If you run a business, then profit maximization is probably your main objective. Do you believe that calculating your profit margins will give you a clear picture of your business’s health? Suppose your company’s revenue of the previous month was USD 50000. You might think that your company’s health is in good shape. Very happy about the KPI of your company. But if you dig deep you will see maybe you have spent USD 49000 excluding the overhead costs like tax, bills etc. So, does this statistic help you really calculate your true profits and returns?
Not really!
To maximize your profit margins, you need to maximize your Return on Investment. Now the question is how you do this Herculean task? What if I tell you that your CRM (Customer Relationship Management) software can make this task easier for you? Sounds good right? Let me explain to you how this process works and how can you maximize your profit margins by using the magical tool CRM. A study shows that 34.6% of sales professionals who use CRM tools have a significant impact on their company’s bottom line.
Let us first see how calculating your returns can be beneficial for you. This basically calculates what you are getting in return compared to what you have put in your business. Calculating your returns would help you understand what is working for you and what isn’t for your business. Based on such clarity you can take your next business action accordingly. Hence, ROI stands for Return on Investment which calculates the gain or loss that is created on the money your company invested. Now let us break down how can you measure the returns on your investments simply.
There is a simple formula for calculating ROI:
(Net profit/Investment) *100
For example, if an investor spent $500 to buy a share of a particular company then sells it off at $1500, the ROI would be (1000/500) *100 = 200%.
Hence, this is a simple metric, not complicated, can be calculated and understood easily.
It is no rocket science. Let us decode the magic formula.
Two major things need to be done for increasing your ROI:
Now our concern is how can we increase our profit margins! Profit is nothing but the difference between the revenue earned and the cost of investment. Here our motive is to increase the inflow of money i.e. the revenue. Well this isn’t much difficult.
Two major ways of increasing revenue are:
To sell more what we must keep in mind is how to go for cross selling as well as up-selling.
The basic business skill tells us that to do so two things are of utmost importance.
Here CRM plays the role of the protagonist. In fact, a study in 2017 has shown that customers spend 20% to 40% more when they are engaged with a CRM. So, how does it do it? A CRM gives you the much needed visibility to analyse your data. Once you can analyse the data you will get to know immediately your customers’ choices, buying habits, buying intervals. All the information would help you to sell more by cross selling and up-selling. Another study shows that CRM is the very tool the successfully turns loyalty of your customers into profitability.
For example, suppose you run a business of providing a variety of services like home salon services, home cleaning services, lawn mowing services and so on. Suppose one of your customers take home Salon services from your company every month. Suddenly she discontinues taking services from you. Then you can see this information in the CRM system, and you can immediately take the necessary action. You can call your customer and ask why she chose to discontinue and give her better deals and discounts on her salon services. Also, you can go for cross selling here. If she takes your Salon services, you can ask her to take your home cleaning services as well at a discounted price.
This is how you can retain your old customer. A happy customer would make your revenue numbers happy.
Another major function of this intelligent software is sending emails to potential customers with the goal of transforming them into profitable customers. Don’t take my words for it! There are studies that show companies that use CRM successfully have improved sales by 29%.
Next step for increased inflow of money can be selling often. But the question is how can it be done? This can be done by improving the customer service, upgrading the quality of the product and shortening the sales cycle. If you can close the deals quickly then you have the opportunity to sell again to the same customer after a short interval. So, having centralized as well as organized data will never let you overlook any vital information which might lead to business loss.
Your clients might contact you via several media (social media, email, telephone etc) and inquire about your products and services, request follow-ups on their orders or reach out to you for information on any issue. This amazing software does not let you miss out on important customer interactions and communications. This keeps your customers satisfied. This smooth functioning of all the departments will bring huge profit margins for your company. Statistics prove that data accessibility for sales people shortens the sales cycle by 8-14% .
For example, with all your customer data in one place you will know how many follow ups are due and you can take the needed actions. When you address all the problems of your customers efficiently then the chances of selling your products frequently to them become easy! If your customers like the quality of your products and are satisfied with the customer service, then they will definitely keep purchasing your products. So, building customer trust and relationships is crucial. Studies indicate that by using CRM, customer retention and satisfaction rates increase by 47%.
The next important task is to bring down the cost of investment. If this is not feasible for some reason, then at least we must make sure that we can avoid unnecessary expenses and keep the outflow of money in a stable condition. Now let us have a look into the ways we can minimize our outflow of money.
Here again your best friend is CRM! The automation function of this software will do all the mundane repetitive tasks for you so that you can focus on constructive business ideas and productive works. The mundane tasks include sending auto generated mails to leads, sending “thank you” and “welcome” mails to the customers. A study conducted by Barton J. Goldenberj shows automation increases labor efficiency and reduces man hours.
Allocating your funds wisely and judiciously would take you a long way. CRM will let you analyse all your data. Such visibility and analysis will help you make intelligent business decisions. The moment you take this step you will see a considerable amount of increase in your Return on Investment.
Next what you can do with this software is performance mapping of your employees. When you know which of your employees are performing better you can give them higher incentives so that they can keep up the good work and cut down on the incentives of those employees who do not have a good performance. This intelligent software will give you a clear visibility from which advertising medium you are getting the maximum number of leads. Once you get the details you can accordingly allocate most of your advertising funds into that medium. What is the outcome of this strategy? Such a strategy would help in greater returns on your investments. Simple!
Managing all the different departments of your company is not easy. It is cumbersome! Miscommunications can have a huge toll on your business. Your profit margins can go down if all the departments are not well coordinated. Data can be gathered from various sources but organizing that data systematically is more important. What can you do with all the scattered unorganized data? Nothing!
In order to draw conclusions from all your data you need a data organizer. Here again your savior is CRM which serves the purpose of organizing and centralizing all your data. Without a proper management system all your data can be lost, and corrupted, prioritizing customers becomes a mere guesswork rather than based up on facts and statistics, meetings and follow-ups are jeopardized. In a study conducted in 2017 it was found out that 25.3% of participants surveyed by CSO Insights agreed that their CRM system had significantly improved the productivity of their sales team
Calculating ROI and how to increase ROI of your business probably are the two things that keep you up all night. For every business firm (big, small, mid-sized) a clear visibility of your business revenue and cost is crucial. Without a CRM in place it would be very difficult for you to calculate the ROI and keep track of all the metrics which are scattered all over. There are higher chances of errors while calculating your returns without this software.
With clear visibility and centralization of your customer data you can make wise business decisions through right analysis of the data. Better business insight is equivalent to increased returns on your investments. Do you want your business to grow? Do you dream to get higher returns on your investments? Then CRM is the most essential software that you need right now without any further delay!