What are the problems associated with measuring the ROI on a CRM system?
ROI is the acronym for return on investment, a measure of performance that helps in evaluating the efficiency of an investment singly in comparison with other investments. The enterprise-wide impact, the effect on revenue and costs, the fact that most CRM’s are deployed for strategic reasons rather than tactical and difficulties in quantifying improved benefits such as improved decision making make some of the core problems associated with measuring ROI on a CRM.
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The Hilton case confirms the above. The hotel’s management acknowledges that it is almost impossible to measure ROI on CRM. According to management, most of the objectives have been achieved from an electronic standpoint. However, it is almost impossible to determine if the effectiveness of personnel has increased with CRM.
How do you think Hilton measured its ROI? How else could the ROI be measured?
Various companies have difficulties in measuring ROI on CRM’s. Hilton’s case was no different. Hilton acknowledged that the mathematical approach to measuring ROI had its limitations. They, therefore, took a theoretical approach to examine customer satisfaction through ensuring the employees were well trained and the service given to customers was worth their money. To help in tracking the satisfaction of customers through CRM, the company adopted the Satisfaction and Loyalty Tracking survey which gave various performance indicators on CRM.
The rating indicators obtained through SALT were a key pointer to the effectiveness of CRM and platform for the improvement of services offered by Hilton. Hilton could also employ activity-based costing (ABC) which many experts agree provides a good starting point for calculating customer profitability for CRM. ABC identifies shifts in behaviors in relation to resources consumed and recommends the ways through which businesses can shift customers to more profitable behaviors.
Was the Hilton system successful?
Success is relative and sometimes, specific to a company or industry. However, there is consensus that outcomes such as rising customer numbers, satisfaction, and profitability denote success. According to the company, the system was very effective from an electronic standpoint. Staff was able to easily print the guests’ arrival report as shown in exhibit 8, and there was clarity in the company ranking of their customers in order of importance.
Increased efficiency brought by OnQ CRM system made it possible for staff to enough preparations beforehand effectively raising customer service standards and customer satisfaction. Ultimately, Hilton had to come up with a good method to measure ROI on its CRM. However, the fact that service delivery and contact between customers and hotel staff increased is in itself a measure of success.
Do you think it achieved its ROI?
As said earlier, ROI is the gains from an investment that technically refer to the proceeds obtained from an investment. A positive ROI measure for OnQ would mean Hilton achieved ROI on its investment. That would mean access and keen evaluation of revenue figures before and after the investment. While it is difficult to calculate the above, it is safe to conclude that Hilton did achieve its ROI on the OnQ CRM. Adoption of results from SALT and revelations by managers such as Cowan that customer service had improved in the electronic front is proof that customer satisfaction was on an upward trend. Given that the company was profitable before the implementation of the system, the revelations are a pointer to even better performance by the company. Hilton, therefore, achieved its ROI.
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What further information might you need to answer this question?
To calculate ROI one has to have access to information on the gains the company has made from the investment as well as the cost of investment. A calculation of an investment by the cost of investment is done with the resulting figure expressed in percentage form. This figure gives the benefit of the investment. In Hilton’s case, the above information is missing and it is necessary that it is available so that an effective ROI can be calculated.
What variables do Hilton Hotels use to measure the success of their system?
Most of Hilton’s variables of measure are not mathematics oriented. Tom Keltner, EVP, and CEO of the Americas identify the willingness of property owners to invest in Hilton as one of the measures of success. The acquisition of Blackstone showcases other variables that Hilton uses to measure success of CRM. They include proof of significant savings through improved efficiency of call center operations, effective differentiation of the Hilton Brand from the competitors and easiness of delivering the needed return going forward. Also, increased customer satisfaction as evidenced by SALT will offer critical variables to Hilton Hotel management to measure the success of their OnQ CRM system.
As a Central Manager of Hilton group, what metrics would you like to obtain from the CRM system / other management information system that would really help you? Why?
CRM systems are equipped to perform a wide range of functions that that avail information crucial to the management of a company. As a central manager of Hilton group, information on customer retention, visits and/or orders per customer per annum, cross sales, referrals from already existing customers and reactivation of previously inactive customers will form a central to the management of the facility. The above information will be handy in understanding the trends of the company so that effective plans can be put in place to reap maximum profits from its core business.
As a hotel manager of one of the Hilton properties, what is your impression of the Arrivals report? Is there any other information that is likely to be collected by Hilton that could be displayed to you on the same report to improve your customer service?
The Hilton hotel arrivals report gives a good impression. The arrivals numbers are impressive especially after the launch of CRM. There is a likelihood that the CRM has helped reactivate dormant customers while recognition has ensured increased loyalty from already existing high value clients. Additionally, the numbers may have gained from a high recommendation rate from satisfied clients owing to the improved CRM. On the same report, a manager will find it useful if information on the spending patterns of the clients is displayed.
That way the manager is in a better position to easily segment customers who visit the facility for easier marketing. Also, it will be important to display the arrivals timing in order to help in staff deployment. Correct staff deployment helps in better delivery of customer service by ensuring that staff is not under or overstaffed.