What is CRM software?
CRM is an abbreviation standing for Customer Relationship Management. It is basically a business process of organizing your company’s interactions with clients at various levels and invluding virtually any departament in a company, from sales and marketing to accounting and logistics. The goal of using such software is to gather insights from client data to develop you business, manage sales and upsells and keep or get new customer or supplier leads.
Today, when you hear the term CRM, it’s often associated with CRM software or the program that runs the company’s CRM strategy. Strictly speaking, CRM is the management principle or business strategy, while CRM software is the tool used to consolidate customer data.
How CRM started
CRM has been around since shop owners started to keep customer records in filing cabinets or log books in the last century. CRM started as a customer service tool, mainly to record customer personal information and purchases to answer buyers’ questions or concerns, or speed up delivery of services by keeping tab of the transaction phase: from filling up an order form to providing after-sales warranty.
As the business environment became more competitive and customer expectations increased, CRM would integrate sales and marketing, administrative, accounting, logistics and other key business operations to ensure the company’s relationships with its customers remain healthy throughout the business process. For example, different types of CRM software can help you pinpoint and prevent a potential delay on raw material delivery in the supply chain, which can delay servicing a customer need that can undercut current and future sales.
The information technology revolution of the 1990s and early 2000s paved the way for the CRM infrastructure that we’re familiar with today: integrated, on-premise, cloud-based, modules-featured and vendor-provided. Furthermore, we have industry-specific systems now, such as, CRM software for real estate or financial CRM software. Today, social media, mobile and top of the line cloud technologies are arming CRM with a more intuitive, laser-focused customer insight.
5 Reasons why you need CRM
By implementing a CRM strategy, the CEO or business owner can see the big picture of his business and how each puzzle piece fits in (or unable to fit in). Here are some of the key benefits of CRM:
- Better understanding of your customer
- Retain customers
- Attract new customers
- Win new contracts (B2B CRM)
- Increase profitability
Better understanding of your customer
A business may have different types of customers that require different sets of messages to engage them. CRM helps you identify these types in different ways. You can check frequency of purchases to segregate repeat customers from one-time buyers. You can even further segregate repeat customers into varying degrees of purchases. Likewise, you can set the types by demographics based on age, sex, education, interest, or location. Or treat your customers by their seasonal habits. For instance, CRM software can combine sales data and customer information to sort these different types.
One of the main goals of CRM is to identify your high-value customers. They are the customers that give you more business, who often are the repeat buyers. It’s called the Pareto Principle, defined by Investopedia as the 80:20 between inputs and outputs. In sales, it means 80% of your sales come from only 20% of your customers, your high-valued clients. You’d want to serve this niche differently (with better service) because they give you more in return.
The CRM software can provide a database of these customers and manage it real-time. That means it can add or subtract customers in the elite list based on their active purchases as defined by your parameters. Depending on the CRM software, you can further segregate high-valued customers in different levels with a VIP list as the biggest sources of revenues. This kind of CRM was popularized by banks and credit card companies with their silver, gold, platinum and black cards.
Attract new customers
CRM can also identify prospects based on sales leads. Many times, your sales team will be dealing with prospects that may or may not give you business. You can create parameters or signals in your CRM strategy to identify who among these prospects are worth pursuing or dropping. In fact, a sophisticated CRM can pinpoint not only who, but when among these prospects can turn into who; that is, a buying prospect. By consolidating data like customer demographics, buying history, seasonal habits and other key determinants, you can profile your customers through CRM.
Attracting new customers can also mean reviving an old customer relationship through reselling or upselling an existing customer. Both tactics deliver new revenues for the business; hence, they are considered as new customers.
Win new contracts
B2B (business-to-business) CRM can also help you create competitive quotes when bidding for a contract. By consolidating data from your logistics, supply chain, project turnarounds, available resources including staff and other key indicators, you can present a more viable quote that’s attuned not only to your client’s needs, but more importantly to your capability. In short, CRM helps you present a clear deliverable strategy with identifiable budget when pitching for contracts.
Although they sound the same, increasing profitability is different from increasing profits. The latter is focused on selling to earn more, while the former means reinforcing your company’s strengths and solving its weakness to earn at every opportunity. Increasing profitability is strategic planning (while the other is a tactical solution) that aims to turn your business into an efficient machine. More than just increasing the quota of your sales team to earn more, increasing profitability may mean cutting down your sales people and retaining only the best performers, while re-allocating the sales budget to product development to create a new revenue stream.
All these benefits can be delivered by a solid CRM strategy. Keep in mind though that CRM is just a tool. Much of the accuracy of its insights will depend on the kind of data you put in. Gene Marks wrote a Forbes article warning what CRM can’t do for your business.
When conducting a comparison review for the best CRM, make sure you understand the different types so you match apples with apples. We can categorize CRM software in three types:
B2B vs. B2C CRM
B2B or business-to-business CRM focuses more on creating contracts, appointments and supply chain leads and less focus on customer service. That’s because B2B companies often have direct person-to-person deals and the communication is straightforward as written in agreements. The priority of B2B CRM is to identify your business’ strengths and viability to another business, your client.
On the other hand, B2C CRM focuses more on customer service, sales and transactions. B2C CRM also manages a larger chunk of data because they deal with volume sales. When people or articles talk about CRM, they are often referring to B2C CRM, unless otherwise explicitly referred to as B2B.
Enterprise vs. small business CRM
An enterprise CRM has robust features that a large company is likely to need. The CRM is likely to include modules (a subsystem with the entire CRM system) such as: marketing module to track campaigns; a customer service module to monitor customer communications and engagement; transactional module to track customer payments, record and mine customer purchases; and appointments module to keep tab of dates, times and methods on contacting customers. Other industry-specific CRM software may include custom-fit modules.
On the other hand, a small business CRM features only a part or some parts of the enterprise version because it has a smaller scale of operations.
On-premise vs. cloud-based CRM (also called online, cloud hosted or web based)
On-premise CRM software is installed in a local server (your server). This means you need to have your own server ecosystem, front-end computers and an I.T. staff to manage the system. Expectedly, it is more expensive at the onset because it is capital-intensive. Normally, you buy a one-time licensing fee to use the software.
Whereas a cloud-based CRM is hosted online by the vendor; thus, eliminating the need to buy your own server and hire an I.T. staff. You just pay a monthly rental ranging from $10 to $100 and above. It’s cheap initially, but those monthly fees will add up in the long run.
CRM is a great way to organize customer insights to create more revenues. But keep in mind CRM is just a tool, a concept that can be misused, as well. If your data is inaccurate or misleading or incomplete, your CRM software will churn out wrong insights. In the end, CRM can only give you the best racing car to outpace the competition; but you still need to drive it the right way.