How to Avoid Paying Too Much for CRM

How to Avoid Paying Too Much for CRM by BizCloud (30/11/11)

Customer relationship management (CRM) software has become increasingly important in today’s hyper networked age. According to Destination CRM, the CRM market grew at a 6.2 percent rate in 2010 (to hit a total of $16.5 billion) and expects a 7.6 percent rise through 2011. While much of that growth has been in the Software as a Service (SaaS) sector, companies also continue to invest in on-premises CRM solutions. Most SaaS CRM solutions are fairly inexpensive, at least for the base software, but add-on features, deployment, training, and support costs can quietly increase the total cost of a CRM solution. Of course, on-premises solutions aren’t without their own significant costs.

Companies looking to reduce their CRM costs -- or considering the purchase and deployment of a new CRM solution – can start by asking themselves these five questions:

1. Is an on-premises solution necessary? Even though an on-premises CRM software package may have a cheaper sticker price, it’s likely more expensive in the short run... as well as in the intermediate and long run. On-premises CRM software typically does not incur any sort of monthly fee like SaaS products do, but it does incur significant infrastructure and operating costs. The server and network equipment, power, and maintenance costs will usually exceed the subscription and support costs of most SaaS packages. There are certainly reasons why a company may choose an on-premises solution -- for example, specific security concerns, networking issues, or integration with an existing IT framework – but companies should not automatically assume one is better than the other.

2. Are all those add-ons and features necessary? SaaS sales representatives often try to wow customers with marketing presentations on all the bells and whistles available for their software. Some of these are integrated with the core package, but others cost extra. Sometimes these features have a direct cost; sometimes they’re limited to more expensive professional or enterprise editions.

3. Will expanding upon and developing the CRM solution be necessary? Many SMBs could likely use major CRM vendors’ products out of the box with minimal configuration or add-ons. On the other hand, enterprise-level corporations may find themselves sinking huge amounts of money into development to create custom solutions that work with a given CRM product’s API. If an SMB overreaches and purchases a complex solution, that can obviously result in significant overspending. On the other hand, larger businesses may find themselves spending more on trying to customize a particular product to fit their needs than if they had started with a simpler platform based on a more developer-friendly platform.

4. Does the business already function in a particular vendor’s ecosystem? This question is straightforward. A Microsoft business should probably give Dynamics a hard look. An Oracle one should consider Oracle CRM On Demand. If a business is built on Linux and has no shortage of developers, then the open source Sugar CRM may be a good fit. Having all of a business’s major software solutions operating within the same ecosystem can significantly reduce support, training, maintenance, and integration costs.

5. Has the company shopped around? CRM shoppers may wrongly assume that enterprise-ready CRM solutions developed by established companies all cost around the same amount for any given feature set. In reality, that couldn’t be further from the truth. As an example, the top versions of Salesforce and Microsoft’s Dynamics CRM offer a similar feature set at a substantially different base price: $195/month for Salesforce versus $59/month for Dynamics CRM.

Once a company has settled on its CRM solution, its IT department can take a number of steps to reduce its long-term CRM-related costs.

1. Excellent training from the start is non-negitable. Training takes time and money, but it almost always pays for itself again and again. There’s little worse than investing thousands of dollars on a CRM solution only to watch it sit unused by employees unfamiliar with it -- or even worse, used improperly by untrained employees such that it actually decrease business process efficiency.

2. CRM solutions should integrate with back office systems. Many CRM products offer little in the way of functionality once a sale is made. But CRM can be much more than this, especially with the advent of social CRM features that assist with continued contact and social networking between businesses and customers.

3. CRM solutions must be administered. While the maintenance and support costs of an SaaS CRM product are dramatically less than those of an on-premises solution, companies should still assign someone (or even a small team, depending on the size of the company) to administer its CRM system. This may not be a full-time job, but it’s still an important one, and will result in overall cost savings in the long run.

CRM Selection and Implementation Best Practices

CRM Selection and Implementation Best Practices by John Kolakowski at Green Beacon Solutions (29/09/11)

Below we’ve highlighted key strategies when considering a new CRM implementation or system enhancement:

Upper Management Sponsorship - If management doesn’t believe in the project, why should the employees? You can’t do that by yourself! Many times the difference between a successful CRM strategy and a huge waste of money is backing from the executive suite.

