Written by: Victoria Yu
Victoria Yu is a Business Writer with expertise in Business Organization, Marketing, and Sales, holding a Bachelor’s Degree in Business Administration from the University of California, Irvine’s Paul Merage School of Business.
Edited by: Sallie Middlebrook
Sallie, holding a Ph.D. from Walden University, is an experienced writing coach and editor with a background in marketing. She has served roles in corporate communications and taught at institutions like the University of Florida.
Updated on July 21, 2024
Imagine you’re buying a new car. You can’t just go to the dealership and pick out the first one you see, can you? No. There are so many different things you must consider before choosing a model. A race car operates on a completely different level than a family SUV, which in turn is different from a standard sedan. And not to mention the pricing! Hundreds of considerations go into shopping for a car to make sure it fits your individual needs.
Shopping for a CRM is exactly the same. If your small business is growing, you might’ve heard that CRM software would be a great tool to help you scale up operations and increase customer satisfaction. And for the most part, that’s true! But what those recommendations don’t tell you is that there are dozens of different types of CRM software suited for different business needs.
Before you make any purchases, you’ll first need to sift through the multitude of options to find the CRM most suited for your needs. If you’re overwhelmed by what’s on the market, don’t worry. To help you out, this guide will go through the different types of CRM software and explain their best use cases.
Key Takeaways
There are three functional types of CRM: operational, collaborative, and analytical.
Operational CRM software optimizes business operations through marketing automation, sales automation, and service automation.
Collaborative CRM software facilitates communication between the company and customers through interaction management, channel management, and document management.
Analytical CRM software derives high-level insights from data sets using data warehousing, data mining, and OLAP tools.
Customer relationship management, or CRM for short, represents the processes and tools a company uses to track customer-company interactions to learn more about those customer relationships and potentially increase sales.
Rather than the methodology, the term CRM nowadays usually means CRM software systems.
A CRM system is an advanced software tool that helps employees manage and track interactions with customers, from first contact through post-purchase customer service on any channel, in an effort to manage client relationships in the most productive way. They’re a lifeline that runs through your entire sales process, the main artery carrying customers to where they need to be, from marketing, sales, customer service, and more.
By removing data silos between different departments and communication channels, employees at every stage of the sales journey can gain a holistic view of the customer’s profile and create quicker, more personalized sales conversations. This boosts the business’s sales velocity and increases customer satisfaction and loyalty.
Plus, as a historical database for all previous customer interactions, analyzing the total customer data in the CRM allows businesses to gain a comprehensive understanding of their marketing and sales efficiency, helping them hone their marketing strategy and sales tactics on a larger scale.
Sounds simple, right? But while managing and analyzing customer interactions is the core feature of all CRMs, specialized CRM systems can also provide additional benefits.
CRMs can be grouped into three broad categories depending on their primary utility: operational CRMs, analytical CRMs, and collaborative CRMs. Below, we take a closer look at each type.
The most versatile of the three types, operational CRM software focuses on streamlining operations using workflow automation and data management to handle boring and repetitive tasks such as data entry. This eliminates human error, speeds up your sales processes, and allows you to scale up operations by freeing up employees for more strategic and high-value tasks.
Operational CRMs can further be broken down into three smaller subcategories and program integrations for each of the main customer-facing sales functions: marketing automation, sales automation, and service automation.
Marketing automation supports the marketing team by automating repetitive processes in digital marketing campaigns, such as scheduling and sending out emails and texts, posting on social media, and implementing A/B testing on a website. It can also help marketers segment leads, analyze the most effective marketing materials for each customer, and use AI to deliver personalized content.
Once the lead’s been identified, they then proceed to the sales team, who use sales automation features such as automatic lead distribution, email and meeting scheduling, and workflow automation. This enables sales reps to follow up on and nurture leads faster, leading to quicker sales cycles and more satisfied customers.
If the customer comes back with a question or complaint, customer service automation can provide them with immediate support through AI-powered chatbots. Service automation also provides self-service features such as autopay or appointment scheduling, empowering customers to help themselves when customer service reps are busy with more complex tickets.
Operational CRMs and the automation tools within it can help pretty much any type of business but are most suited for B2C businesses online that handle a near-constant stream of customers in their marketing, sales, and customer service departments.
On the downside, because operational CRMs come with so many features, you may have to do quite a bit of comparison and cost analysis to find an operational CRM that perfectly suits your needs without charging more for extraneous features. Be aware that you can usually purchase marketing, sales, or service automation tools as add-ons to augment a pre-existing CRM, so when in doubt, go for fewer features, not more.
Some examples of operational CRM platforms are HubSpot CRM, PipeDrive CRM, Salesforce CRM, and Sugar CRM.
Next up, we have collaborative CRM systems, which focus on breaking down information silos and facilitating communication between different company functions, as well as communication outside of the company as well. Collaborative CRM systems are also called strategic CRM systems.
Just like with operational CRM, there are three main features of collaborative CRM systems: interaction management, channel management, and document management.
Interaction management tracks customer-company interactions through all touchpoints (email, online chat, phone calls, social media, and face-to-face) and logs that data and any other notes in a place where all employees in marketing, sales, and customer service can see it to gain a more comprehensive view of the customer.
