You don’t need me to tell you times are a bit tough right now. Buyer confidence is low, and that means that keeping the customers you have is even more important—let alone attracting new customers.

Can a customer relationship management system be the way to do this?

A white paper published by VendorGuru.com claims it is.

While everyone’s avoiding the R-word (recession), most businesses as well as consumers are tightening the purse strings. Customers are suddenly more valuable than just a short time ago.

CRM systems can help a company of any size ensure these customers keep returning—and it’s common knowledge that existing customers are cheaper to retain and more likely to buy than new customers.

“Businesses could find an effective CRM approach will give them an important competitive advantage under recessionary conditions,” states the white paper.

With an effective CRM system in place, businesses may retain profitability and grow even during a recession. Some view recessions as a bit of “natural selection” in the business world, allowing the fittest to survive and paring away those without the strength to weather tough times.

The white paper highlights three strategies for surviving—possibly prospering—during a recession.

Increasing customer penetration is the first. Customer relationship management tools can work to boost profitability as much as 70 percent, according to the white paper. Acquisition costs for new business tops the cost of servicing current customers; there are also opportunities for cross selling. CRM software guides your sales force by offering scripts for cross selling and showing the customers’ order histories.

Achieving efficiencies is second in line; streamlining a business from within is key during lean economic times, and unproductive salespeople can be identified and helped. In fact, CRM can help a company automate processes and develop greater efficiency throughout the entire sales cycle.

Finally, the white paper says CRM can help to use resources effectively. During slower times, keep your staff busy by trying new CRM strategies and solutions.

Coming in On-Budget does not mean you managed to squeeze your project into whatever arbitrary budget you came up with when you first started. It also doesn’t mean that you started with an overly generous budget.

It does mean that you develop a budget that takes into account an analysis of 4 critical areas:

1. PAYOFF. You need to know exactly how your CRM system is going to generate ROI. This will help you focus your project on the right areas. By knowing how you expect payoff to be achieved, you can plan to achieve it.

2 RISK. You need to figure out where the risk is in your project because "risk=expense". By figuring out what can go wrong, you can take measures to minimize and contain that risk.

3. SERVICES. Be sure to fully account for the variety of services that will be required. A few often overlooked areas that can increase your services bill significantly include: meetings, testing time, debugging time and "while you’re here…" time.

4. TECHNOLOGY. Choosing the wrong technology is can be a huge waste of money. From the worst case scenario of a totally failed project to having to spend extra money to make the wrong software do things it wasn’t intended to do.

What makes putting together a realistic budget so difficult for small businesses is that it’s not what they do and they don’t have the experience of having done several before. It’s not what they do. So, they rely on the Sellers of CRM who have their own vested interest in not scaring off their customers with numbers that are perceived to be too expensive.

By putting together a realistic budget, you may very well find that the project is going to cost much more than you were intitally prepared to spend. It’s best to find this out now and before you "sign on any dotted lines".

If you do find out the project is going to cost more, here are a few ideas of what to do:

- WAIT & SAVE. Perhaps you need to wait 6 months until you have a bigger budget. Use this time to get prepared for the project: learn more about the software choices, make sure you’re business processes are as fine tuned as they can be, and focus on how CRM software will generate ROI.

- GO AHEAD. It may be more money than you were expecting, but may still be within your budget. If you’re clear on how the CRM system is going to generate ROI and you’re otherwise ready, go for it!

- SCALE DOWN. If you have a very clear idea of how the CRM software is going to achieve ROI and you can’t afford the full project, focus in a smaller area to begin with that will have a payback. Use this payback to help fund future projects. It’s always a good idea to start with smaller, high-payoff projects first.

- FIND MORE ROI. If you have a really clear and compelling business case for how a CRM system is going to improve your bottom-line, it’s much easier to find the necessary funds to implement it.

- DOUBLE CHECK. Make sure you’re choosing the right technology. Cheap software can often be expensive to implement. Double check to make sure you’re basing your budget on the right CRM software. You may find that a software that costs more in licensing, ends up being an overall more affordable solution.

Coming in On-Budget means you started with a realistic budget. The Insider’s CRM Success System goes into great detail on how to develop a realistic budget and provides the control forms and worksheets you’ll need.

Scott Gingrich is the creator of The Insider’s CRM Success Toolkit, the world’s most complete and only guaranteed approach to successful CRM projects.http://www.thecrmcoach.com.

Undoubtedly, the most common question I hear from companies is "How do I cost justify my CRM investment?" While project costs have come down over the past 12 to 18 months, this remains a key issue. What surprises me now, however, is that this matter frequently arises for the first time in earnest near the end of the evaluation–sometimes right before the project plan is presented to management for approval.

By this time the project team has the expense side of the equation nailed down: software license fees, maintenance, consulting support, hardware, administrative support, training, help desk, etc. The team can recite the dollars-out half of equation in its sleep, but what about the dollars back?

Often what the team wants to hear from me is how other companies have dealt with ROI. CSO Insights has surveyed several thousand CRM projects over the years, and has compiled a wealth of case studies. For example, a manufacturing company reduced its order error rate from 23 percent to less than 0.5 percent; a distribution firm cut the time it took to get new salespeople fully productive from nine months to four; and a financial services group increased the number of leads generated per day, per telemarketing rep, from 1.5 to seven.

These are all impressive numbers, but I caution the executive sponsors of a CRM initiative that the numbers only have meaning to the company that achieved them. In no way should sponsors infer that they will duplicate that level of performance improvement simply by buying a similar technology framework. CRM ROI is a personal experience–no two companies market to, sell to, or service customers exactly the same. So how do you go about finding ROI truth? Here’s a simple framework: Start by calculating what it is costing your company to not implement CRM.

CRM technology is a tool set designed to fix problems. You have to know what your problems are. The ROI calculation is the self-evident result of the process improvement that will take place through the implementation of CRM. We benchmarked the problem for a computer firm: 18 percent of the people calling its 800 number hung up before talking to a contact center rep. For a pet food manufacturer the issue was a 42 percent error rate in its sales forecasts, and for a distribution firm the issue was that voluntary rep turnover had soared to 48 percent.

Having identified their pain point, each of these firms calculated the business costs of letting their respective problems continue to exist: lost revenue from customers hanging up and buying a competitive offering, excessive inventory from buying the wrong raw materials to match inaccurate product forecasts, lost territory revenue from continually ramping up new reps.

Knowing the problem and the cost, the CRM evaluation goal was to determine if and how technology could help minimize or eliminate that problem. A company will gain X additional customers by minimizing prospects abandoning calls, will achieve Y dollars in savings by better managing inventory, and see Z dollars for having experienced reps stay in the territories longer.

The case of business improvement should drive CRM projects from day one. If you cannot quickly list the top-three improvements you expect to achieve by implementing CRM, you are making the error of looking to buy a solution before you find the problem. Reverse the order–first identify the problem, then find the solution–and CRM ROI will then become a much simpler matter.