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 February 26, 2024
Working in sales, you’ve probably heard the term “customer relationship management,” or CRM. But don’t worry if you’re not sure exactly what it means or how to establish it at your company.
To start with, it’s important to understand that an advanced CRM system organizes and helps analyze customer and sales data to help drive growth and efficiency. So all that praise you’ve heard about CRM, may well be justified.
Lucky for you, this guide lays all you need to know about CRM systems, how to leverage them to propel your business – and whether it might be a good fit for you.
A CRM system is an advanced software tool that tracks your firm’s customer interactions, from first contact through multiple sales, in an effort to manage client relationships in the most productive way.
In the old days, companies kept track of customer information with rolodexes and handwritten flip cards. And for your first few sales, you’ll likely track customer data on an Excel spreadsheet. But these methods aren’t sustainable for a growing business.
Nowadays, competition is stiffer than ever and companies are always seeking even the slightest edge. It’s no longer enough to have a unique product – customers now differentiate brands based on interactions and experience.
As a result, companies that provide smooth, personalized customer experiences gain a competitive advantage. This is the promise of CRM, which enables businesses to easily track customer data, customize client interactions, and create a more focused and streamlined customer experience.
This saves time and resources while nurturing customer loyalty. It’s a win-win. And as opposed to traditional marketing and sales that only draws customers in, CRM enables detailed and personalized customer service that encourages customers to keep coming back. This prevents you from wasting energy chasing leads and boosts your reputation.
It’s all well and good that CRM improves your customer’s experiences, but what does it do that a great customer service representative can’t?
CRM systems organize customer data to make projections, synchronize interactions between a business and its clients, and provide a detailed and long-term vision of the relationship.
CRM systems track and record customer and prospect data, interactions, and purchases. With a centralized CRM database, businesses gain a comprehensive understanding of their customers and their sales funnel, which helps manage sales and adjust strategy.
It’s true you could store the same data on notecards and Excel sheets, but a CRM instantaneously stores and recalls the data, saving your company endless hours worth of tedious logging and sifting.
Skeptics view CRM as a tech tool that’s putting sales reps out of work, but that couldn’t be further from the truth. Every time you treat your customer like a person and respect them by remembering their needs and preferences, that’s good customer relationship management!
CRM makes this easier and can lift your customer service to new heights by tracking, processing, and presenting more data than you thought possible. This frees up sales reps to focus on the crucial part of their job – building customer relationships through direct one-on-one contact.
Beyond the standard customer info services, CRM systems can also be broken into three different categories that help businesses focus on specific tasks.
A collaborative CRM system focuses on breaking down information silos and facilitating communication between different company functions. Most collaborative CRMs automatically link marketing, sales, and customer service, which interact with the customer through the sales pipeline. Some providers in this field also extend that connection to technical support, vendors, distributors, and beyond.
Collaborative CRMs include Zoho CRM, Salesforce Essentials, and Freshsales.
Analytical CRMs focus on collecting and mining massive amounts of data and making assumptions and projections. More than crunching a few basic KPI metrics, an analytical CRM might collect info on the customer’s brand preferences, purchase history, main means of interaction, credit score, click-through rates, and more.
By analyzing every element of customer relations, 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.
Analytical CRMs include Salesforce Einstein, HubSpot Marketing Analytics, and Zendesk Explore.
Finally, operational CRM focuses on streamlining operations using automation and data management to handle repetitive tasks. Operational CRMs mainly focus on marketing, sales, and customer service. For example, they could automatically schedule and send out emails for a marketing campaign, manage lead interactions, track lead scoring, and provide a chatbot to answer basic customer questions.
Some examples of operational CRMs are HubSpot CRM, PipeDrive, Salesforce, and Agile.
Companies use CRM in order to optimize operations, improve the customer experience, and ultimately increase sales volume and velocity. Let’s look into 10 discrete benefits that CRM users enjoy.
Your CRM platform will automatically log all emails, calls, meetings, and other interactions with your prospect, which your sales team can access 24/7. This reduces manual work, resulting in time and cost savings for the business.
As the customer passes through the sales pipeline, any sales rep can see their background, contact info, preferences, and interactions with the company. For example, a sales rep can see which products a customer showed interest in and when. With this information, they’ll be able to customize their pitch, improving the customer experience – and the likelihood of a sale.
CRM will likely improve your sales efficiency and velocity, potentially impressing your customers with a personalized experience and driving them to return again and again.
CRM systems provide a thorough overview of all your prospects that you can organize by segment, location, demographics, industry, and so on. If your CRM doubles as a lead database, you can filter sales prospects by the same criteria.
Your CRM software will provide metrics about each market segment, so you can easily see if, for example, you receive more leads from a certain region or if prospects from a certain industry are more likely to become customers.
This info will help target your marketing and sales to yield the best results.
A CRM system provides a visual overview of how many sales leads, prospects, and opportunities are at each stage of your sales pipeline, as well as estimates for how many deals you’ll close and the revenue you’ll earn in the period.
These data points are important metrics for several business functions. For example, finance will want to know when to expect a large windfall from a big deal, and marketing will want to know if you’re running out of leads to pursue.
On top of viewing bottlenecks in your sales funnel, your CRM tool can help prevent build-ups by sending automated reminders to sales reps to follow up with prospects. If there are any inefficiencies in your sales pipeline, your CRM will highlight them and their causes, improving your sales pipeline strategy.
With access to real-time sales data, businesses are able to identify areas for improvement and make data-driven decisions.
