Maximizing and Measuring the ROI On Your CRM Investments

1. Maximizing and Measuring the ROI On Your CRM Investments Tom Spitale Principal Peppers & Rogers

2. CRM: Attempting to Cross The Chasm Between Visionaries to Pragmatists • Geoffrey Moore wrote how high-tech companies fail and succeed in crossing the Visionary - to – Pragmatist “chasm” • CRM – a strategy enabled by high-tech – is in the critical crossing the chasm period

3. … and move it over time The Message That Some Visionaries Missed: Measurement Discipline Number of Customers Picket Fence Mass Marketing CRM and 1to1 Marketing Customer Value

4. Agenda • Convincing the Pragmatists • The Truth about CRM ROI • How CRM ROI Is Measured Today • Tools, Techniques and Tips For Measuring Impact • How CRM ROI Will Be Measured In The Future • Maximizing CRM ROI: The First Mover Advantage • Why You Must Turn Your Pragmatists Into Visionaries To Really Win This presentation is for Visionaries in Pragmatist firms, software marketers selling to Pragmatists…and Pragmatists themselves!

5. First Step To Convincing Pragmatists: Replace the Hype With Facts • Over 70% of CRM Projects Succeed • CRMGuru.com studied 600 CRM-implementing companies • Biggest predictor of success: a comprehensive, specific CRM strategic plan • Failures are “self-inflicted” • Other key success factors: • Line-level training • Organizational/executive support • Setting measurable goals (measurement discipline) • Bottom line: No “gain” without the “pain” • But that’s what will make successful CRM a differentiator • Our experience: Without the metrics, many abandon ship due to the pain Source: “The Blueprint for CRM Success”, 2002 study by Caribou Lake Customer-1, CRMGuru.com and Mangen Research Associates

6. Results of PRG In-Depth Study of 15 CRM Implementations: 32% Average IRR But these companies are just getting started on the path of CRM

7. The searchCRM/PRG ROI Measurement and Effectiveness Survey Survey Was Still “Open” at Time of Slide Publication Tom Will Summarize the Results To You Now…

8. Customer talks with you Save me time FEEDBACK You tailor your product, service or interactions • The more effort customer invests, the greater • their stake in making relationship work • Going to a competitor = reinventing the relationship Treating Different Customers Differently: The Learning Relationship

9. don’t know customers know transactions know history know preferences Identify Differentiate treat everyone the same by value only by value then needs by enhanced customer needs talk at customers talk with, but forget talk with, remember feedback loop Interact one size fits all some choice customize some mass customize Customize Typical Status of a Thus-Far Successful CRM Initiative

10. Result From Improving the Customer Experience En Masse Through 2003, achieved benefits have been 78% on a $3.7M investment. Projected ROI, through 2005 is 122%

11. Expected Results When Treating Different Customers Differently • Entertainment industry client needed to determine the financial impact from implementing CRM software solution • Result: 78% ROI realized; anticipated 122% ROI through 2005 • Impact realized without significant changes to customer treatment • Additional analysis uncovered opportunities to increase contribution or decrease costs by applying customer valuation and needs strategies • Conservative estimates at $1 million per year • Aggressive estimates at $2.5 million per year • If implemented for one year, these strategies could increasethe realized ROI between 50-95%! Our Conclusion: It’s Better Than We Even Thought It Could Be

12. How To Conduct a CRM ROI Analysis • Today’s limitations to measuring CRM ROI: • Lack of company history in measuring impacts to customer equity • Lack of baseline data • Very little industry data to provide benchmarks • Two critical needs: • Facilitation • Historical and Benchmark Data • Facilitation leads to credibility of the ROI result; historical and benchmark data is nice if you can get it! • Get cross-functional executives to participate

13. Getting The Executive Team To Participate • Study will be useful in internal communication efforts and in continuing CRM buy-in and momentum-building within the organization (remember, no gain without the pain) • Sets actionable metrics for your CRM program going forward • Provides validation for moving forward and can uncover specific areas of new CRM opportunity

14. 2% 17% 16% 17% 43% 5% Licenses Add'l SW HW Vendor Cons. Other Cons. Training Full Disclosure: Counting All of the Costs Total $3,707,179

15. Next Step: Identify metrics and “data owners” Acquire Acquire Grow Grow Retain Retain Marketing Marketing Sales Sales Service Service

16. The Nuances of Tracking Cost Reduction Metrics Gains in Working U.S. Credit Backlog Because Quotes are Handled Faster

17. Tracking an Increased Revenue Metric: Campaign Efficiencies/Effectiveness • 2002 Total Touches (outbound campaigns) = 671,000 • 2003 Total Touches = 1,138,381 • Increase in outbound touches = 467,381 • % impact on sales (1/200) = 0.5% • Total incremental yearly sales = 2,337 • Avg. product profit = $7,927 • Total Benefit = $18,524,646 • % due to CRM = 10%

18. The 1to1 Metrics Database: Bounding Assumptions In Reality • 1to1 Metrics Dictionary  tool is the deepest database of CRM metrics in the industry • Built from over 10 years of doing CRM business cases and ROI analysis • Example: High-tech BtoB company knew that they had gained efficiencies from faster handling of leads through CRM initiative • Lack of baseline data caused doubts over the assumptions around impact • PRG compared situation with results from several other high-tech BtoB marketers • Result: assumptions deemed credible by executive team and CFO

19. High Degree of Confidence Low Degree of Confidence The Confidence Matrix: Keeping Credibility High High Increased Conversion Rate Reduced Cycle Time Average Revenue Per Customer Data History Increased # of High Probability Opportunities Increased Customer Satisfaction Low Low High Degree of Correlation to Financial Impact

20. Key To a Successful Study: Get the CFO to “Play” With The Spreadsheet

21. Actual Value Strategic Value Servicing costs Migrate these (strategic value unknown) Spend no resources on these The Next Generation of Measurement: Differentiation and “Customer Equity” Use 1to1 to keep these customers ...and grow these MVCs MGCs “Migrators” BZs

22. The Limitations of Pragmatism: Threat or Opportunity Exercise

23. 1to1 To Gain a Lasting Competitive Advantage, Pragmatists Must Become Visionaries! The only true competitive advantage comes from understanding of your customer that you have and that your competitors don’t – the more customer needs you learn and fill, the greater the barrier to defection This information has to come from the customer. To Take Full Advantage of This, You Must Move Faster Than a Pragmatist

24. Contact Information To Opt-In to the PRG ROI Newsletter Your Peppers and Rogers Group Contacts: Send an email or call me: Tom Spitale (724) 891-1417 Tom.Spitale@1to1.com Visit our web site at: www.1to1.com Newsletter registration: - https://www.1to1.com/Subscribe.aspx?Publication=27927