Gartner Research

The Economics of Customer Relationship Management

Published: 15 August 2000

ID: G0091678

Analyst(s): Beth L. Eisenfeld , Tom Berg

Summary

Management Summary Customer relationship management (CRM) is an enterprise business strategy designed to optimize profitability, revenue and customer satisfaction by organizing the enterprise around customer segments, fostering customer-satisfying behaviors and linking processes from customers through suppliers. CRM requires a large investment in technology, labor resources, consulting services and training. Many enterprises now use CRM total cost of ownership (TCO) and factor in business benefits to build a compelling return on investment (ROI)-based project justification. To put this research in perspective, TCO is a holistic view of IT costs across the enterprise over time and includes people, process and technology. ROI is a financial analysis of how a project affects an enterprise's financial statement. Understanding CRM economics is important because two of the three key drivers of a CRM strategy (i.e., optimizing revenue and profitability) are tied directly to understanding the economic benefits. Ultimately, it is important for enterprises to employ the necessary steps, actions and behaviors to realize key benefits, e.g., ROI and, for publicly traded companies, contributions to earnings per share (EPS). The application domains of CRM include: o Technology-enabled selling (TES) o Customer service and support (CSS) o Technology-enabled marketing (TEM) This Strategic Analysis Report focuses on the economic implications of CRM and examines several Key Issues, including: o How will CRM initiatives be evaluated, measured and justified? o How will enterprises measure the total costs of ownership for a CRM project? o How will enterprises minimize TCO within CRM initiatives?

Table Of Contents
  • Management Summary
  • Introduction
    • Trends in CRM Economics
  • The Four Key Tools for CRM Project Success
    • Understanding the TCO
    • Understanding the Benefit Calculations
    • Understanding the Project Work Plans
    • Understanding the ROI
  • Minimizing the Costs of CRM Initiatives
    • Case Studies
    • Minimizing Costs for the Largest Components of TCO
    • Reducing TCO While Delivering ROI
    • Manage TCO But Focus on ROI
    • Earnings Per Share
    • Minimizing Unplanned Project Costs
    • Project Cost Pooling and Other TCO-Lowering Strategies
  • Critical Success Factors for Delivering CRM
    • Issues to Face Before Launching CRM Initiatives
    • Executive Board Approval
    • Ongoing Measurement of CRM Initiatives
    • Reaping the Benefits of CRM
  • Conclusion
  • Acronym Key

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