5 Simple Formulas to Measure the ROI on Your CRM Investment

Let’s start with a simple assumption to make this article worth your time: you care about your business. Because if you don’t, there’s really no point in going further. 

But if you’re here, we’re assuming that things like lead generation and revenue growth are high on your list. 

And that means that whether you're already using a CRM, or you’re planning to start using one soon, you’re asking yourself one simple question: “Is it worth It?”

Luckily, there are several equations that can help
calculate the return on investment on your CRM:

CRM ROI = (Gain from Investment into CRM – Cost of investment) ÷ Cost of Investment

According to the global tech analysis firm Nucleus Research, the answer to this equation is an average of $8.71. That means that, on average, CRM systems return almost $9 for every $1 invested. 

What that also means, is that some companies get far better ROI from their CRM systems, while others aren’t getting a single dollar back. 

So what’s the difference between the companies who use nearly 10X their CRM ROI and those that end up sending their money straight down the drain?

The answer to that usually depends on two key factors:

• How well your CRM features support your company’s needs

• Whether your teams actually use the features your CRM provides

In this article, we’ll show you several metrics that have a direct correlation with the ROI your company can get out of its CRM system, as well as which CRM features can drive that ROI even higher. 

CRM ROI Formula #1: Increase in Conversion Rates

One of the most crucial metrics driving business revenue is how well leads are converting into buying customers. Even a slight increase in conversion rate by 0.5% can yield thousands of dollars in increased revenue.

While it should be noted that average conversion rates vary across industries, there are two distinct lead conversion processes that your CRM can have a direct impact on: Speed to lead and lead nurturing. 

Improve Your Lead Response Time

The speed with which sales reps contact their leads after their details are captured is everything.

According to a research study published in Forbes and the Harvard Business Review, the chance of qualifying a lead when responding within the first five minutes is 21 times higher than when responding within 30 minutes. Despite that, only 26% of companies manage to respond that quickly. 

Want to improve your speed to lead and make it to the upper echelon of leaders in your industry? Here are some of the key CRM features to look for:

Automatic Lead Distribution

Leads can come in through several sources, such as online forms, external marketing services, and even manual entries from team members. But no matter the source, there has to be a system in place that automatically assigns every incoming lead to the proper handler, whether it’s a sales rep, a loan officer, or an admissions counselor

Inbound Call Routing

It’s equally important to assign incoming calls to the right rep, to ensure your leads get instant access to the person who can solve their problem and move them one step closer to conversion.

Voicemails

Even if all managers are currently occupied, no lead should be left hanging. A high-ROI CRM will route the call to other free agents, and/or set up a custom voicemail message to reassure clients that they dialed the correct number and will be contacted soon.

Step Up Your Lead Nurture With An Airtight CRM

Next to speed to lead, robust lead nurturing can also have a massive impact on your conversion rates.

There is no shortage of strategies for improving your lead nurturing systems. Among the most critical and often neglected ones is consistent follow up. Studies show that the majority of prospects say “no” four times before they say “yes”. At the same only a handful of salespeople initiate the fifth contact. 

Let’s talk about some of the features your CRM should have to empower your reps to consistently follow up on the leads you’re giving them:

Automated Drip Campaigns

If your CRM system supports drip campaigns, you can automate entire follow up sequences around pre-built emails and SMS templates. No sequence fits all cases though, so make sure your CRM offers customization options that make it easy to determine who receives what message and when.

Unclosed Leads Pool

One of the most overlooked parts of the lead nurturing process is making sure no lead ever slips through the cracks. If you don't have a plan for leads that were assigned to a rep but poorly nurtured (or not processed at all), you're effectively leaving money on the table and killing your ROI. In order to prevent large losses in potential revenue, look for a CRM that provides features for storing, tracking and re-distributing assigned leads that haven’t resulted in a successful transaction.

Outbound Voicemails 

Outbound voicemails are a powerful technique that allows companies to warm up their leads before the actual call or revitalize old records without direct participation of managers. It can be combined with automated follow-up features or improve your average lead response time when your managers are overloaded with incoming leads and can’t respond personally.

