CRM is costly only if we don't use it. We should consider it as a necessary HR expenditure. Why do we provide tea, coffee and chairs for our team members? To increase productivity. CRM belongs in the same category.
Most SMEs think CRM is very costly — a luxury for the rich — and tell themselves they'll buy a CRM once they grow big. Nothing could be more wrong.
You need systems to grow and to manage growth. It becomes very complicated to implement new systems once you've already grown.
Let's analyse the cost of CRM in five ways
1.Gym subscription v/s CRM cost
The best gym in my city has an annual subscription of 80,000 rupees per year. My friend Ramesh is a big fan of it. But my other friend, Suresh, finds it very costly.
You might think Ramesh has lots of money to waste on it. But the truth is very different.
Suresh does not like exercise and is not going to visit the gym regularly. Ramesh, on the other hand, is very regular — he never misses a single day, and he takes full advantage of the dietician and special classes. The difference shows in their fitness levels.
The gym is the same. The usage is different, the motive is different, the purpose is different. A gym on its own doesn't do any good — it's only useful if we utilise it properly and thoroughly.
The same is true for CRM. You will find CRM costly only if you are not going to use it. Unfortunately, most companies don't properly plan the changes their working style will need when they bring in a CRM.
CRM can bring Digital Transformation. Incidentally, Digital Transformation is not about technology — it's about how people make use of technology to transform their work.
2.Two types of CRM costs
When you implement CRM, there are two types of costs: hard cost and soft cost.
Hard cost is what you pay the CRM vendor — software, implementation, customisation, training and so on.
Soft cost is what you spend internally on change management. It is almost always ignored and rarely counted. In reality, soft cost is generally much higher than hard cost — meaning the licence fee is a small fraction of the overall transformation cost.
So if you don't get proper support and guidance from your CRM vendor, your soft cost increases significantly. Keep this in mind when you're chasing the lowest price.
3.Free CRM v/s paid solutions
CRM is not just software — it's a framework, a different kind of management system. The vendor also brings best practices and guidance, and that part is very important.
98.5% of the time, a self-implemented (or free) CRM fails unless you have an experienced consultant guiding you. If you are a tiny startup with sound management ideas and good technology understanding, there's a fair chance you can implement a free CRM successfully — otherwise, less so.
Why do CRM companies give away a free version? Not for you to use — for them. It generates leads for their costly premium cloud product. Free CRM users are qualified leads for the vendor.
Free CRM solutions are generally crippled, not complete. A few open-source CRMs are exceptions.
Going for Free CRM or a paid solution depends on whether you want to save time or money.
4.One-time cost CRM v/s subscription-based CRM
Traditionally, most SME owners (especially in India) have bought PC software with a one-time cost and a nominal AMC. But no modern CRM platform is sold as a one-time purchase — and there's a reason for that.
- Continuous development. Modern CRMs are complex and ever-evolving. They require ongoing R&D investment.
- Connected systems. A CRM cannot exist in isolation. It has to integrate with email, your website and many third-party applications, which means it must live in the cloud (public or private).
- Always-on. CRM is no longer the data-entry tool it was 20-25 years ago. People use it on mobile every day, so it has to be available continuously, anytime, anywhere.
All of the above increase the cost of development and maintenance.
5.Don't look at CRM costs in isolation
The biggest mistake people make is looking at CRM cost in isolation and treating it as an additional expense. Let's look at it differently.
- Cost of your sales team. Say you have five people in your sales team with an average salary of 30,000 per month. That's 1,50,000 per month and 18,00,000 per year in salary.
- Current output. You are getting a certain output (the result, not just the sales) from this team today.
- Potential efficiency gain. If your team is better organised and uses better automation tools, their efficiency will increase. Typically, a 20-30% increase is possible.
- The simple maths. For a 20-30% increase in efficiency, can you spend 4-5% of the salary cost? That's the real question.
CRM is a fundamental tool for every salesperson. In the old days, you had to provide a typewriter to a typist. Today, you have to give a computer — and a CRM — to everyone on your sales team. You already spend on training, conveyance and travel. CRM is no different. Without it, your sales team is crippled.
Conclusion
To repeat — CRM is costly only if you don't use it fully.
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