§ Assessment of economic efficiency
As a result, it remains to assess the payback period of the project and the expected profit, as well as assess what additional cost increases can be allowed when creating a corporate portal.
Armed with all these assessments, you can decide to start a project to create a corporate portal, develop technical and economic requirements and contact the Contractor.
§ Formulation of requirements for the corporate portal
Technical and economic requirements are not a technical task, but precisely the requirements that are put forward by the Customer and on the basis of which the Contractor begins analytical work on the creation of a corporate portal and issues TOR.
Creation of a corporate portal, preliminary tests
The purpose of this stage is to create and develop a functioning corporate portal, fully completed by the company's automation system, only filled with test information.
At this stage, the Contractor works almost autonomously on the basis of the TOR and design documentation developed at the previous stage.
The contractor carries out:
layout of the corporate portal design;
corporate portal programming;
database creation;
creates a corporate portal, fills it with test information;
configures the portal and conducts preliminary tests.
After that, the corporate portal is installed on the company's network (Intranet, Extranet, Internet) and presented to the Customer. The customer is also provided with the necessary documentation (administrator and user manuals).
Further work is carried out by the Contractor together with the working group of the company, whose members, if necessary, undergo preliminary training. At this stage, tests of the layout of the corporate portal are carried out in real conditions, in real workplaces (but only in some workplaces), in real business processes. The corporate portal is being set up for the company's business processes and, in some cases, business processes are being corrected and optimized, technical documentation is being corrected.
After that, the corporate portal is presented to the Customer. The final tests are carried out, the Acceptance Certificate of the work (stage) is drawn up.
§ Trial operation, regular operation
The goal of the stage is to create a fully functioning (at all workplaces, at all business processes) corporate portal with debugging of all business processes, and entering regular operation.
Preparatory stage and trial operation
At this stage, firstly, if necessary, training is carried out for all employees of the company associated with the work of the corporate portal. Further, the employees of the company with the participation of the dedicated employees of the Contractor carry out the following works:
initial filling of the corporate portal database (catalogs, reference books, etc.)
practical work begins on all business processes of the company.
At the same time, the main attention is paid to the collection and analysis of comments, operational revision of the corporate portal is carried out in simple cases, a list of further serious improvements (both the corporate portal and the company's business processes) is being prepared.
The trial operation of the corporate portal is carried out for 1-3 months, depending on the complexity of the project.
§ Refinement based on the results of trial operation
The trial operation ends with the drawing up of the Act and, if necessary, the schedule for the elimination of comments. Remarks arising from non-fulfillment of any clauses of the TOR are eliminated by the Contractor free of charge.
§ Support for corporate portal
The support of the corporate portal is carried out, as a rule, by the company's IT specialists. The contractor is involved in cases where it is necessary to restructure the company's business processes and to correct the corporate portal software accordingly.
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Before making any investments, investors necessarily try to find out when the investments will start to make a profit.
For this, such a financial coefficient as the payback period is used.
Concept
Depending on the goals of financial investments, one can distinguish a few basic concepts of the payback period.
For investment
The payback period is the period of time after which the amount of invested funds equals the amount of income received. In other words, in this case, the coefficient shows what time will be required in order to return the money invested and start making a profit.
The indicator is often used to select one of the alternative projects for investment. For an investor, the project with a lower coefficient value will be more preferable. This is due to the fact that it will become profitable faster.
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For capital investments
This indicator allows you to assess efficiency reconstruction, modernization of production. In this case, this indicator reflects the period during which the resulting savings and additional profit will exceed the amount spent on capital investments.
Often, such calculations are used to assess the efficiency and feasibility of investment. If the value of the coefficient is too large, you may have to abandon such investments.
Equipment
The payback period of the equipment allows you to calculate how long it takes for the funds invested in a given production unit to be returned from the profit gained from its use.
Calculation methods
Depending on whether the change in the cost of funds over time is taken into account when calculating the payback period or not, they traditionally distinguish 2 ways of calculation this coefficient:
- simple;
- dynamic (or discounted).
Simple way to calculate is one of the oldest. It allows you to calculate the period that will pass from the moment of investment until the moment of their payback.
