Posted by David
We continue our foray into the daunting task of assessing the ROI of CRM systems . . .
A Framework to Assess ROI in CRM
Simply stated, return on investment = Returns (cost savings, incremental revenues / billings / fees) * 100 divided by Investment (total cost of ownership)
The key steps in assessing ROI will be to breakdown the Returns and Investment into smaller measurable elements and define a metric to assess each of them.
Returns
Measuring returns for CRM systems is most complex as there are many tangible / intangible benefits. The most important aspect of any measurement is correct benchmarks. Firms should define various metrics which they want to measure ROI of CRM systems upfront and make benchmark measurements before the system implementation begins. This will ensure that benefits are correctly attributed to changes by the CRM system (to maximum extent possible). One way to classify various benefit streams is to break it down into four main areas:
1. Revenue Enhancements
CRM systems will deliver benefits (like those described below), that will increase a firm’s top-line (revenues / billings / fees). Actual line items (as described below) will differ based on CRM systems' scope but thinking on these lines will make sure a comprehensive analysis is done to assess revenue / billing enhancements.
· Increase in total revenue / billings / fees (due to increased marketing and business development productivity, lawyers are able to service more of the “right type” of clients and matter engagements). Measure increase in close rates, competitive bid successes, increase in billings per client
· Improved client retention (measure reduction in lost clients, or increase in client referrals)
· Increased cross-selling (measure cross practice group / cross specialisation services per client)
· Reduced lost opportunities due to failed relationship intelligence (not knowing about clients business needs; new matters; stimulating and enhancing lawyer / client communications – knowing about new matters / opportunities before competitors)
2. Margin Enhancements
The firm will be able to “upsell” clients to more profitable work because the new CRM system can take syndicated demographic data sources for the client base and, using analytics, suggest specific client plans with greater appeal.
3. Cost Reductions
Apart from raising top-line, most of the time CRM systems result in cost savings in various practice groups of the firm. Some items to consider are:
· Reduced client acquisition costs (e.g. measure number of calls / contacts / events / subscriptions required to generate / qualify / convert a lead, prospective opportunity)
· Decrease in cost of sales (by increase in marketing and business development productivity, reduction in proposal generation time, improvement in order configuration accuracy etc... - measure these individual elements to assess decrease in costs of marketing and business development, client acquisition costs)
· Decreased cost to retain and service clients, including:
-- Reduction in Client Service Representatives (CSR / EA / PA) because of self serve web interface/s.
-- Reduction in CSR / EA / PAs because of streamlining processes (workflow automation) and reducing call times.
-- Reduction in CSR / EA / PAs because of increase in first call resolutions.
-- Reduced telecommunication costs (lawyers using integrated mobile, VOIP / CTI / web interface vs. long-distance calls / faxes / face to face meetings)
4. Other Benefits
Apart from above returns there will be a lot of intangible benefits in the long run that are difficult to quantify but there are some suggested ways to quantify them. Below are some examples:
· Increased client satisfaction and stronger brand equity - A client survey specifically asking whether new changes (e.g. integrated mobile, VOIP / CTI / web interface) has been useful for them and comparing the overall satisfaction with previous ratings will give a measure of increase in client satisfaction. Now translating this to dollar amounts is difficult but some increase in new matter engagements can be taken as a measurement. Overall increase in client satisfaction ultimately leads to stronger brand equity.
· Increased partner satisfaction - This is often overlooked but most of the time CRM systems will provide great benefits by streamlining workflow processes for partners, lawyers and associates. Increased satisfaction for partners eventually helps in bringing more revenue, increasing billings and fees. Again surveying partners and seeing how they have perceived changes and correlating them with actual fees for partners can help in identifying any returns there.
· Superior market intelligence leading to better forecasts, deal flow and financial management - Having better market intelligence can help improve forecasting / budgeting. (e.g. measure any changes in forecasting accuracy, the firms “deal database”). An improved forecast helps in overall financial management and resource planning, workload planning (measure benefits in all practice groups due to increased forecasting accuracy).
· Practice group / development of specialisations tied to client needs - New specialisations a firm invests in, can be better designed from start if CRM can provide market intelligence. (e.g. measure client demand for new services / specialisations; know about new matters / opportunities before competitors).
Up next, the conclusion . . .
