How much does a CRM system cost?

As the Commercial Director of a CRM consultancy, I get asked this question a lot - Just how much does a CRM system cost?

Over the last year I've spoken with over 250 companies who were considering investing in CRM. During the sales process, most of them asked this question sooner or later. For some it was the elephant in the room. And, I must confess, I'm yet to figure out when is the optimal time to raise it! 

Asking how much does a CRM system cost is a simple enough and logical question to ask. But the truth of the matter is, there's no simple answer. Not all that helpful, I know!

However, in this article I'll explain why it can be a difficult question to answer, and what the different elements are that must be considered when searching for an answer.

Major factors to consider

CRM Scope

CRM as a discipline is not only wide but also deep and varied. There are several different factors, or areas, to consider. Compare this to bookkeeping, for example, which is highly defined, proceduralised and regulated, and you'll get a sense of what I mean. CRM is like Heinz: - there are 57 varieties (or even more!).

CRM is a discipline - or a way of doing business - rather than just a software application. Therefore, there are many factors beyond the software itself which need to be considered. For example: the people, the culture, the business processes, and many more. What we're actually talking about is change or transformation. It's certainly not just software selection and installation.

Given this context, don’t be surprised that comparing estimates between multiple potential providers will be difficult, if not impossible.

Return on Investment (ROI)

Your investment should not be considered in isolation. You need to determine what success looks like. For example, if I invest £1,000 and get a £2,000 return, that’s a twofold return. Not bad.  But if I invest £2,500 and get a return of £10,000, I get a fourfold return, and that's great!

The benefits of a CRM project will typically fall into one of the following areas:

1. Revenue Growth: Tools to improve the effectiveness of sales and marketing teams
2. Improved Quality of Service: Integrated tools for support, project delivery and order fulfilment
3. Reduced Operational Costs: Streamlined and automated business processes
4. Tracking Key Business Information: The right information to the right people at the right time to improve decision making

Of course, there'll be overlap, and you may have more than one desired outcome. It's always worth spending time considering - and achieving consensus - on the central question:

Why are we doing this?

When I meet with prospective clients, if I don’t get a warm fuzzy feeling when I ask this question, it sets alarm bells ringing for me. We're a professional services firm so our raison d’étre is helping clients achieve their desired business outcomes. If they can’t articulate what those are, we’re all on a hiding to nothing! 

Answering the question of why you are doing this will help you in defining the desired return on investment. 

CRM project cost components

There are 3 major cost elements in a CRM Investment. These are:

• Software licensing
• Professional services fees
• Maintenance

How much does it cost to buy a CRM system?

Software Licensing

Software licence costs are mandatory and recurring. They will usually be quoted on the vendor’s website on a per-user, per-month basis.

Don’t assume that you'll be able to pay monthly, however! Or that in doing so you won't incur a significant cost premium. Some products may have a defined minimum number of users; others may have different editions offering different features and functions. Some vendors package both features and a defined number of users.

There are several different models which can make comparison tricky but not impossible with a bit of patience and guidance from the vendor or their channel partner.

Of course, software vendors aren't charities, so any free edition will typically have significant limitations, either in functionality, number of users, or both.

The last thing to be aware of is the low headline price. Often it can almost double by the time you’ve added on the exact mix of extensions or modules that your company and users require.

How much does it cost to implement a CRM?

Professional Services

After the software licensing costs there are the professional services fees. This can also be referred to as implementation or onboarding.

This service can either be provided by the vendor themselves or a dedicated consultancy. Technically, professional services are an optional cost element. A one-off cost at the start of your journey. It's well worth remembering that not all implementation partners or implementation services are created equal! Partner selection, and the way you go about implementing your project, will usually have a greater impact on your desired outcomes than the selection of the technology or product itself.

Fixed vs. Bespoke Implementation

Implementation is sometimes offered as two very different approaches. There is a fixed approach and a bespoke approach.

Fixed Approach

The fixed approach will typically be quite prescriptive both in terms of what you get, how you get it ,and how much you get. The benefit, however, is a fixed price! Like a fixed menu at a restaurant, you get everything that's included and nothing else! It’s only good value if you want and need everything that is included.

Bespoke Approach

The bespoke (or custom) approach is totally different. It’s a collaborative approach. The destination isn’t necessarily tightly defined when you start and it’s a journey of discovery.

The good news is that whilst it isn’t possible to accurately define the cost, that is something that both parties understand. Naturally I would advise anyone considering a CRM project: that if you think there's a half-way house between these two approaches - i.e. a fixed price with a continuously variable requirement or outcome - then you’re kidding yourself! 

Go it on your own or get help?

Now, I mentioned above that professional services were optional. You can avoid these fees altogether by self-implementing. After all, how hard can it be, right?

Well, it’s worth pointing out that CRM projects have a high failure rate.

 Around 50% of CRM projects fail to achieve their target outcomes!

In our experience the selection, or not, of an experienced professional partner to deliver the project has a significant impact on the likely project success. In fact, it's no exaggeration when I say that circa 90% of the organisations who declined our offer of Professional Services did not renew their licences at the end of the first year. A clear sign that their project failed.

Estimates of effort

There are a number of factors that impact on effort estimates. These include:

• The momentum or cadence: You'll use more resource, regardless of whether internal or external, if you start and stop!
• Culture: Users typically fall into one of 3 camps: 1) Active supporters, 2) Neutral, 3) Saboteurs (actively resist). You need to identify who your supporters and detractors are, and to manage them accordingly. 
• In-house expertise: How much in-house expertise you already have, their availability, ability, and their desire to get involved
• Number of users: This will impact upon the rollout and training time required

How much does it cost to maintain a CRM?

Maintenance

The final element of cost is having an ongoing relationship with your implementation partner. This might be described as a 'Support Agreement' or a 'Customer Success Programme'. This is an optional and recurring cost. Think of it as a monthly retainer, similar to the way you engage an IT service provider.

If you choose not to engage with this service, you'll likely still be able to get support. It's just you probably have to wait longer and pay more!

Final thoughts

I'd encourage anyone considering a CRM project to pay particular attention to the hidden cost of getting it wrong. If you have to repeat the project, what's the cost of the wasted effort? What about the hidden costs of future reticence in your staff?

Sometimes I come across organisations who just want to dip their toe in the water, so to speak. And I understand the sentiment, but to me it's another red flag. It says, "This organisation isn’t committed to making this work”.

If you want your CRM implementation to work, it's well worth spending time in making sure you select both a partner and a product which meets your needs. The partner should ask pertinent questions, have demonstrable experience and a track record of success, and be aligned with your people and culture and fill you with confidence.

So, back to the question of: 

How much does a CRM system cost?

First, you need to evaluate the scope of your CRM project. A successful project will identify the breadth and scope up-front. 

Second, you need to know that there are 3 cost elements to consider:

• Software licensing - Product features; number of users
• Professional services fees - Project environment; project delivery timeframe; 
• Maintenance - Ad-hoc or subscription

Third and finally, you need to evaluate the potential ROI to help make the business case for the investment.

If you're planning on investing in a CRM solution, are in the midst of a project, or have an existing system that isn't meeting your business needs, then schedule a free consultation with one of our experts. On the call we can share our advice and guidance to help move your situation forward.