The Economic Theory of No Free Lunch...or Free CRM
There is an economic theorem called “No Free Lunch.” It states, in layman terms, “whatever goods and services are provided, they must be paid for by someone.”
Free lunches have a history in the USA that goes back to the mid-19th century. In fact, it was a commonplace promotion that saloon keepers used to attract drinkers during the slow daytime hours. Free lunches were served to anyone that purchased a drink. Customers would typically pay more for the drinks than they would have spent on the food.
Logically we all understand that businesses do not remain profitable if they are giving products or services away without getting something in return. However, we still manage to get excited when we hear the word ‘free.' Now and then a grantmaker will tell us that they are looking at Salesforce for their CRM tool because it is free for non-profits.
The Myth of Free CRM
I appreciate any non-profit that is looking for ways to save on operational costs. However, I have also heard from grantmakers who have tried the free Salesforce CRM, and the out-of-the-box solution does not work for them. They end up spending anywhere from $5,000 - $20,000+ on consultants and professional services just to get this for-profit business solution to work with their grantmaking processes.
Let’s take a look at how much a free entrée would cost our friends Frank and Sally if the restaurant operated like Salesforce’s ‘free’ CRM solution.
Why a Free Entrée Isn't Free
Frank finds a great coupon for a free entrée at a new French restaurant Sally wants to visit. When they arrive at the restaurant they discover they will have to use the $10 valet service. They didn’t think of that cost ahead of time, but hey, they are getting a free entrée, so that is OK.
They go into the restaurant with high expectations. The host hands them a menu and vaguely waves them in the direction of an open table. As Sally and Frank walk, menus in hand, to an open table, they look around and notice that there are not many patrons and the décor is sparse. The table and chairs are plain and there are no linens. There is no music or artwork on the walls. Sally raises an eyebrow at Frank, he shrugs and says “hey it’s basic, but everything we need is here, and we came for the food.”
They look at the menu and it is in French. Hmmm. A waiter passes by and Frank tries to flag him to ask for help. The server suggests that they ask another patron for help interpreting the menu or to use the translation services available for a fee using the house phone.
Sally looks across the table at Frank with a decided frown. Quickly realizing that the menu prices are outrageous and beyond their budget, they agree that Frank’s rusty high school French will have to get them through the menu. They quickly discover the menu is à la carte. The coupon for the free entrée will not be enough food and they will have to spend more money to get side dishes to have the meal they expected. OK, Frank thinks, the entrée is free, so it isn’t the end of the world to spend a little more money.
The sommelier comes to their table and tells them that in order to use the coupon they have to order a bottle of wine. “What?!” Sally and Frank say in unison. “If you want a meal, you have to buy a bottle of wine,” the sommelier says. “That is the only way the dinner can work.” So Frank sighs and agrees to spend some more money and get a bottle of wine. Sally eagerly waits for the wine to arrive.
They place their order and in Frank’s rusty French he tries to explain Sally’s need for gluten-free items and orders the dishes he thinks will work. So much for a free dinner! They walked into a bare bones restaurant and so far they have had to pay for parking and translation phone support, they didn’t get any help from the waiter and were required to order wine, just to get their dinner to work. Sally pours another glass of wine.
The waiter brings the dinner to the table. Finally some service! Unfortunately, because they didn’t understand the menu and didn’t want to pay for the language interpretation, half the food contained gluten. On top of that, the side dishes turned out to be sea urchins and tripe. And they did not work…at all… with the free lamb feet entree. Ugh.
Frank asks Sally if dessert and coffee can save this meal. She laughs, a little hysterically, and says “We can’t afford this meal as it is, let’s just cut our losses and get out of here.” As Sally empties the wine bottle, Frank looks at the itemized bill. In addition to the food and wine costs, there is a charge for nearly everything else including:
- The sommelier's consultation on wine
- The customer support call from the pay phone
- The chef's cost for customization of the gluten-free dish
- Storage cost for the wine buck beside the table
- The waiter's implementation cost for delivering the food to your table
- Another consulting fee for Sally's request for directions to the restroom
- A retainer for the busboy's service to clean up any messes you may make
They reluctantly pay the bill. As they leave, Frank hands the valet the expected tip and gets in the car. Defeated, he turns to Sally and says, “This was nothing like I expected. Forget the free entrée; I wish we would have just gone to a restaurant that would have anticipated what we wanted and delivered a great meal for one fixed price."
The Real Cost of Free CRM
The theorem of no free lunch holds true for CRM solutions too. Like Frank and Sally’s free entrée, many grantmakers find that ‘free’ CRM can quickly escalate into an unaffordable solution that isn’t designed for their needs. Here is how the experience and itemized bill would look like in a free CRM solution.
- Free entrée = free software subscriptions
- Valet fee = unanticipated costs
- Bare bones restaurant atmosphere = limited out-of-the-box CRM functionality
- Menu = features and functions that are difficult to interpret and convert to grant-making needs
- Language = developer-speak, with little understanding of grant making needs
- Sommelier = consultation fees
- Bottle of wine = need to integrate with other applications
- Chef = customization costs
- Pay Phone = pay for support services
- Side dishes = pay for items you need to get the experience you want
- Dessert and coffee = functionality that would make the solution far better, but unaffordable extra costs
- Valet tip= unanticipated post implementation service costs
CRM Costs - Beyond the Subscription
When looking for a grant making CRM solution, make sure to look beyond the user subscription costs and evaluate all of the financial factors. To learn more about financial factors for CRM solutions, read our white paper Making the Right Investment in CRM for Your Grant Making Organization.