Is Salesforce Worth the Price Premium?

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Summary

  • Salesforce CRM is a market leading solution. But acquiring the market leader comes with a significant price premium.

  • Whether that price premium pays dividends or just results in higher total cost of ownership (TCO) depends on how you use it, or more specifically, if you use the advanced capabilities that separate Salesforce from its competitors.

  • Here we share those Salesforce advanced capabilities that can increase CRM ROI.


From my three decades of helping clients design and implement many different CRM applications I've learned there is no one-size-fits-all CRM software solution. Salesforce is a CRM platform that I have a lot of experience with. I find it's a strong solution for many companies, but not for every company. It comes with a price premium that should be considered in the context of measurable value and ROI.

For example, from my experience of having implemented both Salesforce and Microsoft Dynamics sales software I find that for most companies, implementing the Salesforce Enterprise edition is essentially equivalent to the Microsoft Dynamics Customer Engagement Enterprise edition, at least in terms of features and capabilities. Yet at $150 per user per month compared $95 per user per month, Salesforce comes with a 63 percent higher fee. That adds up when you consider this is a monthly recurring fee. The price difference becomes ever greater for companies that choose the Salesforce Unlimited edition. The price differences are similar when compared to SAP CRM or Oracle CX.

So, is the Salesforce price premium worth the investment? Here's how to tell.

Transformation Enablement

Salesforce is an innovator and industry disruptor. Its CRM software includes some advanced capabilities to help its clients innovate and disrupt their markets.

Those capabilities include things like:

  • Digital transformation, which is really a business transformation strategy that figures out how to use digital technologies or channels to lower operational costs, better engage customers and create new value

  • Data transformation, to convert data from a raw material into a finished good, such as customer insights

  • Customer experience management, to deliver relevant, personalized, contextual and predictive customer experiences that satisfy customers and build loyalty

  • Omnichannel communication to engage prospects and customers in their preferred digital channels, while maintaining conversation fidelity when those discussions cross channels

  • Einstein AI (artificial intelligence) to shift CRM software from a customer data depository to a predictor of customer behaviors, creator of customer insights and facilitator of customer and company objectives

  • Extensibility tools such as its Lightning platform (Force.com), Apex, other Platform as a Service (PaaS) tools and AppExchange ecosystem

Can other CRM applications do these things? Sure, but in these areas, Salesforce leads the pack.

Companies with clear eyed plans for company or product innovation, or digital or business transformation, or some type of hypergrowth can benefit from the market leadership of Salesforce CRM.

Companies who are pioneers and trailblazers and fully leverage the Salesforce advanced capabilities will likely earn increased ROI, making the price premium a good investment.

Transformation Illusion

When going off to college my mom told me never to go grocery shopping when hungry. I should have listened better. Because when I went to the supermarket a bit famished, all kinds of foods I had previously ignored looked interesting. However, those interesting foods later sat in the kitchen cupboards until they expired or I just threw them out.

Too many CRM software buyers make a similar mistake. They are hungry for a new solution and all of those cool features, functions and advanced capabilities that they never knew existed before the demo suddenly look great.

However, after the purchase reality sets in. They have finite budget, resources and time. Visions of business transformation become illusions. Those visions were never really part of any business plan or slated transformation effort. They were more aspirational. But they sure sounded exciting at the time.

Instead of using AI to create complex algorithms, or omnichannel engagement to communicate in social networks, many CRM buyers implement CRM software to perform account, contact and opportunity management. You know, the basics, the tasks that every CRM software provides.

Paying a premium price for simple or commoditized capabilities creates a recurring financial drain.

The 80/20 Rule

Salesforce has evolved its application features and functions over two decades. So has Microsoft Dynamics Customer Engagement, Oracle CX, SAP CRM and many other competitors. Our research and experience show that when it comes to CRM fundamentals, about 80 percent of features and functions are highly commoditized and delivered by pretty much every vendor. They all do lead management, account management, opportunity management, forecasting and all the basics quite well.

CRM Software Rule

Research also shows that most companies use less than one third of their CRM applications capabilities. For these companies, CRM implementation is more of an event than a journey.

What separates the CRM vendors are the advanced capabilities such as industry specific features, AI, machine learning (ML), digital commerce, advanced technologies such as blockchain or Internet of Things (IoT) or tools that enable low code/no-code customization or application extensibility. If these advanced technologies accelerate your business growth plan or transformation, Salesforce should be a top consideration. Otherwise, alternatives should be considered.

