By Jo Best, 3 February 2004 16:45
NEWS Customer relationship management (CRM) applications might have been considered as 'nice to have but a bit of a luxury' by businesses in the past - but all that could be about to change. CRM-savvy companies are enjoying return on investment (ROI) of up to 1,000 per cent, according to analysts.
A new report by analyst firm IDC, The Financial Impact of CRM, quizzed firms in Europe and the US to discover how using the CRM applications had impacted their business. With companies reporting a ROI of anywhere between 16 per cent and over 1,000 per cent, you'd be forgiven for thinking the main impact has been on the balance sheet - but the report shows that productivity has also been boosted by implementing the technology.
The productivity gains experienced by CRM users accounted for over half of the ROI, while improvements to business processes made up 42 per cent, with the remaining return on investment attributable to savings due to the new technology.
Promises of sky-high ROI might well sound tempting, but be warned - the initial investment won't be small. The average initial payout for a CRM suite was found to be in the region of $426,000, with costs over five years topping the million-dollar mark.
Nevertheless, those opting for CRM won't have to wait that long to see their investment hit the bottom line. Fifty-eight per cent of those surveyed reported payback within a year, while 35 per cent saw it within one to three years.
Mark Wardley, IDC's vice president of CRM applications research, said in a statement that the benefits of customer relationship management can sometimes be intangible but do pay off in the long run. "The net impact on an organisation can at times be subtle and distributed throughout the enterprise. Cost savings and productivity enhancements can be evidenced in saving a sales person 20 minutes per week in writing activity reports or answering four times the volume of Web-based service requests in the same amount of time."
silicon.com's special report on CRM will be published on Wednesday
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1. Geoffrey Darnton
Fascinating! ... and I thought the problem of calculating RoI for IT investments has still not been solved despite over 30 years of trying (and particularly for what is, effectively, infrastructure investment). Could we please have a pointer to the underlying methodology used?
The highest RoI I have found so far, was a claim of 830,000 percent in the, now classic, work of Meyer and Boon (The Information Edge, 1987)- can any of your readers beat that?