Stakeholder Participation - Once you’ve received executive sponsorship, and prior to developing your CRM strategy or selecting your CRM software, form a CRM team with key representatives from each department to make sure colleagues’ needs and concerns are addressed. Too often companies neglect to include the correct stakeholders, and the initiative fails to meet the needs of those tied to its results. Pick your CRM team wisely - everyone will need to own the customer experience. Remember when forming the team; consider people, process, and technology as all will be affected.

Determine Success Metrics - Define “critical success factors” (CSF) prior to the project’s kick off. Without these metrics, how will you know if your CRM program has been a success?

Define Business Objectives - Your CRM strategy must be designed with agreed-upon and prioritized business objectives and customer requirements in mind.

Customer Identification - Next, agree upon a definition of “customer” - the marketing department of an automobile company might consider a “customer” to be a dealer, but the call center might consider it to be a driver. Solicit consensus from stakeholders and confirm with upper management on this and other key definitions. Can you identify your customers across multiple touch points (retail, call center, mail, catalog, web and e-mail)

Customer Differentiation - Further identify your customers by defining segments - your high-value and high potential customers. Know who you want to serve. Understand what that customer wants? Prioritize. What is the customer worth and what is their potential worth to the company?

Customer Understanding - Now that you’ve identified and segmented your customers, understand what they want, and how they want it from you.

Customer Experience Goal Definition - Sense a theme here? You and your company are the users, but the solution is about your customer. Articulate the customer experience. How should their experience feel? Identify important business interactions e.g. high volume or high cost. Identify interactions that are important to the customer - high involvement and high perceived importance. Evaluate performance: How are these interactions currently handled by your company? Are there opportunities for improvement? Focus on hot spots: Identify the areas that require your greatest focus and will provide the greatest potential return.

Customer Strategy Integration - Today interactive marketing is a fragmented discipline in which marketers work with many different vendors to develop and execute marketing programs. Recognize that disparate databases of customer information prevent companies from gaining a holistic view of the customer throughout the organization. Break down those silos. Line-of-business (LoB) managers are often employing tactics that address products and not customers. That is because they are still looking at accounts on file, rather than at customer relationships e.g. banks that send two offers within a short time span – one that recommends consolidating their debt into a home equity loan and the other that offers a balance transfer for their credit card.

Define and Map Data Requirements and Standardize Data - You’ll need to know what customer data is necessary and from what system it will originate. See your customer through the same lens. A firm understanding of the level of customer data - account or household level - is critical. Do you plan to append external data? If so, what types: household size, income, psychographics, ZIP, real estate information etc.

Since various departments may see your customers quite differently from one another, use one integrated set of analytical data throughout the company to help make key decisions about how much to invest in a particular customer.

Create Customer Engagement Programs (i.e. by cycle: acquisition, growth, and retention) - Customer engagement is a process, not an event. Too often retention is treated as a project, rather than a guiding principle. Move your customers through the lifecycle… to maximize their value.

Collect Data - Collect and use information from each customer interaction to make your chosen customers more valuable to your enterprise. Can you identify behaviors, attitudes, needs, propensities, or intentions? Plan to clean your data regularly.

Monitor & Adjust the Customer Experience - Keep your eye on the prize. Measure the results against the metrics that you determined earlier and address the inevitable issues. Walk a mile in your customers’ shoes. Don’t rely on complaints from customers about how horrific it is to do business with you. Put yourself in their shoes by going through the typical customer experience. 

Evaluation & Purchase - Don’t buy what you don’t need in a CRM solution. The fewer bells and whistles, the less time and money you’ll need to devote to train internal and external users on the solution. People don’t like change as it is; keeping things simple only makes the switchover that much easier. And train early and train often.

Communicate - Evangelize your successes to the rest of the organization. Identify quick wins. Tackle the smallest, easiest task straight away and save the hard stuff for later. Success early on gets the ball rolling and motivates employees. Success can be contagious.