Before You Invest in CRM Software, Assess Your Needs

Smart car buyers don't get a Ferrari when a Fiat will do. The same philosophy is true of CRM systems, which can be as utilitarian or as luxurious as you want them to be. The key is determining whether the extra features will improve profitability and business outcomes enough to justify their cost.

By David Taber
Thu, August 16, 2012

CIO — Making the business case for enterprise applications is usually fairly simple. But when you're looking at strategic CRM systems, it's a lot tougher. The cost side of the ledger is much simpler than the benefit side, but both depend on how sophisticated your goals are. It's like asking "What's the price of a car?" It depends on whether you're looking at a Fiat or a Ferrari—there's a wide range even though they're both made by the same company.

Business Case for CRM Depends on the System Design Target

As noted in the first part of this two-part series on buying CRM software, the concept of a design target has been around for decades, and it needs to be applied when trying to optimize your CRM investment.

The design target is the locus or centroid of the use cases and persona you are trying to satisfy with a system. Go back to the Fiat vs. Ferrari example. Both are gasoline-powered with two doors and a stereo, but that's about as far as the common ground goes. Essentially every element of each car is optimized for its target buyers, and the user goals are so different that no one would ever compare the two products.

The same idea applies to CRM systems. What you're looking for, what you'll pay and how much you'll benefit will vary tremendously. So, what is your system design target?

The Design Target for Sales Systems

For sales, the starting point is sales force automation (SFA). At the low end, this may be little more than a glorified contact manager, so for a minimal price you'll get some improvement in sales productivity and measurability. If this satisfies your business need, there isn't much point in spending a lot more. Your business processes may not be mature enough to use much more functionality, so minimal is optimal for you.

All that a simple SFA can really do, though, is increase your sales volume, not your sales profitability. In almost any business, the cost of acquiring a new customer is several times higher than the cost of getting the same revenue out of existing customers. If you can increase the loyalty and repeat business portion of your business, then you can change the economics of your business model.

To supercharge the revenue engine, a CRM system must be integrated with your ecommerce system, your channel partners, your online communities, and your social media accounts to increase the speed and depth of revenue capture. It also needs to have powerful analytics and models that provide early warning systems and mathematically solid forecasts.

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