Have you recently implemented CRM software? Or you’re considering a CRM investment but don’t want to waste your money.
Utilizing CRM (effectively) results in a streamlined sales cycle, meaning the software offers a higher return on investment (ROI).
Some business owners can’t see past the up-front costs that come with CRM systems and fail to implement them correctly.
Hi, I’m AJ! I’ve used CRMs throughout my career, and using them correctly allowed me to sell my business for multiple seven figures!
How can you ensure your CRM solution provides a high ROI? I’ve compiled all the tips and tricks you must know!
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What is a CRM?
What is a CRM? CRM stands for customer relationship management software.
It allows businesses to store customer data, automate processes like sales pipelines and marketing campaigns, and analyze key metrics.
By integrating a CRM into your business operations, you can easily track:
- Customer relationships
- Sales cycles
- Lead scores
- Product launches
This helps you optimize the way you do things and only pursue the best leads.
What is CRM (ROI) Return on Investment?
CRM ROI measures the efficiency of your investment in the software. You can express this measure in dollars, but it’s calculated as a ratio.
For example, the ROI of CRM software is the ratio of earned income (resulting from the software) to the cost of the CRM.
A successful business has an ROI ratio of over 100%, meaning they aren’t losing money on the investment.
Also, it’s essential to understand that CRM ROI calculation differs from a payback period.
A payback period indicates the time it takes to recover the cost of your CRM solution.
What CRM System Metrics Should Be Used to Measure ROI?
It may surprise you to learn that there are several metrics you should use to calculate the ROI of your CRM solution.
I recommend using as many of these CRM metrics as possible to get the most accurate ROI for your business.
First, analyze your sales volume after implementing a CRM.
Have sales reps been able to close more sales throughout the quarter? Has implementing CRM resulted in higher dollar amounts per sale?
Check these figures before and after investing in CRM.
Time Per Sale
Another metric to observe is the time your sales team takes to close a deal.
Note the time it took sales agents to close a deal after implementing CRM, as this is a great way to tell if your sales process has become more efficient.
Number of Deals Closed
Looking into the number of deals closed since investing in CRM is a technique to measure how well your marketing and sales teams are working together.
When your marketing department sends leads to your sales team, are more deals being closed?
Again, comparing these figures before and after you implemented customer relationship management software is essential.
Sales Administrative Time
CRM systems should streamline and automate routine tasks, especially those related to administrative duties.
After implementing a CRM tool, analyze the amount of time your sales reps spend on selling and interacting with customers.
Your sales costs should decrease after investing in CRM because the sales department spends less time on administrative tasks.
An excellent benefit of using CRM is identifying where your leads are coming from.
Using this metric, you can track where your leads originate and pinpoint any weak spots and underperforming channels.
Net New Revenue
New revenue is another metric that helps you determine whether your CRM ROI is positive.
Analyze your customer relationships and determine if your team has been connecting and selling to new customers since implementing CRM.
Also, look for other new avenues of sales revenue, including subscription pricing and product or service delivery services.
Ideally, your CRM solution leads to more sales from current revenue streams and builds new techniques.
Upsell rates are an excellent way to analyze whether your CRM implementation costs are paying off.
Analyze your annual revenue and see if your business has sold more add-on or supplement products and services since enforcing CRM solutions.
CRMs help strengthen customer satisfaction and loyalty, making it easier to sell to your current customer base.
Customer Acquisition Cost
The last metric I’ve used for ROI calculation is customer acquisition cost. This metric tells you how much it costs to acquire a new customer.
Naturally, the more it costs to acquire a new customer, the less profit you make.
Ensure you determine the value of an individual and average customer to get the whole picture.
When you calculate customer value, you do the following:
- Guide decision-making processes using data
- Make the lead-to-sales process more efficient
- Prioritize sales reps’ time
How to Calculate CRM ROI
Now that you understand the metrics you need to calculate the ROI of CRM software, it’s time to show you the CRM ROI formula.
CRM ROI calculation takes time and effort, which deters some business owners from determining this data.
However, one of the best things I did to ensure my company’s CRM was helping my business processes and not hurting them was calculating the return on investment.
NPS: Net Promoter Score
You must use the NPS survey to determine the ROI of your CRM investment.
This survey is an objective measurement, showing you how your existing customers view you.
