Benefits of CRM Justifying Costs Staff

Updated · Jun 13, 2001

CRM industry spending will increase at a compound annual growth rate of 25 percent, from $61 billion in 2001 to $148 billion in 2005, according to research by International Data Corp. (IDC). The forecasted growth surpasses the expected budgets of the overall IT services market, which is predicted to show 12 percent growth from 2000 to 2005.

IDC found the bulk of the spending on CRM will be associated with outsourcing/operations management, which accounted for $32 billion in revenue in 2000. Spending in this area is expected to increase to $82 billion in 2005. CRM training is also expected to be a strong market, exceeding $2.9 billion in 2000 and growing to $11 billion by 2005.

“CRM's solid performance despite a weakening economy can be attributed to the business benefits and cost savings it generates for customers,” said Jocelyn Young, manager of IDC's CRM Services research program. “As companies need to justify their e-business investment, they will look to CRM solutions as a key means to increase e-business return on investment.”

A study by The Gantry Group also found that Internet-based CRM programs are rapidly gaining popularity, particularly among brick-and-mortar companies selling through stores, catalogs and e-commerce channels.

Of the companies who have not implemented an eCRM solution yet, more than 81 percent are planning to introduce an integrated eCRM program in the next 12 months. Of those who have a nonintegrated eCRM solution in place now, more than 91 percent plan to integrate it over the next 12 months, The Gantry Group found. Respondents also indicated that they are instituting eCRM programs to improve customer analytics in order to
improve margin and profitability, and are specifically seeking to improve customer retention and customer satisfaction via their eCRM solutions.

“One of the most interesting insights we exposed was that almost two-thirds of survey respondents clearly stated their interest in solutions that provide integrated eCRM that include data warehousing, analysis infrastructure, reporting and data mining tools for segmentation and list generation,” said Dawna Paton, managing partner of the Gantry Group. “There is no doubt about the value proposition of integrated eCRM programs now that the ROI of these solutions is being proven out.”

Somewhat surprisingly, the study also discovered that companies may not be spending their CRM dollars in the right place. Although monitoring an online call center is the second most important activity to all companies, and the most important to brick-and-click companies, it is only the seventh most often deployed tool within eCRM solutions in-house and eighth among outsourced.

Companies already using integrated eCRM applications have moved on to trying to better understand price optimization and precision merchandizing. On the other hand, companies without integrated solutions are trying to better understand more fundamental issues, such as lifetime value of customers and the impact of customer service on profitability. Companies with no eCRM in place at all are seeking the lowest level of information — namely monitoring user experience.

More than 92 percent of The Gantry Group's respondents believe in eCRM's ability to develop personal relationships that enable companies to match products and services to the individual customer, and more than 91 percent of respondents view their Web site as a critical part of their business model. Customer service profitability via eCRM programs has also become a major focus of companies hoping to gain a competitive advantage in the next year. These respondents also believe in eCRM's ability to improve customer retention and offer high-quality service to their most valuable customers.

Not surprisingly, companies that consider their Web site to be a critical component of their customer service and order tracking activities are more likely to engage in integrated eCRM than companies whose Web site objectives do not include customer service. Additional areas that companies are seeking knowledge include user experience, buying habits and precision marketing.

Reprinted from CyberAtlas.

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