ROI stands for Return On Investment. In CRM ROI is calculated by dividing customer LTV (lifetime value) by CAC (customer acquisition cost).
There are two major reasons why companies looking to increase their ROI rely on CRM software. First, because in many industries customer lifetime value is measured in years, there needs to be a system of accurate record keeping. Second, CRM software has proven to be instrumental in upselling, cross selling, improving retention rates and increasing customer life time value in other ways. Thus, by helping increase LTV while keeping CAC the same, CRM improves ROI.
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