According to research and advisory firm Gartner, Customer Relationship Management is a $20.6 billion industry, predicted to grow to $36 billion by 2017. Clearly, organizations are spending a great deal on CRM systems as they continue to appreciate its contributions to both customer acquisition and retention, as well as its implications in the big data movement.
However, Gartner has also reported that, as many as 42% of CRM user licenses bought are never used, wasting billions of dollars for the companies that purchase the software.
The likely cause is that companies have been over purchasing CRM user licenses, by obtaining more seats than their organization requires. Below are two things companies should consider prior to purchasing CRM user licenses for their organizations, in an effort to squelch overspending.
1) Start Small
It’s usually better (and easier) to start with the bare minimum and add more licenses as needed than to over-purchase and reduce. While this idea may seem like common sense, why are so many companies doing the opposite? It’s because CRM vendors typically offer substantial discounts to companies willing to bundle a larger number of licenses together. They encourage customers to buy more by convincing them that it would be less expensive to purchase additional licenses upfront, than to add on more seats later, once the business grows.
Purchasers often accept this line of reasoning, believing that although they may not need more licenses at the time of implementation, they could potentially use them in the future. However, there are two problems with this thought process:
- It makes the assumption that the business will grow. While optimism is a good thing, it’s not the most realistic way to make buying decisions, particularly in our current economic climate.
- The purchaser may have to pay maintenance fees on the unused licenses, making it more costly to buy a greater number of CRM user licenses than you actually need.
While buying more CRM licenses at a deep discount may seem like a wise investment in the short term, if they go unused by your organization, it will cost you more in the long run.
While buying more CRM licenses at a deep discount may seem like a wise investment in the short term, if they go unused by your organization, it will cost you more in the long run. It is estimated that this mistake can cost your business a 20% to 30% increase in total cost of ownership compared to businesses that make CRM user license purchases based on current need.
There’s no need to feel pressured into making this decision; you can usually purchase additional CRM licenses at any time. Unfortunately, most of the major enterprise vendors stipulate that seats can only be removed when the contract is up for renewal, creating a trap for companies that take the bait, purchasing a greater number of seats than the organization requires.
With that said, it may be more cost-effective to purchase multiple licenses up front if you are extremely confident that you will be adding additional users in the very near future. But if you’re unsure, it’s better to err on the side of caution and purchase only the number of CRM user licenses expected to deploy within the first year of the project.
*Tip: When negotiating the purchase of your CRM application, try asking the provider to add a clause into your contract stating that your company is not required to pay maintenance fees on unused licenses.
Companies that select the most relevant CRM solutions, carefully matching its benefits to the problems that need solving within their organization, while also purchasing the appropriate number of licenses based on current need will experience a faster return on investment than companies that implement CRM systems carelessly.
2) Who Needs Access?
Sales – The sales team will require access to the CRM system in order to process orders, access customer and prospect contact information and track customer-buying behaviors, enabling them to upsell additional products and services. Utilizing the CRM system will allow your sales team to increase productivity by streamlining the entire sales cycle, providing easy access to lead intelligence and improving the reporting process.
Marketing – The sales and marketing departments should work closely together. Implementing a CRM system can help to solidify this relationship by increasing the efficiency of the marketing to sales handoff. CRM software can also improve lead quality, automate marketing communications, and improve segmentation and targeting campaigns.
It’s imperative that customer service can quickly access relevant information regarding customer accounts, purchase history, warranties, contracts and more.
Customer Service – This department interacts with customers on a daily basis. It’s imperative that customer service can quickly access relevant information regarding customer accounts, purchase history, warranties, contracts and more. With a CRM system in place, the customer service department can streamline customer support cases, resolve them quickly and make the information available to other departments within the organization.
IT – Depending on the scope of its responsibilities, your IT department may or may not need a CRM user license. If customers need technical support for the use of your product or service, the IT department may use the CRM system much like the customer service department does. However, if your IT department is solely for internal support, purchasing CRM user licenses for them may not be necessary.
Contractors, off-site, part-time employees, etc. – In the case of mobile or remote staff that work in the areas of sales, marketing or customer service, it is likely that they would benefit from a CRM user license. Because the work is performed off-site, the ability to stay in the organizational loop with a steady stream of information about customers and prospects is key to their success. However, for part-time employees and contractors not assigned to the three departments listed above, it’s possible that it would be more cost-effective not to purchase a CRM user license for their use.
CRM systems give marketers a bird’s eye view of their customers’ wants and needs. They allow salespeople to target their pitches more effectively, and they enable the customer service department to provide exceptional support. More importantly, CRM systems allow each of these departments to collaborate and share information in an effort to increase sales and encourage brand loyalty.
If your organization has an unlimited IT spending budget, why not grant a CRM user license to everyone in the company? It couldn’t hurt. However, this is the real world and the purse strings must be tightened. Therefore, it becomes vitally important to take a long look at your organizational structure, determining what individuals and user groups will offer the greatest ROI from purchasing a CRM user license.
Also, contact your CRM vendor to discover whether they offer different classes of licenses such as read-only or limited access. Whatever you do, don’t become another statistic by purchasing a bundle of CRM user licenses that your organization will never put to good use.