I recently read a report from Nucleus Research that said:
“With a return of $5.60 for every dollar spent, investing in CRM is a no-brainer. Further, that investment has significant staying power. As vendors add social, marketing, analytics, and mobile access capabilities to their offerings, organizations have an opportunity to gain even more returns from CRM”
Even though there has been quite a bit of research done over the past decade on the ROI of CRM, I still get brought into many conversations with organizations trying to determine whether it is worth implementing their initial CRM program or even continuing to upgrade the CRM they are currently using. Well, the fact is when CRM is done right, the ROI can be significant. In my career I’ve implemented dozens of sales process improvement programs for companies that have benefited from improving the way they sell through the use of technology.
In order to illustrate the true ROI on these improvements, let’s look at a study done by Pace Productivity, a time management consultancy, which shows how a typical sales person spends their time.
Although the study was done several years ago, I think it still makes an interesting baseline for our conversation on CRM ROI. In the study it shows that a salesperson spends approximately 23% of their time in direct sales activities. I’ve always found this interesting, as it seems a sales rep spends very little time actually selling in relation to their other supporting activities. It’s true, most sales people are really only measured on how much they sell. Well, let’s take a closer look at what the “23%” means for the typical sales person – he/she spends all day Monday and up to 11 AM on Tuesday actually selling. After 11 AM on Tuesday they go into a sales support mode. When we bring these types of numbers forward to most organizations they are horrified to see how little time is actually spent selling. So if we look at our CRM projects from a sales process improvement and time management perspective, we can clearly start to gather significant ROI. Now let’s take that 23% of selling time and attach a sales number to it. In an example I like to use, we’ll say our sales rep sells $1 million in product per year. That would mean that for every one percent of the time they spend selling, they generate $43,478.26 in revenue. Therefore, every percentage of time that can be diverted from non-selling activities to selling activities should generate the same value. The chart below reflects the revenue gained through capturing more sales time.
23% selling time = $1,000,000.00
30% selling time = $1,304,347.00
40% selling time = 1,739,130.00
I think, using this type of ROI calculation clearly shows how Nucleus Research can state that there is a significant benefit for every dollar invested in CRM. Our example, however, only shows the benefit of the diversion of non-selling time to selling time. What would these numbers look like if we were able to improve the sales process and closing percentages through better follow-up and information management?
Let’s look at how these metrics may affect a subsection of CRM known as PRM or Partner Relationship Management. Through my work with Adxstudio, the leading provider of PRM Portals for the Dynamics CRM market, we have discovered closing percentages can be increased by improving the way opportunities are managed together with your partners. Through the use of a PRM Portal companies are better able to measure the following metrics:
Lead management – when we can more easily share lead information with partners we begin to better analyse and understand the quality, quantity, best source and the closing ratios on these leads. We can also better plan the best method of follow-up and any team selling activities. For example a trade show lead could be distributed to a partner and at the same time, through a workflow, be added to a follow up campaign to be invited to an educational webinar. If the lead registers for the webinar another workflow could be triggered to notify the Partner.
Opportunity management – as the leads get converted to opportunities we find companies that use Partner Portals become more proactive in the coaching of their channel partners and helping them get the right resources they need to bring the opportunity to closure. An experienced corporate rep can coach a partner on the best practices for moving an opportunity to the next stage. As well, the scheduled follow ups by corporate reps using CRM will stop any opportunities from falling through the cracks due to non-activity. These types of follow up reminders can be shared automatically through workflows and the PRM Portal.
Competitive intelligence – If a corporate rep has a view of many competitive opportunities across a number of territories they can begin to build better success strategies. Once we are able to share information with our channel partners we can get a clear picture of who we are competing against. By better understanding the competition, we better understand how to improve our positioning and pricing models. This will allow your sales team become more of a sales coach which will help lead to closing more opportunities. Using a PRM Portal to gather competitor intelligence across many opportunities can also have a huge impact by letting you better understand how to best compete against your adversaries. You will better understand which resources in our organization have the right abilities to beat the competition. Again, through CRM and the Partner Portal you can align these resources with the right Partner opportunities.
So what’s the real ROI on being able to better manage Partner opportunities? Well, as stated previously, since sales is really a numbers game we’ll use another example as a demonstration. For example, let’s say we had 100 opportunities in our partner pipeline with a closing rate on those opportunities of 20%. If each one of those opportunities was worth $10,000, then the value of this pipeline would be $200,000. So let’s assume now through the use of our PRM Portal we have better intelligence on these opportunities and are able to better coach our Partners and align the proper resources required to win this business. In doing so with these improved techniques you are able to improve the closing percentage from 20 to 30%. This would have a significant impact on our revenues. In fact, changing your closing percentage from 20 to 30% on these opportunities would actually increase the sales in this pipeline from $200,000 to $300,000. In other words, an improvement of 50% on overall revenue. It has been my experience that any time we can fine tune and tighten up a sales process we can get substantial ROI for our efforts.
What I’m trying to illustrate here is that it is not simply the CRM software or PRM Portal that’s going to give you a significant return on investment. It’s the improvement of processes and the ability to better manage relationships with your customers, partners, and prospects that will impact your business in a very positive way.