Rather than hand-calculating which customers move to the next stage of the sales cycle or how many come from the next state over, a CRM system comes with built-in tools to measure data such as click-through rates, demographic breakdowns, location, and more.
These statistics are always up-to-date, helping you gauge the effectiveness of your marketing and sales strategies.
As we mentioned before, analytical CRM systems use customer data to project future customer behavior and make assumptions about their customer qualifications such as purchasing power. These provide a much broader picture than a single sales rep ever could. From there, the CRM will recommend courses of action to help your sales team target their efforts.
Website not up to scratch? No problem. Your CRM platform can probably double as a communication platform for customer interaction, hosting live chats, scheduling meetings, sharing documents, and running video calls.
If you only manage a few customers, this saves you the cost of developing a new website or buying communication tools while making your company look sleek and professional. Again, all of these interactions will be automatically logged into the CRM for future reference.
Some CRM solutions offer integrated marketing automation tools. With this, your CRM will handle menial tasks like organizing leads, overseeing marketing, and sending out emails and surveys. This keeps your campaigns and sales cycle on schedule while freeing up your sales team for more important work.
Besides customers, a CRM system tracks and analyzes the performance of your sales reps. You’ll be able to easily see if your sales reps are meeting their quotas and how they interact with customers. Your reps will know how they’re performing compared to the rest of the team, providing a constant incentive for laggards to step up their game.
Every month, sales managers dread writing and presenting their sales pipeline report for the period. A CRM system might not be able to string the words together, but it can analyze data and calculate KPIs to help build your case, and create appealing graphs to strengthen your report.
Similarly, your CRM tool will automatically calculate statistics like revenue growth rate and compare sales from year to year, showing trends in the data and forecasting future performance.
Such forecasts will help your business adapt its sales strategy as needed, and your CRM will help do that by showing which leads and activities are the most profitable.
So what if a CRM can do all those tasks? If you only have ten 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 because of 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 expect 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 escalate to a manager. If they’re forced to repeat and re-explain their issue each time, by the end they may well be apoplectic. I know I’d be.
Deloitte came to this conclusion in 2021, reporting that nearly 9 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.
We’ve certainly been extolling the virtues of good CRM, but we’re not encouraging you to go out and buy the first CRM you see. You may not even need CRM at all, besides the fact that hasty purchases often end up being a poor fit.
But if you are seriously considering diving into this pool, here are some questions to keep in mind while shopping for the optimal CRM.
The biggest benefit of a CRM system is its integration of all customer data into one place so different business functions can communicate – all other benefits are secondary. If you only deal with a few customers and manage well enough with one live spreadsheet, a CRM may well be an unnecessary investment.
In most cases, spreadsheets aren’t viable in the long run. But there’s no need to put the cart before the horse and buy a CRM before your customer base has grown unwieldy.
If you’re a B2C business selling directly to a plethora of customers, fast-paced, quality, and interchangeable customer experience is a vital part of your industry differentiation and long-term survival.
But if you’re a B2B business that supplies raw metals to blacksmiths, for instance, a CRM may be excessive. It’s true that suppliers also need to build good customer relationships, but their business prioritizes product quality over all else.
Similar to the last point, certain industries and businesses tend to have fewer customers overall – if you only have a few customers, a single designated account manager for each would be more efficient than using a CRM system to pass customers to different sales reps.
Regular customers usually prefer to build a strong connection with one agent rather than dealing with a revolving door of reps. To someone who’s been a customer for ten years, doing business with a familiar face tends to be the best customer experience.
That’s the million-dollar question: how much will this cost? That’s really up to you.
Broadly speaking, CRMs range in price from $10 per user per month to as much as $12,000 a year or more. But having said that, CRM pricing models should never be reduced to a single sticker price.
Some charge per user, others per record or data storage. If you need two key features, say marketing automation and pipeline management, you may need to buy two separate plans from the same provider.
On top of that, CRM payment scheduling is equally complicated: some providers charge a one-and-done payment, an annual subscription, or monthly fees. Some charge a combination mix-and-match fee schedule for different features. It’s a lot to take in.
Whether you can afford a CRM depends on your cash flow, cash on hand, and revenue expectations. If your budget isn’t quite there yet, save your accountant the headache and shelf the CRM purchase for another day.
Would you like to know your customer’s needs and habits? If so, a quality CRM system is a great idea. With a clear picture of your clients and their interactions with your firm, your sales team can develop a strategy that maximizes sales and revenue.
What’s more, as we move to an experience-based economy, CRM is likely to help your company stay relevant by providing a customer experience that keeps your clients coming back, again and again.
Some common providers are HubSpot, Salesforce, Zoho, Microsoft Dynamics, and Pipedrive. Each provider might also supply different products for different functions, such as HubSpot CRM offering separate Marketing Hub, Sales Hub, and Service Hub software.
CRM is important for businesses because it allows them to centralize and organize customer data, streamline communication with customers, and better understand customer needs and behaviors. By improving customer relationships and satisfaction, businesses can increase customer retention and loyalty, and ultimately, drive revenue growth.
Implementing a CRM system involves several steps. To get started, assess your business needs, goals, and budget, then select a CRM provider. Once you’ve made the purchase, train your employees on how to use the system and integrate it into your existing business processes. As you get used to the CRM, monitor and evaluate your CRM solution to ensure it’s pulling its weight.
Your CRM should augment your sales rep’s actions, not replace them. That means a sales rep should still regularly check and update customer data and use the CRM database to personalize customer communications and analyze customer behavior. Finally, integrate the CRM system into your overall business strategies, using its functions to their fullest potential to get the most out of your CRM system.
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