Using this indicator in the process of financial analysis, it is important to understand that it will be sufficiently informative only if following conditions:
- in the case of comparing several alternative projects, they must have an equal lifespan;
- investments are made at the same time at the beginning of the project;
- income from invested funds comes in approximately equal parts.
The popularity of this calculation technique is due to its simplicity, as well as complete clarity for understanding.
In addition, a simple payback period is quite informative as investment risk indicator... That is, its greater significance allows one to judge the riskiness of the project. At the same time, a lower value means that immediately after the start of its implementation, the investor will receive consistently large receipts, which allows maintaining the level of the company at the proper level.
However, in addition to these advantages, a simple calculation method has a number of disadvantages... This is because in this case not taken into account
the following important factors:
- the value of funds changes significantly over time;
- after reaching the payback of the project, it can continue to make a profit.
That is why the calculation of the dynamic indicator is used.
Dynamic or discounted payback period the project is called the duration of the period that passes from the beginning of the investment to the time of its recoupment, taking into account discounting. It is understood as the onset of such a moment when the net present value becomes non-negative and remains so in the future.
It is important to know that the dynamic payback period will always be longer than the static one. This is because it takes into account the change in the value of cash over time.
Next, we will consider the formulas used to calculate the payback period in two ways. However, it is important to remember that in case of irregular cash flow or different amounts of receipts, it is most convenient to use calculations using tables and graphs.
Method of calculating a simple payback period
The calculation uses a formula of the form:
Example 1
Suppose a project requires an investment of 150,000 rubles. It is expected that the annual proceeds from its implementation will amount to 50,000 rubles. It is necessary to calculate the payback period.
Let's substitute the data we have in the formula:
PP = 150,000 / 50,000 = 3 years
Thus, it is expected that the investment will pay off within three years.
The formula proposed above does not take into account that in the process of project implementation, not only an inflow of funds, but also their outflow may occur. In this case, it is useful to use a modified formula:
РР = К0 / ПЧсг, where
ПЧсг - obtained on average per year. It is calculated as the difference between average income and expenses.
Example 2
In our example, we will additionally introduce the condition that in the process of project implementation there are annual costs in the amount of 20,000 rubles.
Then the calculation will change as follows:
PP = 150,000 / (50,000 - 20,000) = 5 years
As you can see, the payback period, taking into account the costs, turned out to be longer.
Such calculation formulas are acceptable in cases where the receipts are the same over the years. In practice, this is rare. Much more often the amount of inflow changes from period to period.
In this case, the calculation of the payback period is carried out in a slightly different way. There are several steps in this process:
- there is a whole number of years for which the amount of income will be as close as possible to the amount of investment;
- find the amount of investments that are not yet covered by inflows;
- assuming that the investments go evenly throughout the year, they find the number of months required to achieve the full payback of the project.
Example 3
The amount of investment in the project is 150,000 rubles. During the first year, it is expected to receive income in the amount of 30,000 rubles, the second - 50,000, the third - 40,000, the fourth - 60,000.
Thus, for the first three years, the amount of income will be:
30 000 + 50 000 + 40 000 = 120 000
For 4 years:
30 000 + 50 000 + 40 000 + 60 000 = 180 000
That is, the payback period is more than three years, but less than four.
Let's find the fractional part. To do this, calculate the uncovered balance after the third year:
150 000 – 120 000 = 30 000
30,000 / 60,000 = 0.5 years
We get that the return on investment is 3.5 years.
Calculation of the dynamic payback period
In contrast to the simple one, this indicator takes into account the change in the value of funds over time. For this, the concept of the discount rate is introduced.
The formula looks like this:
Example
In the previous example, we introduce another condition: the annual discount rate is 1%.
Let's calculate the discounted income for each year:
30,000 / (1 + 0.01) = 29,702.97 rubles
50,000 / (1 + 0.01) 2 = 49,014.80 rubles
40,000 / (1 + 0.01) 3 = 38,823.61 rubles
60,000 / (1 + 0.01) 4 = 57,658.82 rubles
We get that for the first 3 years, admissions will be:
29 702.97 + 49 014.80 + 38 823.61 = 117 541.38 rubles
For 4 years:
29 702.97 + 49 014.80 + 38 823.61 + 57 658.82 = 175 200.20 rubles
As with a simple payback, the project pays off in more than 3 years, but in less than 4. Let's calculate the fractional part.
