Last updated: What is CRM? A beginner’s guide to customer relationship management & CRM Software

What is CRM? A beginner’s guide to customer relationship management & CRM Software

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Customer relationship management (CRM) is a technology that analyzes and manages customer interactions and data throughout the entire customer lifecycle. It’s designed to build better customer experiences, improve customer service, and boost business relationships while increasing revenue.

The meaning of CRM becomes clearer when you think of it as software akin to a traditional filing system in which the names of customers and prospects as well as all of their relevant information (phone number, email, deal stage, notes, etc.) are stored.

What does CRM stand for?

CRM stands for customer relationship management. Whenever people talk about CRM, they’re referring to a CRM system — an application that helps with contact management, sales management, call-center agent productivity, and more.

Modern CRM systems can be used to manage customer relationships across physical and digital touchpoints, which includes — but isn’t limited — to marketing, sales, commerce, and customer service.

What is a CRM system?

A CRM system is software for effectively managing a company’s interactions with current and potential customers.

CRM systems help improve customer relationships and connections by offering a 360-degree view of the customer with easy access to data like contact info, customer service requests, marketing campaigns, and sales history and opportunities, thereby streamlining businesses processes. It uses data analysis about a customer’s history with a company to gain critical insights and opportunities.

The goal here is pretty simple: improve business relationships, increase conversions, and boost retention rates.

The quality of your product obviously matters when it comes to long-term customer loyalty, but so does your customer service.

  1. How well are you educating your new customers on how to use your product?
  2. How quickly are you responding to their questions?
  3. How easy is it for them to get in touch with you?
  4. Are you doing anything to anticipate their questions and concerns in a proactive, rather than reactive, way?

All of this matters when it comes to customer retention, and is why brands invest heavily in CRM systems (or customer relationship management systems).

What does a CRM system do, and what is it used for?

A CRM system collects first-party data from a potential customer and then tracks that customer via any additional data your company collects about them – including email communication with your team, calls, web pages visited, and products used – throughout their lifetime with your company.

Customer experience technologies like CRM give a company the ability to do a couple of very important things:
  1. Understand where a customer is in their lifecycle with your brand: Are they migrating over from another tool? Are they coming up on a scaling moment when they may need more support? These are the types of tipping points when your team should be reaching out, rather than waiting for the customer to do so. Reach out with helpful information, see if you can connect them with folks who can help them. This will help you understand exactly what this customer might need based on their past history with your business.
  1. User experience and customer experience are inextricably related: By aggregating CRM system data, you can begin to spot areas where things get difficult, confusing, or when customers may churn, reducing retention. These are moments you want to look deep into, and understand what’s causing the issue. If you can, fixing this issue within the user experience — that is, the UX and design of the product itself — you can mitigate churn and a need for customer service in general. This allows your team to focus more on customer acquisition rather than retention because your UX is already solving for it.

A CRM system uses data analysis about customers’ history with a company to:

  1. Improve business relationships with customers
  2. Focus on customer retention
  3. Drive sales growth
  4. Streamline business functions and automated manual processes to free up resources
  5. Automate marketing, workflow, lead management, sales force, and contact center operations
  6. Create better products, better experiences, and better customer service
  7. Access real-time, actionable information across the organization and the supply chain
  8. Strengthen B2B operations and relationships
  9. Train employees to build strong customer relationships built on trust and empathy
Top companies use relational systems that allow them to adapt to the way different customers buy and convert prospects into qualified leads through the sales pipeline.

They do this by considering relationships and how gathered insights weave a narrative before, during, and after a customer has been won.

A growing trend is developing more socially aware experiences based on the customer journey using omnichannel marketing.

Successful businesses will look for innovative ways of engaging the customer through experience architecture. What this ultimately means is that relationship management systems that manage to successfully leverage data insights in real-time to provide an outsized customer experience will win in the digital revolution.

Since customer retention is crucial to brand growth, and competition is increasing within nearly all industries, CRM is more important than ever.

Here are a few things CRM can track:

  1. How you treat existing customers
  2. Products you recommend to them
  3. Email streams (or SMS streams) you have them in
  4. Events you invite them to
  5. Social channels you engage them on

What are the benefits of CRM?

The benefits of a CRM system are endless, and result in increased customer loyalty and engagement as well as better ROI.

Let’s review just a few of the top benefits of using CRM:

1. Improved sales and revenue

A next-generation customer relationship management system can help increase sales and revenue with integrated tools for sales force automation, lead management, sales forecasting, cross-selling, e-commerce, and more. This maximizes visibility into your sales pipeline and give sales reps access to key information in real time.

2. Enhanced customer analytics and insights

Harnessing customer data, reps can access deep insights. The best software solutions let you run real-time customer analytics so you can quickly identify and seize new sales opportunities, manage highly effective marketing campaigns, and wow customers with personalized service.

3. More targeted marketing

Whether your focus is social media marketing, email marketing, or campaign management, using the right program allows you to reach the right people with the right message, at the right time. It’s a great way to get to know your customers and deliver highly targeted marketing on their channel of choice.

