How Likely is it That the Often Quoted Nucleus Research CRM ROI Estimates Are Correct?

Last Updated on March 15, 2021 by Shaun Snapp

Executive Summary

  • Nucleus Research has produced the most widely quoted CRM ROI estimates anywhere.
  • We review how likely these estimates are true.

Introduction

In the article, Our Evaluation of the Information Quality Level on CRM ROI from Google Search Results, we reviewed a large number of the top articles according to Google on the ROI of CRM. What continually kept popping up was quoting a study by Nucleus Research stating that the typical CRM implementation returned an ROI of 8.7x or 870%.

Because of how widely Nucleus Research’s estimate is quoted by vendors who use it to try to sell their CRM systems, it made sense to investigate how likely it is that this estimate is correct.

Article #2: Discover’s CRM ROI Implementing CRM

In just the second article we reviewed on CRM ROI according to Google’s top results, we ran into this quote.

Research by Nucleus has shown that for each $1 spent, a CRM will generate a return of $8.71, which is an extremely attractive percentage. This is why CRM savvy companies are constantly looking at making further investments into their systems

This quote was repeated in the fourth article we reviewed.

Article #4: Business 2 Community’s Calculating ROI CRM Business Leaders Guide

Here we have another estimate from Nucleus listed.

And the signs are that if you get it right, you can quickly realize a very attractive ROI. In a recent survey of CRM decision makers, Nucleus Research discovered that successful projects are generating a return of up to $5.60 for every $1 spent.

This is lower than the previous estimate because older and Nucleus Research states that CRM systems’ ROI is increasing due to lower prices and better products.

This quote was repeated in the sixth article we reviewed.

Article #6: Nutshell’s ROI of CRM

Nutshell is another CRM vendor. This article requoted the Nucleus Research study again.

According to a 2014 study by Nucleus Research, every dollar spent on CRM implementation returns as much as $8.71 in sales revenue.

This quote was repeated in the ninth article we reviewed.

Article #9: Set Shape’s CRM ROI 5 Simple Formulas to Measure the ROI on Your CRM Investment

Shape uses the suspect Nucleus Research claim again.

According to the global tech analysis firm Nucleus Research, the answer to this equation is an average of $8.71. That means that, on average, CRM systems return almost $9 for every $1 invested.

This quote was repeated in the thirteenth article we reviewed.

Article #13: Software Suggest’s How to Measure and Improve CRM RIO

And the Nucleus Research study appears again.

The importance of CRM can be identified from the fact that companies, on average, earn more than $8.71 for every dollar spent on the implementation of CRM, as per the study by Nucleus Research in 2014.

This quote was repeated in the fifteenth article we reviewed.

Article #15: EISGP’s CRM ROI How to Get What You Pay For

And here comes the Nucleus Research study yet again. My my, how these two studies from NR have gotten around the CRM ecosystem.

Nucleus Research says for every $1 spent on a customer resource management (CRM) software platform, the return is between $5.60 and $8.71.

Therefore, it should be apparent that Nucleus Research’s CRM ROI estimate is a constant source of reference for CRM vendors.

Getting into the Details of The Nucleus Research CRM ROI Estimate

It is important to cover the Nucleus Research study, as it is repeatedly referred to articles about the ROI of CRM systems.

Here are the most important quotes in our view from this study.

In looking at the case studies published since our last analysis, Nucleus found that for every dollar a company spends on CRM, they now get back $8.70.

The first question that came to my mind was..

“Why are none of the case studies mentioned or otherwise listed?”

In research, normally, the individual case studies are listed. Without this, it makes it difficult to say much or to evaluate the study. Questions I had about the study or white paper (I am not sure what to call it, as a study has to contain details) include the following.

  1. What is the variance among the data points?
  2. What are the high and low values?
  3. How many data points are there? Nucleus Research does not state the number of case studies anywhere. What if this research contains two case studies?
  4. Were the data points provided by a vendor? If they were, this would eliminate the study’s validity, as vendors always cherry-pick data points. These types of analyses are always managed by marketing, and marketing is allergic to research.
  5. Who paid for the study? Was it a vendor? I find it hard to believe that this work was not funded by some entity connected to the CRM industry.