For example, a lead might first interact with your marketing team on social media. If the same lead emails the sales team inquiring about a purchase, your collaborative CRM would tell the sales team about their social media interactions, such as which of the company’s posts they liked, so that sales can customize their sales pitch to match what the potential customer is interested in.
While we did mention earlier that tracking customer interactions is part of the baseline features for CRM platforms, collaborative CRMs take this a step further by natively integrating into the communication channel itself. For example, if a potential client emails your company, your collaborative CRM, with access to your email account, could automatically match the sender against your current customer database and put the email in their customer file – no need for a rep to manually input the information.
Then, once you’ve gathered all that information across all customer touchpoints and channels from interaction management, a collaborative CRM can help your business leverage that collected data through channel management by providing insight into which communication channel was the most effective.
Channel management helps your business cut down on extraneous communication methods and meets customers where they are, making customers more comfortable while interacting with your business.
Within the company, collaborative CRMs also facilitate document sharing between employees, acting as a library for customer records such as contracts, proposals, and SLAs. It also stores and shares in-house documents such as the employee handbook, marketing materials, sales enablement materials, and sales playbooks. With faster access to reference documents, employees can ensure compliance with legal agreements and company procedures.
In addition to linking marketing, sales, and customer service, which interact with the customer through the sales pipeline, some collaborative CRMs also extend their connections to technical support, vendors, distributors, and beyond, for truly integrated communication across all aspects of the company.
Collaborative CRMs are most useful for companies with a large number of communication channels. For example, a B2C company might have an online store with multiple digital touchpoints, or a large multinational company might have marketing and sales teams in different office locations. Whether it’s employee-to-customer or employee-to-employee, a collaborative CRM can help you out.
However, if you’re only interested in the cross-department employee communication aspect of collaborative CRM systems, we recommend looking into enterprise resource planning (ERP) software instead, which unites all business departments rather than just the customer-facing ones.
Some examples of collaborative CRMs include Zoho CRM, Salesforce Essentials, Copper CRM, and Microsoft Dynamics 365.
Finally, analytical CRMs collect and mine the massive amounts of customer data you’ve collected to make assumptions and projections about your customers, the market, and your future sales forecasts.
More than crunching a few basic KPI metrics, an analytical CRM system processes an amount of data incomprehensible to the human mind to reveal hidden correlations and data patterns, helping businesses capitalize on future customer behavior and plan for the future.
As with the other types before, there are three main benefits of an analytical CRM system: data warehousing, data mining, and OLAP tools.
As opposed to having data locked away in information silos, analytical CRMs collect info on the customer’s brand preferences, purchase history, main means of interaction, credit score, click-through rates, and more, storing current and historical data in a single central database. This makes it easier to extract data, run analyses, and generate reports.
Once you’ve got your data warehouse set up, analytical CRMs can search and analyze that flood of information to identify patterns and extract useful insights from the data set.
As your CRM gathers data on customers, the insights generated will naturally be about your customers, profiling their actions, interests, and demographics to make unique customer segments. Then, the next time you get a fresh new lead, your analytical CRM can match the lead’s information against those pre-existing segments to predict how the customers will act based on the actions of the customers before them.
Online analytical processing (OLAP) tools allow a business to make the most of its data set by finding correlations between each individual element all at once, in a process called multidimensional data analysis.
For example, if a business had information about each of their transactions’ locations, times of day, and purchase method, the business could use their analytical CRM’s OLAP tool to quickly analyze each of these elements’ effects on sales, saving employees the hassle of hand-calculating all of these correlations.
Using similar high-powered data analysis, OLAP tools can also run different scenarios, predict future trends, and validate hypotheses, allowing businesses to make more data-driven decisions.
On an individual customer scale, an analytical CRM can determine whether a lead meets your ideal customer profile, what they’re looking for, and what decisions they might make next. With this knowledge, sales reps can better target their sales efforts. Then, for broader marketing and sales efforts, decision-makers can also use analytical CRMs to make more data-driven decisions and prepare for the future.
On the downside, all of these hypotheticals don’t mean a thing if your company doesn’t have the operational capacity or flexibility to use the data and suggestions. The software also has quite a steep learning curve for employees. As such, analytical CRMs should only be considered for more advanced businesses rather than startups.
Analytical CRMs include Salesforce Einstein, HubSpot Marketing Analytics, and Zendesk Explore.
So what if a CRM can do all those things? If you only have 10 active customers, there’s no need for fancy million-customer tracking systems, right?
Well, the future of marketing, sales, and customer support is only beginning to come into focus, and customer expectations are bound to change in ways you may be unprepared for without CRM.
When you think of the four Ps of marketing success (product, price, placement, and promotion), customer experience isn’t among them. But Forbes recently found that nearly all consumers (96%) are willing to switch brands based on the quality of the company’s customer service.
Ensuring customer satisfaction, then, is not just a good idea – it’s an integral part of keeping your business running! The future of customer interaction may be uncertain, but there are a few trends emerging. Here are two big ones, along with an explanation of how CRM can help you leverage them.
