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Measuring CRM Effectiveness

Enhancing customer experience is always a challenge. In order to enhance business performance, organizations have to expand their customer base.

Growth happens only when customer relationships with the organization are robust and satisfied. And customer satisfaction can only be increased with effective CRM in an organization.

But how would one measure the effectiveness of CRM for an organization? Below are some criteria that can be applied:

1.       Increase in customer retention 

2.       Increase in orders per customer per year

3.       Increase in average spending per order or visit

4.       Increase in cross sales

5.       Increase in up sales

6.       Increase in reactivation of previous customers

7.       Increase in referrals of new customers by existing customers

8.       Achieving each of the above while keeping increased costs (required to make them happen) from offsetting the increased sales

Certainly, all this data can be collected over the years and a trend can be identified to measure the effectiveness of the implemented CRM program.  Perhaps other parameters such as increased order per customer, number of orders per year, defections etc. could add to it.

But will all these parameters really ‘measure’ the effectiveness of CRM in an organization?

To me it goes beyond that –

1. Customer Expectations
Can we bring in customer’s perceptions or their expectations into this calculation? Will there be any effect of these parameters on the overall effectiveness?

E.g.: - A organization’s intent might be to provide quick service – say in 5 minutes/customer - but the customer might expect service to take 10 minutes or more than that for it to be performed to his satisfaction.

So here the customer expectation might be different from what the organization is providing/intends to provide.

2. Perceptions 
What has been the customer’s  past experience with the organization, and what is his current experience? Perceptions keep changing with each experience.  Does every customer carry the same perception every time? Does the organization maintain the same perception each time to keep their customers satisfied and happy?

3. Emotions
It is clear that people make emotional decisions based upon experience as described in my previous blog post “Mantra of Growing Business”. Emotions keep changing as per the experience and so does the perception.

Some customers take rational decisions and accordingly their perception changes.  So what emotions do customers carry when their expectations are met, and how can this be measured?

4. Customer History
Sometimes, everyday interactions with customers or past history of a customer would help understand a customer better to serve and fulfill their needs. So are organizations tailoring their services in a better way based on this to keep their customers happy?

5. Belief
Customers ‘belief’ in the product/service or overall organization may vary.  As mentioned above, “perceptions” would turn into belief if the customer experiences similar service over a period. Customers carry this belief towards the organization and this belief would impact customer relationships and future growth.
 

6. Communication
The key element – how frequently organizations communicate to their  customers not only through advertising but also through personal communications. People feel valued if communication happens at a personal level and their opinions are sought and taken into consideration. Personal communication helps to influence perceptions positively. So, how effective is the organization’s communication towards their customers?

Understanding these six aspects, capturing and recording this data, and then linking it to other growth/decline parameters and analyzing these stats would help understand customers better. And that is a good place to start on the path towards improving customer relationships!

Comments

Hi,

I would like to add one point, that most of the factors mentioned above are internal and mostly focussed around what can be termed as the Internal factors. There are also external factors that might contribute to the overall growth or sales figures and which might not be directluy related to the CRM initiatives been taken by the organization.

I feel that these measures also need to be accounted for.

I like your collection, thanks for sharing this wonderful collection of themes with us.

I like your collection, thanks for sharing this wonderful collection of themes with us.

Hi,

Thank you for this interesting and structured overview! I'd like to add some other metrics that can be usefull to define CRM efficiency, such as

- sales closing rate,
- marketing campaign ROI,
- lifetime customer value, etc.

We have published an article on this topic recently.

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