Is an 870% ROI an Average or a Goal?

Now let us review something that Nucleus Research says that none of the vendor or other articles on CRM ROI shared.

Although not every company should expect $8.71 returned for every new dollar spent on CRM, it’s not unreasonable to set that as a goal, and to take advantage of the competition in the marketplace to demand vendors show – and deliver – sustainable return on investment.

So, how is a goal the average?

It is stated by Nucleus Research as if it is an average. There is another major problem with no details being published, which is the fact that no software category that has an ROI anything like this. So the combination of strong and unrealistic or uncharacteristically high claims combined with no supporting detail makes a claim difficult to believe.

Furthermore, several paragraphs in the Nucleus Research CRM ROI white paper don’t seem like they were written by an IT analyst but seem more like something taken from a CRM vendor’s marketing department.

See the following quote.

Maintain your most valuable asset: never lose a contact purely because it wasn’t in the system. All relevant information must be stored within this one central place. No lead should ever go unregistered, no matter where it originates from.

This makes it sound like a CRM system is the only system to record for a contact. This is a strange thing to propose as it is certainly not true. It is exactly the type of false claim that software vendors routinely make. I record Brightwork Research & Analysis contacts in an online database called Airtable, and I have yet to lose any contact. This would appear to disprove the idea proposed that this capability is provided by CRM systems exclusively.

Secondly, virtually any SaaS application or on-premises applications that many people can log into would qualify as “one central place.” It isn’t easy to see how a CRM system has a monopoly on being a central location.

Let us discuss another very dubious paragraph in the white paper.

Your CRM is worth it because it enables you to focus on your customers. Keeping them at the center of your business is the fastest way to boost sales and profits.

How did such a promotional statement find its way into what is supposed to be an independent CRM analysis?

  1. CRM is worth it every time?
  2. CRM allows you to focus on customers, more in what way?
  3. Before CRM systems arrived on the scene, were there no customer-focused companies? Don’t cable companies and phone companies have many customer-related type applications, including CRM? Does anyone think that AT&T or Verizon has a superior focus on customers versus, say, Sears circa 1940 when everything was paper-based at the company? Sears built a remote empire before they had many stores by sending out catalogs and taking orders over the phone and mail. And did Sears become more or less known for customer service as it adopted information technologies?

Why, if all of this is true, do so many salespeople report the opposite ability to focus on customers when they are made to use CRM systems? Are Nucleus Research and the CRM marketing department that had this quote placed into the study/white paper aware that salespeople used to keep track of customers before computers existed by using paper and pen or pencil?

I am sorry if this seems like a diversion; I think it is necessary to verify the white papers’ assertions. These assertions are thrown at the reader at rapid speed, and it is necessary to slow things down and check the assumptions that are being claimed.

At this point, I would like to revert to a quote from a different article on the failure rate of CRM projects.

Article #17: CIO’s What To Do When Your CRM Project Fails

What is the Failure Rate of CRM Projects?

There are at least a dozen oft-quoted industry analyst reports that estimate the failure rate of customer relationship management (CRM) projects. The analysts’ methodologies and standards vary, so the resulting failure numbers are all over the place — between 18 percent and 69 percent.

That is a massive range.

And failure is a relative term. I have seen many clients that don’t call their CRM implementation a failure but don’t get much out of the CRM system and the data in the CRM system is of poor quality. So not all projects that are categorical failures necessarily add value. Many CRM systems are live but produce little in the way of ROI.

I bring this up if we apply a scenario where 1/3 of the CRM implementations are failures, 1/3 are middling and produce a very low ROI, then how high must the successful 1/3 of CRM implementations be to obtain the ROI estimate provided by Nucleus Research. The answer is, of course, ridiculously high.

Our Conclusion on This Highly Referenced Nucleus Research Study/White Paper

Overall this article makes many assertions that are aspirational but do not match the experience of companies that have implemented CRM. Given the failed or middling CRM implementations, to attain the ROI proposed by Nucleus Research, the successful CRM implementation would have to attain an impossible ROI to match the results presented by Nucleus Research. Something else to consider is I believe this is the first article to get into any details around the Nucleus Research study/white paper.

