Customer relationship management
Introduction to customer relationship management, the systems available, and how they can help you to improve sales and productivity
Customer relationship management (CRM) is a strategy for managing your business' interactions with current and prospective customers. The term CRM also describes IT systems and software designed to help you manage these interactions.
There are dozens of CRM systems available that come with varied pricing plans. Successful CRM strategy relies on choosing the right technology that can help you turn your customer data into useful, actionable insight.
This guide will help you understand what is a CRM system and decide if your business needs it. It will explain the business benefits of CRM systems and potential drawbacks, and show you how to create your CRM strategy.
Finally, it will outline the most common types and examples of CRM software and tell you how to implement them.
What is a customer relationship management (CRM) system?
Understand what a customer relationship management system is, how it works and how it can help you turn customer data into actionable insight
A customer relationship management (CRM) system is an IT technology that allows you to manage the business relationships you have with your customers, service users and suppliers.
What does a CRM system do?
CRM is a software or a tool that provides a central place for storing all your customer data and sharing it with other teams within your business. It allows you to create records and track the history of all your interactions with the customers, including:
- phone calls
- service enquiries
- purchasing habits and preferences
As well as tracking contact history, in most CRM systems you can also:
- add notes
- schedule follow-ups
- assign tasks to staff
- generate reports and sales forecasting
Why have a CRM system?
With all your information collated in one place, it becomes easier to understand and anticipate the needs and behaviours of your customers. This, in turns, allows you to:
- keep customer contact relevant, personal and up-to-date
- modify your business to better serve your customers
- identify new leads and sales opportunities
- win new business
In essence, CRM can help you to recognise the value of your customers and capitalise on improved customer relations. The better you understand your customers, the more responsive you can be to their needs. See more on the business benefits of CRM systems.
Do I need a CRM system?
Not all businesses need a full CRM system. If you are a sole trader or you typically have very few leads and no repeat business, the costs of an enterprise level CRM software may outweigh the benefits. Find tips to help you decide if your business needs a CRM system.
Even the best CRM system will need to be properly managed, if you are to make the most of its features. Without good management, significant challenges can arise - such as creating duplicate records and accumulating vast amounts of incomplete, unnecessary or out-of-date data. It's important to consider the potential drawbacks of CRM systems.
Types and examples of CRM software
Understand the main types of CRM systems and find examples of outsourced, off-the-shelf and managed CRM software solutions
Customer relationship management (CRM) is important in running a successful business. The better the relationship with your customers and suppliers, the easier it is to conduct business and generate revenue.
Technology can greatly help you to optimise your CRM and make your service more efficient, cost-effective and reliable.
Types of CRM systems
Different types of CRM software exist. Most are capable of performing key CRM functions - storing, tracking and sharing your customer data. However, many software solutions can also support specific business goals. For example:
- operational CRM can help better manage your day-to-day operations, such as marketing, sales and customer service
- analytical CRM can help track customer interactions or improve your customer acquisition and retention processes
- collaborative CRM can strengthen engagement across various departments, suppliers or stakeholders
See also what is a CRM system.
Examples of CRM solutions
CRM software typically falls into four broad categories: outsourced, off-the-shelf, bespoke and managed solutions.
Outsourced CRM solutions
This includes web-based CRM solutions for your business, including cloud CRM software. This approach is ideal if you need to implement a solution quickly and you don't have the in-house skills to tackle the job from scratch. It is also a good solution if you are already geared towards e-commerce. For examples of CRM systems and their features, see this comparison table.
Off-the-shelf CRM solutions
Several software companies offer CRM applications that integrate with existing packages. Cut-down versions of such software may be suitable for smaller businesses.
Off-the-shelf products are generally the cheapest option as you are investing in standard software components. The downside is that the software may not always do precisely what you want and you may have to trade off functionality for convenience and price. The key is to be flexible without compromising too much.
Bespoke CRM software
Consultants and software engineers can customise or create a CRM system and integrate it with your existing software. However, this can be expensive and time-consuming. If you choose the custom-tailored option, make sure that you carefully specify exactly what you want. Costs will vary, so it may be worth getting several quotes from different reputable professionals.
