Determining the real cost of purchasing (or subscribing to) implementing and maintaining a Customer Relationship Management (CRM) system is undoubtedly a challenge. And that’s before you begin running the numbers on what the return on that investment in CRM will be!
And truly, that IS the point. Ultimately, the overall cost of the CRM should be only a fraction of the return you realize over time. That said, clearly those who sign the checks have a need to know how big the check is going to be. The following breaks down the various areas of “cost” related to CRM and provides some guidance on how to estimate the costs.
Yes, even the process of choosing a customer management system costs money! In fact, some companies spend literally years and thousands of man hours choosing their system. While that sort of drawn out process is not recommended, it is true that proper planning and organization of the “shopping” process sets the stage for success. In fact, historically, 50% of CRM implementations fail to meet management expectations. While that is improving in recent years, it’s important to know that making a good start of things sets the direction for the entire journey.
- Document requirements – This is the crucial step in the entire process. As they say,”start with the end in mind”. Because CRMs are so multifaceted, it’s very easy to get too focused on the wrong bells and whistles. There are multiple people with various roles and certain individuals or teams may love specific capabilities but, you should identify going in what are the “must haves” vs. the “nice to haves”. To see examples of how other companies have created their requirements lists, click here.
- Vendor discussions – you can probably identify one to three people on your team that will handle most of the vendor dialog. That will keep the bulk of your team from having to invest a lot of time in each vendor. Having clearly and thoroughly documented requirements will minimize this too. Just send your list to the vendors and see who can handle all of your must haves and focus in on them.
- Demos – You’ll probably find 3 to 5 vendors that fit your requirements and your budget and you’ll want to get in depth demos of each. Be sure that all areas of your team are represented and create a structure for each member to have a vote so you can choose a winner after it’s over.
- Internal meetings and debates – the primary mistake made in implementing CRM solutions is that management doesn’t take the time to get the end users (sales, customer service, marketing, etc.) on board. Ultimately they’re going to make or break the system. If they feel like they had no say in the selection, then they’re not likely to be thrilled. So, more internal discussion is a GOOD thing. Invest in soliciting input from all involved users and ensure that representatives of every department are involved in defining requirements, getting demos and planning implementation.
- Negotiations – believe it or not, negotiating with vendors can be quite time consuming. There may be multiple software vendors and multiple consultants. Insist on reading the terms of service from each vendor in advance. You cannot afford unexpected surprises!
Selection Cost: Estimate a minimum 96 hours of internal manpower for a team of 10 to 20 users.
Let’s be honest. Software vendors will always make it seem easy to setup and use their software. Some will tell you that you won’t need any help. You just logon and go to work. Others will tell you that you really must hire a “certified consultant” to configure things for you.
No matter the solution you choose and the level of difficulty of that solution, you are implementing software in your business that every customer facing employee will rely on in some way. That’s a big deal. The greatest risk is the disruption of the work that these people do. Done wrong, a CRM implementation can cost millions in lost productivity, poor customer service and even lost revenue.
The industry rule of thumb is that you should expect to spend $1 on consulting related to implementation for every $1 in annual subscription costs for a cloud based system.
Here are some examples:
- Data clean-up: You’ll probably be pulling together data from various sources. Multiple files from the sales team, others from marketing and still more from operations and accounting. There will be duplication across all of these sources and various bits of critical info to glean from each source. The costliest way to manage this is to have your admin assistant try to sort it all out in Excel. This just leads to sitting, staring at one row of data at a time trying to decide what goes where. And its so slow that by the time you’re finished, it’s all out of date. Identify the crucial pieces of data, their most reliable source and get someone skilled with databases and queries to put together a plan to bring it all together for you.