CRM ROI Calculation - Lead Conversion Rate:

Total Average Conversion Rate

Average increased conversion rate =  SUM {Increased conversion rate across all lead sources } / Number of lead sources

Conversion Rate By Lead Source

Number of leads per month from Source 1 * Increased conversion rate for source 1 = Increased number of closed leads per month for source 1

Increased conversion rate resulted from:

• Smart lead routing based on: lead source, agent experience, lead status and location

• Decreased lead response time

• Automated of follow-up and drip campaigns for all leads

• Re-engagement of dated and neglected leads

Example: 

The average amount of leads from all sources for Company X is 2,000, with an average conversion rate of 2% for a total number of closed leads per month of 40. 

Company X uses a CRM solution with lead nurturing features and the average conversion rate across all sources increases by 0.5%, boosting the number of closed leads per month by 10. 

With an average revenue per lead of $500, the company’s monthly revenue grew by $5000. Given the monthly cost of a CRM solution per 5 users is $495, the ROI is around 1010%.

CRM ROI Formula #2: Increase in Revenue Per Lead

Revenue per lead is directly tied to the overall revenue and there are many ways a CRM system can help push that number higher:

• A smart CRM organizes your entire sales databases including new leads and existing customers. With better lead segmentation, reps can offer relevant information and services to the most responsive groups of customers and leads to better match discounting policies, provide new services to existing customers, and get better ROI on every contact in your system. 

• Improve customer retention levels and NPS through higher quality service. According to CRM ROI studies, lifting customer retention rates by just 5% could increase company profit by 25% to 95%. 

A major factor here is how flexible your CRM system is and how closely it can be customized to support industry-specific sales strategies.

For example, Shape users can automatically review new prospects and score leads based on a company’s sales KPIs, or any other specific parameters.

Here are the revenue-boosting features to look for in your CRM:

Bi-directional Integration with Your Core Systems

Unfortunately, many CRMs do not play well with other systems. That’s especially true for all-in-one systems that claim to do everything from building your website to managing client retention and built-in systems that are added in as an afterthought to your existing management system, for example your Student Integration Systems (SIS) if you’re in the education space or your Loan Origination Systems (LOS) if you’re in the mortgage space.

Integrations with Third-party Services

Some services are invaluable in creating deeper connections with leads and customers.For example, BombBomb is a video tool that allows reps to embed personalized videos into any message, dramatically increasing lead and customer engagement. With the right CRM integration, you can weave video functionality directly into any of your sales workflows, such as drip campaigns, automated emails, or even a quick happy birthday message to leads and customers.

Relevant Sales Scripts and Templates

Another way to ensure the highest quality of service across all your organization is to actively use relevant email and text templates to help onboard new reps and ensure that even your less experienced sales agents always know what to say to keep leads engaged.

Simple User Permissions and Collaboration Features

Around 26% of customers experience being transferred from agent to agent without any resolution to their problem. It’s crucial that your CRM supports a wide range of collaboration tools to make it easy for each type of user to see all the info they need to see, and none of the info they don’t. Now your customers are happy and your reps have everything they need to be able to retain and upsell your contacts.

CRM ROI Calculation - Revenue Per Lead:

Revenue per lead =  (Amount of New Revenue Brought By Leads [per quarter] / Number Qualified Leads [per quarter])

New Revenue Per Lead increased with:

• Higher retention rate

• Increase in new referrals per lead

• Focused customer support and upsell strategy

Example: 

Revenue per lead increased by $40 for Company X. Previous revenue per lead was $100 and new revenue per lead is $140. 

If the average monthly number of leads per employee is 30, then the total revenue by employee is increased by $1200. 

If the cost of CRM is $99, the ROI is 1212%.

CRM ROI Formula #3: Time Saved

On average, employees waste 55% of their time on administrative tasks—and sales reps are no exclusion. 

