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Maximizing and Measuring the ROI On Your CRM Investments. Tom Spitale Principal Peppers & Rogers. CRM: Attempting to Cross The Chasm Between Visionaries to Pragmatists. Geoffrey Moore wrote how high-tech companies fail and succeed in crossing the Visionary - to – Pragmatist “chasm” - PowerPoint PPT Presentation
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Maximizing and Measuring the ROI On Your CRM Investments
Tom SpitalePrincipalPeppers & Rogers
CRM: Attempting to Cross The Chasm Between Visionaries to Pragmatists
Geoffrey Moore wrote how high-tech companies fail
and succeed in crossing the Visionary - to –
Pragmatist “chasm”
CRM – a strategy enabled by high-tech – is in the
critical crossing the chasm period
The Message That Some Visionaries Missed: Measurement Discipline
Customer ValueCustomer Value
Number of Number of CustomersCustomers
CRM and 1to1 MarketingCRM and 1to1 Marketing
Picket Fence
Mass MarketingMass Marketing
… … and move it over timeand move it over time
AgendaConvincing the Pragmatists• The Truth about CRM ROI
How CRM ROI Is Measured Today• Tools, Techniques and Tips For Measuring Impact
How CRM ROI Will Be Measured In The Future
Maximizing CRM ROI: The First Mover Advantage• Why You Must Turn Your Pragmatists Into Visionaries
To Really Win
This presentation is for Visionaries in Pragmatist firms, software marketers selling to Pragmatists…and Pragmatists themselves!
This presentation is for Visionaries in Pragmatist firms, software marketers selling to Pragmatists…and Pragmatists themselves!
Over 70% of CRM Projects Succeed• CRMGuru.com studied 600 CRM-implementing companies
Biggest predictor of success: a comprehensive, specific CRM strategic plan
• Failures are “self-inflicted” Other key success factors:• Line-level training• Organizational/executive support• Setting measurable goals (measurement discipline)
Bottom line: No “gain” without the “pain”• But that’s what will make successful CRM a differentiator• Our experience: Without the metrics, many abandon ship
due to the pain
First Step To Convincing Pragmatists: Replace the Hype With Facts
Source: “The Blueprint for CRM Success”, 2002 study by Caribou Lake Customer-1, CRMGuru.com and Mangen Research Associates
Results of PRG In-Depth Study of 15 CRM Implementations: 32% Average IRR
But these companies are just getting started on the path of CRM
The searchCRM/PRG ROI Measurement and Effectiveness Survey
Survey Was Still “Open” at Time of Slide Publication
Tom Will Summarize the Results To You Now…
You tailor your product, service or interactions
Customer talks with you
FEEDBACK
Saveme
time
The more effort customer invests, the greaterThe more effort customer invests, the greatertheir stake in making relationship worktheir stake in making relationship work
Going to a competitor = Going to a competitor = reinventingreinventing the relationship the relationship
Treating Different Customers Differently: The Learning Relationship
Typical Status of a Thus-Far Successful CRM Initiative
IdentifyIdentify don’t knowcustomers
knowtransactions
knowhistory
knowpreferences
DifferentiateDifferentiatetreat
everyonethe same
by valueonly
by valuethen needs
by enhancedcustomer
needs
InteractInteract talk atcustomers
talk with,but forget
talk with,remember
feedbackloop
CustomizeCustomizeone size
fits allsome
choicecustomize
somemass
customize
Result From Improving the Customer Experience En Masse
Through 2003, achieved benefits have been 78% on a $3.7M investment. Projected ROI, through 2005 is 122%
Expected Results When Treating Different Customers Differently
Entertainment industry client needed to determine the financial impact from implementing CRM software solution• Result: 78% ROI realized; anticipated 122% ROI through 2005
Impact realized without significant changes to customer treatment
Additional analysis uncovered opportunities to increase contribution or decrease costs by applying customer valuation and needs strategies• Conservative estimates at $1 million per year• Aggressive estimates at $2.5 million per year• If implemented for one year, these strategies could increase
the realized ROI between 50-95%!
Our Conclusion: It’s Better Than We Even Thought It Could BeOur Conclusion: It’s Better Than We Even Thought It Could Be
How To Conduct a CRM ROI Analysis
Today’s limitations to measuring CRM ROI:• Lack of company history in measuring impacts to
customer equity• Lack of baseline data• Very little industry data to provide benchmarks
Two critical needs:• Facilitation• Historical and Benchmark Data
Facilitation leads to credibility of the ROI result; historical and benchmark data is nice if you can get it!• Get cross-functional executives to participate
Getting The Executive Team To Participate
Study will be useful in internal communication efforts and in continuing CRM buy-in and momentum-building within the organization (remember, no gain without the pain)
Sets actionable metrics for your CRM program going forward
Provides validation for moving forward and can uncover specific areas of new CRM opportunity
Full Disclosure: Counting All of the Costs
Total
Hardware (&
Maintenance)
$627,787
License Fees
(&Maintenance)
$1,599,720
Additional Software
Costs (&Maintenance)
$175,650
Consulting From Tech.
