The business case for CRM

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The business case for CRM

• How can you get the investment for CRM?

Thom PooleManaging Consultant
February 2007
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Paths to competitive advantage
Customer satisfaction
Operational excellence
Revenue marginenhancement
New Customer Acquisition New More
PersonalisedProducts Services Customer
Profitability Return on Customer Partner
Investments Cross-Selling Up-Sellingto
enhance margins dealsize
Streamline Automate Administrative Processes
Lower Operational Costs Reduce inventory
Integrate Stove PipedSystems Relationships
Reduce Cycle-time
Determine UniqueRequirements of
CustomerSegments Adapt to changing
customerneeds and market trends New products
services Provide Customers withExcellent
Service, evenwhen components come from partners

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Sample CRM Performance Metrics
Revenue Margin Enhancements

• Average revenue/person
• Number of accounts/person
• Average revenue/employee
• Average revenue/contract
• Increase average deal size
• Average growth/territory ()
• Cost of sales marketing
• Expressed as of revenue
• Marketing campaign response rates

• Customer Lifetime Value (CLV)
• Average commission/person
• Quota attainment for new reps
• Forecast accuracy
• Improve predictability/planning
• Improve closing
• Win/loss analysis
• Number new contracts/quarter

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Sample CRM Performance Metrics
Operational Excellence

• Average time to market for new product
  development process
• New product development expense as of Revenue
• Gross profit by product line
• Order fulfilment cycle time
• On time deliveries
• Returned products
• Cost per customer contact

• First contact resolution
• Number of customer complaints
• Revenue per employee
• Ordered parts filled immediately from warehouse
  shelf
• Number of cancelled orders
• Number and cause of credit memos issued

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Sample CRM Performance Metrics
Customer Satisfaction Retention

• On-Time deliveries
• Mean response time to customer service incident
• Customer complaints
• Customer satisfaction index
• Share of key customers purchases
• Customer Lifetime Value (CLV)

• Number of repeat customers
• Shopping cart abandonment rate
• Number of referrals to other customers
• Revenue to new versus existing customers

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The corporate requirement

• Individual view of each customer
• Increase the customer interaction
• Increase cross-sell and up-sell opportunities
• Improve direct selling performance and efficiency
• Develop/source products that are relevant to your
  customers

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CRM implementation teams

• Team member selection
• Political lubrication
• Dedicated resources
• Task delimitation

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Justification

• Tangible factors
• Customer retention
• Market penetration
• Cross-selling opportunities
• Strategic factors
• Competitive pressures
• Loss of core product differentiation
• Strategic fit
• Linked decision factors
• Resource allocation
• Salesforce automation
• Finance system integration or replacement

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CRM justification key
Competition
Increasedrevenue
Market
Infrastructure
Cost savings
Strategic
Tangiblefactors
Linked decision factors
Strategic factors
Clark, M Smith, B McDonald, M. 2003
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A CRM results measurement system
The primary building blocks of CRM results
measurement
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Are you ready for CRM?

• Targeted business users display an understanding
  of CRM accompanying benefits
• Management displays an understanding of CRM
  accompanying benefits
• CRM applications opportunities are identifiable
• A business sponsor exists for each discrete CRM
  opportunity
• Obvious stakeholders exist for each discrete CRM
  opportunity

• Company has expressed a need for market
  differentiation
• Communicated strategic initiatives can be
  supported by CRM
• Stakeholders can articulate projected CRM
  benefits for each discrete opportunity
• Stated opportunities can be improved with
  customer-related data
• Projected data sources are highly regarded for
  data accuracy integrity

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Are you ready for CRM - 2

• Cross-functional customer data exists in a data
  warehouse or centralised database
• Departments currently share a cross-section of
  information requirements
• The client is already engaging in some sort of
  customer differentiation or segmentation
• Questions of data ownership across the company
  are either non-existent or easily resolved

• Business units IT staff agree on CRM ownership
  boundaries
• Executive management has an expressed commitment
  to fund CRM-related activities
• Company agrees to modify business processes where
  necessary
• A willingness to sustain the organisational
  impact of CRM (reorganisation, additional
  staffing, etc)

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Are you ready for CRM - 3

• General understanding of requirements-driven
  development exists amongst business IT
  stakeholders
• Management is willing to empower key
  customer-facing staff based on increased
  information improved processes
• Management is willing to implement incentives or
  modify employee compensation to encourage CRM
  adoption

• CRM solution decisions are approached with an
  open mind
• Business sponsors stakeholders have an
  understanding of the differences between CRM
  other programmes
• IT staffing infrastructure is in place to support
  CRM
• There is consensus that CRM is a process not a
  one-off activity
• Business IT stakeholders understand the ongoing
  budget requirements

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CRM implementation
Time
Phases
Planning
Construction
Deployment
Archi-tecture/design
Businessplanning
Technologyselection
Develop- ment
Measure- ment
Steps
Delivery
Customisation/ development Process
integration Prototyping Database design
Project prioritisation Staff planning Pre-implemen
tation checklist
Tasks
Evaluate metrics
CRM Strategy CRM Business Plan Process
planning/ Identification ROI (optional)
Deployment Documentation User training Internal PR
Vendor evaluation Technology alignment Product
installation
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Financial justification

• For most companies today, it is mandatory that
  new CRM investments be driven by a strong
  financial justification
• This justification needs to consider explicitly
  benefits, costs and risks that are directly
  linked to the CRM proposal
• With limited new investment funds available, a
  successful CRM project funding request must
  clearly demonstrate that it not only is
  financially justified but that it is prioritised
  ahead of other projects under consideration
• Back of the envelope business case and ROI
  analysis will not pass the test with most senior
  management reviewing project funding requests

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Financial justification

• Senior management is increasingly involved in
  reviewing project funding requests
• The project/proposal team needs to have a board
  room presence and be able to address CFO issues
  and questions
• Clients want to know what ROI can be achieved
  from process changes and data standardisation
  with existing systems
• The time of file and forget business cases are
  in the past
• Senior management wants to see accountability and
  a willingness to measure and monitor project
  results and possibly put fees at risk

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CRM checklist
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Building a compelling business case

• How does the subject proposal compare to other
  proposals recently approved in the company?
• Can the company afford not to go forward with the
  project?
• What future business options and flexibility are
  gained for the company if it goes forward with
  the subject proposal?
• What level of IT investments has the company made
  relative to its industry peer group?

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Business case deliverables

• Develop an understanding of your companys
  approval requirements
• Milestones
• Steering Committee / Executive Committee
• Scheduled Meeting Dates
• Deliverable Requirements Presentation / Capital
  Appropriation Request (CAR) / Financial Model
• Identify the key decision makers and understand
  their perspective on costs benefits
• Consider modelling deliverables after recent
  successful presentation and CAR

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Business case deliverables

• Walk-the-signatories and obtain buy-in and
  support throughout project
• Executives approach, key issues and direction
  of project
• Company track leads key issues and underlying
  assumptions
• Financial advisor to executive approach,
  underlying assumptions and deliverables
• Develop a storyboard early on and build-up
  throughout the project
• Demonstrate there is support with necessary
  detail backing recommendations

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Thank you

• thom.poole_at_crm-audit.co.uk