The good news is a CRM system can automate the majority of your team’s routine actions, potentially saving hours, days, or even weeks that can be better spent on revenue-generating activities like active prospecting. 

Here are two core features every CRM should have for effective automation:

Integrations

Integrations are crucial for automating mundane administrative tasks to make sure your reps and admin have more time for their most high impact work. Direct integrations with the tools your reps already use and love keeps them from having to switch between several different applications so they can stay focused and perform all their tasks from one central system.

Triggers

Triggers are the heart of every automation. Based on predefined events, triggers launch a series of actions that lets you automate the communications and productivity aspects behind every workflow.

CRM ROI Calculation - Time Saved:  

The amount of saved hours  * $ per hours = $$ saved

OR

The amount of time saved / Time Spent Closing Lead =  N more closed leads

CRM ROI Formula #4: Better Marketing ROI

When it comes to marketing ROI in the digital age, true power comes not from the data itself, but from the cohesive data. You can look at Google Analytics graphs and Facebook interactions all day long, but if the numbers aren’t connected to the right business processes in your company, you’ll never be able to actually apply those insights.

For optimal ROI, look for a CRM system that provides advanced reporting so that you can connect the dots between lead sources, agent performance, and conversion rates. With the right data in hand, you’ll have everything you need to make informed decisions about your marketing campaigns, all in one place.

Source

By analyzing what’s working and what’s not, you can quickly disband faulty marketing campaigns and redirect your resources into high-ROI channels. Over 40% of small businesses don’t measure the ROI or effectiveness of their customer acquisition spend online simply because they don’t have the right tools. 

Instead of shooting in the dark, use a CRM that supports advanced channel and lead source reporting so you can quickly identify and optimize the marketing channels that are bringing in the most revenue.

CRM ROI Calculation - Marketing ROI:

ROI = (Sales Growth - Marketing Cost) / Marketing Cost 

Marketing Cost = N * Effective Marketing Campaigns Cost + M * Ineffective Marketing Campaigns Cost

Optimize marketing campaigns: 

Reduce M, increase N

Example: 

If your average marketing campaign costs are $5,000 per month and you reduce the amount of ineffective marketing campaigns by 30%, with a CRM cost of $495 for 5 team members, this yields potential ROI returns of 303%.

CRM ROI Formula #5: Rep Productivity Gains

Sales agent performance is not a fixed variable, it depends on many things. But whether the goal is to help reps improve their productivity through automation or enhanced work culture, there always has to be a baseline. 

That’s why you should always know where your reps stand in terms of individual and team productivity. Look for a CRM that analyzes the number of leads processed and compares it by lead sources and other groups within your team. With the right reporting tools, you can see at a glance which of your sales agents are the most effective and who needs additional training or support.

The process of enhancing sales team performance never ends, but it should always start at the heart of your sales system: your CRM.

CRM ROI Calculation - Closed Leads per Sales Rep:

Closed Leads Per Employee * Revenue Per Lead - Employee Salary = Total Revenue Per Employee

Example: 

Company X spends $99 per employee per month for access to their CRM.

There has been an increase in closed leads by 5 additional deals per month, with an average deal size per lead at just $100, Company X yields 505% ROI on the CRM.

Choose the Right CRM, Boost Your ROI

Now that you know how many revenue opportunities you can snatch up with the help of a modern CRM, it’s time to put your systems to work to get the best possible return on investment. At the end of the day, simply installing a system and telling your reps to use it won't cut it.

After years of helping our customers get the most value for their money with Shape, we've come to a simple conclusion: 

If your CRM system doesn’t provide value within the first 2 weeks of its implementation, it’s probably not the right fit. We know how hard it can be to try something new and want to make the process as smooth as possible so you and your team can start seeing more ROI asap.Get started with a free 14-day trial of Shape and see for yourself how the right CRM can bring back every dollar you put into it, multiplied.

Article Source:- https://setshape.com/blog/crm-roi-5-simple-formulas-to-measure-the-roi-on-your-crm-investment