Vendor
$639,907
Other Consulting $587,615
Training $76,500
$3,707,179
17%
43%5%
17%
16%2%
HW Add'l SWVendor Cons.
LicensesOther Cons.
TrainingTotal
Next Step: Identify metrics and “data owners”
Marketing
Sales
Service
Acquire Grow Retain
Marketing
Sales
Service
Acquire Grow Retain
Capital Improvement ImpactPrimary
Source:
baseline
Post Implementation Value (Actual)
1998 1999 2000 2001 2002 2003*
Metric
Gains in Working U.S. Credit Backlog Because Quotes are Handled faster 0.48% 0.45% 0.45% 0.45%
Positive impact of a change in this metric…
U.S Sales $582,675,0
00$570,138,
000$285,069
,000
Difference in Total Credit Backlog $166,459 $162,877 $81,439
Cash Investment Rate per annum 2.50%
Average Days Improvement in Credit Backlog 30
Percentage of Benefit Due to SAP CRM Technology 50.00%
Capital Improvement Impact ($) per year $24,969 $24,432 $12,216
The Nuances of Tracking Cost Reduction MetricsGains in Working U.S. Credit Backlog Because Quotes are Handled Faster
Tracking an Increased Revenue Metric: Campaign Efficiencies/Effectiveness
2002 Total Touches (outbound campaigns) = 671,000
2003 Total Touches = 1,138,381
Increase in outbound touches = 467,381
% impact on sales (1/200) = 0.5%
Total incremental yearly sales = 2,337
Avg. product profit = $7,927
Total Benefit = $18,524,646
% due to CRM = 10%
The 1to1 Metrics Database: Bounding Assumptions In Reality 1to1 Metrics Dictionary tool is the deepest
database of CRM metrics in the industry
Built from over 10 years of doing CRM business cases and ROI analysis
Example: High-tech BtoB company knew that they had gained efficiencies from faster handling of leads through CRM initiative• Lack of baseline data caused doubts over the
assumptions around impact• PRG compared situation with results from several
other high-tech BtoB marketers• Result: assumptions deemed credible by executive
team and CFO
The Confidence Matrix: Keeping Credibility High
Data History
Degree of Correlation to Financial Impact
High Degree of Confidence
Low Degree of Confidence
High
Low
Low High
Reduced Cycle Time
Increased Conversion Rate
Average Revenue Per Customer
Increased Customer Satisfaction
Increased # of High Probability Opportunities
Key To a Successful Study: Get the CFO to “Play” With The Spreadsheet
Savings From Reducing Size of Mailing Lists HPLC $0 $0 $0 $0
Savings From Reducing Size of Mailing Lists Mass Spec $0 $0 $0 $0
Capital ImprovementsMarketing Total $0 $0 $0 $0 $0Total Attributable Gains $0 $0 $531,258 $1,346,848 $2,435,686
Net cashflow (out)/in ($200,000) $0 ($165,742) ($165,152) $1,153,686
Breakeven running total $5,657,671
ROI calculation:IRR 88%
Actual Value
Strategic Value
Servicingcosts
“Migrators”MVCs MGCs BZs
Use 1to1 to keep these customers
Migrate these(strategic value
unknown)
Spend no resources on these
...and grow these
The Next Generation of Measurement: Differentiation and “Customer Equity”
The Limitations of Pragmatism: Threat or Opportunity Exercise
I f your competitor does this first…
Level of
Threat
What's your next
move?Could you do it
first?Fills out forms for each customer whenever possible, or remembers past events and doesn't require customer to provide details again
Singles out best customers for preferential treatment, including faster service and more customized services, at a better price
Sends customized offers to customers based on their personal interestsMakes it far easier for a customer to pay for their purchases (I .e. 1-Click ordering, credit card on file, …)
Educates the customer with information tailored to their specific interests or needs, related or unrelated to the current service being provided
To Gain a Lasting Competitive Advantage, Pragmatists Must Become Visionaries!
The only true competitive advantage comes from understanding of your customer that you have and that your competitors don’t – the more customer needs you learn and fill, the greater the barrier to defection
This information has to come from the customer.
1to11to1
To Take Full Advantage of This, YouMust Move Faster Than a Pragmatist
Your Peppers and Rogers Group Contacts:
Contact Information
Send an email or call me:
Tom Spitale
(724) 891-1417
Visit our web site at: www.1to1.com
To Opt-In to the PRG ROI Newsletter
Newsletter registration: - https://www.1to1.com/Subscribe.aspx?Publication=27927