After the third year, the uncovered balance will be:
150 000 – 117 541,38 = 32 458,62
That is, until the full payback period is not enough:
32 458.62 / 57 658.82 = 0.56 years
Thus, the return on investment will be 3.56 years. In our example, this is not much more than with a simple payback method. However, we adopted the discount rate too low: only 1%. In practice, it is about 10%.
The payback period is an important financial indicator. It helps the investor to assess how reasonable it is to invest in a particular project.
The following video lecture is devoted to the basics of financial planning, investment plan and payback period:
5.6.1 Calculation of the economic effect from the introduction of organizational and technical measures (E f) is determined by the formula:
E f = ∆П = P ′ lane - P lane (rub.) (5.64)
where P ′ lane is the financial result of the enterprise proposed by the project, rubles;
P per - the financial result of the enterprise at the present time, rubles.
E f = ∆P = 9096059.44 -2354638.6 = 6741420.84 rubles.
5.6.2 The payback period of the project being implemented (T ok) is determined by the formula:
T ok = KV of the project / E f, (year) (5.65)
where КВ а - capital investments, rubles;
E f - economic effect from the introduction of organizational and technical measures, rubles.
T ok = 23625000 / 6741420.84 = 3.5 3 years 6 months.
Conclusion: for the transportation of goods in the enterprise, 9 vehicles are required, with a carrying capacity of 14.5 tons, the volume of traffic is Q = 285795 tons; freight turnover Р = 4286925 tkm.
The cost of transportation of the calculated volume of cargo was:
Total = 25990992.71 (rub.)
The company's income was:
Dper = 9079945.31 (rub.) - with a mileage utilization factor of 0.49
D′per = 35087052.15 (rub.) - with a mileage utilization factor of 0.63
Pper = 2,354,638.6 (rub.) - with a mileage utilization factor of 0.49
P'per = 9096059.44 (rubles) - with a mileage utilization factor of 0.63
As a result of the introduction of organizational and technical measures: an increase in the utilization rate of mileage from 0.49 to 0.63. Consequently, the company receives an annual economic effect from the introduction of 6741420.84 rubles. The payback period for cars is 3.5 years.
Conclusion
In the diploma project, an analysis of the organizational activities of LLC "AgroTransService" for the transportation of sand to facilities under construction in the urban-type settlement of Kormilovka was carried out.
When studying the pendulum route of movement, the base of LLC "AgroTransService" - construction site No. 2 - the base of LLC "AgroTransService" revealed that the utilization factor of the mileage is 0.49.
The main reasons for the low mileage utilization rate at AgroTransService LLC
Large idle runs;
Zero runs.
In order to increase the utilization factor of the mileage from 0.49 to 0.63, the following measures must be taken:
Find clientele along the route or nearby,
Increase the volume of traffic;
Change the type of route from pendulum to circular,
Organize the timeliness of cargo delivery.
After changing the route due to an increase in the utilization rate of the mileage, LLC "AgroTransService" will be able to timely deliver sand and remove construction waste. At the same time, the volume of traffic will amount to 285795 tons per year, and the profit for the year will amount to 9096059.44 rubles, on the existing route it is 2354638.6 rubles, thereby the profit increased by 6741420.84 rubles. The payback period of the project is 3 years and 6 months.
Bibliography
1. Bachurin A.A. Analysis of production and economic activities of motor transport organizations: textbook. allowance / A.A. Bachurin, Higher professional education. -M .: Higher professional education. 2014 .-- 346s.
2. Velmozhin A.V. Freight road transport: a textbook for universities / A.V. Velmozhin, V.A. Gudkov, L.B. Mirotin, A.V. Kulikov. - M .: Hot line - Telecom, 2012 .-- 560s.
3. Khodosh M.S. Organization, economics and management of cargo transportation by road transport: textbook. manual / M.S. Khodosh, B.A. Daskovky. - M .: Transport, 2010. - 287s.
4. Gorev A.E. Freight road transport: textbook. manual for stud. universities. - M .: Publishing Center "Academy", 2013. - 288p.
