Unknown Methodologies For ROI Estimation
At the end of this article, readers should be able to know some of the methodologies for measuring return on investment.
Some of the methods of measuring return on investments include: Benchmarking, Categorization, Targeting, Costing, Prediction and Measuring:
- Benchmarking:- This has much to do with identification of departments in the organization that might be affected by the proposed changes whether they fall into the categories of back offices or front offices, you must be able to pin point to identify and discuss with them how the change will affect them.
- CATEGORIZATION:- It has to do with categorization of strategic long and short term goals. It will help the organization to focus on its objective what we are saying is that, the organization must divide their goals and know what comes first. This will help them to be orderly in the way things are been conducted
- TARGETING:- Under this, the organization is able to set up performance metrics or things they can use to measure their success. For example, there must be setting up of Milestones and targets when will help the organization to know whether they are succeeding or not.
- COSTING:- As it widely believed that if you want to build a house, you must know what it will cost in order to avoid setting up of an abandoned project, so also you must know what it will cost the organization to acquire a solution and decide on whether the organization has the money or not.
- PREDICTION:- When you are measuring ROI, you must be able to predict the likely future of a solution. To a large extent, using the available statistics, you must be able to predict whether a particular venture will be successful or not.
- MEASURING:- You must be able to measure your gains. This has to do with focusing on the benefits that the adoption of a CRM system has brought to an organization or what is likely to bring. This will also help in getting top management approval for a particular solution.
- SUMMARY:- At the end of this lesson, we have been able to discover that methods of calculating ROI includes: Benchmarking, Categorization, Targeting, Costing, Prediction and Measurement.
Measuring ROI for CRM can be categorized into four classes which includes Revenue enhancement, Margin enhancement, cost reductions and other benefits such as increased customer satisfaction, superior market intelligence and product development tied to customer needs.
At the end of the chapter, reader should be able to measure the Return on investment for CRM systems.
Note: The Formular for measuring ROI is.
ROI = Return (Cost savings, incremental revenue x 100
Investment (Total cost of ownership)
The key stop in assessing ROI is breaking down returns and investment into smaller measurable and destining metrics to access each of them
Organization can break down the various benefits into four classes which include: Revenue enhancement, margin enhancement, Cost reduction and other benefits
This rests on the believe that CRM will deliver benefits that will boost the revenue of the organization for Example: loyal customers will bring about increase in revenue and raising of the exit barrier for customers
This is the belief that sales personnel will be able to up-sell customers to more profitable items. This has to do with the opportunity to sell additional products to existing customers which will help in reducing running
This includes a reduction in the sale, cost, reduction in the cost of acquiring new customers and maintenance of existing ones. All this will reduce when and organization have satisfied and loyal customer base.
This include increased customer satisfaction and stronger brand quality increased channel partner satisfaction, superior market forecasts which allows organizations to close deals faster and proper management of finances and product development that is tied to customer needs
Classes of ROI
- Revenue Enhancement
- Margin Enhancement
- Cost Reductions
- Other benefits
Now your take on this article…
I know you might agree with some of the points that I have raised in this article. You might not agree with some of the issues raised. Let me know your views about the topic discussed. We will appreciate it if you can drop your comment. Thanks in anticipation.
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