Fast Return on Investment (ROI) in Mid-market Customer Relationship Management (CRM) Solutions

by Interact Commerce Corporation

www.saleslogix.com

by Interact Commerce Corporation

Fast Return on Investment (ROI) in Mid-market1

Customer Relationship Management (CRM) Solutions

Table of Contents

Fast ROI Defined for CRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

The Importance of Fast ROI to Mid-market Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Applying Fast ROI Goals to CRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Components of Fast ROI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Individual ROI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Ease of Customization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Ease of Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Effective Training & Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

About SalesLogix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10SalesLo

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Fast Return on Investment (ROI) in Mid-market1

Customer Relationship Management (CRM) Solutions

Fast ROI Defined for CRM

Historically, you could determine the ROI of your sales force automation (SFA) solution by the increase in sales.

But, as SFA evolved into CRM—adding marketing, customer support, and e-business components—ROI became a

concept largely discussed in nebulous and complicated terms.

Not that ROI in CRM has become so immeasurable. But it IS hard to measure the short-term benefits of marketing,

customer support, and e-business—of “making customers happy.” Yet we persist in trying to find suitable measures

for customer retention and loyalty at the expense of measuring ROI that can be acted on quickly.

But the recent demise of many dot-com companies strongly points to a need to measure ROI now—today—to make

the best decisions to effectively run your business for the future.

So, until the tools to accurately measure satisfaction and retention become available, the single most compelling

measurement of ROI is increased sales. For most mid-market companies, sales IS at the center of your business.

And the ultimate goal of CRM—sales, marketing, customer support, and e-business initiatives—is to sell more.

CRM helps you to tie all of your pre- and post-sales activities together to increase revenue:

• Marketing wants to increase quality leads at the very top of the classic “sales funnel.”

• Sales wants to take those leads and use shared knowledge to close sales and turn prospects into customers.

• Support wants to help those customers buy again and again while gathering additional customer information.

Increasing the number of quality leads helps to close more sales. Combine that with lower customer acquisition

costs and you’ve increased revenue.

Thus, Fast ROI—the critical first step in an overall CRM strategy—is the time it takes for your company to recoup the

cost of its CRM solution through increased sales. It provides immediate value to help you make better decisions now

while enabling long-term results and lowering your risk in the future.

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The Importance of Fast ROI to Mid-market Companies

Mid-market CRM goals are typically to increase revenue and profitability, leverage new and existing channels, increase

customer loyalty, and gain competitive advantage and market share.

To do this, mid-market companies must constantly keep time-to-market and subsequent sales cycles on razor sharp

quarterly deadlines. And introducing automation that disrupts productivity can have permanent negative effects on

the organization.

Therefore, any automation initiative must give your organization a real productivity benefit that far outweighs the

costs of disruption. That is, the system must be implemented fast enough for users to readily accept and use the

system with minimal training.

Mid-market businesses, however, spend an average of 5% of their budgets on information technology (IT) initiatives—

compared to 14% for larger companies2. Because resources are more constrained, mid-market companies have higher

expectations for what they get for their dollars.

Mid-market companies also wrestle with one or more of the following issues. They often:

• have little business process automation infrastructure;

• need to improve productivity, streamline internal business processes, and use employees better because of

increasing competition;

• demand real-time reporting to react to fast-changing market dynamics and to support strategic decision making;

• face escalating price pressures that result in growing margin pressures;

• are forced to manage profit margins, reduce risk, and develop new business—resulting in a need to capture

and reuse intellectual capital;

• need help managing a distributed workforce and client base; and

• need to manage increasingly complex workflows including third-party partners and independent contractors.

Mid-market companies also have difficulty quantifying the “soft” benefits of CRM. For example, increased customer

loyalty is difficult to quantify in increased revenues. To do it, your company must know:

• The extent of customers switching vendors;

• The rate of entry of new customers in the market;

• The percentage change of new customers that are attracted to your company; and

• The percentage of customers leaving the market.

