When people in marketing talk about CRM, they typically mean one of two things: the practice of CRM, which stands for customer relationship management; or CRM systems, the platforms that enable marketers to carry out customer relationship management.
The two are pretty closely linked, as if you’re considering improving or building a strategy for CRM in your organisation, chances are you’ll want a platform that can facilitate that. But before getting into the ins and outs of technology, let’s ask a more fundamental question: what is customer relationship management (CRM), and why do you need it?
More on CRM from Econsultancy:
What is CRM?
When you’re a small business just starting out with a handful of customers, chances are you probably don’t need any help with remembering who they are, how they came to be a customer with your business, and other individualised, personal details that make up your relationship with them.
But as your business begins to grow, it becomes a lot more difficult and less practical to try and memorise all the individual details about each customer. There are simply too many of them, and you can’t always have a direct and personal relationship with each one, try as you might.
So, either you simply lose those details and that nuance in your interactions with each customer – which equates to that customer feeling like just another faceless entity among many (because they are) and not receiving the same level of care and attention they used to when your business was smaller, causing relationships to deteriorate and customers to churn away – or you develop some kind of centralised system for managing those relationships. This is CRM – customer relationship management.
What are the benefits of CRM?
Based on my summary above, you’re probably already getting a sense of why it is that CRM would be beneficial to your business – it helps you maintain more personal and individualised relationships with your customers, to keep track of important details like past interactions, past orders, their spend and/or budget, and generally allows you to keep on top of who your business is serving, how and why.
You’ll often have heard business leaders talk about being ‘customer-centric’, or ‘customer-first’ – but it isn’t possible to do that if you can’t even keep track of who your customers are.
Interacting with customers is also a lot more complex and fragmented in the digital, Web 2.0 age than it once might have been. Conversations can take place across social media, live chat, telephone, email and more – and without a central place to store details of all those interactions, threads can quickly be lost, conversations aren’t followed up on, and issues lie unresolved as it might not be documented who was supposed to follow up on what, what the last action taken was, and what the plan was for the next step. Ideally, your platform for managing all of this information should be accessible to members of different teams – customer service, sales and marketing – so that they can each log in, access information, record details and seamlessly hand off from one to the other.
Here’s where CRM systems come in. Sure, you can use a spreadsheet or even a Word document to keep track of details about your customers if you really love frustration – but chances are that this kind of document will quickly become dense and confusing, particularly if multiple people are accessing it to record information. It will also lack a lot of the features that a good CRM system offers that make the practice of customer relationship management that much smoother and easier.
Advantages of a CRM system
The features that your CRM system offers will depend to an extent on which platform you opt for, but here are some general things that a good CRM system typically allows you to do:
- Keep track of marketing and sales results, so that you can log exactly where and how you brought in a sale, the value of each lead or customer, how much you spent on a specific channel (and what the return was), and other relevant details. CRM systems can be useful for helping sales teams better understand their pipelines, and also improve forecasting for marketing teams by allowing them to gain more of an overview of the sales pipeline and process.
- Store an overview of every kind of interaction with a customer, from customer service interactions to post-sale follow-ups, as well as preferences like whether a customer has opted in to receive weekly email updates. This allows all of the important information to easily be tracked, managed and updated, as well as accessed by all of the relevant teams.
- Organise and send to a custom email or mailing list for a particular marketing or sales campaign. This can be a very time-consuming process without a dedicated CRM system, but CRM systems allow you to organise and create dedicated lists with very little effort.
- Improve synergy between marketing and sales teams by allowing them to share details and interactions with each customer, enabling one to pick up seamlessly where the other left off and access all of the relevant background information. CRM systems also improve general communication across an organisation by simplifying the process of recording information about clients – and leave colleagues with more time to spend doing the actual marketing and selling that they excel at.
- Automate various time-consuming tasks like contact management, lead management, reporting (another very tedious thing to do manually) and integrating with other systems you might be using to manage business processes, like email systems, calendars or scheduling tools, project management tools, etc. Not every CRM system has to include automation, but more and more of them do as standard, and it can save a lot of time on various tasks if your CRM does offer automation.