The NPS survey calculates customer satisfaction based on how willing your customers are to recommend your company to their friends, family, and others.
According to the data, NPS leaders usually experience two times faster growth than their competitors.
Cost Per Lead
The cost per lead metric shows how much your company spends on recruiting, marketing campaigns, etc., compared to the leads you receive.
Businesses have to spend money to make money; that’s non-negotiable.
However, your marketing team shouldn’t be spending more money on leads than the sales you acquire.
CRM technology helps balance this metric, ensuring you don’t overspend when finding leads.
Revenue Per Lead
Revenue per lead is a metric to determine if you want to improve CRM ROI.
Revenue per lead is calculated by taking the total revenue generated by leads and dividing it by the number of sales-qualified leads.
When I used CRMs, I completed this calculation every quarter, although some businesses do it annually.
If your CRM solution needs to improve your revenue per lead, it’s time to identify weak spots in your business processes.
Time to Recoup Customer Acquisition Cost
The time to recoup customer acquisition cost, also called the customer break-even point, measures how long it takes your business to earn back the money it spent to acquire customers.
This metric is integral to the CRM ROI formula because it shows how efficiently you and your team spend money to attract new customers.
Additionally, it shows your business’s ability to sustain its current acquisition strategies in the long run.
Marketing Campaign Effectiveness
After CRM implementation, it’s crucial to measure the effectiveness of your marketing campaigns.
There are many formulas to use when measuring CRM ROI. That said, several factors determine how well your marketing campaigns work.
Some of these factors include the following:
- Cost per lead
- Incremental sales (how marketing efforts contributed to sales)
- Campaign conversion rate (which marketing efforts generate your best customers)
- Customer lifetime value (total worth customers bring to your business)
Marketing data and customer insights are critical to measuring the ROI of CRM solutions accurately.
Customer Retention Rate
Not emphasizing and measuring customer retention rates was one of my initial CRM failures.
Experienced business leaders understand that customer retention is more crucial than trying to generate new revenue.
Focusing on retaining customers longer makes them more profitable, contributing to overall revenue.
The ROI of CRM software considers a critical factor because it shows how well your CRM implementation helps strengthen customer relationships.
Email Distribution Growth
The last CRM ROI metric you need is email distribution growth.
Email lists are among the most popular sales funnels, and tracking the growth shows how many new customers you attract.
A web-based customer portal and email list increases marking campaign engagement, tracks customer expectations, and helps boost sales.
Part of CRM cost is building email lists, so tracking email distribution growth is crucial in determining the ROI of CRM.
How Much Can a CRM Increase Revenue?
Learning how to use CRM effectively can lead to massive revenue growth.
Of course, the increase in revenue varies between companies because of several factors, including the following:
- The tools you use
- The current status and size of the company
- The type of products and service your company sells
- How much money your company spends on marketing
- The amount of data you have on sales forecasting, customer tracking, etc.
Regardless of these factors, CRMs are said to increase sales by 300%!
How can CRMs improve sales and generate revenue growth so effectively? When I utilized CRM technology, the tools that helped my company generate more revenue included the following:
- Automated marketing communication
- Automated data organization (no more manual data entry!)
- Weak point indicators in our sales processes
- In-depth sales pipeline tracking
- Customer interaction statistics
Basically, CRMs organize data and give you a clearer picture of business operations, leading to data-driven decisions that increase annual revenue.
Remember that the revenue margins won’t be as high in the first few years of using CRM. The initial training cost is typically significant, especially if you have several employees.
However, investing in these training costs is essential because it ensures you and your team use the software to its fullest potential.
How Much ROI Can You Expect from a CRM?
Are implementation costs really worth it? After all, how much can customer relationship management technology increase profits?
It may surprise you that the right CRM can significantly increase recurring annual revenue.
About ten years ago, studies proved that CRM implementation resulted in an $8.71 ROI boost for every dollar spent.
And current studies show CRM ROI rises almost $30 for every dollar spent. As you can see, learning how to implement a CRM system is worth the cost.
It’s essential to recognize that your company may not see an ROI of $30 for every dollar spent right away. CRM projects take time to learn and develop.
However, the total CRM cost is worth it in the long run, showing why you need to view this technology as an investment.
How to Maximize CRM ROI
You’ve seen how a CRM solution can potentially boost sales and revenue massively.
You’re probably asking, “How do I maximize my investment to get the highest CRM ROI possible?”
