The Gist

  • Journey to loyalty. The ultimate goal of customer relationship management (CRM) software is to personalize individual customer experiences at every point along their journey from prospect to repeat buyer, increasing brand loyalty and the company's bottom line.
  • Four classes of CRM. There are four main types of CRM: Operational, Strategic, Analytical and Collaborative. Most enterprise-class CRM systems will provide features and functionality from each of these areas. Embrace the learning curve and be open-minded to new marketing automation solutions.
  • Considering clouds. There are benefits and drawbacks to both cloud-based and on-premises CRM solutions, and the best option for an organization will depend on factors such as company size, technical expertise and budget.

While most people equate customer relationship management (CRM) with enterprise software such as Salesforce, CRM is much more than just another enterprise software package. CRM is a discipline that represents the practices, strategies and technologies organizations deploy to manage, analyze and improve customer interactions.

The ultimate goal of CRM systems, technologies and software is to personalize individual customer experiences at every point along their journey from prospect to repeat buyer. When successful, CRM increases brand loyalty and the company's bottom line.

A Brief History of CRM: From Sales Automation to Customer Experience

CRM software has been around for decades. It was first introduced in the late 1980s. Its primary focus was sales automation and contact management, not customer experience. The goal of these early software packages was simply to digitize and organize customer data for analysis and management.

With the rise of the internet and the growth of ecommerce in the late 1990s and early 2000s, companies began to interact with customers digitally on a grand scale.

These new channels increased the importance CRM systems as sources of customer intelligence and reporting that could be used to do things such as predict churn, provide next-best-actions to customer service reps, track customer value over time and lay the foundation for today's customer self-service portals to name a few of the myriad activities CRM software can support.

With the rise of big data, cloud and mobile technologies it’s easier than ever for companies to use CRM systems to collect, store and analyze customer data while creating new opportunities for highly-personalized interactions and omnichannel marketing.

According to Statista, Salesforce leads the worldwide $59B CRM market with 24% percent market share. Its main competitors — SAP, Microsoft and Oracle — each capture about 5% of the CRM market respectively.

Related Article: Using Customer Relationship Management to Promote Business Growth

From Humble Beginnings to Cutting-Edge CRM Technologies

Like all enterprise software, CRM systems have evolved from humble beginnings as simple customer data management platforms. Today, they use cutting-edge technologies such as AI and chatbots to cover a wide range of customer-facing activities including:

  • Sales: Managing and tracking sales opportunities, prospects, quotes and orders.
  • Marketing: Automating email campaigns, lead nurturing and customer segmentation activities.
  • Customer and call center support: Managing and automating customer support inquiries, requests and tickets as well as providing AI-driven next-best-offer and next-best-action options.
  • Social media management: Automating posts to social media sites, responding to customer feedback and comments on social media.
  • Customer self-service: Giving customers access to their account information, order history and support resources.
  • Chatbots: Automating customer service interactions through chatbots.
  • Analysis: Collecting and analyzing customer feedback and survey responses.
  • Location based services: When integrated with GPS data, some CRM systems can create marketing campaigns based on a customer's geographic location.
  • Cross-channel engagement: To create a single view of the customer, modern CRM systems can track and record customer interactions across channels-social media, email, text, telephone, online and apps.

The Benefits of CRM: Improving Customer Experience and Boosting Revenue

When implemented and managed correctly, CRM systems create a lot of benefits for organizations. Top of this list is improving the customer experience. By better understanding and anticipating customer needs, wants and behaviors, CRM systems enable brands to develop personalized customer experiences that can lead to improved satisfaction and loyalty.

By automating mundane, repetitive tasks such as sending out marketing emails or posting to social media, CRM systems increase the efficiency and effectiveness of marketing, sales and customer support teams — freeing up time for higher value-add activities such as expediting exception management activities and creating personalized services.

Because CRMs serve as centralized repositories for customer and sales data, organizations can analyze vast troves of data to find patterns and opportunities for upsell and cross-selling activities. They can also identify trends — both negative and positive — early that allow them to proactively head off problems or spot opportunities for new products or services.

This consolidated view can be used to engage with customers and prospects with the right message, at the right time and on their preferred platform such as mobile, online, email, mail or via the phone. Marketers and sales managers can also track customer interactions across multiple touchpoints throughout the organization including sales, marketing and customer support, warranty and service.

