Let me try to demystify that. Firstly, I have called it CRM System and not software, because – simply put CRM is a system to be implemented ant not software to be installed.
Secondly cost of CRM is divided in to two parts:
- Hard Cost (also known as external cost)
- Is the cost of software, hardware, consultancy & implementation cost – which is charged by CRM Vendor.
- Soft Cost (Also known as internal cost)
- Is the cost which is incurred cost inside the organisation for the change management, training time, employee downtime, integration with your business process etc.
Generally it is observed that soft cost or internal cost is double that of External cost / Hard cost. Also Soft cost is generally ignored, which is a big (infact very big) mistake. People feel that training and integration is not at all required – or least required. as a result – they are not able to take full potential of the CRM system.
They focus 100% on negotiating the hard cost. which ultimately results in increased soft cost.
For example if the software consultancy and implementation is not done properly – there will be lack of integration in CRM system and your business process, as a result – you will end up in incurring huge costs in employee downtime and lack of efficiency.
If you are in a service industry let me give you an example:
Cost justification for cost of CRM:
- Say you have 30 Service engineers with average salary of Rs. 15,000/- which means monthly salary bill is Rs. 4,50,000 & yearly bill is 54,00,000/-
- Now if CRM system is implemented effectively, the productivity and efficiency of your sales or service team can easily increase by 30% (world wide studies have shown this)
- Which means your ROI for the first year itself is roughly 16.20 lacs.
- What about second & third year – the efficiency is still going to increase – so your saving increases year by year.
Now think, how much you should spend on CRM software?