Consider Salesforce CRM when:

  • Your company is a trailblazer and will fully leverage advanced technologies to accelerate your growth and transformation
  • You have a solid plan, budget, resources and know-how to innovate or disrupt your company or market and require technology to assist
  • You are all in on a new customer strategy, such as Customer Experience Management (CXM), and need technology to support omnichannel engagement, deliver customer insights at key moments of truth and apply data to deliver differentiated customer experiences
  • You company is in one of Salesforce's industry editions, such as Financial Services, Consumer Goods, Retail or Manufacturing

Consider other CRM software solutions when:

  • You seek basic CRM, that is account, contact, activity and opportunity management. You simply want to organize customer data, perform simple tasks such as quotes or sales order processing and get reporting (i.e., pipeline and forecast reports)
  • Your company growth goals are less ambitious, or your growth path is more incremental
  • You don't yet have a solid transformation plan so you would be putting technology ahead of strategy (never a good idea)
  • You don't yet have a CRM strategy, which would result in an aimless technology deployment
  • You don't have the data scientists, IT resources, budget or know-how to deploy AI, ML, or advanced technologies
  • You want an enterprise-wide, fully integrated business software suite, that is CRM with Enterprise Resource Planning (ERP), Supply Chain Management (SCM), Human Capital Management (HCM) or manufacturing software delivered from a single vendor with vendor-managed integration
  • You want an on-premise or hybrid cloud deployment

Salesforce is the market leader for a reason. It does some important things uniquely well. But unless you use Salesforce's advanced capabilities, you will increase your recurring subscription investment and total cost of ownership significantly without much payback.

11 COMMENTS

  1. Your second summary point pretty much expresses my perspective on Salesforce. My professional experience with Salesforce demonstrated that, if everyone with customer interaction actively and routinely used the software system components, it yielded a comprehensive and real-time view of that company’s personnel, products, decision-making dynamics, operations, CX programs and competitive positioning. As a research and consulting services vendor, Salesforce offered unique software and systems which, de facto, gave us a continuous pulse of current and prospective client activity. Though I wasn’t directly involved in cost analyses of what Salesforce offered relative to competition, it certainly seemed well worth the investment in cash and staff training time.

  2. There is no doubt the advancements Chuck describes delivers a competitive advantage. I think the challenge is finding that talent on staff. I would like to hear what Chuck thinks of SalesForce’s professional services or outsourced groups that have SalesForce specific expertise on staff to build the components the customers needs? They provide additional training and support to keep the platform relevant to the customer’s needs? It would be interesting to see who those companies are and an idea of their scope of work.

  3. I can agree in almost everything, the key is the alignment between what you really need, what you will use and what you can pay for.
    I like a lot your words in “my mom told me never to go grocery shopping when hungry”.
    Anyway I can desagree in the reasons why and why not you need Salesforce, there are other many advanced CRMs that solves really well most of things included in the “Consider Salesforce CRM when” for example Dynamics.
    Most of companies just use the 10-20% of the tool capabilities, and there uses to be a lack of strategy.
    Thanks

  4. Michael – it’s interesting you mention staff training time. While reduced training is a minimal cost savings, Salesforce touts reduced training as a competitive advantage that achieves increased user adoption. I think on this point they are not necessarily unique but they are right to refer to the bigger advantage. More adoption = more software utilization = more payback. Thanks for sharing your experience.

  5. Hi Chris, your question is a good one. When it comes to getting professional services and support, Salesforce’s extraordinary growth and success create some growing pains for customers. There is clearly more consulting services demand than supply. Salesforce’s own professional services are credible but not expansive. They also tend to focus only on very large accounts. There are many strong partners, but not enough, and most serve midmarket and enterprise customers because those are big $ gigs. Small businesses are often most in need of support and have the fewest options. This is a critical target audience where Salesforce needs to amplify cost effective service and support options.

  6. Thanks for your comment Javier. I’ve seen some research that shows most CRM customers use less than 30% of their CRM software capabilities, irrespective of CRM system. My own experience working with clients supports that research. It also supports your other point – that low CRM software utilization is closely tied to not having a CRM strategy. In fact, the CRM strategy is normally a road map that prescribes how to take advantage of more capabilities over time. If there is no CRM strategy, and no road map, the initial deployment usually becomes a one-and-done event with no subsequent journey.

  7. Thanks Chuck, I agree.
    Another important thing I’ve found during my experience is that the data and systems information quality uses to be a bit poor, what difficults a bit more addressing a good strategy. In the other hand, CRMs sellers uses to try to sell a top car when companies just need a bike.

  8. You bring up a good point about data quality. Pretty much every CRM implementation I do involves a data conversion and the only thing they all have in common is that the data quality is not as good as the client thought it was. Maintaining data quality is a continuous effort. CRM data is a perishable asset. Unless managed with a CRM data quality program the data will deteriorate at about 2 percent per month. And without data quality the information reporting has no integrity.

  9. thanks for this article Chuck, although I tend to disagree when I hear that SF is so much better than SAP, Oracle, and MS. At the end of the day the main differences in capabilities boil down to existing infrastructure and preferences. Not, that SF does not have an impressive product line but singling them out is not quite correct. What one can and should give them high credit for is that SF is one of the few companies that does really tell a story. Their marketing and sales organizations are hard to beat.

    Looking at the 4 bullet points under “Consider Salesforce when” – i would consider Microsoft, Oracle, and SAP as well.

    When a basic CRM is required I would really not look for any of the big 4 systems but for tier two and three ones.

    Again, SF is good, but …

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