Other relevant CRM terminology
Here are some other terms you might come across in reading up on CRM and find it useful to have definitions of:
eCRM: eCRM stands for Electronic Customer Relationship Management, and was coined to refer to CRM in the context of internet-based channels like emails, websites and online chat. Now that digitally interacting with your customers is less the exception and more the rule, people generally just use CRM to refer to online customer relationship management, but this term might occasionally crop up or be used to distinguish online CRM from offline methods.
Social CRM: Similar to eCRM, social CRM as a term was coined when interacting with your customers via social media was less standard, and people were just beginning to build strategies and look for platforms that included social channels in their customer relationship management. In the 2020s, social CRM is more normalised and most CRM systems will integrate with social media by default, but if you do come across the term, that’s what it refers to.
Cloud-based or on-premises CRM: A cloud-based CRM system refers to a platform that stores its data on a remote server (‘in the cloud’) instead of on a server belonging to the company that uses it. A third-party company will maintain the storage, handle software installation and updates, and provide backups, hardware maintenance and security.
An on-premises CRM, by contrast, is hosted on the company’s own server and premises, requiring them to buy and maintain all the associated hardware, software and licenses. We’ve delved more into the benefits of a cloud-based CRM when compared with an on-premises CRM in our piece, Cloud-based CRM systems – What are the benefits?
Operational, analytical, and collaborative CRMs: These are considered to be the three main types of CRM system available to marketers:
- An operational CRM is designed to automate and enhance front-office business processes (or operations) like sales, marketing and customer service. This is essentially your standard CRM system, and likely what most people think of when they think of a CRM.
- Analytical CRMs, as the name suggests, offer similar features and tools to an operational CRM but focus more on the analysis of customer data to extract information and meaningful insights that help to drive customer acquisition and retention. If operational CRMs provide the ‘who’ and ‘what’ of your customers, analytical CRMs provide the ‘why’.
- Collaborative CRMs focus on integrating front-office and back-office communications (this includes external stakeholders like suppliers and distributors) to deliver a seamless multi-channel customer experience. The emphasis is on facilitating communication between departments and teams, and on promoting a customer-centric culture throughout the organisation.
What about DMPs (data management platforms) or CDPs (customer data platforms)?
CRM systems aren’t the only platform out there dedicated to tracking customer data, and you might be wondering whether an alternative platform like a DMP (data management platform) or CDP (customer data platform) would better suit your needs, or even just what the key differences are between these tools when it comes to managing the relationship with your customers.
Jordie van Rijn wrote a piece on this topic for Econsultancy that contains some great detail on how a CDP differs from a DMP or a CRM, and I recommend reading that for a fuller explanation. But essentially, a DMP stores and manages audience data for the purposes of ad targeting, and is thus more focused on audience segments than on individual customers. They typically only capture and store third-party data and cannot store personally identifying information (PII), making them useful for targeting but not interchangeable with a CRM.
CDPs, on the other hand, are designed to process and connect much larger volumes of data than a CRM. As Jordie van Rijn writes, “CRM systems are built to engage with customers, this is on the basis of historical and general customer data to create a persistent customer profile. They aren’t built to ingest huge volumes of data from other sources.
“A CDP is able to connect all types and sources of customer data, whether internal or external, structured or unstructured, batch or streaming. This allows you to form a much more comprehensive view and to better understand your customers, and act on it even in real-time.”
Notably, a CDP can ingest and connect data that comes from a CRM, so the two platforms can work together if you have a CRM and are considering the merits of a CDP, or if you’re researching the suitability of both a CRM and a CDP. For more on what makes a good CDP and how to get the most from it, have a read of this piece from Calvin French-Owen.
If your business is growing and you want to maintain the same level of personal, tailored relationships with your customers that you had when your business was starting out, you need a CRM strategy and you’ll probably want to invest in a CRM system. What type will depend on the needs of your company, the channels you’re integrating and the insights you want, but customer relationship management is essential if you want to keep on top of your customer interactions and relationships, join the dots across various channels, harmonise your sales and marketing and generally deliver a great customer experience that will make your brand stand out.
And if you want to learn more about building a customer experience strategy, gaining a real understanding of what the customer wants and embedding customer-centric thinking into the heart of your organisation, Econsultancy has a fast-track online training course for that.