The data provided by CRM systems can help marketers understand which marketing campaigns are most effective in driving sales, which products or services are most popular with new and returning customers, and which channels are used most frequently for customer service inquiries. This information can be used to meet customers where they are with the products and services they want.

By improving customer satisfaction and loyalty, reducing customer churn and improving marketing and sales efforts, CRM systems can increase revenue and profits. According to a 2021 McKinsey study, The Value of Getting Personalization Right — or Wrong — Is Multiplying, 76% of consumers said personalization prompted them to consider buying from the brand and 78% said personalization increased the likelihood they would buy again from the same brand.

One way CRM systems can do this is through a process called reengagement. Reengagement happens when a sales lead or existing customer who has been quiet for some period of time responds to a promotion campaign such as clicking on a link in an email. A CRM system can automatically tag and segregate these individuals for more immediate and personalized follow-up.

Related Article: Is Your CRM Keeping Up With Your Customer Service Efforts?

Four Flavors of CRM: Operational, Strategic, Analytical and Collaborative

According to the software review and ratings website Capterra, CRM systems can be loosely categorized into four main types. It is worth noting that most of today's enterprise-class CRM systems will provide features and functionality from each of the following areas:

Learning Opportunities

  • Operational CRM is designed to increase operational efficiency mainly through the use of automation.
  • Strategic CRM is customer-focused and designed to increase and improve their interactions with the business.
  • Analytical CRM is focused on analyzing customer and business metrics such as recurring revenue, top sales accounts and customer retention rates.
  • Collaborative CRM is mainly concerned with streamlining collaboration and data sharing between internal teams.

Integrated CRM: Connecting Data to Create a Holistic View of the Customer

Most enterprise software packages today are not designed to be the standalone, siloed systems they once were. To get the most out of your CRM system, it is best to integrate it with other enterprise management systems such as enterprise resources planning (ERP), marketing automation and other systems like salesforce automation, warranty service, call center, IT helpdesk — basically any system that holds information that could be relevant to your customers.

Integration ensures that you can create a holistic view of your customer so regardless of when you interact with them, your organization's representatives can answer most of their questions or act on most of their requests without delay.

Cloud vs. On-Prem Deployment: Weighing the Pros and Cons

Like most commercially available software packages today, CRM systems are available either in the cloud or they can be installed in your data center and run by your IT shop. There is also a hybrid option that would be customized by your IT people to share data, for example, between an on-premises solution and a cloud-based call center management system.

There are benefits and drawbacks to both approaches. On the plus side, cloud-based CRM packages require little to no expertise to set up and run. They are also sold as subscription models with tiered pricing based on the level of functionality and number of users required. This approach cuts down on cost fluctuations and simplifies budgeting since your provider will typically bill you a similar amount each month. Cloud-based expenses typically come out of the OpEx side of the IT ledger.

Although cloud-based CRM systems such as Salesforce are popular, using one means that your organization will not control the application or your data when it is in transit or offsite. That could create data privacy, security and compliance issues, for example.

Cloud-based CRM systems also are typically less customizable than their on-premises counterparts. Also, over time, cloud-based systems typically cost more to use than those owned and operated by the organization.

That said, cloud-based systems, either purchased directly from the vendor or via a managed service provider, are typically a better choice for small businesses that do not have the resources or in-house technical knowledge to manage and run these highly complex and integrated offerings.

On-premises systems are owned and operated by your IT organization. They can be very expensive to set up, maintain and run. This is particularly true for midsize organizations. A midsize firm often cannot generate the economies of scale of an enterprise-class organization that relies on a shared-services model to spread costs across the organization.

With on-premises software there are also myriad short- and long-term costs such as software licensing, systems training costs, hiring CRM system administrators, purchasing and provisioning hardware and middleware, data center leasing as well as costs managing backup and recovery. These costs can add significantly to the overall sticker price of your CRM system.

On the plus side, many of these costs are often one-time expenses that can be budgeted for and amortized off the books over time. Also, on-premises solutions typically are cheaper for large organizations to run long-term.

CRM is a Necessity for Businesses in the Digital Age

As the world continues to rely more heavily on digital technologies and networked solutions for everything from finding directions to purchasing groceries, CRM systems are an essential support system for any successful business strategy.

CRM systems are no longer nice-to-haves for most organizations. They are a necessity for organizations that want to maintain, improve and scale the relationships they have with their customers.