4. Better customer experience management

Looking to improve customer service? Modern CRM software provides contact center reps and field service technicians with a 360-degree view of customers and automated suggestions to resolve issues on first contact. This has the effect of boosting customer satisfaction and loyalty with better omnichannel experiences, including social media.

5. Smoother internal and external collaboration

The term “collaborative CRM” describes how software allows a business to share information among teams, departments, and internal and external stakeholders. Everyone can access the most up-to-date information, so customers never have to repeat themselves – even if they jump between departments. This improves the customer journey and experience.

Chart illustrating the benefits of CRM

What are the types of CRM software?

Building and maintaining great customer experience is at the core of any good business model; your CRM system is the tool that helps you stay on top of your customers’ engagements and their relationship with your business.

But always understanding your customers, their relationships, engagements, and experiences at any given time can prove to be a challenge. This is true whether you’re a small business with a hundred customers or a large one with hundreds of thousands.

There are five main types of CRM systems:
  • Operational. This type of CRM software helps manage your customer relationship based on the operational data you collect on your customers.
  • Analytical. Analyzes customer data and generates insights about your customers through data visualization.
  • Collaborative. Enables the centralization and sharing of customer information and engagement data across teams or departments.
  • Campaign management. Helps businesses improve their sales and marketing campaigns.
  • Strategic. Allows business to achieve both customer relationship and strategic business needs but putting the customer first.

Let’s dive deeper and take a look at each of these types of CRM systems in a bit more detail.

Operational CRM

Operational CRM is software that supports core sales, marketing, and customer service functions within a business to give you a complete view of each customer’s journey. It stores interaction data with customers and prospects such as contact data, direct sales, commerce transactions, call center interactions, website and email engagement.

Operational CRM systems support the following three core business processes:
  • Sales automation: Involves the automation of manual tasks or business processes leveraging software, artificial intelligence (AI), and other digital tools in order to eliminate the manual work involved in repetitive tasks such as prospecting, pipeline management, sellers’ activity tracking, sales forecasting, sales analysis, and reporting. Sales automation gives reps more time in their day to focus on high value, profitable customer engagement.
  • Marketing automation: Streamlines and automates marketing tasks such as lead generation, nurturing, and scoring. Automates the process of targeting customers and prospects with personalized content by leveraging data. Marketing automation integrated into CRM software provides sales and marketing with shared visibility into customers’ engagement. This helps shorten the sales process, unify customer data management, provide consistent messaging, enhance pipeline management, and reduce human error.
  • Service automation: Automates certain customer service tasks via self-service resources, proactive messaging, or simulated chat conversations. Service automation benefits include reducing customer service costs, augmenting human interactions at key touchpoints, allowing for 24/7 support, minimizing human error, and improving efficiency and time to value.

Analytical CRM

Analytical CRM analyzes your customer data and identifies patterns to help you make better business decisions. A good analytical CRM tool’s core feature identifies patterns by leveraging historic data as well as current operational data. This allows you to perform sales forecasting and predict trends, giving you a competitive advantage.

Here are the benefits of an analytical CRM system:
  • Customer analytics: The use of both quantitative and qualitative data about your customers with the objective of understanding your customer segments better and to derive meaningful conclusions. Analytical CRM systems identify patterns, allowing you to drill deeper and find specific customer segments that offer the most profitable business opportunities. It segments markets and directs your sales and marketing accordingly, and can also inform your future product and service offerings.
  • Marketing analytics: Tracking, aggregating, and analyzing data from marketing activity for your business. Marketing analytics also focus on campaign management and planning, product analysis and branding. Analytical CRM systems helps discover new market opportunities for your products and solutions, and helps you plan, manage, and scale marketing campaigns. By applying analytical processes to marketing-related data, analytical CRMs provide insight on what drives customer actions for marketing optimization and higher ROI.
  • Sales analytics: Gathering sales data and evaluating sales performance through data analysis and modeling in order to diagnose why something may have occurred, predict sales based on patterns and trends, and prescribe the best plan of action. Analytical CRM systems help you identify, optimize, and forecast sales. Moreover, insights from analytical CRM software can highlight where you may need to reorganize your organizational priorities and assign sales reps accordingly.
  • Service analytics: Collecting and analyzing data generated from customer service and customer support interactions for your business. Service data is aggregated from support tickets, live chats, emails, social media interactions, and more. Analytical CRM systems allow you gain insights into customer service rep productivity; leverage insights to improve CX; understand customer satisfaction levels and formulate a personalized service offering that best suits your individual customer’s needs. It also helps break down service costs and optimize the balance with revenue.
  • Channel Analytics: Aggregating and analyzing data collected from your website and digital channels, contact center, mass media, direct mail, e-commerce, and physical store locations to help identify customer behavior and preferences. Analytical CRM systems allow you to integrate these insights with the customer database and uncover cross-channel insights, understand your customer’s path to purchase, measure the true impact of your marketing investments, inform planning, and boost ROI.

Collaborative CRM

This type of CRM software enables the centralization and sharing of customer information and engagement data across teams or departments with the purpose of engaging customers in a consistent and systematic way. This makes it easy for everyone to access customer records, history, notes, and other engagement data in real time.

