Andersen study says higher salaries mean increased profit

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Investing in top sales, marketing and service professionals can add $40 million to the profit of a typical $1 billion business, according to an Andersen Consulting study. The study looks at the impact of initiatives to foster customer relationships and suggests the most profit-generating programs. 

The study - How Much are Customer Relationship Management Capabilities Really Worth? What Every CEO Should Know - pegs the potential payback for providing financial rewards and incentives at $13 million. Other investments related to creating a high-performing organization could add another $27 million, including for example: attracting and retaining ‘stars’ ($10 million) and building selling and service skills ($9.5 million). Above average sales and marketing salaries correlate with higher profit in every industry studied. 

The survey sampled the views of 500 executives from more than 250 companies in industries such as chemicals, communications, electronics and high technology, forest products, pharmaceuticals and retailing. 

It studied 50 marketing, sales and service capabilities common across most industries, of which fewer than half have dramatic impact upon financial performance. For the 21 capabilities that have high impact on company profit, even moderate improvements could add pretax profits of $40 to $50 million a year for a typical $1 billion business. Deriving world-class performance around these same 21 capabilities could boost pretax profits $120-140 million a year. 

Technology, the study concludes, influences 40 per cent or so of CRM’s impact. Despite its relative infancy, eCRM – using electronic channels to market to, sell to and serve customers – is in the top third of the profit-adding capabilities identified in the research, with the potential to contribute $8 million in pretax profits per year. eCRM came out ahead of more traditional drivers of value, such as segmentation and channel management. 

“Previous to this study, companies knew they had to become more customer-driven but weren’t sure precisely how to get there,” said Dale Renner, global managing partner of Andersen’s CRM. “This research takes the guesswork out of where CEOs should put their investment dollars. It starts and finishes with people and the technology that enables them to better understand their customers and to convert that knowledge to tangible results.” 

Of the top 21 capabilities, motivating and rewarding employees topped the list with a $13 million impact, followed by customer service ($13 million), turning customer information into insight ($12 million), attracting and retaining personnel ($10 million), and building selling and service skills ($9.5 million). 

The impact of technology is greatest in the area of customer insight, and leveraging that insight quickly and profitably is critical in the internet economy where speed alone often determines who will succeed. The research found that using technology to collect and analyze data, then share the insights of that analysis with everyone in the organization, could add another $12 million to the bottom line. 

“Our research clearly found that the highest performing companies give frontline employees quick and easy access to critical customer data,” said Mark Wolfe of the Customer Relationship Management practice at Andersen Consulting. “And top performers even share information with channel partners outside their organizations.” 

Andersen Consulting is an $8.9 billion global management and technology consulting firm which helps clients from a wide range of industries align their people, processes and technology with their strategy. It has more than 65,000 people working in 48 countries. 

The research surveyed how well companies execute various CRM capabilities by asking over 400 questions covering a range of strategy, process, technology and human performance issues in three sections: marketing, sales and service. 
Statistical techniques allowed the research team to calculate the impact of improving performance of CRM capabilities on a company’s return on sales (ROS). Survey questions were correlated to the business unit’s self-reported ROS for three years. 
Survey findings were validated during interviews with executives in the industries studied, as well as others not included in the research (financial services, automotive, utilities and .com). 

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