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Reducing CRM's Total Cost of Ownership
Organizations can increase the value of their CRM initiatives, while keeping costs low, by focusing on increasing the value of CRM for those who use it.
For the rest of the August 2004 issue of CRM magazine please click here
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Even as the economy seems to be making a comeback, 71 percent of CFOs stated they are cutting nonessential funding, according to a study by Booz Allen Hamilton. These CFOs are examining every expenditure, including the CRM budget. So how can organizations increase the value of their CRM initiatives while keeping costs low? One way is by focusing on increasing the value of CRM for those who use it. "The biggest contributors to success cost the least," says Steve LaValle, CRM partner, IBM Business Consulting Services. Consequently, "there is an increased focus on the experience of the user, whether that's an internal user or a customer." For example, The Yankee Group found that one of the biggest spending areas for CRM is focused on connecting users with the information they need. Companies are spending on infrastructure integration and automation: connecting and automating such tasks as order management and billing between the CRM user and the back office so the user sees information that meets her needs, when they need to be met. The result is an increase in productivity and related items like first-call resolution, all of which translates to cost savings. Another strategy companies are using to boost the value-to-dollar ratio is to shift their spending on CRM programs, according to Yankee Group. Many companies are investing in what the research firm calls edge-of-the-enterprise applications like customer-facing tools. CRM self-service tools are one such technology. Making self-service tools more intuitive and easier to use, according to Sheryl Kingstone, CRM program manager at Yankee Group, can help companies decrease the amount of person-to-person time necessary to assist customers, and that reduces the cost of customer service. Brian Kelly, executive vice president of marketing and product strategy for KANA, agrees that there is a shift in spending in the CRM market. "Companies are going to be investing in more strategic initiatives, initiatives that have the by-product of reducing costs." What are those cost-reducing initiatives? According to Kelly, many companies now focus on internal operations like case management, call routing, and providing service professionals with the right information to help customers the first time they call. "Eighty percent of CRM costs are in the process of solving the customers' problems," he says. Improved problem resolution equals lower costs.
According to LaValle, the "right" strategies will be different for every organization, but companies need to go back to basics for reducing costs and increasing ROI. These basic strategies--defining clear CRM strategies, change management, and budget management--aren't sexy, but they're the most important details in making CRM initiatives successful and ensuring long-term ROI. LaValle says that if these basics aren't attended to, ultimately CRM will fail. However, when they are properly addressed the chances that CRM will succeed increase from about 15 percent to 70 percent or more. And that success will be at a lower cost, because of better upfront planning. It's imperative that organizations return to a holistic way of CRM spending, approaching new projects from the perspective of what is in place now, what has and has not worked in the past, and what are the goals for the future. "Make sure you have a true plan," Kingstone says. "Look at the business processes and do the due diligence." And, look at how CRM budgeting will improve the success of that core business. Most important, CRM should be a focus of the entire organization. "Just to strictly cut costs will adversely affect the level of service you're offering," Kelly says. "It can't be just about cost take-out. It has to be about improving the level of customer service you're providing."
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