• February 1, 2012
  • By Leonard Klie, Editor, CRM magazine and SmartCustomerService.com

CRM Is a High-Yield Investment

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Business analytics applications, including business intelligence, performance management, and predictive analytics, are delivering significant return on investment, with an average benefit of $10.66 for every dollar spent, according to Nucleus Research.

For CRM systems, the return was $5.60 for every dollar spent. "In fact, in terms of the overall financial value, the CRM projects studied in this analysis delivered sixty-three percent in direct benefits, such as cost savings or avoided hires, and thirty-seven percent in indirect benefits, such as increased productivity or greater customer retention," the research firm concludes.

Workforce management applications yielded returns of $7.88 for every dollar spent. The most benefits were derived from systems that track time and attendance.

Nucleus Research drew these conclusions after analyzing dozens of case studies during the past three years. Companies ranged from small businesses to large multinational firms. The dollar figures represent both hard returns, like cost savings and increased sales, and soft returns, like greater productivity, collaboration, and customer service, according to Rebecca Wettemann, a vice president at Nucleus Research. "We looked at what they spend and what they get in return, including direct and indirect benefits," she says. In some cases, the returns were as high as $20 or $30 on the dollar.

Despite a limited number of deployments, analytics was found to have the greatest return, primarily because these types of applications can lead to changes in decision-making that ultimately result in unexpected improvements in profitability, including higher revenue and gross margins and lower expenses. David O'Connell, principal analyst at Nucleus Research, calls these applications "extremely lucrative" and says they yield "very significant competitive assets.

"It's perilous for companies not to be deploying analytics," O'Connell says. "With so many organizations opting not to invest in analytics, those companies that leverage this technology to learn more about their customers, products, and costs will be in a strong position to cost-effectively grow their business at the expense of rivals."

Nucleus also found that companies that integrated their analytics applications with three or more data sources tended to achieve higher returns than organizations that integrated only one or two data sources. "This speaks to the competitive advantages that analytics can give to companies," O'Connell says. "They can use it to take all that information, slice it up, and serve it to the key decision-makers."

And where other software areas show smaller incremental returns after reaping the greatest benefits in initial deployments, CRM applications were found to deliver significant ROI throughout their life cycles, often enhanced by further investment, Nucleus Research concludes.

Organizations effectively deploying secondary applications, such as mobile, social, marketing optimization, and sales analytics, can see triple-digit ROI while greatly increasing employee productivity. By deploying applications that run on top of existing CRM systems, companies have seen an improvement in business forecasting and an increase in sales.

"People have gotten smarter in their spending on CRM," Wettemann says. "They've taken a smarter approach, doing more phased-in deployments and keeping up-front costs low with cloud deployments."

With reductions in the cost of deployment via the cloud, a focus on end-user productivity, and a push toward social and mobile applications, there have been fundamental shifts in the goals of the CRM market that contribute to maintaining a high ROI. This has driven vendors to produce more rapid deployments that are developed through continued innovation in this space.

"There are still plenty of opportunities to get positive returns from CRM," Wettemann adds. "We see it as a way to better engage customers and make people more productive.

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