In October 2017, we surveyed MDM readers about how they use or plan to use CRM. This article looks at the strategies employed by companies that reported ROI with those that didn’t to uncover best practices that lead to success, as well as common problem areas that may sabotage initiatives.
Many company leaders I’ve consulted with over the years have expressed a disappointing lack of return on their CRM investment. Why do some industrial sales organizations see a high return and others struggle? To answer this, we surveyed executives at distributors, manufacturers and manufacturers’ reps about their CRM programs.
Nearly 90 percent of respondents to the survey (most were distributors) are either planning to implement CRM in the next six months or have already implemented CRM (see Figure 1).
A third of those who have already implemented CRM said they are “happy” with their program’s ROI (Figure 2). Two distributors in the survey quantified this return, each attributing a 25 percent year-over-year sales increase to CRM implementation.
Half of CRM users say it’s too early to tell whether they are getting a return on their CRM investment. This is due in some cases to recent roll-out, but participants also cited persistently low adoption rates, incomplete integrations and underutilized features as preventing them from reaching their system’s full potential.
CRM’s less-than-perfect reputation isn’t necessarily due to some inherent shortcoming in the technology. Instead, companies may be failing to capitalize on best practices in CRM selection, implementation and ongoing use. In particular, many companies are thinking about CRM as a tool rather than a process. The MDM survey data suggests most companies are also not viewing it as a solution for their entire teams, but rather just outside sales. This is critical.
Based on an analysis of the survey data and my own experience working with industrial sales organizations, I’ve identified best practices that result in ROI from CRM.
Think beyond outside sales
Survey results paint a picture of an industry that tends to view CRM as a short-term project, led in most cases by only one department (sales or IT) and implemented for use – almost exclusively – by their outside sales teams. CRM users’ comments and my own experiences, though, suggest that garnering broad-based support across departments via a cross-functional implementation team early in the CRM selection process generates better buy-in down the road.
One way to do this is simply by opening the lines of communication: “Provide structured time for employees to provide input on … what they would like the CRM program to do for them,” said one respondent.
Unfortunately, for most CRM users, customer-facing teams such as inside sales or customer service were far less engaged in CRM than outside sales teams or not participating in CRM at all. Buy-in levels were low or CRM wasn’t used by nearly half of inside sales teams, more than half of customer service teams and more than three quarters of service/repair teams, according to the survey.
Because many distributors are only thinking about CRM in the context of outside sales, they are missing out on most of the value.
Team selling is critical to increasing ROI from CRM; if those team members who speak with customers the most (your service representatives or repair associates, for example) don’t document it, that knowledge isn’t available for outside sales to leverage. Getting more departments on board is a huge area of opportunity that most companies aren’t leveraging.
Outside sales buy-in critical
Not surprisingly, respondents who reported they were happy with the ROI on their CRM investment also reported higher buy-in levels. There was an especially strong connection between ROI and the outside sales team’s buy-in levels, with 90 percent of high-ROI teams indicating moderate or high buy-in compared with 66 percent for the rest of the group (a 24 percentage-point difference).
Distributors have experimented with a variety of strategies to boost buy-in levels. The most popular, according to the survey, are “talking about CRM benefits” and “talking about CRM features,” with more than 78 percent of CRM adopters in the survey employing each of these.
Involving multiple departments in the CRM implementation process or rolling out CRM slowly by starting with only one department/team – each employed by more than 40 percent of respondents – also was common. On this front, involving multiple departments rather than just one department when initiating a pilot project will ensure a full picture of the potential benefits you’ll reap when implemented company-wide.
CRM users don’t agree on whether reward or punishment is the most effective strategy to boost buy-in. One distributor who reported moderate outside sales buy-in levels and high buy-in levels in several other departments favors the “carrot” approach, incentivizing CRM usage. This distributor said forcing reps to use CRM just for management purposes “doesn’t provide all the benefits we want. They need to embrace it as a tool that will help them.” But, the respondent admits, “getting that to happen is very difficult.”
Another distributor, this one favoring the “stick” approach, has implemented a requirement that sales activities must be documented in their CRM before mileage reimbursement is paid out: “This penalty approach seems to work better than any incentive we have tried.”
Take care when taking a “stick” approach. We’ve found that this can sometimes result in the input of garbage data by your team to fill a requirement.
