Smark Blog

Why Don't Companies Invest in Cleaning Their CRM?

Written by Courtney Vevea | Aug 28, 2023 8:44:03 PM

In today's business world, CRM systems are like the grease that keeps things running smoothly. They help companies manage relationships, automate manual processes, and essentially do more with less, but here's the kicker: many businesses don't give their CRM systems the TLC they deserve. But why do so many companies often skip the crucial step of cleaning up their CRM? It's a question I've struggled to answer for many years, but I've narrowed it down to three main reasons:

1. They don't see the value it brings to their bottom line

2. They think they can take care of it internally

3. They don't see it as as big of a problem as it actually is

What exactly is CRM cleanup?

Think of CRM cleanup as the digital spring cleaning for your customer data and internal systems and processes. It's all about going through your CRM system to tidy up, fix errors, kick out duplicates, and make sure your data is accurate and up-to-date and your workspace is clean and orderly. 

Cleaning up a CRM can include:

  • Removing or merging duplicate leads, contacts, companies/accounts, deals, fields/properties, forms, landing pages, lists, files, etc
  • Matching contacts with their correct companies
  • Connecting child companies with their parent companies
  • Removing (and correcting!) inaccurate phone numbers, emails, addresses, etc
  • Removing retired contacts or those who have passed away
  • Deleting unused lists, filters, fields/properties, reports, dashboards, workflows, forms, templates, etc (or in other words, clearing out the clutter)
  • Organizing and renaming files
  • Creating consistent naming conventions
  • Clearing out and closing old deals or opportunities

Ideally, anyone who uses a CRM should be doing all of these cleanup items a little bit each day, but that isn't always possible. Unfortunately what happens is that bad data will never fix itself and will only snowball into a bigger and bigger problem as the days, weeks, and years go by. I've never met a company that holds everyone accountable for data cleanliness, but ultimately, it can become a huge (and very expensive problem). How expensive, you might ask?

What is the cost of bad data?

Messy data is like trying to drive with a foggy windshield. It goes beyond not being able to see clearly—a foggy windshield can cause deadly accidents. While a messy CRM is not a life or death situation, not having accurate insight into your prospects and customers, or transparency into accounts throughout the business, costs companies in the US millions of dollars—up to 27% of their revenue, to be precise—and your business is no exception. It leads to marketing campaigns that miss the mark, sales teams chasing ghosts, and lost opportunities (ahem, revenue) galore. 

The implications don't stop at money lost, but at lost time and lost employees. When your CRM looks like an episode of Hoarders, your sales and marketing teams end up wasting about 30% of their time on leads that go absolutely nowhere. In a study by Validity, 71% of CRM users in the US would consider leaving their role if leadership doesn't dedicate more resources into a CRM data quality plan. Sales reps waste an average of 27% of potential selling time, or around 562 hours a year, searching for what they need in a sea of bad data. 

So decision-makers who don't see the value it brings to their bottom line will ultimately spend more money on lost time, lost revenue, lost customers, and lost employees. 

Why do companies avoid cleaning up their CRM internally?

Simply put - CRM cleanup isn't a walk in the park. It's time-consuming, it needs a bit of know-how, and sometimes, people are just resistant to change. Another massive problem is there's no clearcut solution on who should be involved in the managing of CRM data. If your company is large enough or lucky enough to have a full-time administrator, they can usually help with data cleanup. Administrators are usually highly paid because they are highly skilled in their CRM, but they are often bogged down with more essential tasks. 

The best way to execute a cleanup strategy internally is to make it the responsibility of a cross-functional team—whether that is their full time or part time responsibility. Again, this is hard for some companies, especially smaller startups who already have most employees wearing too many hats. But by having a team who meets regularly to strategize about and execute continuous cleanup can prevent the snowballing of bad data and the need for an agency to come in and clean things up.

Often companies who think they can clean up their CRM internally do not have a clear strategy of how to execute cleanup, don't understand the time and commitment needed to cleanup their CRM, and most importantly, don't understand how to prevent bad data from happening in the first place.

