The Message to CRM Vendors in 2004? Show Me the Money!

Because we have collected data on more than 2,000 CRM purchases made over the past three years, CSO Insights continues to get a lot of calls from companies planning to make CRM investments. They are trying to ensure they are getting the best possible price from the vendors they are considering.

During these conversations, I often drill into the process that they are going through to make (or not make) a CRM technology purchase. Looking back at 2004, I saw a lot of changes in the CRM marketplace, but one that really struck me was the change in buying patterns on the part of end-user firms.

In the heyday of CRM during the late '90s and into the year 2001, a lot of CRM purchases were made based on "gut feel": If we buy it, the benefits will come. Then the economic downturn hit, and CRM sales growth hit the skids in 2002 and 2003. In 2004, we saw a solid renewed interest in CRM technology, but the buyers were being much more diligent in their decision-making process. They wanted to know what the ROI would be for the project.

In the past, ROIs for CRM were, for the most part, very simplistic. Vendors would calculate how many minutes per day a sales rep, support rep or marketer would save by having easy access to information and then magically translate that into a productivity gain. Well, that is not cutting it anymore for most CFOs. They want hard dollar figures. Before they open their checkbooks, they want someone (translation: the vendor) to show them the money that will be coming in as a result of these purchases.

Getting down to business
What are ROI business cases looking like now? More and more of the purchases we tracked in 2004 focused on putting the vendor on the spot to show how its offerings would impact specific problems, such as improving lead conversion rates, getting new reps more productive more quickly, improving cross-selling/up-selling, decreasing order errors and eliminating billing errors.

To determine these savings requires the vendors to really take the time to understand their prospect's business: to look under the covers of how the end-user firm's sales, marketing and support groups are working and then develop specific strategies for how their applications will increase the effective of operations.

Are all the vendors successfully making this transition from selling features to selling benefits? For the most part, yes. But not all vendors are good at this, yet. However, with companies like Pivotal, FirstWave, Knowlagent, SalesNet, NetSuite, OneSource, MobilePoint, Dendrite, Involve Technology and NimbleFish leading the charge in making solution selling a reality, all vendors will have to get great at this in 2005, or they will not be competitive.

All of this is a very positive trend, in my eyes. Holding the vendor community accountable from the onset for quantifying the real business benefits their systems will deliver to a customer is what we should have been doing with CRM systems all along. My advice to firms looking to make new or add-on purchases in the coming year is fundamentally require your vendor to earn your money. If the folks there can't figure out in detail how their technology will optimize the performance of your people, the odds are you won't be able to, either.