How much should you spend on CRM software?

By David Taber, CIO |  Enterprise Software, CRM

The definition of what's encompassed by CRM changes like an amoeba. Sales and service are certainly part of CRM, but what about marketing automation? Email blasters? Ecommerce? Website advertising? Social media? Pricing optimization? All depend on whom you ask within your company and how your company is performing.

3. The Cost Range of CRM Systems Is All Over the Map

The initial acquisition costs--from "fake free" open source CRM systems to products that run $3,000 per seat per year, if not or more--can mostly be determined up front. When it comes to system extensions, integration and ongoing system administration and governance, though, the costs are hard to quantify without extensive business process and technical analysis. Even when you do come up with a cost estimate for CRM system extension, integration and administration, it's rarely realistic, even if it's precise.

4. Payoff Is the King of All CRM Variables.

CRM vendors and industry analysts will be more than happy to provide you with wonderful numbers about efficiency and performance gains. Don't get too excited about those numbers for these reasons.

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They don't apply to you. Since your business processes, competitive situation, product lines and sales personnel are different from whatever companies were measured to produce those numbers, the payoffs and interactions of leveraging CRM systems will not be directly comparable.

They are rarely based on a control group. Too often, the numbers are based on a "before and after" comparison of a team when several other changes were made at the same time as the sparkly new CRM system. New product launches, organizational changes, competitors' missteps and even team morale could have as much to do with the improved business performance as the CRM system. It's almost impossible to statistically normalize the numbers or isolate the payoff that comes just from CRM improvements.

Depending on where you are as an organization and what market you are in, the specific CRM features that really pay off will vary dramatically. Is your support organization a cost center under margin pressure, where shaving pennies is all that matters, or is it a source of renewals and upsells, making it an effective profit center? Dozens of questions such as these will cause the payoff from a CRM system to vary dramatically.

The business case for your CRM depends upon the system's design target. The concept of a design targethas been around for decades, and it needs to be applied when you're trying to optimize your CRM investment. We will discuss how to do this in Part 2 of this article.


Originally published on CIO |  Click here to read the original story.
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