Why don't companies see CRM cleanup as a problem?

The thing is, some folks think that once the data's in the CRM, it's like a fine wine that gets better with time. They don't realize that data can go sour. So, they think CRM cleanup is like cleaning your closet—nice, but not really necessary. Gartner recently reported that 60% of enterprise decision-makers don’t know how much bad data is costing them. I'm going to venture a guess that part of the reason is they don't have to rely on their CRM a daily or hourly basis. They don't have to deal with the repercussions of sending out emails with the wrong names or to the completely wrong persona, or forgetting your customer's renewal date because the information was never entered, or being on the other line of a prospecting cold call to an ex-customer because it was not properly notated in the CRM. They often think the blame for these problems lies squarely on the individual, and not the fact that most companies do not have a comprehensive CRM strategy.

Because bad data collects slowly and gets worse and worse over time, it doesn't get as much attention as all the other fires executives have to deal with on a daily basis. It is like a frog jumping into a pot of warm water that slowly gets hotter until it starts to boil—it doesn't know it's being cooked alive until it's too late.

In short, organizational leaders might not be convinced that something as simple as updating emails and job titles, merging duplicates, and matching parent/child accounts can have a positive effect on the bottom line, and so they are hesitant to allocate budget and resources to something that takes away from people's day jobs that keep the company running. 

What's the ROI of investing in data cleansing?

Now, here's where it gets interesting. Investing in CRM cleanup isn't money down the drain. It's more like planting seeds that grow into dollar bills. Not only can your company avoid that 27% loss in revenue due to bad data, but it can lead to a more productive and happier workforce, full of employees who can easily find what they need and can spend more time working on activities that positively impact the company and their overall success. 

According to Gallup, replacing an employee can range in costs from one-half to two times that employee's annual salary.

Just using these two metrics, we can get a sense of the kind of ROI a company can expect from investing in data cleansing in the following example:

Let's say in 2021, a mid-size company had an annual revenue of $10 million. That year, they lost four sales reps with a base salary of $50,000 a year. In their exit interviews, all four sales reps mentioned how difficult it was to make sales due to the incomplete and bad data in their CRM, and this contributed to their job dissatisfaction. They would consider staying if the company invested in a data hygiene strategy to improve their CRM. As a result, the VP of Sales wanted to hire an expensive CRM agency who would help clean up their CRM, but the rest of the executive team did not agree that the $180,000 investment was a good use of money, and they decided to replace the sales reps. 

In 2022, they lost 27% of their revenue due to customer dissatisfaction, a stagnant pipeline, a low volume of leads. They spent one-half times the sales reps salary recruiting for new reps, which took them the first six months to find and the next six months to train. 

2022 Revenue: $7,300,000

2022 Recruiting Costs Replacing Reps: $100,000

The company suffered nearly $3 million in losses directly related to bad data in 2022.

In 2023, they decide to partner with the CRM agency who charged $15,000 a month for the next year cleaning up the bad data, replacing out-of-date data with fresh new data, merging duplicates, finding correct emails, eliminating unused or duplicate fields, implementing standardization and naming conventions, creating preventative workflows to keep the data from getting worse, and more.

That year, they had a several successful, segmented and personalized marketing campaigns that generated twice the amount of leads as the year before. Their four new sales reps leveraged this improved data to add $2 million in ARR over the previous year.

2023 Revenue: $9,300,000

2023 CRM Cleanup Costs: $180,000

Even though the company spent more on CRM cleanup than they did replacing their sales reps, they were working with better data, which resulted in better campaigns, higher job satisfaction, happier customers, and more sales.

The company had a $1,820,000 investment gain by hiring that expensive CRM cleanup company.

While that example is an over-simplification to a complicated problem, it still shows that investing in CRM cleanup and data cleansing comes with a cost, but the cost is not nearly as high as ignoring the problem. Bad data is a massive billion dollar problem in the United States, and it is not simple or straightforward to take care of the problem internally, especially if a company is strapped for time, money, and resources. However investing in cleaning and maintaining a well-organized CRM can absolutely positively impact a company's bottom line.