Determining this data in a fragmented mid-market is difficult at best. The mid-market company is struggling to

create customer service processes and trying to measure results against relatively few benchmarks. Often, it is

easier to think about the costs of not having good customer service.

Applying Fast ROI Goals to CRM

Fast ROI in CRM means using a cost-effective solution to increase sales in the shortest time possible. CRM

expenditures cannot drain your company’s near-term goals. Yet the CRM solution must have the functionality to

greatly enhance productivity.

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The faster you can increase sales with your CRM solution, the faster your organization can attribute bottom line

results to that solution. Other CRM components—marketing, customer support, e-business—contribute to overall

ROI. But Fast ROI is critically dependent on sales.

This dependence on sales makes it imperative for employees—especially salespeople—to accept the CRM solution.

And the system must be fully up and running as quickly as possible for this to occur.

Enterprise vendors have consistently failed to provide Fast ROI to mid-market companies. Through 1998, as the

“Big Four” enterprise resource planning (ERP) vendors (SAP, Baan, Oracle, and PeopleSoft) attempted to sell to the

mid-market, its customers found a mismatch:

“Big Four systems are associated with a host of evils: high prices, difficult reengineering, lengthy

implementations, ruinous service-to-software cost ratios, inadequate support and training. No CFO

of a mid-sized company is anxious to see expensive ERP consultants setting up shop in the corporate offices…

And when you ask the Big Four why a middle-market company should prefer them to one of the many

fine middle-tier ERP vendors, they recite a familiar trio of reasons: superior functionality, leading edge

technology, and, perhaps above all, scalability.” 3

That enterprise CRM vendors fail to deliver in the same ways as their ERP counterparts is no surprise. With little

or no understanding of mid-market businesses, enterprise CRM vendors treat those customers exactly like their

Fortune 500 customers—as if they have time and money to burn.

Components of Fast ROI

Individual ROI

Individual ROI is the most important component of Fast ROI. If users do not believe they are getting anything

out of the product compared to the time spent training on and using the software, they’ll: (1) not use the product,

(2) enter minimum data, or (3) enter poor data.

With any of these three results, analysis will not be accurate. Corporate knowledge will not be increased. Turnover

of salespeople who refuse to use the tools may even increase. And company ROI will suffer. It’s “garbage in,

garbage out.”

To increase user acceptance—and achieve Fast ROI—mid-market companies require:

• A user-friendly product that gives the management team solid data to make effective decisions;

• An intuitive, easy-to-use product that minimizes the learning curve;

• A product that can be easily customized to meet business needs;

• Relevant product features that speed up the time required to complete routine tasks; and

• Minimal user training or self-training to maximize efficiency.

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Ease of Customization

For Fast ROI to occur, mid-market companies need flexible tools to customize the solution to existing sales

processes—not a complicated re-engineering process that disrupts the business for months or even years.

To keep implementation time to a minimum, the product must have software development tools that:

• Can be used by either a dedicated or a non-dedicated system administrator, and

• Allow the system administrator to change the CRM solution on the fly to address new business issues

and processes.

When it’s easy to make changes to the application without a team of expensive outside consultants or programmers,

Fast ROI is more easily realized. For longer term ROI and low total cost of ownership (TCO), you can adjust the

system to changing needs based on the IT resources in your organization.

Ease of Integration

To provide a closed-loop, customer interaction cycle, mid-market CRM solutions need to integrate seamlessly with

back-office applications such as finance, manufacturing, and order entry.

But while back-office integration catches the most interest, it’s only one of several integration issues that

the CRM solution must address. For Fast ROI to occur, it must also address:

• “Anytime, anywhere” connectivity: The system must have an architecture that allows for telephony, wireless

communication, faxing, e-business security, handheld PCs, and e-mail.

• Vertical solution integration: Rather than force them into rigid “industry-standard” templates, mid-market

businesses need business partners with industry-specific knowledge who can fit the CRM solution to specific

business problems.