However, there is more to be analyzed because Nucleus Research has produced multiple white papers on CRM ROI. And this helps provide more context as to the likelihood that Nucleus Research’s CRM ROI estimate is either correct or reasonable.

The Table of Nucleus Research CRM ROI White Papers

The following is a tabular form of the studies/white papers produced by Nucleus Research on CRM that I could find.

Nucleus Research CRM ROI Output

YearTitleDescriptionEstimated ROI
2007ROI Case Study Microsoft Dynamics CRM Roland DGA CorporationA well done case study with a reasonable ROI, and very substantiated support.63%
2011CRM Pays Back $5.60 for Every Dollar SpentIs similar to the 2014 study/white paper.560%
2014CRM Pays Back $8.71 for Every Dollar SpentHigh level study/white paper with no details about the samples used, funding, etc..870%
2019SALESFORCE ESSENTIALS 5P CONSULTINGAppears to be very much a sponsored study by Salesforce. Implementation duration was not at all realistic.998%
2020Microsoft Dynamics 365, on average, Delivers $ 16.97 for Every Dollar SpentThis is a ROI estimate for Dynamics 365, of which Dynamics CRM is one component. 1697%

Something that should immediately come across is that the ROI estimate from the studies after 2007 is extremely high. Let us chart the ROI estimates.

Here is a question. How did Nucleus Research go from an estimate of 63% ROI to 1697% CRM ROI in the space of 13 years?

Let us review the 2007 study to see how it was constructed and contrast it to later Nucleus Research studies/white papers.

Nucleus Research’s ROI Case Study Microsoft Dynamics CRM Roland DGA Corporation

The first thing that is apparent from reading the case study is that there is far more detail than in any later published studies.

This describes the situation of the customer that implemented Dynamics CRM before the implementation.

With no central repository to search for information, employees elected to abandon the use of one of its CRM systems because it wasn’t providing sales and marketing teams with valuable lead content. As a result, Roland DGA was paying high maintenance fees for an unused system.

This is 2007, so the options for SaaS customer databases would have been limited. But this still does not explain why Roland DGA could not have created even a custom application running on-premises that stored customer information in a central repository.

In May 2005 Roland DGA elected to implement Microsoft Dynamics CRM because of its simple to use interface, integration capabilities, and market presence.

That is one interpretation. Microsoft has never had a competitive CRM system. The last reason, market presence, is normally why you would buy from Microsoft.

Because Roland DGA had isolated systems that were not linked, management had no way of measuring the success or failure rate of its ongoing sales and marketing initiatives, making it difficult to adjust processes and determine best practices.

Limited visibility and lack of opportunity for client and dealer feedback made it difficult to capitalize on additional sales possibilities.

This could not have been true.

You can measure the success or failure rate within a single customer information database. Roland DGA may not have had this, but it is not because its systems were not linked. As you can see, this study, which is by far the most conservative of the five produced by Nucleus Research already exaggerates the benefits of the CRM system.

Duration Details About the CRM Implementation

The following quotes get into the implementation duration details. CRM systems, particularly in 2007, are some of the most basic applications. However, the quotes should have given anyone pause about using Dynamics CRM considering the durations listed in these quotes. Remember, these are quotes from Roland DGA management, which means they are already probably less than how long it really took. Reality could be somewhat too much longer than what is stated here.

Phase one began in June 2005 and lasted 100 days. During that time existing CRM solutions were replaced, there was a major migration and data clean up effort, hardware and software applications were purchased, and the solution was integrated with Microsoft Dynamics GP financial suite.

Phase two began in October 2005 and lasted 9 months, during which Roland DGA introduced lead management and literature fulfillment integrated with Powertrak’s Advanced Marketing Module and Dealer Portal.

Phase three consisted of a 2-month system upgrade in September 2006 to
Microsoft Dynamics CRM 3.0 and Powertrak 8.0.

