How to measure the effectiveness of CRM implementation

Here’s what the length of the sales cycle, customer lifetime value (LTV), and other metrics tell you

We’ve already established that CRM isn’t a set-and-forget technology. You need to choose the right solution for your business, encourage your employees to use it, and actively coach them using the CRM data.

But how can you tell if you’ve been successful on your quest for CRM mastery?

In this article, we look at the key CRM performance indicators that can help CRM managers understand whether CRM implementation has been successful or not. Here's what you'll find out:

Sales metrics to assess the effectiveness of CRM implementation

At the beginning of your CRM journey, you’ll have heard a widespread belief that CRM software is only a tool for salespeople.

This is nothing but a myth we’ve busted on multiple occasions.

Still, almost every member of your team, including marketers, customer support representatives, developers and C-suite executives can benefit from using a CRM. CRM software did, indeed, start as a solution for the sales department.

The original purpose of a CRM was to help sales reps store and organise customer information, identify sales opportunities, move leads down the sales funnel, and close more deals.

It makes sense to focus on sales metrics first.

Length of each stage of the sales cycle

You need to pay attention to the average number of days your leads spend in one stage of the sales cycle. It’s a good indicator of your ability to move potential customers down the sales pipeline. A CRM system offers the chance to keep track of all your leads and quickly spot bottlenecks in your sales process.

For instance, you can use CRM software to…

Set automated alerts for when leads haven’t moved stages in X days
Be notified about leads who take longer to convert than average

Afterwards, analyse stalling leads, find commonalities between them such as their lead source, take note of their lead score, and try to find any of their objections. When you have this information on hand, it becomes easier to work through the problem with your sales reps and shorten the length of each stage.

For example, if you notice that the majority of leads getting stuck in the leads stay in the Final Negotiation, you might want to take a look at sales processes there.

"26% of all forecasted deals – those nurtured leads that seemed like they were in the bag – turned into 'no' decisions because salespeople failed to find full alignment with the customer’s needs before closing"

🗣️ CSO Insights

A CRM system, on the other hand, allows you to overcome this obstacle as it gives answers and solutions to the following questions…

Is there a way to automate some of the proposal creation processes?
Do you have proposal templates?
If so, is your team actively using them to close deals faster?

Learn how to identify what hinders sales using a CRM by checking out this article!

The more effectively your teams use CRM, the more efficient your lead conversion efforts are; the faster you close deals. Boom.

The length of the sales cycle

The number of days it takes for you to acquire a new customer, from prospecting to closing the deal and getting the money into your account, is the length of your sales cycle. The shorter it is, the better.

Lead velocity is another name for the length of the sales cycle

The key factors that affect lead velocity are the cost of your product or service, and how transparent you are about it; how well you communicate its value to customers, the number of touch-points along the way, and the quality of the data in your system.

CRM software helps to shorten the length of the sales cycle...

It automates repetitive tasks
It allows for cleaner, more reliable data that is free of duplicates
It scores leads more accurately and quickly
It aligns sales and marketing departments
It keeps tabs on your sales pipeline

Learn the 14 strategies to shorten the sales cycle with CRM in our article!

If you compare the previous period to the current one and see that it takes much shorter to close deals, CRM implementation was successful.

The quality of leads

There’s a direct correlation between the quality of the leads that enter your sales pipeline and the success of your CRM implementation.

CRM software helps to streamline prospecting, lead capture, and lead scoring.

Firstly, with a customer database filled out with complete and reliable information, you get a better chance at approaching the right crowd in the future. Analyse the customers you already have in the system, single out the characteristics they share and use those to develop an Ideal Customer Profile (ICP).

An accurate ICP saves you a lot of time and effort as you’re only targeting the people who’re likely to convert and don’t waste resources on the low-quality prospects.

CRM software also makes data capture more effective. By making certain fields required, you standardise the process of customer record creation and ensure all the leads in the system experience an equal customer journey.

Some CRM solutions even let salespeople automate the lead capture process and create customer records from incoming emails, LinkedIn profiles and Facebook messages with a single click. No details fall through the cracks!

Finally, CRM simplifies the lead scoring process and allows you to spot high-quality leads early. This allows you to focus on the deals with the most value for your business and distribute the workload accordingly. You can design a lead scoring model for your specific business and configure the CRM to assess every incoming lead in regard to those criteria.

If you see a drastic increase in the quality of the deals in your pipeline, you can suggest that your employees are successfully leveraging the benefits of the system!

The close rate

The close rate is the OG sales metric to tell how well your sales department is doing. Successful CRM implementation helps drive close rates in several ways.

Reps can see the full history of communication between the lead and the company in the CRM record, no matter who was in charge of them. Now they hold full context on hand and can focus lead nurturing efforts on addressing the specific needs and wants of each lead.

This also gives sales reps the upper hand while taking care of sales objections. When you have the entire history of interaction at your fingertips, you can foresee and easily deflect any objection on the spot.

Finally, your team also gets a much better chance at closing the deal because every step of the process is completed on time thanks to automated follow-ups and tasks.

If you’re closing more deals, the CRM is doing its job!

Marketing metrics to assess the effectiveness of CRM implementation

It makes sense to take marketing metrics into account when assessing the effectiveness of a CRM implementation, seeing as though your sales and marketing teams are aligned. The tell-tale marketing signs are customer lifetime value (LTV), customer acquisitions cost, and email marketing metrics.

Customer lifetime value

Customer lifetime value (LTV) is a marketing metric that reflects on the amount of revenue you can expect from a single customer account. You need the following four figures to calculate LTV…

Average purchase value. The total revenue your company makes in a year divided by the number of purchases made that year
Average purchase frequency. The total number of purchases in a year divided by the number of customers who made purchases that year.
Average customer value. The average purchase value multiplied by the average purchase frequency rate.
Average customer lifespan. The number of days you expect customers to stay loyal to your brand and make repeat purchases from you.

