When the investment in CRM question comes before a CFO or sophisticated buyer they will sometimes try to understand the financial arguments helping to justify the investment. We have often looked at Return on Investment (ROI) cost justifications. Typically with sales managers ROI is a persuasive argument however CFOs and Controllers may take another deeper look. Consultants, Sales Managers and Internal Champions need to understand why ROI doesn’t always answer the whole question.
ROI is important as it sheds light on the total money the investment will bring in. For example if a Sales department forecasts one extra close per salesperson per year at a profit of $10,000 we can quickly calculate the ROI. With 10 salespeople, the ROI is $100,000 per year. If your project promises an acceptable ROI, it will merit attention..ROI alone won’t deliver you the win. Investors will evaluate your project using several other considerations. Gaining confidence in the revenue estimate is a key to understanding the value it will holds for the company.
We should expect questions of this nature:
What is the basis for your return stream?
What is the likelihood your projections are accurate?
How do you expect the system to generate one extra close per year?
Some sales managers persuaded by the value of CRM will understand that the efficiencies will lead to more closes and will potentially say why not two or three extra closes. They will then multiply the ROI projections. But the underlying question is not answered even though the answer seems intuitive to some.The question is, exactly how does a CRM solution will deliver one more close per year, much less two or three?
A deeper look will help the conservative “one close more per sales rep” and give justification the the business can buy into.
Increase Customer Contact: Salespeople historically have spent 17 percent of their selling cycle in front of the client, and performing administrative functions consummes over 35 percent of their time. By automating the administrative work, more time will be available to reach and service customers. With greater visibility in to your buy and sell cycles, you will be able to better qualify these time savings. When raising this point it is imperative to demonstrate exactly how the time saved can be used to make more contacts.
Decreased Closing Cycle: Many CRM solutions provide Quote and Proposal enigines and more that can decrease the time necessary to generate an accurate proposal. By working with your CRM vendor, you should be able to put together a demonstration of the proposal process on the new system. Comparing your existing process with the new process will go a long way in supporting your estimated ROI. Point out to descision makers that a common tendency a common tendancy is to cut margins to close deals . By accelerating the delivery of key information the customer can use, the company can shorten the sales cycle and this tendency can be reduced, This will result in both in better margins and decreased the sales lost to no decision.
Decrease training time and Increased Information Retention: In most organizations, the ROI on bringing a new salesperson up to speed is measured in months, quarters and sometimes years. When sales people leave the lose of company information creates a vacuum in the sales process. The learning curve is even steeper when a salesperson takes over a territory that has no current account or lead information. The sales process repeats questions of current customers that the departing person already asked with the same likelyhood of error jeopardizing customer satisfaction. Your CRM solution can capture this critical information, allowing new hires to come up to speed much more quickly, saving the client the frustration of having to retrain your company on their business.
This concludes Part 1, Part 2 will follow shortly.
Jeff Loucks – Available Technology