The Truth Behind ROI

By Heather Baldwin

CRM software vendors are finally getting the message about the importance of providing ROI data to potential customers and many are now showing up on sales calls armed with case studies, ROI calculators and industry data. After all, if a vendor can show you how another company using its solution got a 300 percent return on its investment, or if he can demonstrate how your company will save $80 million annually based on figures he plugged into his ROI calculator, that’s a pretty convincing reason to buy, right?

Not so fast, warns Tony Kotler, director of Kotler Marketing Group in Washington, DC. While the numbers may look great, it’s important to determine exactly how the vendor arrived at them. In too many cases, says Kotler, vendors use generalities, averages and best guesses, then present those numbers as reliable data. To avoid disappointment later, Kotler says customers should ask vendors how their data was collected. “Most vendors, in compiling an ROI case, collect surveys and interviews from current customers, but what they’re getting with this type of approach are estimates,” says Kotler. “What you’re looking for is more objective research, something to signal that the analysis is just more than awareness, impression and estimates.”

Take the measurement of time to perform certain administrative tasks, for instance. Usually, vendors will ask end-users to estimate the time spent on each activity and calculate cost-savings from those estimates. But those estimates may not be accurate. “Instead of asking me how much time I think I spend, a more accurate way to measure would be to have me prepare a log,” says Kotler. Likewise, rather than take a customer’s word about the production time of certain products, a vendor should send someone in to observe. “If you find a vendor who has compiled data using logs or first-hand observations, you’ve got much more accurate numbers than those based on impressions or guesses,” says Kotler.

Kotler also advises organizations evaluating CRM software check that the ROI numbers vendors cite in case studies of existing customers are from a company in a related field. If you make refrigerators and you’re given a case study from a banking customer, that customer’s success with the CRM software is irrelevant. And even when a vendor can provide a relevant case study, ask for more. “If you’re presented with a single case study in your industry, I’d ask to see two more,” Kotler advises. “One isn’t convincing or impressive; however, three different ROI analyses that show a consistent, comparable return? That’s pretty compelling.”