A 2018 Statista survey revealed that more than one out of three customers expect a same-day response to their questions and complaints, while one in five expects an immediate response! If you’ve got customers worldwide, you’d need to have customer service reps working 24/7 to meet this expectation.
CRM systems automate responses to simple queries, freeing up your customer service reps to provide more personalized care (and get some rest!). Though it may seem like a major investment, a quality CRM is likely to cost less than hiring sales reps to answer basic questions.
The expected turnaround time for questions is bound to decrease as more businesses switch to CRM systems with these features. As CRM increasingly becomes the industry standard, companies without it are likely to fall behind.
More than reacting to a customer query, analytical CRM can take your customer service one step further and predict your customer’s profile, wants, and needs from pre-existing data, swiftly offering a personalized experience and potentially solving problems before they arise.
This aligns with Garner’s 2022 study on the future of customer service, which found that businesses are shifting from a “reactive customer service designed to limit costs to a predictive strategy that delivers additional value to customers.”
In other words, predicting customers’ needs and responding to them is becoming par for the course. It could be difficult to join this trend without CRM.
Nobody likes repeating themselves. When a customer has an issue, they might first ask the website chat, then email customer service, call a rep, and finally escalate to a manager if a resolution isn’t found. If they’re forced to repeat and re-explain their issue each time, by the end they may well be apoplectic.
Deloitte came to this conclusion in 2021, reporting that nearly nine out of 10 callers (87%) found it frustrating to repeat themselves on multiple channels. By tracking and recording all customer interactions, good CRM lets marketing, sales, and customer service reps learn about a customer’s needs and issues without forcing the customer to explain time and again.
This saves everyone time and effort.
While you could also accomplish this by designating someone to manage each customer, customers are also on the fence about balancing privacy and personalization. They want companies to know about them. But are they okay with a real-life person knowing their personal information in excruciating detail?
You certainly don’t want your customers feeling like they’re being stalked by a hypervigilant service rep. In this case, a CRM system’s benefits are twofold: the CRM can provide automated answers to frequently asked questions and issues, and customers can get help from different reps with the same level of attentiveness at all stages.
There is no one-size-fits-all CRM software, so you’ll have to do some research before purchasing a CRM. Take a look at your current business needs, and decide whether you want to improve employee communication through a collaborative CRM system, customer analytics through an analytical CRM system, or workflow management through an operational CRM system.
Once you buy your first base CRM platform, don’t worry about staying stuck with it forever – you can either buy a new CRM or purchase integration modules for your CRM of the other two types’ functions to ensure your CRM meets your business’s needs.
If you’re a small business just starting out, we’d generally recommend going for an operational CRM system first to improve your work processes. Then, as you gain more employees and business functions, a collaborative CRM integration tool could help you unify your workplace. Finally, once you’ve gotten all your basics set up, an analytical CRM integration can help you dig into the nitty-gritty of each customer to optimize each interaction.
After reading this guide, you’ve hopefully gained a better understanding of your options when it comes to purchasing different types of CRMs. Operational, collaborative, and analytical CRMs all have their own features and benefits, so a clear understanding of what each does is fundamental in choosing the right CRM solution for your business.
It’s true that all CRM solutions will, at the very least, improve your customer management and employee communication. But by identifying your unique challenges as a company and picking the right specialized CRM system to match, you can shore up your weaknesses and leverage new business opportunities, setting your business up for a thousandfold return on your CRM investment as customers come pouring in.
To be clear, we’ve only talked about the different functional types of CRM, distinguished by their uses and goals. Beyond operational, collaborative, and analytical CRMs, CRMs can also be specialized for unique industries such as financial services or medical services, which would include specific tools for that field.
Additionally, CRMs can be classified by the way they’re installed and hosted: whether on the cloud or on-premise. Cloud-based CRMs are hosted by the software provider and accessed through the cloud. On-premise CRMs host the data locally on the company’s servers. There’s also hybrid CRMs, which, contrary to the name, simply mean that a company can begin its service as a cloud-based CRM and download it to become an on-premise CRM.
A CRM benefits sales reps and top-level executives alike by managing and analyzing customer data, the sales pipeline, and customer communications.
Depending on the type of CRM you choose, it can also provide additional benefits, such as automating marketing functions, generating sales and service rep reports, and forecasting how your business will function in the future.
Customers are expecting increasingly detailed levels of service in their sales experiences, meaning that companies will have to work extra hard to attract and retain customers. CRMs enable this by using technology to help sales reps manage customers faster and on a larger scale, giving your company a competitive advantage.
Beyond the features you need in your operational, collaborative, or analytical CRM, you should also consider if the CRM supports add-ons and third-party integrations into other software systems, if the CRM is hosted through the cloud or on-premise, and how many users your CRM allows.
Some other common factors to compare are lead generation and management, sales pipeline management, communication facilitation, and marketing automation. You’ll also want to consider the user interface and customer service.
Additionally, pricing structures for CRMs vary quite a bit depending on the vendor – some may charge monthly or annually, or charge per user. Be sure that your CRM’s cost doesn’t outpace your cash flow.
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