5 types of costs for your CRM project
When you’re considering a significant improvement to your CRM system, you may have more costs to consider than just the fee you’d pay to make it happen.
Here are five that I have encountered in my years as a consultant:
1. Time cost
The time that you and your employees will have to devote to managing and participating in the project.
For example: You believe that a highly customized member engagement workflow will get you a 30% increase in member acquisition and retention, but you find that the project requires your membership director and their staff to spend 2 days per week participating in the design process.
2. Technical switching cost
The technical effort of moving from one system to another, or to modify related systems to support the changes.
For example: You know that moving from an expensive SAAS CRM subscription to an open-source CRM could save you tens of thousands of dollars every year, but you find that making the switch will require you to set up or alter a number of related online services, such as outbound email providers, payment processors, and e-commerce integrations.
3. Human switching cost
The effort and mental stress of changing your staff’s (and possibly your members’) way of using the system.
For example: You want to design and implement more robust security and permissioning policies to accommodate the growing complexity of your organization, but you find that doing so will require significant re-training of staff, more time for member support to handle questions about the changes, and possibly dealing with frustrated staff members who can’t do things the way they used to.
4. Opportunity cost
The cost of doing one thing and leaving another for later. What other projects are you delaying or giving up in order to take on this new improvement? What other needs that you’re aware of are you assigning a lower priority than the project you’re undertaking?
For example: Instead of spending time and money on moving away from your expensive SAAS CRM provider, you could spend those resources on other aspects of your organizational mission. You have to choose something, and it’s important to acknowledge that you’re prioritizing one thing over another, and to understand why you’re making that decision.
5. Sunk cost
The time, money, and organizational good will that you’ve already spent on a failed solution to your problem. The value of that investment can create a strong desire to “stick it out” so your prior investment doesn’t feel “wasted”.
This is the classic “sunk cost fallacy”, and it should be regarded as a fallacy. But it’s a very human response that often creeps in anyway.
For example: The Development Director who’s already convinced their board to approve hiring an offshore team to build a custom donation management system – promised for delivery in 6 months, 2 years ago – may not find it easy to chuck that out and start over with someone new.
Here’s the thing:
Improving your systems is going to take some effort and expense, and it’s not always about the fee. As you’re planning to make these improvements happen, the more explicit you can be about naming the other costs, the more easily you can prioritize and execute to reach your goals.
(Speaking as a strategic consultant and CRM implementer myself, I also know that the more you can share about these other costs early on in the process, the more your consultant will be able to help you address them and still get a win for your organization.)
All the best,
A.