Logo
BodyBGTop
How to...choose the right metrics for determining ROI
ROI criteria must change to reflect the changing needs of the marketplace and the changing pressures on shareholder value.
For the rest of the August 2004 issue of CRM magazine please click here
Page 1



The pressure is on to account for the true return on investment for CRM initiatives. Too many attempts to answer the ROI question stall at the starting gate, however, paralyzed by indecision or an inability to narrow ROI to the proper questions. Consider these four steps in evaluating the success of your CRM investment. 1. Understand today Managers must clearly understand the state of the process to be improved, and must as well consistently measure it to draw meaningful conclusions about change and improvement. If sales conversion levels are expected to increase, then the historical conversion levels need to be documented with the same clarity as they will be measured over the life span of the CRM initiative. "We established a baseline about two years ago, and we cross-check [progress] with an independent agency," says Arthur Parmentier, director of worldwide support for NetScout. The network management company closely measures its contact center's ROI on customer loyalty indicators. 2. State a hypothesis Watching a number on a browser dashboard is not the same as measuring ROI. Expected ROI should form a complete sentence, such as "Reducing the time to generate proposals will shorten the sales cycle by X and result in Y percent higher revenues." At Scottish Water, Scotland's national water and sewer utility, a customer service improvement program fundamentally changed the way the company measured its success. To calculate the ROI of the CRM project, implemented in conjunction with Oracle, the utility established and then piloted a new customer service and dispatch system that emphasized first-call resolution with the right tools, rather than immediate truck rolls. "The theory we had was that delivering exceptional customer service can be paid for out of improvements in first-time job completion, reduction in overtime, and reduction of lost time," says Barry Lawson, head of customer service at Scottish Water. 3. Tie metrics to incentives Companies must reflect agreed-upon ROI metrics not only in CRM status reports, but also in the way they conduct business and reward or punish their executives and employees. Conflicting signals will hamper strategy and lead to inefficiencies and inconsistencies in how customers are treated.
"You see scoreboards in a lot of contact centers that say, 'We have taken this many calls today,' but how does that relate to customer satisfaction?" says Steve Roop, vice president, CRM product marketing, at PeopleSoft. "If the vice president of the contact center is paid on customer satisfaction, or has a bonus related to call deflection to self-service, then the operational metrics they should track must tie to those objectives." 4. Never stop asking With careful planning ROI criteria will lead to interesting answers to pertinent questions about business and customer performance. However, CRM efforts evolve and company strategies change. So be sure to constantly reevaluate ROI criteria--as new functionality becomes available, new channels to customers open, and new product and service priorities work their way through the business, ROI standards will then remain meaningful to the task at hand. Standards and competitive pressures change, and ROI criteria must change with them to reflect the changing needs of the marketplace and the changing pressures on shareholder value.
Page 1
To contact the editors, please email editor@destinationCRM.com
Every month, CRM magazine covers the customer relationship management industry and beyond. To subscribe, please visit http://www.destinationCRM.com/subscribe/.
Learn more about the companies mentioned in this article in the destinationCRM Buyer's Guide:
{0}
Search
Popular Articles
 

BodyBGRight
Home | Get CRM Magazine | CRM eWeekly | CRM Topic Centers | CRM Industry Solutions | CRM News | Viewpoints | Web Events | Events Calendar
DestinationCRM.com RSS Feeds RSS Feeds | About destinationCRM | Advertise | Getting Covered | Report Problems | Contact Us