If we leave the topic of what the durations mean for Dynamics CRM’s efficiency for a moment, what is evident is that Nucleus Research used to include much more detail in their studies/white papers. Since 2007, the details have nearly entirely disappeared from them, and the ROI estimate has rocketed upward.

This translates to me that Nucleus Research became more sales-oriented and focused on driving revenues, and less focused on keeping the research grounded in reality. I have seen this at several companies, and it is common in software vendors when ex-Oracle executives begin to take jobs in them. They bring the corruption of Oracle to these companies and degrade the previous reputation of the vendor. Very quickly the lies begin to enlarge.

A High ROI From the Most Expensive Vendors?

Something curious is that the opportunity for CRM resides with the smaller CRM vendors. This is because mega-vendors like Microsoft and Salesforce charge high prices for their CRM systems. Salesforce is a high maintenance solution with a weak technology backend. Yet, Nucleus Research reports extremely high ROI for both Salesforce and Microsoft Dynamics CRM.

Why is this?

These are vendor-sponsored studies/white papers, and the mega-vendors are the vendors that can afford to pay to have these studies performed.

Mega vendors like Microsoft and Salesforce focus on using a software sale in one area to take over a company’s IT spend. They eventually want to sell you everything they have. This makes them bloat their software to make it gobble up more of their customers’ functionality footprint. Like NoCRM, smaller vendors are not only much lower-priced but they focus on integrating with other solutions, as they only offer a point solution, in this case, a CRM system. 

Disclaimer

*This is not an endorsement of NoCRM, and Brightwork Research & Analysis has not a relationship with and has never interacted with NoCRM. We used NoCRM briefly before going to Airtable which is not a CRM system, but a flexible online database. NoCRM is however an example of a non-mega vendor. Notice the focus on simplicity in the messaging. Mega vendors cannot message this way because they are selling complexity.

Conclusion

The following issues apply to the Nucleus Research CRM ROI estimates.

  • Nucleus Research does not publish details in their white papers. There is no way to know much about the study, and importantly, no way to scrutinize it. This is reminiscent of Gartner’s Magic Quadrants. There are no tables of numbers, just dots on a four-quadrant graphic. This is done to provide the IT analyst with maximum flexibility and minimal ability to have their study/white paper audited.
  • The ROI estimates are exceedingly large and seem designed to be carried and repeated by as many CRM vendors as possible, which is, in fact, what happened.
  • The studies/white papers appear to be paid for by CRM vendors. They contain CRM vendor marketing claims and phrasing. However, none of the studies/white papers define the funding.
  • Nucleus Research proposes the highest ROI for one of the highest cost CRM systems: Salesforce and Microsoft, which “coincidentally” have the most money to pay companies like Nucleus Research.

Overall, the CRM ROI estimates published by Nucleus Research is an example of standard industry-sponsored research and are unlikely to be representative of CRM ROI overall.

What Did We Expect?

We have habitually found that IT analysts produce studies that are not only funded by software vendors but are controlled by vendors. Brightwork Research & Analysis is not so much an IT analyst as a research entity. However, we are contacted by vendors that present us with financial opportunities to produce rigged research. Another repeating pattern is vendors reach out to relationship managers. These people are very complementary, and their job is to try to get positive coverage of their company and products from IT analysts, but for free. Many vendors consider it completely natural that they would be able to become wealthy and push enormous levels of compensation to their executives, while the entities that cover software like IT media and IT analysts be completely beholden to them and present their marketing and sales material to their readers as fact.

Because of this first-hand experience, in addition to analyzing the work of IT analysts, it becomes relatively simple to see what is going on behind the scenes.

Is Only Nucleus Research to Blame?

Here is a problem with only blaming IT analysts. Vendors often point out that IT analysts are corrupt (at least in private). However, how can IT analysts make money without in some way selling out? The vendors are themselves corrupt, and they, in turn, corrupt the IT analysts. As with slavery, morality applies to both sides of the transaction, not only the person buying the slave but also the person selling the slave.

And the one who corrupts an entity is as guilty of corruption as the entity that is corrupted.