What’s a customer worth? The Real ROI on CRM

Written By: Dave Packard

from December 19, 2012

“Never neglect details. When everyone’s mind is dulled or distracted the leader must be doubly vigilant.” ~Colin Powell

Many have done the research and are aware of system costs/ per user/per month and the benefits of Customer Relationship Management systems. Some of those benefits are sales pipeline/ forecasting, lead scoring, customer segmentation for marketing, campaign ROI, and case management – to name a few. Knowing the system’s expense is always relevant but the ROI on CRM really comes down to one simple question: What is a customer worth?

For illustration sake, a company’s average customer stays five years and makes five $1,500 purchases each year. That is $7,500 a year – $37,500 over 5 years. Assuming an average gross margin of 25%, the average customer is worth $9,375 over the lifetime of their relationship with the company. That is just one customer. More customers equal more revenue – a rather obvious statement given the math:

• 500 customers = $4,687,500

• 1,500 customers = $14,062,500

• 5,000 customers = $46,875,000

• 25,000 customers = $234,375,000

So, why do customers often leave? Neglect. Neglect can cover a wide range of issues: Customers who feel underappreciated, undervalued, or forgotten are most likely to leave. It was hard work obtaining those customers. Do not let them leave for such a poor reason.

Everyone knows that keeping a customer is more cost-effective than finding a new one. Microsoft Dynamics CRM provides account managers information to allow a response to customer issues before it is too late.

Microsoft Dynamics CRM is built to show all activity for each customer— from sales – to marketing – to complaints.

When all front lines (those who touch the customers most often) are working from the same system, customer details are visible to everyone. Customer Service can see that Sales recently presented a proposal; Sales can see the customer just received the latest campaign from Marketing; Marketing can see all the products the customer owns and start targeting them with cross-sell promotions. The customer believes your company knows their account, gains confidence, and sees no reason to leave.

Avoid losing sight of the details and think of the possibilities of turning that five year customer average into six years, seven years, and longer. Perhaps the real ROI on Microsoft Dynamics CRM is not how much it costs but how long it can help maintain the customer relationship.

The longer the relationship – the greater the reward! What is a customer worth to you?