The best way to ensure return on investment is to prepare for it.
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We have all heard the story: It is not that CRM projects fail per se; it is that companies haven't created a thorough blueprint of their goals. Today vendors are increasingly trying to avert this type of potential disaster by helping their customers draft plans to achieve return on investment from their CRM implementations. One such firm is ChannelWave Software Inc., which has an ROI model it uses with all of its customers.
When a sales representative at Cambridge, Mass.--based ChannelWave identifies a prospect, Simon Adell, the company's senior financial analyst, is usually the first one called to help determine the viability of the potential lead.
Using the company's ROI model and a set of complex metrics, Adell will assess whether ChannelWave 5, which supports presales, sales, and post-sales activities via a suite of integrated, Internet-based applications, can deliver a return on investment for the prospect.
The ROI model, which was developed by Hobson & Company exclusively for ChannelWave, focuses on a variety of activities the customer would use the software to manage or track. These include percentage of partner activity, annual sales of product by partners, deals per partner, number of sales leads, sources of sales leads, close rate of sales leads, and channel marketing and communication costs.
It takes about one to two hours to conduct the initial analysis. Adell's goal is to determine a break-even time frame for the prospective customer. "If it's more than twelve months it's not a good fit, and I'll tell the sale rep that before he pursues the lead any further. But if a company is selling more than $25 million through the channel, the numbers will work out. Fifty million dollars [in channel sales] is a very safe bet for a short return on investment," Adell says.
The average break-even period is eight to nine months, Adell says. That includes the three to six weeks to deploy the solution, and then an average of three months for the customer to get ramped up.
Once Adell determines that using ChannelWave's offering will yield a proper ROI, the salesperson will follow up with the prospective customer. If the prospect is interested in pursuing the discussion, then Adell is brought in to perform a much more detailed ROI analysis.
The ROI model is a critical tool, says Christian Heidelberger, ChannelWave's president and chief executive. "We don't want to work with customers unless they are willing to do this analysis," he says. The reason for this is that ChannelWave is willing to tie its remuneration to the ROI results.
The process of the extensive ROI model can take up to two weeks to complete, "but can crystallize the case for using CRM tools," Heidelberger says.
The total ROI analysis can take from 10 to 40 hours, and often requires a great deal of time on the part of the client, Adell claims. In most cases ChannelWave is able to drive a three- to five-year return of $3 million to $5 million for a company with annual sales of $50 million to $60 million, he says. That ROI scales up depending on the amount of revenue in the channel, he says.
Adell says he cannot accurately project much further than three years. "But of course, most people are most interested in the immediate return of the first year," he says.