• Application service provider (ASP) or hosted solutions: Within a hosted environment, the solution must scale

to accommodate large numbers of users without client administration. And, since the “one size fits all”

approach does not work for most companies, it must also be flexible enough to customize to specific

business processes.

Thus, Fast ROI demands that the solution has (1) a modular architecture to accommodate all integration issues,

and (2) tools to quickly roll out new functionality and customizations as the mid-market company experiences

rapid growth.

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Effective Training and Support

Simple yet flexible CRM solutions will inherently minimize the training and support required to manage the system.

The more complex the system, the higher will be training and support costs. For Fast ROI to occur, CRM solutions

must provide:

• Flexible training options including training on demand, and

• Options for corporate and local partner support.

During implementation, administrators need appropriate user training from the CRM provider and affiliate.

After implementation, administrators need support to get the organization off “training wheels” and back to full

productivity. Timing is critical. If users get frustrated in the first 30 days, they will not perceive the system as

valuable and Individual ROI may be impossible.

Mid-market companies also need a local partner to help them assess their technology needs, implement the

technology, train their staff, and be there immediately when a problem occurs. Since larger service providers are

not typically organized in this way, many mid-market companies experience frustration when using those larger

service providers. In fact, a 1999 Whittman-Hart study found that only 54% of mid-market companies were satisfied

with IT implementations—compared to 80% for Fortune 500 companies4.

Conclusion

Unlike large enterprises, mid-market companies often do not have the time or the resources to implement new

business applications. Yet they’re more susceptible to competitive pressure and growth expectations than their

larger counterparts—making their CRM needs even greater.

Getting Fast ROI in a CRM solution allows the mid-market company to start enhancing productivity prior to the

next quarterly announcement—without disrupting the company’s current operations or draining financial or

human resources. It is an effective catalyst in propelling a company's overall CRM strategy, with some short-term

results complementing long-term gains.

CRM solutions that provide the four components of Fast ROI—widespread user acceptance, flexible customization

tools, easy integration, and effective training and support—provide the greatest value and will give mid-market

companies the competitive edge.

Notes

1 While there are numerous definitions for “middle market,” most major analysts agree that middle-market businesses includethose with revenues of $10 million to $1 billion and between 10 and 1,000 employees. Estimates indicate that there are some 225,000 businesses in North America and 1 million businesses worldwide that meet that definition.

2 Hammond, Mark. “Is the mid-market ready for ERP?” eWEEK, January 29, 1999.

3 Teach, Edward. “Wooing the middle market.” CFO Magazine, September 1998.

4 “Whittman-Hart Middle Market Monitor," CIC Research, January 15, 1999.

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ABOUT SalesLogix, by Interact Commerce Corporation

Interact Commerce is the leading relationship management software provider for small, home, and mid-market

businesses. Its easy-to-use products include mid-market customer relationship management (CRM) leader SalesLogix

used by more than 3,300 businesses; and best-selling contact manager ACT! used by more than 3 million professionals

and 10,000 corporations.

Its easy-to-use products implement fast for anytime, anywhere access to critical information. SalesLogix integrates

with leading back-office software for a complete view of the customer. Distributed and sold in 67 countries worldwide,

SalesLogix and ACT! dominate the high tech, real estate, financial services, manufacturing, marketing, and consulting

industries. Its headquarters is in Scottsdale, AZ.

SalesLogix is a registered trademark of Interact Commerce Corpporation. ACT! is a registered trademark under exclusive license to Interact CommerceCorporation by its owner, Symantec Corp., in the U.S. and other countries. ©2001 Interact Commerce Corporation. All rights reserved.

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by Interact Commerce Corporation8800 N. Gainey Center DriveScottsdale, AZ 85258 U.S.A.

✆ 1.800.643.6400

www.saleslogix.com 13RI40XXWP01