ROI Metrics for Software (and Beyond)

Carol Smalley
Managing Editor, CRMGuru
Member

Posted 11-Mar-2003 08:38 AM
Currently our company does not have any established metrics. After we implement our CRM system, it would be wonderful to have measurement tools for the future. I'd appreciate any suggestions of standard (or not so standard) software industry metrics used. I do understand that it really depends on our individual company needs, but I thought this would be a good place to start.

Thanks,
Nikki Casale

EDITOR'S NOTE: Discussion on CRM ROI beyond the software component is encouraged!

Carol Smalley
Managing Editor, CRMGuru
Member

Posted 15-Mar-2003 03:44 AM
NOTE: Posted by Editor Carol Smalley on behalf of Regis Verliefde [rverliefde@warmlyyours.com]

Dear Nikki,

Not only does it depend on your company needs information-wise, but also does it depend on the size of your company. Needless to say that in the small company I work for, Excell spreadsheets are still present.

And I guess they should, but only as an intermediate to final results.

Most softwares will include their own analytics. Of course in need for some customization. The OnContact software we use for instance enable us to analyze general data. From there, for further analysis, the best way is to use a bit of SQL programming and export data in a software like Crystal Reports. And from there, publish it on the INtranet. That's what we do.

When we need to know how many mailings we sent this month, the CRM software will do. But when we need to know how many projects were started by the people that recieved a mailing, and what are the sizes and potential sales, you need a bit of programming.

Software use "tables" gathering the data and that you can combine to obtaine cross-table results when you need specific reports.

Hope that helped.

Posts: 301 | Location: Upstate New York, USA | Registered: 24-Jan-2003 Reply With QuoteEdit or Delete MessageReport This Post
Ignored post by Carol Smalley posted 15-Mar-2003 03:44 AM
Carol Smalley
Managing Editor, CRMGuru
Member

Posted 15-Mar-2003 03:48 AM
NOTE: Posted by Editor Carol Smalley on behalf of Justin Roff-Marsh [justin.roffmarsh@ballistix.com.au] during discussion forum test phase.

Your question is based upon the assumption that you can apply a standard set of metrics to your organisation. This is not possible.

What is possible, however, is to apply a standard approach to the creation of your own management system.

To appreciate this, first consider some process dynamics (drawing on The Theory of Constraints):

1. The output of any process is determined by the volume at the process constraint (or bottleneck).

2. At any one point in time, any process will have just one constraint. (In a well managed process, this constraint will stay in the one place!)

3. Only changes in constraint volume will have any impact on process output. For this reason, all management decisions should be made with reference to their impact on volume at the constraint.

So, if all management decisions should be made with respect to constraint volume, this should be your global performance indicator. Specifically, this KPI should be 'Gross Profit/Unit of Constraint'.

Here's an example.

Let's assume that your sales process consists of a marketing coordinator (whose job is to generate sales opportunities using promotional campaigns), a sales coordinator (whose job is to schedule appointments into a salesperson's diary) and a salesperson (whose job is to do those appointments).

Your first challenge is to identify the process constraint. In this example, this should always be your salesperson. Obviously, your process will make more money when your salesperson is operating at full capacity, than it will when either your marketing or your sales coordinators are working flat-out. (It is a statistical impossibility for all three individuals to operate at full capacity.)

If your salesperson is your process constraint, this tells you that your KPI should be '$GP/Available Appointment Slot (AAS)' (an appointment slot is a salesperson's unit of constraint).

Now, every management decision should be made based on its likely impact on $GP/AAS.

You can increase this number by ensuring that:

1. Every available appointment slot is filled (that's the sales coordinator's job).

2. Maximising the quality of the sales opportunities that provide those appointments (that's the marketing coordinator's job).

This provides you with your secondary performance indicators:

1. Sales coordinator: Utilisation Rate (the percentage of AAS that are scheduled)

2. $GP/Appointment Conducted

Of course, this same thinking can be applied to any process.

Hope this helps

Justin

Tom Lacki (Carlson Marketing Group)
Member

Posted 25-Mar-2003 09:36 AM
The objectives of measurement in a CRM context are typically twofold. First, to document that change in a set of business performance metrics has occurred; and second, to establish causality: to demonstrate that the investment in CRM is responsible for the observed changes. With these objectives in mind (and using the analogy of a 'gauge' or 'dial'), the questions to be answered are three in number:

(1) What are the 'needles' of interest? Stated differently, what is the collection of metrics to be included within the business case? Which indicators, if positively influenced, will be indicative of success? Is there organizational agreement on the answer to this question? Does the set of indicators holistically represent the dimensions not only of financial growth and profitability, but also brand (e.g., awareness), employees (e.g., retention), customers (e.g., cost per new customer), and operational considerations (e.g., service time)? Answering this question involves the creation and approval of a formal and written measurement plan that specifies the data required for establishing and monitoring the business case, including marketing inputs (costs) and business outputs (revenue) to permit the calculation of ROI

(2) Did the 'needles' move? Answering this question involves establishing the tracking and monitoring processes to identify change over time.

(3) Did our CRM marketing initiative(s) cause the 'needles' to move? In other words, how confidant are we that the observed changes can be attributed to our marketing interventions (versus, for example, economic or competitive influences)? Answering this question involves issues of experimental design and statistical analysis.

These questions, while often not easily addressed, may collectively serve as the base of an approach to achieving CRM measurement.

As Grace Hopper (Admiral, U.S. Navy; 1906-1992), once said, "One accurate measurement is worth a thousand expert opinions".

Tom Lacki, Ph.D.
Sr. Director, Knowledge Management—Worldwide
Carlson Marketing Group