Oracle Commerce Consulting

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Oracle Commerce Consulting

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Oracle Commerce Consulting

What is CRM’s return on investment?

Oracle Commerce Consulting | By managing each stage of the sales lifecycle more efficiently, a typical CRM system provides a high return on investment. Of course, you can get by without making that investment. You may be able to cobble together a CRM customer data repository using spreadsheets and email. It’s a safe guess that anywhere between 30 to 40 percent of marketers do. But as you grow, you’ll quickly discover the law of diminishing returns and realize that you need a CRM system.

In 2011, Nucleus Research found that the average ROI of CRM was $5.60—meaning that for every dollar spent on a CRM solution, on average, companies earned back $5.60.

In 2014, Nucleus Research found that the return rose to $8.71—a 38 percent increase. A fully integrated CRM can drive even more profitability. Nucleus also found that CRM integration with other internal applications brought “productivity increases across sales, service, and operations and a 20 to 30 percent growth in business.”

So how do you calculate that dollar amount? ROI is a little different from the payback period—the amount of time it takes to recover the cost of your CRM investment. It has also been called the “break-even point”. The more you sell, the quicker your payback period. If you don’t sell more, your payback period will be much longer.

ROI measures the efficiency of an investment. Even though it can be expressed in dollars, it’s a ratio—a ratio of income earned to the cost to finance the CRM investment. The goal is to have the ratio be more than 100% to avoid losing money. ROI figures can be calculated for nearly anything into which you can make an investment and measure an outcome. The outcome of your ROI calculation will vary depending on which figures are included as revenue and costs. If you don’t sell more, your return will be much lower. To calculate your ROI, you first need to determine what incremental revenue your new CRM system will bring in. And to do that, you need metrics.