5. Nikolin V.I. Fundamentals of the theory of road transport systems (freight road transport): textbook. allowance / V.I. Nikolin, E.E. Vitvitsky, S.M. Mochalin, N.I. Lankov. - Omsk: Publishing house OmGPU, 2011. - 281p.
6. Savin V.I., Schur D.L. Transportation of goods by road: A reference guide. - 3rd ed., Revised. and add. - M .: Publishing house "Business and Service". 2013 .-- 544 p.
7. Elgin AP Technical characteristics of trucks [Electron. resource]: [article] / A. P. Elgin. - Omsk, 2012. - access mode: http://nova.rambler.ru
8. Kasatkin F.P. Safety of transportation services and transport process: textbook. manual / F.P. Kasatkin. - M.: March, 2014 .-- 350 p.
9. Integrated mechanization of construction: Textbook. for universities / V.B. Permyakov. - M .: Higher. shk., 2011 .-- 383 p.
10. Kudryavtsev E.M. Complex mechanization of construction. - M .: Publishing house of the Association of building universities, 2009.
11. Mayboroda M.E. Bondarskiy V.V. Tutorial. Rostov-on-Don. Ed. Phoenix -2008 Approved by the Ministry of Education of the Russian Federation for SVE students.
12. Regulations "On working hours and rest time for car drivers" Resolution of the Government of the Russian Federation of June 25, 1999 No. 16.
13. "Charter of road transport and urban land electric transport" - M., Transport, 2007
14. G.V. Perervoy, S.V. Leonova, D.Yu. Zhelin - "Complex of programs for road transport"
The calculation of the economic effect of the proposed measures is carried out in order to determine the feasibility of financing a certain project, the essence of which is to make a profit.
Types of economic effect
It involves investing capital in order to generate additional profit to achieve. In the second case, the economic effect cannot be calculated, since the social effect does not imply a profit.
The economic effect can be positive or negative. To achieve a positive effect, it is enough to make a profit. In other words, the size of the investor's income must be higher than the amount of the investment. This effect is called profit. The second way to get a positive effect is not in investments that increase the volume of income, but in saving production costs. The most profitable way to get a positive effect is to increase income and reduce production costs.
A negative positive effect is achieved when the costs of the proposed activity exceed the revenues. In this case, the economic effect will be called a loss.
Methodology for calculating the economic effect
The classic formula for calculating the economic effect is as follows:
Eph = D - Z * K, where
Ef - economic effect;
D - income or savings from events;
З - costs of carrying out activities;
K is the standard coefficient.
Standard coefficient
In addition to the concept of "economic effect" there is another term that is used to determine the feasibility of investment. It is cost-effective. It also requires a standard coefficient. It shows the minimum permissible efficiency of an investment project, which must be achieved for the state and society.
The standard factor is a constant. Its meaning varies depending on the industry in which it is applied. The value of this index ranges from 0.1 to 0.33. The highest value of the parameter is in the chemical industry, and the lowest is in the transport industry. In the industrial sector, the standard coefficient is 0.16; in the field of trade - 0.25.
Feasibility of calculating the economic effect of the proposed measures
The economic effect can be calculated for any period of time. It depends on how long the events are designed for. The calculation of the annual economic effect is carried out in cases where activities requiring investment are carried out or can be carried out during the year. An example is the payment of bonuses to employees for increasing sales by month. Thus, there is no better way to understand the feasibility of bonuses, how to calculate the economic effect for the year. The formula for calculating the economic effect of the proposed measures in this case will look like this:
Er = (D1 - D0) * Z * K, where
- Eg is the annual effect;
- D1 - income after events;
- D2 - income before events;
- З - costs;
- K is the standard coefficient.
Example
In order to more clearly understand how the expediency of an investment project is determined, it is necessary to consider an example of calculating the economic effect.
The company is engaged in the manufacture and sale of furniture. The management decided to give bonuses to employees if they can improve the quality of products. As a result of the measures taken to improve the quality of the goods, the company was able to earn 100 thousand dollars, which is 15 thousand more than before the implementation of the measures. 8 thousand dollars were invested, and the standard coefficient is 0.25. Accordingly, the economic effect is calculated as follows:
Eph = 15 - 0.25 * 8 = 13.