A few of the benefits of a collaborative CRM system are:

  • Reduce customer service costs
  • Increase customer retention and loyalty
  • Provide value-add through up-selling or cross-selling
  • Drive true omnichannel customer interaction and service delivery
A collaborative CRM system has two components:
  • Interaction management: Deals with tracking customer touchpoints across channels. Interaction management helps you manage and keep track of every single interaction and exchange with customers to ensure communication with customers are optimized for communication preference, frequency, recency, and relevancy
  • Channel management: Involves identifying, designing, and orchestrating the best communication channel based on data gathered from collaborative CRM software. Advances in the use of machine learning has paved the way for intelligent collaborative CRMs, giving businesses the ability to deliver a  true omnichannel customer experience for better customer retention and loyalty.

Campaign management CRM

This type of CRM software helps manage marketing and sales campaigns. A campaign management system is a blend of operational and analytical CRM systems that helps you create, execute, and manage multichannel campaigns based on data and insights about your customers. It also helps track the effectiveness of those campaigns by customer segment and other campaign dimensions.

Features of a campaign management CRM system include:

  • Access to customer data and insights
  • Ability to plan, execute, and manage multichannel campaigns
  • Deliver personalized messaging
  • Automate email messaging workflows, including event-based content marketing
  • Monitor campaign performance, reporting, and analytics
  • Visibility into campaign costs and budget
  • Data aggregation and list building
  • Ability to deploy surveys or polls quickly, for example customer satisfaction surveys

Strategic CRM

This type of CRM puts the customer first, and helps you make decisions better based on the information collected and based on the current market trends in the industry achieving both customer relationship management and business goals.

This type of CRM solution is useful if your achieving business goals depends on longer sales cycles and long-term relationships, as opposed to short sales cycles.

A strategic CRM system not only gives you insights right away but instead dynamically adjusts or customizes the way you interact with customers in the long run.

Why do small businesses need CRM?

The truth is, companies of all sizes face many of the same problems when it comes to interacting with current and potential customers.

No matter how big or small, every business must contend with the challenges of today’s digital world, where customers find what they want through Google searches, online reviews, and social media posts.

From mom-and-pop shops to the Fortune 500, no business can be complacent in the face of savvy, connected shoppers who can switch to a competitor with one quick click.

In addition, when it comes to customer service, it doesn’t matter how many employees you have. All businesses must foster customer loyalty.

A Gartner study found that if a customer has an easy or low-effort experience with a brand, they’re 94% more likely to buy again. The more you understand your customer — which is at the heart of CRM — the easier this becomes.

With the right CRM, you can deliver on your brand promise and create, build, and sustain long-term relationships with your customers.

Why is CRM software better than a spreadsheet?

CRM is all about gathering data that can be used to glean insights about current and potential customers, helping brands cater to their needs.

Whether it’s the company’s website, telephone, social media pages, email, or live chat, customer data insights become priceless nuggets that help close deals, boost sales, and delight loyal shoppers.

Very small businesses may start out taking care of CRM through Excel spreadsheets or some other manual system. Over time, though, this becomes unsustainable for most. Not only is it time consuming, but the data may be inaccurate and doesn’t integrate with other systems a small business might use, such as accounting.

With a cloud-based CRM, small businesses don’t have to worry about IT issues, software maintenance, backup, updates, or other expenses. These tools may even be available on a month-to-month basis so small businesses don’t have to commit long-term. They also can work with other online tools to automatically pull in relevant information automatically, such as customer account data or information about how prospects found the business.

5 questions to ask when choosing a CRM

The type of CRM system you choose for your business will depend on the features and extension you need beyond the core CRM functionality.

When evaluating CRM solutions, you’ll need to go through what’s known as a request for proposal (RFP) process. During this process, you’ll have the opportunity to ask detailed questions about the platform and get demos so you can compare your options side-by-side.

Here are five essential questions to ask:

1. Is the CRM intuitive?

CRM is no help if it’s clunky to use and running reports becomes an exercise in frustration. Make sure it’s simple, easy to navigate and user-friendly overall.

2. Does the CRM software help you get more organized?

The tool should make it easy to access information anywhere, anytime on any device, while keeping data consistent and updated across channels.

3. Does the CRM supplier offer training?

Whether you are using a CRM for the first time or working to take your use of the software to the next level, you should have plenty of opportunities for training on your chosen tool.

4. Does the CRM help you deliver personalized experiences?

Tailoring messages and content to the specific actions of prospects and customers is now table stakes for any business. That’s a basic function of CRM, so make sure you’re easily able to take advantage of it.

5. Does it integrate with your other applications?

Modern cloud-based CRM tools often have native integrations within the software, making it simple and easy to automatically draw in data from your email system, accounting tool, appointment scheduler and more.

One thing you’ll want to be sure to ask for in the RFP is for customer examples within your industry. Better yet, ask the CRM vendor for contact information to those brands so you can call them and ask them specifically what they like or do not like about the tool.

Modern CRM, meet revenue:
– Seize opportunity
– Engage quickly
– Scale anywhere
Boost your bottom line
Get going TODAY.

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