We’ve found that companies that train on the “why” and not the “how” of CRM see the greatest buy-in from their teams. Show how your team will benefit from CRM, including saving them time (automated reports, identifying opportunities); increasing their quote hit rate; a seamless customer experience; and refining their sales pitches to a specific customer.
Respondents with high levels of outside sales team buy-in were 11 percentage points more likely to encourage current users to share success stories. One respondent that employs this strategy has identified user champions that drive the program: “We have found that the speed of the captain is the speed of the crew.”
Prioritize features that fill gaps
The most successful distributors will recognize that CRM is just as important as ERP to running a business, and that combining the front and back end of your sales cycle is the Holy Grail. Survey results indicate that adopters do value some features that allow them to better manage the front end – lead and opportunity management.
The survey asked CRM users to indicate – out of a provided list of 20 common features – which three are most valuable. The five features most commonly included on participants’ lists were contact management (44 percent), sales opportunity management (40 percent), quote management (24 percent), customer segmentation (20 percent) and ERP integration (19 percent).
One participant noted that their CRM-ERP integration “has made a tool instead of a job out of CRM” thanks to their improved ability to find and retrieve important communications, analyze sales history and prioritize accounts. (Despite its benefits, I usually recommend companies hold off on integrating CRM with ERP until after the CRM system is up and going, as the integration is a big project in itself.)
Email integration (18 percent) was highly valued by some, with one distributor commenting that “this feature is the most widely used by the sales force.” Interestingly, respondents indicating good ROI from CRM were even more likely to list email integration (or built-in email functionality) as a top feature.
Email integration should be a requirement because that is how most communication occurs in business today; integrating those communications between customers and your inside sales, customer service, marketing and other departments will provide far greater efficiencies.
An integration, at a minimum, will include linking contacts in your CRM system with any messages sent to or from those contacts from anyone in your company.
If you haven’t yet implemented CRM or are in process of doing so, don’t start with a list of features. The real value of CRM comes when you focus on filling gaps in your sales process. Identify those gaps with a simple CRM audit (outlined in my book ROI from CRM, available at mdm.com/roifromcrm). Use that analysis to create a road map and wish list to get the most out of CRM based on how it can help you improve your sales process. Then use that to deepen the conversations you have with potential vendors.
Don’t rush to implement everything at once. Identify two or three things you want to accomplish, and when you’re happy with the progress, broaden the use of CRM within your organization further. This ensures you don’t overwhelm your team with too much, too soon. If you’re already deep into CRM, you can also scale back.
CRM offers you competitive edge
CRM is, at minimum, a requirement for doing business today. CRM can also provide a competitive edge depending on how you use it. Is it just a documentation tool to check up on your team? Or are you sharing and leveraging your team’s knowledge across your organization to make better business decisions and solve customer problems?
I like to use the analogy of three people in a skeet-shooting competition. They all have a gun, but one person will win because of how they use the gun. It's how you use CRM to improve your existing sales process that will make the difference. In fact, we’ve found that companies that see an increase of less than 1 percent of annual sales will offset their initial investments in CRM. Areas of potential return include improved quote follow-up, leveraging data from other departments (an inside salesperson following up on a service visit), and facilitating knowledge transfer after a salesperson leaves the company. I’ve heard distributors say the latter is worth the cost of CRM alone.
While the above are great opportunities, those who use CRM to fill gaps in their sales process and shift their team’s focus to the front end of the sales cycle – the lead and opportunity stages – will find the highest ROI from CRM.
Brian Gardner is the author of ROI from CRM: It’s About Sales Process, Not Just Technology, published by MDM, and is the founder of SalesProcess360. Contact him at firstname.lastname@example.org.
About This Survey
This survey received responses from 190 distribution industry decision-makers. Distributors made up the largest portion of survey-takers, with 132 participants. Manufacturers and manufacturer’s reps made up the second-largest group. The rest fell into the “other” category (software vendors, consultants and other service providers).
Executives, owners and sales managers comprised the largest portion (66 percent) of the respondent pool, but sales, marketing, IT and other directors/managers were also well-represented. More than a dozen sectors participated, with industrial distributors and manufacturers being the most prevalent. Companies ranged in size from less than $2 million to more than $1 billion.