Long term investment
In cases where the investment will be carried out for a long period of time, the indicator of economic effect will not be able to reflect the feasibility of financing. Opportunity costs must always be taken into account. They appear when an investor makes one or another choice in the presence of another alternative. In this situation, the opportunity cost is considered to be the unearned profit that the entrepreneur could earn if he chose another option for investing his funds.
There is always at least one alternative investment option, and it must be taken into account in order to get a more complete picture when calculating the economic effect of the proposed measures. This alternative is a bank deposit. In this case, it is necessary to take into account the percentage of the deposit and discount the income and costs.
In this situation, the net indicator will act as an economic effect. the fact that costs exceed costs.
The point is that a negative value of the net present value does not always mean an excess of expenses over income. If you include a calculation percentage, for example, 5%, in the calculation, then a positive value means that the return on investment is more than 5%. If the NPV is equal to 0, then the investment is profitable by exactly 5%.
To understand how profitable the proposed measures are when it is less than zero, it is necessary to calculate the internal percentage. A positive value indicates the profitability of the project, while a negative value indicates that it is unprofitable. If the internal interest is 2 at a calculation rate of 5%, then the investment has paid off 2 percent, but with the alternative use of these funds, they could have brought in 3% more. Thus, in contrast to the coefficient of economic efficiency, it is a more suitable solution for calculating the financing of measures to improve the enterprise, designed for a long term.
More often than not, managers perceive the effectiveness of CRM implementation at the level of common sense. Indeed, the importance of effects such as increased sales productivity, satisfaction and customer retention is understandable even to a non-expert. Valuation difficulties arise when trying to accurately assess the return on investments (ROI) ratio, since there is no specific universal formula for such an assessment.
Today, many already understand that the effectiveness of an information system is determined by its content and the quality of implementation - the "correctness" of structures and processes, etc. In other words, the result of a CRM implementation is determined by the quality of the business model. At the same time, in practice, the implementation of CRM is often implemented purely as automation existing processes with existing staff. If the existing quality of the business model is satisfactory, then this approach is well understood. In this case, we can talk about such implementation effects as an increase in staff productivity, an increase in the speed of service, the elimination of losses and duplication of information. It evaluates the return on the cost of purchasing an applied CRM system and implementing it in accordance with existing processes. Therefore, we can say that when introducing CRM as a software product, automating processes based on it, companies receive direct effects of the category of cost reduction and some indirect effects obtained through the support of the existing business model.
In a complex project for the implementation of a client-oriented strategy and creating a system sales, you can get a much larger number of effects - both effects of the category of cost reduction, and effects of a different order.
Various sources (META Group, Gartner Group, ISM, etc.) distinguish the following main categories of effects from CRM implementation:
This qualification is quite illustrative and shows the main categories of the effects obtained. However, it does not take into account such (at first glance, implicit) effects as risk reduction. For example, in business there is a "winner takes all" expression. In some markets, the loss of a competitive position can be fatal, and in this case it is no longer just about a simple increase in income. Therefore, for completeness of the classification, we will also talk about the effects of reducing (or increasing) risks from the implementation of CRM.
The nature and the possibility of a direct assessment of the effect obtained are different. From this point of view, we will be interested in the categories of direct economic effects and indirect economic effects.
So, let's divide the economic effects into three conditional categories:
1) direct economic effects;
2) indirect economic effects;
3) the effects of risk reduction.
Direct economic effects
This category includes the effects of direct action that affect the profitability of the company. The table below describes the changes being made in the project to implement a customer-oriented strategy and create a sales system and the resulting short-term and long-term economic effects.
