How to Maximize Your CRM Spending
Updated · Jul 08, 2016
WHAT WE HAVE ON THIS PAGE
CRM systems are essential for many businesses, thanks to their ability to help companies establish and build relationships with current customers and prospects.
CRM is also getting easier and more inexpensive to use, experts say.
“The great thing about CRM is that the costs have gone down over time,” said Denis Pombriant, managing principal for Beagle Research Group, LLC. “Vendors have made it easier to install and have consumerized it a great deal. The applications look more and more like any good cloud applications. The user interfaces are appropriate to the jobs companies have to do with them. There’s a great ability to assimilate most of what you need [to learn] by osmosis.”
Still, companies want to spend wisely on CRM. As with any software, careful planning, evaluation of an enterprise’s true needs and good negotiating tactics can keep a lid on CRM expenditures.
Overall costs, initial and ongoing costs of hardware, software consulting, personnel and training all need to be part of the evaluation and cost comparison process said Rebecca Wettemann, vice president of research for Nucleus Research.
According to a recent SalesNexus blog post, the typical cost of implementing CRM for a 10-user team is about $17,600, with about 60 percent of the cost for vendors/consultants and nearly half of that for implementation. The biggest internal manpower cost is for selection, representing about 40 percent of the internal expense.
So how can you ensure that you get the maximum value from your CRM budget?
In this article, we cover:
- How to assess your CRM needs
- How to keep CRM customization and training costs under control
- Some tips for negotiating the best CRM deal
How to Determine Your CRM Needs
Determining your CRM needs should be the first thing you do, before evaluating the capabilities of any CRM system. Wettemann recommends taking a careful look at the enterprise’s own business to make an honest evaluation of its CRM needs now and in the near (three years) future.
“Build a value matrix. Determine the core functionality that you need. Just because a CRM system has low functionality doesn’t necessarily mean that it’s bad. You shouldn’t be paying for a Mercedes when you can get by just fine with a Ford,” she said.
On the other hand, the enterprise needs to determine if the “Ford” truly provides the needed performance. According to SalesNexus, half of CRM implementations fail to meet management expectations.
The SalesNexus blog post recommends separating “must have” and “nice-to-have” bells and whistles.
Hardware is primarily a consideration if a company is going to have an on-premise CRM solution, though that’s an ever smaller portion of the user base as an increasing number of companies move to cloud-based CRM. According to Gartner, 47 percent of total CRM revenues came spending on software-as-a-service in 2014. Most enterprises supply their workers with laptops or tablets powerful enough to operate cloud CRM software along with other business needs, Wettemann said.
“Software is a big area for variability in pricing, so there is a lot of opportunity to get discounts,” she added. “Think about the ongoing costs, not just the initial price.”
How to Control CRM Implementation Costs
To control CRM implementation costs, Wettemann recommends carefully checking a vendor’s references and paying attention to any clues during the negotiating phase to ensure that the vendor is focused on the enterprise’s success with the CRM system, not just on its billing and potential up-charges.
CRM customization is another area where enterprises can keep the lid on expenses or go overboard, according to Wettemann. “It’s really important to look carefully at your implementation partner. How much are they going to customize? How much customization do you really need? Depending on the vendor, those bills can add up quickly.”
Most of today’s CRM systems have much of what most enterprises need “out of the box,” according to Wettemann. So carefully determine if any customization is truly needed, she suggested.
Today’s CRM systems enable users to do much of any needed customizations themselves, eliminating the need for additional vendor fees for performing this work, Pombriant said.
Additionally, the more customization, the more complex the integration might be. So consider integration costs and whether those are part of the base contract or if this represents an additional charge.
The more intuitive a system is, the less training will cost, so the simplicity of learning the system should be among the considerations in system selection, Wettemann said. Enterprises can further limit training costs by following a “train the trainer” approach, with “power users” being trained and in turn training other users, she advised. “Having power users in different locations can prove to be very effective.”
The SalesNexus blog recommends group training sessions, including ones for remote staff, to minimize CRM training costs.
How to Negotiate for Best CRM Pricing
CRM vendors will use, among other techniques, business cases to sell their products to enterprises. Enterprises should use the same approach to seek better pricing from vendors, Wettemann said.
The end user should provide a business case and tell the CRM vendor that they need a certain price to get the ROI needed for the expected benefits, Wettemann explained. “Sharpen your pencil. Tell the vendor you need to hit this price for your CEO to sign off on it. There’s always room for negotiation in competitive situations.”
She also recommends looking at three-year contracts in order to obtain the best pricing. Vendors will tend to offer discounts to secure the customer for that length of time. Even if there is slightly better annualized pricing for a four-year agreement, those deals tend to be too long to be practical in today’s fast-changing technology environment, she said.
And a Word on CRM Vendor Stability
Another consideration for enterprises is whether the CRM system itself or the company behind the system will fail. As the SalesNexus blog post points out, enterprises should closely examine the vendor’s history of downtime for any cloud-based CRM solutions and should consult with other users about the stability of installed solutions.
In the past, an important consideration for any technology investment was the financial stability of the company behind it because a system would do little good if the vendor failed and could no longer provide support. While this is not much of a factor for today’s well established CRM vendors, Wettemann cautions that financial stability should be a consideration if an enterprise is considering a system from a newer vendor. Similarly, the enterprise should discuss the vendor’s planned system investments to ensure that the CRM solution can keep up with the evolving business.
By following good initial planning and needs evaluation, limiting customization, carefully planning training and using good negotiating techniques, enterprises can limit their CRM expenditures and increase their ROI.
Phillip J. Britt’s work has appeared on technology, financial services and business websites and publications including BAI, Telephony, Connected Planet, Independent Banker, insideARM.com, Bank Systems & Technology, Mobile Marketing & Technology, Loyalty 360, CRM Magazine, KM World and Information Today.