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

Tom.Spitale@1to1.com

Visit our web site at: www.1to1.com

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