|
State before implementation |
Changes |
Short-term effects after implementation |
Long-term effects after implementation |
|
There is no single customer base. There are no segmentation options for different indicators (including dynamic ones) |
Customer segmentation |
|
|
|
Product promotion is carried out without analyzing the effectiveness of interactions along the chain |
|
|
|
|
Functional structure of the organization, no responsibility for customer relations |
|
|
|
|
The personnel motivation system is not focused on the goals of the company's client strategy. |
|
|
|
|
The staff is not provided with information tools and is not trained to interact with clients |
Staff training |
|
|
|
Customer data is not systematized, employees do not have the ability to access the knowledge base |
|
|
|
|
No tools for planning and forecasting sales |
|
|
|
|
Management decisions are made without taking into account the indicators for working with clients |
|
|
|
|
No tools to manage processes |
|
|
|
|
Contacts and requests are processed manually |
|
|
|
|
Employees and customers have little understanding of the status of order fulfillment |
Automation of the order execution process |
|
|
|
Employees receive information from disparate sources and spend considerable effort to obtain it |
Maintaining a single database of current and potential customers |
|
|
Indirect economic effects
For example, these include the increase in the value of shares on the stock exchange as a result of increased transparency of processes, increased manageability, which is important for attracting the interest of third-party shareholders. Possible effects of this kind are shown in the figure below.
Reducing risks
The table below describes the main risks that can be mitigated by the implementation of a CRM system.
|
Changes |
Reduced risks |
|
Customer segmentation |
The risk of losing the most profitable / profitable clients |
|
Choice of channels and optimal promotion chain |
The risk of deteriorating relations with partners, the risk of not delivering customer value to customers |
|
Organizational structure optimization |
The risk of decreasing the flexibility of the organization, the risk of deteriorating customer relations |
|
Creation of a new personnel motivation system |
Personnel risk versus overall company goals |
|
Staff training |
Risk of reduced staff motivation, risk of deteriorating customer relationships |
|
Creation of a unified database, knowledge base |
Risk of deteriorating customer relationships |
|
Sales planning and forecasting |
Risk of non-fulfillment of income and / or profitability plans |
|
Customer Metrics Management |
The risk of losing competitiveness |
|
Business process automation |
Risk of reduced productivity, process efficiency |
|
Automation of processing contacts and requests, creating a self-service system |
At the same time, the introduction of CRM can also lead to the emergence of new risks, such as a decrease in employee productivity at the initial stage of the system operation, rejection of the system by a number of employees.
Assessment of the effect of CRM implementation
Basic approaches to assessing the economic effect of CRM implementation
Obviously, the achievement of all the performance indicators given above within the framework of a separate project is impossible due to limited resources (time, financial and others). Therefore, a CRM implementation project should include a goal setting stage. The goals of the project should be logically linked to the strategic goals of the enterprise. In particular, using a balanced scorecard (BSC), it is possible to decompose general goals into goals of the "lower" levels - customer, operational, personnel and technology.
To assess the effect of the implementation of CRM, the method of analyzing several key indicators before and after (as well as during) changes can be used. These are the dimensions in the context of which the company will further evaluate the effectiveness of its relationships with customers. Some of these indicators can be determined by most companies even before the start of the project. Several company-specific indicators are selected, for example:
- percentage of potential customers' response to marketing messages (audience reaction);
- growth of new customers (return rate);
- purchase cost;
- share of successful deals;
- length of the sales cycle;
- average time for solving typical problems by the service department, etc.
Metrics are usually grouped by business process group or CRM subsystem.
The paradox of the situation is that for a formalized assessment of the effectiveness of CRM implementation, you need non-financial data from the periods before the implementation of the CRM system, and this data is not available, because to collect them you need ... a CRM system. Yes, you can estimate the bottom line - the growth of the company's income in different periods of time, but is it caused by the implementation of a CRM system? To answer this question, you need to be able to analyze the structure of the customer base, the effectiveness of managers, the growth of customer loyalty, and much more that can be done using the CRM system itself. Therefore, in order to obtain a reasonable estimate, the selected indicators (both in kind and in value form) are monitored as the corresponding processes are reorganized and the components of the information system are introduced. You can compare the monetary value of the reorganization effects and the associated costs to estimate the ROI on your CRM investment.
Another problem in assessing efficiency: certain economic effects from the implementation of a CRM system for each specific company can affect in its own way. Lacking ready-made tools, many give rough estimates with significant scatter, for example, "the percentage of customer retention increased by 5-10%, which gave a profit increase of 20-30%, the automation of the mass of manual operations almost doubled the productivity of staff" and others like that. Such assessments taken from practice, of course, are also valuable.
How to assess the effects of a possible CRM implementation even before the start of the project? This can be done based on the specific business model being implemented. In fact, this model should be developed at the early stages of a CRM implementation project, and later it already serves as a model that verifies the achievement of the indicators laid down in it. The issues of building and formalizing such a model are beyond the scope of this article. Here are some examples.
