Cost-Benefit Analysis (CBA) for CRMs: Key Insights

Not using a Customer Relationship Management (CRM) system for managing customer interactions, data, and business processes is now a dinosaur era behavior. However, the decision to implement a CRM system is not just about adopting new technology for a number of use cases; it is also about understanding the cost-benefit dynamics.

Why Conduct a Cost-Benefit Analysis When Choosing Your CRM?

A cost-benefit analysis (CBA) helps companies determine if the benefits of implementing a CRM outweigh the costs. It helps to unearth potential risks involved and have a clear understanding of the ROI.

Here are 5 important statistics you should know that indicate that CRM implementation benefits do outweigh the costs. Note that these numbers can act as benchmarks for the CBA for your CRM.

1. According to a Gartner study, the revenue of CRM businesses has increased by 393% between 2010 and 2020. This stark growth in revenue does reflect the benefits that the CRM platforms bring to the table.
2. CRM returns $3.10 per dollar spent according to a study published by Nucleus Research. This return is mainly for the use cases that help organizations to strengthen customer relationships, leverage enhanced productivity tools, and tap into superior analytics capabilities.
3. According to the 2023 CRM statistics by TechReport, 91% of companies with 10 or more employees use a CRM, and 92% of businesses say that CRM has helped them achieve their income goals.
4. 46% of customers will buy more when given a personalized experience according to the top customer experience trends in 2024 published by Forbes.
5. Marketing will continue to be the fastest-growing CRM software market with a combined forecast 15.6% CAGR from 2021 through 2026 based on Gartner’s Market Opportunity Map report.

While these are good numbers that solidify our confidence in modern day CRM platforms, it is still important to conduct CBA for your own business’ requirements.

How to conduct a Cost-Benefit Analysis for a CRM?

Set up a plan

Set clear goals about what outcomes you want after CRM implementation. Assign values to each outcome (including the non-tangibles) to build your own set of KPI metrics. This will make it easy to measure success and weigh the benefits against the industry benchmarks.

Understand Costs

CRM system implementation involves following types of costs:

Initial Investment

The initial investment in a CRM system includes a license fee for the software purchase or a subscription fee (if the CRM is cloud-based) and implementation costs. Subscription-based cloud CRMs typically have lower upfront costs compared to on-premise solutions. So, your CBA should first evaluate if you need an on-premise CRM or if a cloud-based CRM will meet the needs. You should also evaluate the need for buying additional apps that might be needed for integrating your existing tech stack with the CRM that you are evaluating. If you think you will need additional apps, then consider initial costs of those apps also.

Ongoing Costs

Ongoing costs include subscription fees for cloud-based systems, maintenance costs for on-premise solutions, and any additional costs for updates, training, managing the CRM, and technical support. Include the on-going costs of buying additional apps for integration with the existing systems.

Hidden Costs

Consider potential hidden costs such as data migration and additional customization. Some customizations can turn out to be costly. So, understanding what customization you’ll need with your CRM, is an important step in your CBA.

Analyze Benefits

CRM systems bring different types of benefits in the form of improvements in your processes – both tangible and intangible improvements. Estimate a monetary value for each improvement.

Enhanced Customer Relations

CRM systems offer a 360-degree view of the customer, leading to improved customer service and satisfaction. Ask your self what will be the monetary value that will be derived once the customer relationships are improved.

Increased Efficiency

By streamlining the sales process and offering better customer insights, CRM systems can lead to increased sales efficiency and revenue growth. Increased efficiency is also seen when other functions such as marketing and customer support are closely aligned with sales in order to grow and close more deals. Calculate the potential increase in sales forecast due to higher efficiency that you will achieve out of implementing a CRM system.

Improved Internal Communication and Collaboration

CRM fosters better communication and collaboration within teams. Improved internal collaboration in turn helps to provide improved customer experience through a customer’s buying journey. You might want to attach a monetary value to this aspect also and include it in the two benefits discussed above.

Improved Data-Driven Decision Making

With comprehensive data analytics, CRM tools enable data-driven decision-making, crucial for strategic planning and business growth. Consider how you want to attach a value to the agility that a CRM system will provide your organization for quicker decision-making due to a centralized data and reporting feature that provides you performance overviews almost on a daily basis!

Balancing Costs with Benefits

Finally, your CBA will be done right if you can balance the costs with benefits based on these factors:

Short-Term vs Long-Term Benefits

While the initial costs might be high, the long-term benefits, such as improved customer loyalty and increased revenue, often outweigh these expenses.

Customization and Scalability

Invest in a CRM that offers customization and scalability to align with your business growth. Any CRM that does not offer customization can stagnate your revenue growth and turn out to be a ‘sunk cost’ in case you need to switch to another CRM platform.

CRM ROI Calculation

Calculate the return on investment (ROI) by comparing the costs of the CRM against the measurable benefits it brings to your business. Use the KPIs that you would have identified earlier and weigh against the industry benchmarks. Don’t forget to consider short-term costs against the long-term benefits in your calculations.

Things That Will Happen in 2024 and Beyond…

A CRM system is not just an investment in technology; it's an investment in your business's future. By conducting a thorough cost-benefit analysis, you can ensure that your investment in CRM technology pays off in terms of improved customer relationships, increased sales, and better business decision-making.

From the statistics that I have shared above, we can say that CRM is only going to grow in importance, adoption rates, usage, as well as enter into many new industries, becoming a necessary tool not only for salespeople, but for marketers and customer support agents too.