To get an LTV figure, multiply average customer value by the average customer lifespan.

The use of CRM has a positive effect on all of those factors. For instance, a well-implemented CRM system can help your business increase the average customer lifespan by improving retention and satisfaction. It also allows you to market your products to better-targeted audiences and acquire more high-value leads.

A higher lifetime value = a more successful CRM implementation!

Customer acquisition cost

Total amount of money [spent on acquisition]
÷
Total number of customers [won]

A reliable CRM system helps you to both acquire more customers and lower the marketing and sales acquisition cost. It targets more qualified leads and it decreases the amount of resources you spend on that by automating a range of sales and marketing processes.

With a CRM in place, your CAC plummets.

The C in CRM stands for customer. That means you must factor customer-related metrics in when assessing your CRM software implementation. There are a few…

Churn rate and retention rate

These two metrics go hand in hand, but like salt and pepper, peanut butter and jam, or Romeo and Juliet. They don’t complement and balance each other. They’re mutually exclusive like tea and coffee, Coke and Pepsi, Mercedes and BMW.

It’s a life-long rivalry between the two. If retention rate goes up, the churn rate must go down. But you need to know both in order to make a fair judgement about business performance. Churn rate is the measure of how frequently customers leave your business.

To calculate this, divide the number of churned customers by the total number of customers your business has.

"68% of customers churn because they think a brand doesn’t care about them enough"

🗣️ Customer Experience Report by Right Now

We outlined the most common reasons of customer churn.

A well- implemented CRM software makes it easier for your customer service team to prove that they do, indeed, care about their clients.

CRM automates follow-ups so no customers or leads are left unattended
CRM sets notifications so that you never forget to congratulate customers with anniversaries and other special occasions
CRM enables communication continuity as it provides its users with full customer context and client history

Read this article to learn the nine CRM strategies that help reduce customer churn.

Here’s the catch. Customer churn is the most extreme indicator of customer dissatisfaction. If you only take this metric into account, you risk noticing inefficiencies when it's already too late to change the situation. Hence, it’s important to consider other, more subtle customer satisfaction metrics. Keep reading this article for more!

If fewer customers churn and more stick around your business, you can assume that you’ve effectively implemented your CRM system.

The Net Promoter Score

Net Promoter Score (NPS) is a 1-to-10 measure of a customer’s likelihood to recommend your business to their friends and colleagues. To find out the answer to the burning question of “how do you perceive my business?”, you need to ask your customers a variation of the following two questions…

On a scale of 1 to 10, how likely are you to recommend our company to a peer?
Why did you choose that score?

According to the results of the survey, you’ll be able to divide all the respondents into three categories…

Promoters are those who gave you the 9-10 score. They’re brand advocates; people who absolutely loved every minute they’ve had with your business.
Passives are those who gave you the 7-8 score. Average customers who got what they paid for but weren’t too pumped about it.
Detractors are those who gave you the 0-6 score. Customers who wouldn’t hesitate to switch to a competitor the next time they need the product or service you offer.

Your goal is to keep the number of detractors and passives low, and grow the mass of promoters. CRM software makes it possible to achieve...

CRM personalises customer experiences for your customers
CRM keeps track and visualises your NPS
CRM automates the NPS surveying process

Read our first-hand experience in a guide to increasing a SaaS brand’s Net Promoter Score.

If existing customers are ready to put their reputation on the line for your product, CRM implementation has been successful!

The first contact resolution rate and average time to resolution

Levels of customer satisfaction are affected by the ease at which customers can solve any problems they have with you, your business, or your product. Ideally, your Customer Support team should be able to resolve any customer inquiries during initial contact, without any follow-ups. This ability is indicated by the First Call Resolution (FCR) rate.

If your FCR is high, it means that your customer support reps are skilled, knowledgeable, and have full customer context at hand at all times. CRM software provides your customer support team with a chance to have a better understanding of the customer’s problem and keep tabs on the previous interactions they’ve had with the business. They can solve problems quickly.

Even if a rep doesn’t manage to resolve the inquiry within the first interaction, a successfully implemented CRM decreases the average time to resolution.

If your team solves problems quickly, they’re doing it because they’ve got CRM helping them.

Your team

While not a metric per se, the state of your team as a whole and each individual team member is a good indicator of whether or not your company managed to successfully implement a CRM. CRM software seeks to make the lives of your employees easier, and ensure they’re at their most productive at work.

There are several critical indicators of an effectively implemented CRM system.

The number of channels used for work communication

Modern CRMs offer collaborative features such as tasks, mentions, and shared communication. All of these minimise the number of open tabs needed to refine the task and find out the deal details from the co-worker.

The average size and quality of the workload

Thanks to the sales and marketing automation functionality the majority of great CRMs provide, the average size of your teams’ workload should decrease. Moreover, CRM changes the scope of tasks, too. With a successfully implemented solution, teams enjoy more interesting, creative tasks since the system takes care of the repetitive ones.

Employee satisfaction

All the aforementioned leads to higher levels of employee satisfaction and makes a workforce more productive.

They find it easier to solve day-to-day problems, complete tasks, communicate the results of their activities to the managers, and move up the career ladder.

Successful CRM implementation is teamwork. Half the job is on the CRM managers and the employees they manage, and the other half is on the CRM itself. If the solution is faulty or doesn’t suit the business workflows, it won’t stand a chance of effective implementation.

So, make sure you opt for a CRM that works best for you! Give NetHunt CRM a try — the first 14 days are free, so you can make sure it’s a match made in heaven.

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Originally published January 12, 2022, updated September 27, 2023

How to measure the effectiveness of CRM implementation