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ROI from Customer Relationship Management

The Customer Management Community reports that analyst firm Gartner Group recently suggested that while many organizations will cite being able to measure CRM ROI as being important, in practice very few take any practical steps to achieve this beyond basic lip service.

Many businesses are disenchanted with CRM implementations because of failure to completely measure all the factors involved in the implementation, says Michael Smith, Gartner research vice president, who discussed building a business case for CRM at the Gartner Customer Relationship Summit in Chicago.

Over 70 percent of companies recently surveyed said they measure total cost of ownership of CRM implementations, but only 17 percent say they measure ROI. Interestingly around 60 percent believe that they do measure "benefits" -- which is an interesting and perhaps revealing distinction.

But the reality is that unless all three -- TCO, ROI and benefits -- are measured together then there will be no perception of the true ROI, argues Smith. "CRM programs based on incorrect strategies are likely to fail," he noted. "Building the business case and measuring ROI along with the costs and benefits will lead businesses to make wiser investments in CRM instead of complaining about CRM that fails to meet expectations."

What is needed is a proper scale of metrics, he argued, but don’t start this development by using hard cash as the basis. "Develop a metrics model that shows the cause and effect relationships between business activities and financial results. From there, generate hard dollar ROI for the project," he advised.

When you do get around to the subject of money, they recommend that you take a long term view. Gartner also found that too many firms use cost calculations that only extend out a year or two. Given the typical investment in a large CRM project, I'm truly amazed that these systems are still being deployed with little more than the promise of success, combined with the required leap of faith.

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