The Benefits of CRM

It's true that the benefits of CRM are often overstated, especially by vendors, but it doesn't mean that CRM tools are useless. Properly implemented, they can and should bring a whole set of tangible benefits.

Cost Savings

This is often the first goal that is reached for (if not always attained) during CRM initiatives. The idea is that the technology will make it easier to reach customers, to sell to them, and to service them. Self-service tools are often sold solely with a cost-saving rationale, but most other CRM tools, from quote generators to internal knowledge bases, are also likely to produce cost savings by boosting employees' productivity. We will revisit this topic when we discuss return on investment (ROI) for CRM implementations in .

Customer Satisfaction and Loyalty

Good CRM tools make it easier for customers to do business with you, whether it is through the flexibility of self-service, by being able to get what they need faster because employees can be more efficient thanks to the tool, or by receiving targeted information that is immediately useful. Several studies[1] have shown that highly satisfied customers are not merely happy: they buy more, cost less to service relative to what they buy, are less price-sensitive, and are happy to spread the word about the vendors they favor. So there is a distinct business advantage to cultivating loyal customers.

[1] The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value and Loyalty Rules! How Leaders Build Lasting Relationships in the Digital Age, both by Frederick H Reichheld Harvard Business School Press 2001.

Increased Profits

Profits are the ultimate test and a consequence of both the cost savings and the increased customer loyalty described above. It's not always easy to tease out the part CRM plays in increased profits, however, since by the time profits show up many underlying variables have changed beside the new CRM system. So it's particularly important to devise strategies to measure the increase in profits attributable to the CRM tool.

Increased Internal Accountability

By assigning and tracking tasks, the CRM tool makes it possible for everyone to follow the flow of requests from owner to owner, to analyze adherence to SLAs (service-level agreements) and to note any delays or errors. This is helpful both for managers who want to evaluate their teams' performance and also for function owners who need to coordinate with other functions. No more wondering about who owns a particular issue, whether something fell through the cracks, or whether there is a systemic problem when issues are handed off from one group to the other.

Employee Satisfaction

Few CRM implementations bother to quantify their impact on employee satisfaction, perhaps because employee satisfaction is rarely measured, and in any case apportioning the effect of CRM implementations on employee satisfaction is very difficult. The reality is that the availability of good tools makes a big difference to employees, especially the employees who are eager to deliver better value to customers (in other words, the more valuable employees). Employee satisfaction matters because satisfied employees vote with their feet: they stay and reduce costly turnover. Satisfied employees also are likely to be more productive.

Better Business Intelligence

Another benefit that is difficult to quantify, better business intelligence means that you can get to know your customers better so you can adapt your products, marketing strategies, and support levels accordingly. The more modern CRM tools tend to have much better built-in analytics so you can really take advantage of the customer data that is stored in them. The main obstacle to getting better business intelligence is actually not the tool itself, but rather the fact that the existing data is not exploited as well as it could be. For instance, there are many support organizations that don't have a process to identify and address the top issues that customers call about, even though it would quickly translate into large cost savings.

What Should you Expect for your Implementation?

What benefits can you reasonably expect from a CRM implementation? All of the above, although the extent and timing will depend on the scope of the implementation. For small-scope projects such as self-service support, you may see significant savings within a few weeks of rollout as the caseload drops significantly, especially if most support requests are straightforward. Generally speaking, all CRM projects should result in cost savings, although rarely so quickly. Improved customer satisfaction can be more elusive than cost savings, not so much because of weaknesses in the tool itself but because the customer is not always put at the center of process definition. In other words, many projects view the customer as an entity to be managed rather than as a volunteer who will gladly participate if the CRM offering is attractive and delivers tangible benefits. Not surprisingly, customer satisfaction may drop if the net effect of the CRM implementation is to put a barrier between customers and their human helpers within the company. Profits should follow cost savings and increased customer satisfaction, but you need to be patient. Even after months of implementation work, it takes time for the users to fully master the new technology and even longer to see tangible benefits, again depending on the scope of the project. It will take many months to a year before you see increased profits on larger projects, but the good news is that the profits can be significantly larger than for a small-scale project. In any case, if you want to establish and quantify tangible benefits from your CRM project you must set quantitative goals and a baseline before you start so you can keep a scorecard of the impact of the project. We'll come back to this later. It's now time to address common questions and negative perceptions about CRM, all issues that may be on your mind as you decide whether to take the plunge. We'll discuss the following:

  • whether CRM technology can conquer all CRM issues;
  • whether CRM nirvana is a good goal to have;
  • the true failure rate of CRM projects;
  • why CRM is important for all companies, not just the very largest;
  • why you should get going with CRM even if all you do is a small piece;
  • when CRM technology should be viewed as a tool kit rather than as an app;
  • the proper roles of IT versus the business owners in a CRM project.