious stakeholders exist for each discrete CRM opportunity Company has expressed a need for market differentiation Communicated strategic initiatives can be supported by CRM Stakeholders can articulate projected CRM benefits for each discrete opportunity Stated opportunities can be improved with customer-related data Projected data sources are highly regarded for data accuracy & integrity

12. Are you ready for CRM - 2 Cross-functional customer data exists in a data warehouse or centralised database Departments currently share a cross-section of information requirements The client is already engaging in some sort of customer differentiation or segmentation Questions of data ownership across the company are either non-existent or easily resolved Business units & IT staff agree on CRM ownership boundaries Executive management has an expressed commitment to fund CRM-related activities Company agrees to modify business processes where necessary A willingness to sustain the organisational impact of CRM (reorganisation, additional staffing, etc)

13. Are you ready for CRM - 3 General understanding of requirements-driven development exists amongst business & IT stakeholders Management is willing to empower key customer-facing staff based on increased information & improved processes Management is willing to implement incentives or modify employee compensation to encourage CRM adoption CRM solution decisions are approached with an open mind Business sponsors & stakeholders have an understanding of the differences between CRM & other programmes IT staffing infrastructure is in place to support CRM There is consensus that CRM is a process & not a one-off activity Business & IT stakeholders understand the ongoing budget requirements

14. CRM implementation Planning Construction Deployment Business planning Archi- tecture/ design Technology selection Develop- ment Delivery Measure- ment Time Phases Steps Tasks CRM Strategy CRM Business Plan Process planning/ Identification ROI (optional) Project prioritisation Staff planning Pre-implementation checklist Vendor evaluation Technology alignment Product installation Customisation/ development Process integration Prototyping Database design Deployment Documentation User training Internal PR Evaluate metrics

15. Financial justification For most companies today, it is mandatory that new CRM investments be driven by a strong financial justification This justification needs to consider explicitly benefits, costs and risks that are directly linked to the CRM proposal With limited new investment funds available, a successful CRM project funding request must clearly demonstrate that it not only is financially justified but that it is prioritised ahead of other projects under consideration Back of the envelope business case and ROI analysis will not pass the test with most senior management reviewing project funding requests

16. Financial justification Senior management is increasingly involved in reviewing project funding requests The project/proposal team needs to have a board room presence and be able to address CFO issues and questions Clients want to know what ROI can be achieved from process changes and data standardisation with existing systems The time of ‘file and forget’ business cases are in the past Senior management wants to see accountability and a willingness to measure and monitor project results – and possibly put fees at risk

17. CRM checklist  Prioritised higher than competing projects  Risk factors considered  Leverage (i.e., ‘use’) existing IT assets  ‘ Quick wins’ in first 6-12 months  Financial payback within 2-3 years (max)  Assumptions validated and supported  Financially justified and ROI driven  Incorporates people, process and technology  Connected to company strategy Project Approval Requirement

18. Building a compelling business case How does the subject proposal compare to other proposals recently approved in the company? Can the company afford not to go forward with the project? What future business options and flexibility are gained for the company if it goes forward with the subject proposal? What level of IT investments has the company made relative to its industry peer group?

19. Business case deliverables Develop an understanding of your company’s approval requirements: Milestones Steering Committee / Executive Committee Scheduled Meeting Dates Deliverable Requirements: Presentation / Capital Appropriation Request (CAR) / Financial Model Identify the key decision makers and understand their perspective on costs & benefits Consider modelling deliverables after recent successful presentation and CAR

20. Business case deliverables ‘Walk-the-signatories’ and obtain buy-in and support throughout project Executives – approach, key issues and direction of project Company track leads – key issues and underlying assumptions Financial advisor to executive – approach, underlying assumptions and deliverables Develop a storyboard early on and build-up throughout the project Demonstrate there is support with necessary detail backing recommendations

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