5.2. An example of assessing the direct economic effect obtained through the growth of employee productivity.
Take the sales department of a large company. Sales costs consist of two components:
- fixed costs (salary, office maintenance, administrative costs, and others);
- variable costs (bonuses, travel expenses, communications, supplies, and others).
Suppose that there is the following current structure of expenses and income of the department (for the year):
Let's assume that implementation has achieved a 15% increase in productivity per year. This means that sales people have 15% more time to complete their duties - sales, which they can spend on attracting new customers. Suppose this leads to an increase in income by a proportional amount, 15%. At the same time, the variable part of expenses will increase, while the fixed part of expenses will increase slightly. As a result, we have the following department indicators after increasing employee productivity:
|
Index |
Became, mln. $ |
|
|
Variable costs | ||
|
Fixed costs | ||
|
Profit department |
Thus, there is a direct economic effect from an increase in employee productivity: $ 15 million with a 30% increase in profits.
An example of assessing the indirect economic effect obtained by increasing customer loyalty.
For companies operating in conditions of limited and high cost of financial resources, the client strategy is to increase the productivity of interaction with the most profitable of the existing clients. Accordingly, suppose that the company has set a goal - to increase sales despite market stagnation. To do this, we determine that it is necessary to increase the average profitability of clients by 10% within one year. To do this, you need to achieve an increase in customer retention. Segmentation, analysis of the customer base is carried out and a business model is created that would support the achievement of these indicators at all levels of the company: operational, technological, in terms of personnel training and others.
Let's select two segments and their indicators:
|
Segment |
Number of clients |
Costs for attracting one customer, |
Total profit for the year, million $ |
Average LTV, thousand $ |
Average LTP, thousand $ |
|
|
Large companies with a turnover of over $ 100 million | ||||||
|
Medium-sized companies with a turnover of $ 10 to $ 100 million |
Here LTV / LTP (Lifetime Value, Lifetime Profit) - "lifetime" value (of the client) - income / profit brought by the client during the period (life cycle) of his purchasing activity. These indicators are determined as follows:
LTV = (Length of Relationship / Average Time Between Purchases) ´ Average Purchase Value;
LTP = (Length of Relationship / Average Time Between Purchases) ´ Average Purchase Profitability.
1) For large companies without increasing customer retention, total segment LTV = 20 × ((24 months / 12 months) × $ 100K) × 1.2 = $ 4800K
2) For large companies, with an increase in customer retention, the total LTV of the segment = 20 × (((24 months × 1.1) / 12 months) × 100 thousand dollars) × 1.2 = 5280 thousand dollars.
Thus, the expected effect of measures to improve customer retention indicators within the framework of a CRM project in the segment of medium-sized companies: an increase in revenue of $ 4.8 million, achieved in two years. Obviously, this is not profit, since the project will incur costs depending on the specific measures within the project, but this figure will allow us to determine how much we can spend on measures to increase customer retention (including the implementation of a CRM system) of this segment during 2 years old. If we calculate the economic effects over longer periods, we can see that even a 5% increase in retention can give a profit increase of about 50% in 5 years.
The importance of the CRM methodology and tools also lies in the fact that with its help we can quickly track the achievement of established goals at intermediate stages and make informed management decisions to timely adjust the development of the company.
As we can see from the LTV / LTP indicators, the growth of income and segment profits can be achieved not only by increasing the life cycle. This is also possible by reducing the average time between purchases (for example, by organizing cross-selling), as well as by increasing the value (profit) of individual purchases (for example, by creating additional consumer value).
You can also compare the productivity gains discussed in the first example with the profitability effects of the existing customer base discussed in the second example and understand that the cumulative effect can be even more significant.
Here we looked at examples of evaluating the two effects of creating a sales system based on CRM methodology. As shown earlier, there can be many more such effects. As you can see, the effects of CRM implementation are multifaceted and complex, and there are no universal formulas for calculating the return on investment. However, most of the effects lend themselves to a rough quantitative assessment based on a pre-developed business model, which should be built as part of a project to implement a client-oriented strategy and implement a CRM system.
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