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CFROI of Customer Relationship Management

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Selchert, M. (2005). CFROI of Customer Relationship Management. Empirical Evidence from mySAP CRM Users. 2. Verlag Wissenschaft & Praxis. https://doi.org/10.3790/978-3-89644-942-9
Selchert, Martin. CFROI of Customer Relationship Management: Empirical Evidence from mySAP CRM Users. (2).Verlag Wissenschaft & Praxis, 2005. Book. https://doi.org/10.3790/978-3-89644-942-9
Selchert, M (2005): CFROI of Customer Relationship Management: Empirical Evidence from mySAP CRM Users, 2,Verlag Wissenschaft & Praxis, [online] https://doi.org/10.3790/978-3-89644-942-9

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CFROI of Customer Relationship Management

Empirical Evidence from mySAP CRM Users

Selchert, Martin

Managementschriften Fachhochschule Ludwigshafen am Rhein – Hochschule für Wirtschaft, Vol. 5

(2005)

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About The Author

The author is a professor at Ludwigshafen University of Applied Sciences and a management consultant. He specializes in management, marketing, and e-business. Before becoming a professor, he worked from 1994–2000 with McKinsey & Company, Inc., a leading international management consultancy. Therein he focused on information technology, telecommunications, and multimedia. He has many years of project experience in assessing the profitability of IT investments and optimizing the management of IT project portfolios.

Abstract

Customer Relationship Management (CRM) promises to create value for a company through a software-supported customer focus of its entire business system. But the urgent question of CRM's impact on the bottom line is still open. This study, focused on mySAP CRM users in Germany, Austria and Switzerland, produces quantitative evidence of such an impact. It is more than a survey, as cash-flow return on investment (CFROI), the net present value, and the break-even period result from individually crafted, comparable business cases for all participants. These financial decision criteria are founded on a solid and detailed analysis of operational improvements through using CRM. The main results are provided by sector; and many of the potential »factors of CRM success« are tested.

Table of Contents

Section Title Page Action Price
Table Of Contents 5
Prof. Dr. Hartmut Walz: CFROI of CRM: A Challenge Well Met 8
Prof. Dr. Martin Selchert: Introduction and Acknowledgements 10
1 Management Summary: High Value Creation Potential Through Using CRM 12
2 Research Design and Key Concepts: Understanding Value Creation by CRM 18
2.1 The Urgent Challenge of CRM Value Assessment 18
2.1.1 The Urgent Need to Assess Value of CRM 18
2.1.2 The Empirical Findings: Sparse and Contradictory 21
2.1.3 The Challenge in CRM Value Assessment 22
2.1.4 The Aim of the CFROI of CRM Study 24
2.2 The Research Design: Meeting the Challenge 26
2.2.1 Key Concepts for Measuring CRM Value 26
2.2.2 The Structure of the CRM Value Metric 35
2.2.3 The Individual Business Cases: More than a Survey 43
2.2.4 The Trustee Model: Ensuring Openness and Honesty 45
2.2.5 The Study Process: Ensuring Interactivity 46
2.2.6 Participants: Focus on mySAP CRM Users in D-A-CH 48
3 Results: Higher Productivity, Lower Cost, Higher Revenue 53
3.1 Project Targets: Met by CRM 53
3.2 Financial Targets: CFROI, NPV, and Break-Even Period 57
3.2.1 Financial Targets Including Experienced-Based Expectations 57
3.2.2 Financial Targets Excluding Experience Based Expectations 66
3.3 Productivity Targets: Potential for Cost Reduction 68
3.3.1 Improved Customer Information: The Basis for Higher Productivity 68
3.3.2 Marketing: Valuable Analytic Insights, Improved Campaigns, and Consequential Lead Management 75
3.3.3 Sales: Operative Process Improvements 80
3.3.4 Interaction Center: New Opportunities in Telesales and Help Desk Functions 91
3.3.5 Internet Sales: Automated Order Management 96
3.3.6 Service: Improvement Potential Not Yet Developed 100
3.3.7 Other Productivity Effects and Potential Cost Savings 101
3.4 Revenue Targets: More Customers and More Revenue per Customer 103
3.4.1 Increase in Revenue: The Basic Logic-Tree and Aggregated Results 104
3.4.2 New customer acquisition: Leads 110
3.4.3 “New” Old Customers: Customer Satisfaction and Customer Retention 116
3.4.4 Increase in Goods Sold: Larger Quantities and Cross Sales 121
3.4.5 Higher Prices: Absolute and Relative Price Increases 128
3.5 Speed Targets: Time-to-Market, Time-to-Volume, and Time-to-Delivery 130
4 Key Factors of Success: Industry Sector, Situational Fit, and Proficient Project Management 135
4.1 Financial Results by Sector 135
4.2 Systematic Framework for Key Factors of Success 141
4.3 External Situational Factors of Success: Technology, Customers, and Competition 144
4.3.1 Influence of Production Technology: Service Character and Complexity of Goods and Services on Offer 144
4.3.2 Customer Influence: Insignificance of Large Numbers 148
4.3.3 Influence of Competitive Pressure: The More the Better for CRM 149
4.4 Internal Situational Factors of Success: The 7-S of CRM 152
4.4.1 Organizational Structure: Dynamics Breed High CFROI of CRM 152
4.4.2 Systems: No Impact of IT Proficiency Before the Implementation 153
4.4.3 Staff: Specific Skills and Internationalization Matter 155
4.5 Good Project Management: a Necessary but Not Sufficient Condition for Success in CRM 157
4.5.1 Management Support and Involvement 157
4.5.2 Employee Buy-In 160
4.5.3 Quality of CRM Targets 165
4.5.4 Proficiency of Project Execution 166
4.6 Value Drivers by Industry Sector 170
5 Closing Remarks: Strengths, Limitations, and Best Use of Results 177
5.1 Strengths of the Study: Neutral, Quantitative, and Systematically In-Depth 177
5.2 Limitations of the Study: Small Sample, and Limited Geographic Scope 179
5.3 Best Use of the Results: Guidance for the Company Specific Business Case 180
6 Appendix 183
6.1 References 183
6.2 Table of Figures 189
6.3 Glossary of Terms and Abbreviations 192
6.4 Questionnaire "Value Creation by mySAP CRM" 196
Herausgeber 215