Successful implementations of CRM applications have yielded returns ranging from 16 percent to more than 1,000 percent, according to IDC's new study.
Posted Feb 2, 2004
According to a recently completed ROI study from IDC, "The Financial Impact of CRM," successful implementations of CRM applications have yielded returns ranging from 16 percent to more than 1,000 percent. IDC also found that technology-related savings account for only 7 percent of the average return, while benefits accrued from increased productivity and business process enhancements account for 51 percent and 42 percent of the return.
"We discovered that ROI was so high because companies have begun to scope out very specific goals, and purchase only those applications that helped companies do what they wanted to do," says Mary Wardley, vice president for IDC's CRM applications research. "Instead of buying big solutions companies are taking a much more modular approach that is easier to control and measure returns."
Wardley also notes that the highest returns came from companies that purchased applications that performed tasks the company could not previously execute. "If a company can now pick up leads off the Web, that is going to provide a high level of ROI," she says.
Companies are seeking to present a clear, integrated front to their customers, Wardley says, which involves tight integration between data, departments, and systems. "Customers are coming in through the ceiling, doors, and windows," Wardley says. "And customers want to be able to reach any part of the company through one interface. Thus, systems really need to be tight in order to gain this type of transparency."
In addition, securing management buy-in to CRM projects has increased, which has helped increase ROI. "As CRM trickles down from the top, business processes can be more easily reworked to be more productive," she says.
Other key findings from "The Financial Impact of CRM" include:
19 percent of the companies that participated in the study generated an ROI of 50 percent or less, 52 percent generated an ROI between 51 percent and 500 percent, and 30 percent reported returns of 501percent.
58 percent of participants experienced payback in one year or less, 35 percent experienced payback between one and three years, and 8 percent experienced payback in three years or more.
median initial investment in a CRM application is approximately $426,000, which includes the accumulation of all costs incurred before the implementation enters production at a site. The median total cost over the first five years is estimated at $1.2 million.
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