DSC Tech Library
Customer Relationship Management
This section of our technical library presents information and documentation relating to CRM Vendors and Customer relationship management software and products. Providing customer service is vital to maintaining successful business relationships. Accurate and timely information provided in a professional manner is the key to any business and service operation.
Telemation, our CRM software application, was built on this foundation. But the flexibility to change is just as important in this dynamic business environment.
Telemation call center software was designed with this concept from the very beginning.
That is why so many call center managers, with unique and changing requirements, have chosen and continue to use Telemation CRM software as their solution.
Our Telemation CRM solution is ideally suited for call center service bureaus.
The following is an article relating to the CRM industry.
ROI: Gateway To Implementation or Road Map to Success?
By: Glen S. Petersen, GSP & Associates, Inc.
It is Just a Number
Return on investment (ROI) is a financial calculation that indicates the degree to which benefits
exceed the investment for a given project or initiative. ROI is applied to initiatives that utilize
capital resources because unlike expenses, capital is used to acquire assets that have a longer
term impact that will either help or hinder the organization as it operates in the future. The
calculation of ROI is in the form of a ratio where benefits are in the numerator (top) and
investment/costs are in the denominator (bottom). By itself, ROI is just a number.
Within most organizations, capital is a limited resource; therefore projects and initiatives that
require capital must compete for allocation and approval. Historically, manufacturing and
facilities were the prime users of capital but increasingly, IT is moving to a very prominent level
(30 percent is not unusual) and therefore must compete for limited resources. Larger
corporations typically have a capital budget that identifies the potential recognized projects and
then when a project is ready to start, a detailed plan and ROI analysis are submitted to actually
release resources to the project. So the first hurdle for a project is to be included in the capital
budget; the next step is to gain release of the actual funds, which requires the details and
justification. The decision to proceed with a project is commonly handled by the most senior
level of management and at certain thresholds in investment, it may require board approval.
The Politics of Approval
Although the tools of ROI can provide rank order analysis, risk assessment, etc., it is still a
political decision that is subject to all of the foibles of human judgment. For example, it is not
uncommon for members of senior management to mentally benchmark the level of funds
requested to equivalent investments that have a relatively known return; for example, a
production line, warehouse space, R&D, etc. This mental benchmarking is very important
because if the ROI appears weak or marginal as compared to the mental standard, it could be in
trouble. Obviously the political influence of the individual backing the initiative is also
important. Certainly it is possible to get approval for an initiative with little more than an
emotional appeal from the right person, but is that what it is all about?
ROI as a Gateway
Clearly ROI is a key component of the right of passage of initiatives to get initiated. If ROI is
viewed as simply a number that is placed in an approval box, it may gain access to the funds but
all bets are off in terms of success. Consider this real life example. Not too many years ago, a
major manufacturer rolled out an extensive CRM system based on essentially the political
emotion of a senior vice president. The project alluded to an ROI but it was vague and certainly
not tied to specific strategies or metrics. Though the project team attempted to do a
conscientious job of implementing the system, it was never the less the impetus of the VP
driving the timing and commitment. The result was all to predictable, the organization resisted
the imposition of the system and the VP left the company leaving a legacy and project team with
a high cost system, little organizational support, and questionable benefits. Yet more road kill on
the highway to competitive advantage.
This example reinforces that it is possible to use pure emotion to get a CRM initiative through
the approval process but what has been gained? In today’s economic climate, all organizations
are emphasizing the ROI component of the submission and to that end; many CRM vendors are
offering ROI calculators. These calculators represent a positive sign in that they reflect the
vendor’s recognition that these applications must add economic value to the user organization.
The calculators also help user organizations think about the potential for their organizations to
improve performance. However, merely generating a number that meets the ROI level required
as a right of passage is likely to set the stage for failure. Why is this so? In Lewis Carroll’s
book, Alice In Wonderland, Alice asks for direction from the Cheshire cat. When the cat
inquires about Alice’s destination, Alice confides that she does not know. The cat then observes
that any road will take her there. To achieve success means that success must be defined and a
road map used to get there.