I’ve picked up a few simple yet effective strategies to maximize your ROI.
Let’s check them out!
Step 1: Define Your CRM Strategy
The first thing you and your team must do to maximize your ROI is define your CRM strategy.
A common mistake I’ve seen people make is purchasing a CRM and expecting sales and revenue growth to occur magically.
Remember, CRM software is simply a tool; it’s up to you to use it efficiently.
Ensure you and your team implement a CRM strategy. This strategy should include the following objectives:
- A clear picture of why your business is investing in CRM software
- A budget (annual software costs, training costs, integrations, etc.)
- A CRM timeline (how long will it take to implement the software?)
- Departments that will use the software (Sales teams, marketing, customer service agents, etc.)
Also, it’s essential to prep your business for the shift that comes with implementing CRM.
Ensure people know that new processes are coming and that there will be an adjustment period.
Most importantly, a CRM strategy helps your business stay on track and invest in the best CRM.
Step 2: Choose the Metrics You’d Like to Track
Step two is similar to the first; you must analyze what your company needs and which metrics you need to track to expand the company.
CRMs include numerous high-tech features. However, your business may not need all of these tools to succeed.
Identify the weak spots in your business.
Do you need help finding leads? Or does your marketing strategy need work? You may need to automate routine tasks and help your employees be more efficient.
To ensure my CRM met my company’s needs, I sat down with my team and heard what information they felt needed organization and better tracking.
I remember one sales rep bringing something to my attention that I hadn’t thought of before our conversation. This quick meeting saved me countless hours and money in the long run!
Step 3: Choose a Cloud-Based CRM
Some of the best advice I can give you is this: choose a cloud-based CRM!
Cloud-based CRMs include several advantages, including the following:
- You don’t have to maintain the software
- The hardware and infrastructure are stored somewhere else
- You don’t have to hire IT experts or webmasters
- The plans are very affordable
Cloud-based CRMs are typically more secure and affordable than in-house software. And they are a smarter choice financially for small businesses.
Step 4: Choose the Right CRM Integrations
One detail business owners love about CRMs is that you can integrate third-party services.
For example, say your business uses an email campaign software that contains thousands of data pieces. Rather than transfer this data to a new CRM, you can simply integrate the software.
Analyze the features each prospective CRM has before determining what integrations you need.
What can CRM integrations help your business with? The possibilities are almost endless.
Some of the most popular third-party integrations help CRMs with the following tasks:
- Drive automated marketing campaigns
- Automatically process payments securely
- Organize commission pay management
- Track sales estimates
- Communication client project details efficiently
- Accounting and payroll information
- Virtual or in-person customer support communication
Find a CRM that allows you to integrate the software you need for your business to thrive. Most CRMs have this capability, so don’t settle for one that can’t integrate your favorite tools.
Step 5: Start Tracking Progress Monthly
Lastly, if you want to maximize your CRM ROI, you must track your progress monthly.
Tracking progress monthly ensures you catch mistakes quickly, preventing an undiagnosed problem from continuing for weeks.
Also, tracking progress allows you to meet regularly with your marketing, customer service, and sales team and review goals, questions, etc.
You want to stay on top of how your employees use CRM and identify areas of improvement quickly.
Tracking your monthly progress helps your business stay on the right path and continually move forward instead of backward.
What Can an SMB Expect from a CRM?
A CRM can be a powerful tool for a small business.
It helps you organize customer contact information, track progress with leads, and even generate automated reports to provide data on the performance of your company.
Small businesses can expect several upfront investments of time and money. It takes a little bit of time to learn the program and get everyone on board.
However, making a plan before investing in CRM helps alleviate stress because you’ve accounted for training, trial periods, and monthly cost.
Basically, small business owners should expect a lot of hard work when they initially implement a CRM. But, after some time, they can expect high ROI, streamlined operations, and a better understanding of their business.
Wrapping Things Up
A CRM solution can result in significant revenue growth when you implement the technology correctly.
Several metrics like cost per lead, net promoter score, and customer retention rate ensure you measure the ROI of CRM accurately. And to maximize your return on investment, ensure you check your progress monthly and integrate the proper tools.
Now that you understand why CRMs are integral for business growth, it’s time for you to choose the perfect software.
Let us know in the comments section which integrations help your CRM function most efficiently!