- Data migration: Once you have all your data pulled together, it’s time to load it into your new CRM. If you’re going to end up with just one big Excel file that needs to get loaded into the solution, then this should be easy with any system. However, it’s highly likely that to truly leverage the capabilities of your new system, you’ll need to load data into different “tables” within the system. The vendor or their trained consultants will need to help you understand what needs to go where. In addition, often, there are limitations on which tables you can add data to directly so, you’ll need their help with the actual loading.
Plus, the timing is crucial. All day, everyday, things are evolving with your customers. If the process of cleaning up the data and then migrating it takes too long, you’ll end up with a CRM full of out of date information. That’s no way to get started. Ideally, you’ll want to plan a process whereby you pull together the latest information from all of the critical sources, merge it all together and then load into the new system very quickly, just before you “go live” so the information is fresh and valuable to the users. That often involves going through the process at least once as a dry run to get all pieces lined up properly.
- Customization – This is the crucial piece. Out of box, one size fits all solutions are easy to get started with but, only take you so far. You’ll find that the cool looking dashboards that are built into systems are not quite actionable information for your team. There are little details about the way you run your business and the nature of your relationships with customers that make all the difference in the world. Your CRM needs to make tracking and managing those specifics easy. It’s well worthwhile to bring in experienced experts to talk with your team about core processes and make objective recommendations about fields needed, key processes to focus on managing and automating and key reports for management. There is an important balance between completeness and simplicity that must be struck. Too many fields and too many new procedures to learn will just overwhelm and turn off users. Sometimes a phased in approach is best where the 2 or 3 most valuable and common processes are all you worry about in the beginning and the you add to the CRM over time.
- Documentation of procedures – If you’re customizing the solution, then the vendor’s documentation is not going to cut it. You need very simple and easy to understand procedures documents for each process and each role.
- Integration – moving customer information between the CRM and the accounting system or other marketing, backend or operational systems is usually worthwhile. However, this often requires technical expertise that even many consultants don’t possess.
Implementation Cost: Estimate 40 hours of internal manpower and at least $5,000 in consulting fees.
Kicking things off with a good training session is crucial. Your team is busy and they’re just not going to stop what they’re doing for long to learn the new system. When it’s time to “go live”, you should have the “must do” processes clearly defined for each different type of user or role. They need to leave the training knowing how to do exactly what they are expected to do.
- Current Staff: clearly, you can get everyone together in one room at one time and go through the system but, unless everyone has exactly the same job, they’re going to need to see different things and having people sit through learning how someone else should do their job is not very productive. Plan to put together a few groups of users by role and train them on the specific processes they need to master.
- Remote staff: You can train remote users virtually but, you’ll still need to plan on grouping them into training sessions focused on their role.
- New Employees: Be sure you record the training sessions for all roles so that as new employees come on board, someone else doesn’t have to sit there showing them how to do all the little things.
Training Cost: Estimate 8 hours of internal manpower for coordinating and at least one hour per user plus $1,500 per on-site training visit by a consultant.
The greatest cost can be system failure. If you re-train your entire team to follow new processes that depend on your chosen solution, then your business comes to a dead stop if the CRM fails. If you’re choosing a cloud based solution, be sure you look closely at the downtime track record of the vendor. How often has the system been down in the last couple of years? What’s the average “outage” duration? If you’re choosing a software solution that you’ll run and maintain internally, talk with other users about their experience with stability. Budget time for proper maintenance of systems and databases to ensure downtime is minimized.
Downtime Cost: For cloud based solutions, take their downtime track record over the past year and use that to estimate the # of man hours your staff will lose. For locally installed solutions, budget a minimum of 16 hours per month for your IT staff to babysit servers, backups, software upgrades, etc.
What will it earn?
In case all of the above has gotten you squeamish about the whole project, don’t worry. The fundamental principle should be that your business will earn far more than all of the costs associated with CRM. Increased sales, longer customer lifetime, higher lifetime value per customer, higher customer satisfaction and more should all be the results of this endeavor! For an in-depth look at how to estimate the return on your CRM investment, stay tuned! We’ll be releasing and article very soon!