ROI as a Road Map
ROI is just a number but a properly developed and articulated ROI is based on a set of
assumptions relative to cause and effect relationships. These cause and effect relationships are
tied to a set of metrics that measure performance and the degree to which the cause and effect
relationships are working as predicted. The ROI road map describes how the organization is
going to leverage these relationships and how the effect is going to be measured (metrics).
Lastly, a senior executive signs on as the sponsor to ensure that it all happens.
In the past, most organizations have dealt with capital appropriations on a cost reduction and/or
avoidance basis. What makes CRM initiatives seem peculiar or somewhat less solid is the
inclusion of top line results that are hard to isolate or prove one way or another. Part of the
difficulty is that most organizations go from tactic or strategy directly to top line results such as
revenue and margins. Though this may have intuitive appeal it smacks as a very big leap of
faith. What is missing in many cases is the use of customer performance metrics. Customer
performance metrics link customer behavior to the top line financial drivers (revenue and
margins). Examples of customer performance metrics include new customer acquisition cost,
share of customer, customer profitability, etc. It must be realized that unless the organization
improves these key metrics, it is unlikely to experience competitive improvement. The customer
performance metrics become pivotal to the linkage of cause/effect relationships to the ROI.
Through the creation of appropriate metrics, senior management will gain confidence that it will
be able to track what is working and what is not. The size of the chasm becomes visible and the
leap of faith more reasonable a business proposition.
This approach provides a clear road map and defines success. Lacking such a definition, how
will you know you arrived? More importantly, lacking this definition, how committed will
senior management be if problems arise (and they usually do at some level)? CRM is littered
with failed and abandoned projects. One can only believe that the organizations did not
adequately assess the cost and/or define (or believe) what was truly at stake. ROI is certainly no
silver bullet but investing the effort to make it a road map radically improves one’s probability of
being on the winning side to the success statistics.
About GSP & Associates
GSP & Associates, Inc. is a consultancy that is dedicated to helping user organizations to
leverage their investment in CRM related tools. The company provides expertise in the strategic
and operational application of CRM tools, sales tools, sales process modeling, and business case
development and ROI analysis.
About The Author
Glen S. Petersen is an internationally recognized speaker, writer,
practitioner, and thought leader in the Customer Relationship
Management (CRM) and e-Business industries. Mr. Petersen has
held senior level management positions with systems integration and
end user organizations. As a visionary and early adopter of Sales
Force Automation (SFA), in 1986 Mr. Petersen led one of the first
successful national implementations of SFA in the United States.
Realizing the tremendous future of this new technology,
Mr. Petersen joined a SFA software start-up company in 1988 and had the pleasure of working
with many of the pioneering organizations that deployed sales force automation at a time when
most organizations were unaware of its existence. In 1991, Mr. Petersen left the vendor
community to do consulting. This experience combined with his background in operational and
strategic planning places Mr. Petersen in a unique position to advise and assist clients in this
challenging area of change management and technology integration. During this period, Mr.
Petersen has developed a number of proprietary facilitation techniques, which help organizations
to better understand the potential of these technologies, and how to rally the organization around
a single threaded, phased implementation approach. Prior to founding GSP & Associates, Mr.
Petersen was Senior Vice President at ONE, Inc. and Ameridata, a $1.3B provider of hardware,
software, and services. In these positions, Mr. Petersen sold and directed operational strategy
engagements and helped major corporations articulate and justify their CRM and e-Business
Mr. Petersen is the author of six books:
Mr. Petersen can be reached at 505-771-1956 or email@example.com
- High-Impact Sales Force Automation: A Strategic Perspective
- CRMS: ROI & Results Measurement
- CRM Leadership and Alignment in a Customer Centric World
- ROI: Building the CRM Business Case
- CRM Best Practices: Self Assessment
- Making CRM An Operational Reality