Database Reference
In-Depth Information
3.2 Preparing a Business Case for CRM
Before proceeding with the evaluation, selection, and implementation of a CRM, it is essential
to prove that its introduction will have demonstrable benefits for the organization. Each applica-
tion has a different purpose, nature, certainty, and risks. This is achieved by preparing a business
case for the implementation of a CRM. The basic premise of a business case is that an investment
will have an impact and payback that spans a timeline spreading across a few months or years.
However, to be relevant, it is essential that the input costs and the resulting outcomes must be
directly related to the specific investment decision. This is difficult because
There are no baseline data available prior to the implementation of the CRM, making before
and after comparisons impossible.
There are too many independent variables to be accounted for.
Many of the resulting benefits are soft (or intangible) and hard to quantify.
There are several approaches for assessing the payback potential and period of any investment.
Here are some of these approaches.
3.2.1 Financial Approach
The financial approaches use techniques like Return on Investments (ROI) based on the calcula-
tions of the Net Present Value (NPV) or the Internal Rate of Return (IRR). But one of the sim-
plest methods is to compute the breakeven / payback period, when the cumulative flow of income or
benefits exceeds the cumulative flow of the costs. Clearly, the shorter is the payback, better is the
opportunity. However, this is not very reliable beyond a period of couple of years, as it does not
take into account the time value of money.
Financial benefits from the implementation of CRM can be assessed in terms of the increased
revenues. This increase could result either from the generation of new revenue or because of more
efficient production of erstwhile revenue.
Revenue growth envisaged from the implementation of CRM systems could result from
1. Increased sales through
a. Gaining new customers
b. Retaining the customers longer
c. Realizing higher price for existing products or from new sales (up-sell and cross sell)
d. Drastic reduction in the costs of closing the first sale through reduced no. of calls,
accelerated search, and evaluation
2. Better sales mix or customer mix:
a. Increasing sales of higher-margin products or platform products (see Section 3.2.3
“Strategic Approach”)
b. Bonding strongly with higher-value customers and at the same time motivating other
customers to exit from the company's customer base
3. Enhanced customer benefits resulting in improved retention through
a. Improved response time to customer requests
b. Easy access to current order status
c. Reduced costs of searching, evaluating, and buying the product/solution or service
d. Reduced costs of using and supporting the product/solution or service
e. Delivered product/solution or service, which meets or exceeds customer expectations
f. Greater range of products/solutions or services addressing varying needs of the customer
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