CRM budgeting guidelines – simple math or not?

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One can hardly discount the merits of Customer Relationship Management (CRM) software. CRM solutions have surged to become the single biggest software market today, and increasingly more companies across all industries embrace them. From the largest corporations to small-to-midsize businesses (SMBs), CRM can be one’s most valuable asset. However, different industries and business sizes also entail different needs; different scopes, different criteria, and frankly, different budgets. Budgeting for CRM is no easy task and is indeed no simple math. Thus, we at MoversTech find it fitting to delve into CRM budgeting guidelines, which should hopefully make your task easier.

CRM budgeting guidelines: breaking down the costs

A woman counting money over a notebook.
CRM budgeting guidelines need to account for implementation costs first and foremost.

First and foremost, no article on CRM budgeting guidelines could begin anywhere but in the fundamentals. Before considering your return on investment (ROI), your integration needs, and many other factors, budgeting must start at costs. These can generally be broken down into 2 main cost types:

  • Basic costs (system, training, migration, etc.)
  • Continuous costs (maintenance, support, employee onboarding, etc.)

With just the above overview, it should already be clear that costs can vary considerably. That’s before even entertaining the option of building CRM software over buying, which can be even more complex cost-wise.

Basic CRM costs

The most basic, inescapable costs of CRM are the following.

Baseline system cost

This is how much your CRM solution itself costs. Keep in mind, however, that this also depends on the type of your CRM of choice – cloud-based or on-premise. Most cloud-based CRM follows the Software-as-a-service (SaaS) model, and thus entail different continuous costs. On-premise solutions are more lenient in this regard, but the baseline system cost will vary nonetheless.

Setup, customization, and integration

Similarly, setting up and customizing your CRM solution entails costs. Those, too, will depend on your exact needs and scope, and thus can’t just be a static number. Furthermore, integrating it into your workflow also hinges on legacy assets, compatibility, and business size.

Employee training

Finally, it’s vital that your employees adopt your CRM solution. Notably, one of the biggest challenges of this software type lies in user adoption, as we’ve highlighted in our 2020 CRM statistics article. According to CSO Insights, Forrester, and Trovare, among others:

  1. Less than 40% of businesses who adopt CRM have an end-user adoption rate of over 90%.
  2. 22% of all CRM implementation problems are related to staff or user adoption.

However, employee training costs will also depend on your CRM solution and your own workforce. It is thus vital to account for all potential training assets and materials your vendor can offer, as well as for how much you can actively ensure proper training sessions yourself.

A triangle on a blackboard that reads "time, cost, quality".
When budgeting for CRM, it is vital to consider the time factor alongside the cost factor.

Continuous costs

On the subject of the potentially continuous cost of training, CRM also entails continuous costs in general. The most notable among them are maintenance and support, and employee onboarding.

Maintenance and support

No software is infallible or free of wear, and the same is true for CRM. You will thus need to adjust your budget accordingly, keeping in mind that it may entail such costs. Maintenance costs are usually easy to account for, as most providers are clear about such charges. Support tends to be less predictable, however, so you should ensure you’re as well-informed on support options as possible.

Employee onboarding

Finally, training new employees to use your CRM software is a continuous cost as well. While it will inevitably vary, basic CRM budgeting guidelines should include this potential cost. Naturally, ensuring proper initial training and onboarding should reduce this somewhat, but not completely. Employees may leave, and departments may find new uses in your solution.

CRM budgeting guidelines: justifying the investment

Basic cost concerns aside, budgeting for CRM should also account for the investment’s value. Many CRM solutions are not even directly tied to revenue, so evaluating them in terms of revenue is nigh impossible.

Nonetheless, there are two main quantifiable metrics that can justify your investment cost; ROI and revenue impact, where applicable, and cost impact.

ROI and revenue impact

A marketing-focused CRM implementation is likely the easiest to gauge in this regard. Marketing boosts revenue, so it can produce quantifiable metrics. Comparing new and old revenue figures can help gauge effective ROI, and thus help inform budgeting decisions. But even if your CRM doesn’t strictly deal in revenue, you can track a few different metrics to gauge effectiveness.

Revenue per transaction and revenue per user

Since CRM solutions intend to improve customer interactions holistically, their effects on user purchase behavior are notable. An improved customer experience often translates to higher individual purchases, as well as increased customer revenue on a larger scale. Customer retention similarly offers a very lucrative return; retention costs much less than acquisition.

The impact of CRM on customer acquisition cost

Still, while retention is preferable to acquisition, new customers are the lifeblood of any business. CRM can have a very notable effect on customer acquisition costs through such assets as the following:

  • Customer segmentation tools
  • Personalized marketing outreach
  • Profitability analysis

All such assets can drastically affect this process, and should thus always be included in CRM budgeting guidelines.

A close-up of a notebook where "competitive pricing" is circled in red.
Simply by informing price points, CRM can have an indirect but notable effect on revenue.

Conversion rates

In the end, those same assets will also inevitably affect conversion rates. Lead conversion may be relatively harder to gauge, but it directly affects acquisition costs as well. Furthermore, conversion rates directly affect revenue, and should thus remain under scrutiny.

Cost impact

Finally, a CRM solution’s cost impact can be gauged in many different ways. If it doesn’t directly focus on generating revenue, consider the following assets that might affect sales and cost-efficiency:

None of these factors translate to revenue, but they do affect it indirectly; cost-efficiency presents opportunities for revenue. As such, cost impact should never be overlooked.

Conclusion

In conclusion, CRM budgeting guidelines are by no means simple math. They may start simple, but accounting for secondary costs, ROI, and effects on cost-efficiency present a challenge. Thus, it’s likely in your best interest to maintain due diligence when budgeting for CRM. And, of course, consulting the professionals can always offer reassurance and some peace of mind.

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