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Can You Have Your CRM Cake and Eat It, Too?
Most companies measure ROI on either cost savings or on revenue growth, but rarely on both.
For the rest of the July 2002 issue of CRM magazine please click here
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The playbook for CRM says that by orienting processes around the customer and making intelligent use of customer information, companies should be able to reduce transaction costs and improve incremental revenue and overall profitability. Sure, it is like asking to have your cake and eat it too, but that was what is promised. However, even companies satisfied with and proud of their CRM strategies very often report capturing significant gains in only one area. Two years into its SalesLogix implementation, consulting outfit ARC Advisory Group, in Dedham, Mass., cheerfully acknowledges saving hundreds of thousands of dollars annually on faster workflow, and assorted implied savings through faster management of email lists and marketing materials. "It has saved us a lot of time, and in our particular business time is money," says Jennifer McGhee, ARC's manager of CRM applications. Yet the company cannot comfortably connect its CRM efforts to top-line success. "It would be hard to pin down places where SalesLogix has helped [with revenue]," McGhee says. This is no surprise, says Beth Eisenfeld, a research director with research firm Gartner Inc. "Most companies justify these things either on efficiency or effectiveness--very few justify on a combination of both," she says, adding that people rarely took ROI cases for CRM seriously until the economy slowed in 2000. "I'm not surprised that people attach to the cost piece [of ROI] first," says Peter McCullagh, vice president of CRM strategy at vendor Siebel Systems Inc. "It's easier to find, easier to measure, and it's what many of their advisors and consulting firms know best." The timing of CRM projects makes it difficult to tell wholly satisfying stories about both sides of the coin, Gartner's Eisenfeld says. "[A CRM project] can take between six and eighteen months to implement, and then adoption and change management is eighteen to thirty-six months, so even those few who say they're going to measure [ROI] are just now getting to the production stages and making their measurements," she says. Such is the case at Boise Office Solutions, which is engaged in a massive CRM and business strategy overhaul the company calls One Boise. Although CIO and Vice President Gary Massel confidently says that the initiative, exposed to customers for more than one year now, has saved millions of dollars, his customer life cycle does not lend itself to easy answers on revenue issues. "Typically, our customers will consider rebidding business every three years, so we really need to get a couple of years between implementation and the [measurement] to find out if, in fact, fewer of our customers are choosing to rebid," he says.
More firms should report clearer indications of true rewards of their CRM efforts in the coming months, as more projects that were based on clear ROI goals mature. Still, Gartner's Eisenfeld suspects that will change little in the way of finding more companies reporting both cost savings and revenue gains. "[Companies] generally choose to focus on one or the other." Siebel's McCullagh says that although he believes the average company has a much greater potential for revenue growth than cost savings by implementing CRM, he acknowledges that that is a more difficult case to make when times are tough. "The softer [the benefit] gets, the harder it is to measure, and managers are uncomfortable," he says. Massel also highlights the problem of trying to measure revenue benefits as customers cut their spending across the board, regardless of how they may feel about their vendor relationships. "I can't tell you today precisely whether we have increased the top-line, since it's a soft market," he says. "We are quite certain that we are increasing share in the market." "The old way of thinking, 'I can save my way to growth,' is over," McCullagh says. Which is perhaps an implicit admission on the part of vendors that as they continue to build more and more vertical solutions for broader ranges of customers, the first-mover cost advantages of CRM are drying up. Ultimately, the cost-savings advantages may merely prove to be the new requirement for doing profitable, effective business, rather than a true bankable benefit. --Jason Compton
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