Managed CRM solutions
A half-way house between bespoke and outsourced solutions, this involves renting a customised suite of CRM applications as a bespoke package. This can be cost effective but it may mean that you have to compromise in terms of functionality.
Find tips to help you decide if your business needs a CRM system.
Business benefits of CRM systems
Key benefits of customer relationship management systems that can help improve customer satisfaction, retention, acquisition and processes
Customer relationship management (CRM) can offer significant advantages to most businesses. No matter what your industry or size - or the type of products or service you offer - customers are the single most valuable business asset. They are the main source of revenue and the foundation of any business' success.
The key to happy customers lies in understanding them. This is exactly what a CRM system helps you to achieve. If you are not sure what a CRM system does, see what is a CRM system before assessing the potential benefits to your business.
Benefits of CRM software
CRM tools can help you to identify, understand, and assist your customers. Some of the notable benefits of using CRM in business are:
- efficiencies, particularly in data management
- better collaboration and communication across departments and teams
- greater accountability
- improved customer experience
- better reporting and analysis capabilities
You may also be able to reap the financial benefits of CRMs. For example, you may be able to:
- increase sales by anticipating customer needs based on historical trends
- cross-sell products by suggesting alternatives or enhancements
- identify which of your customers are profitable and which are not
Other reasons why you need a CRM system
Most CRM software can integrate with other tools, for example, marketing automation systems. This can help you:
- interact with customers in a way that wouldn't otherwise be possible
- target marketing communications according to specific customer needs
- segment your customer base and tailor your marketing to groups or individuals
Ultimately, a CRM system can help you:
- improve customer satisfaction and retention
- maintain good reputation in the marketplace
- increase value from your existing customers
- reduce costs associated with supporting and servicing customers
- increase your overall efficiency
- reduce the total cost of sales
- oversee all interactions during the full customer life cycle
Keep in mind that implementing a new CRM can involve considerable time and expense. Carefully consider the potential drawbacks of CRM systems before committing to change.
Potential drawbacks of CRM systems
Understand the potential challenges and risks of implementing customer relationship management systems, and how to avoid them
Implementing a customer relationship management (CRM) solution is a great way of making the most of your business assets. However, problems in implementing a CRM can cause major difficulties for your business.
One of the greatest challenges to CRM implementation is cost. There are dozens of software options available and many pricing plans that go with them. To work out the actual costs of CRM software, make sure that you consider the total cost of ownership including:
- software subscription or purchase fees
- premium upgrades, eg add-on marketing or reporting features
- IT resources needed
- hardware or software requirements
- staff training and upskilling
Other factors such as data migration and quality, and converting business operations may also affect the total costs of CRM implementation. Proper planning and careful assessment of any potentially hidden costs should help you set a realistic budget for your CRM project.
A lack of commitment or resistance to cultural change from people within the company can cause major difficulties with the CRM implementation. Customer relationships may break down and result in loss of revenue, unless everyone in the business is committed to viewing their operations from the customers' perspective.
To secure buy-in and make CRM work, all the relevant people in your business must know what information you need and how to use it. Make sure to communicate integration needs in advance if other teams need to cooperate on the implementation, eg payroll staff.
Lack of leadership
Weak leadership could cause problems for any CRM implementation plan. Management should lead by example and push for customer focus on every project. If a proposed plan isn't right for your customers, don't do it. Task your team to come up with a better alternative.
Trying to implement CRM as a complete solution in one go is tempting, but it may prove a risky strategy. It may be better to break your CRM project down into manageable pieces by setting up pilot programs and short-term milestones. A pilot may incorporate all the necessary departments and groups but is small and flexible enough to allow adjustments along the way. Find more tips to help you create your CRM strategy.
Finally, don't underestimate the volume of data your CRM project may generate. Make sure that you can expand your systems if necessary. Carefully consider what data you collect and store to ensure that you only keep the necessary information. Follow the relevant data protection laws and comply with the UK General Data Protection Regulation (GDPR).
Decide if your business needs a CRM system
Six signs that will tell you if you need a customer relationship management system for your business
If your business sells, markets or provides services to customers, it is likely that you need a customer relationship management (CRM) system.
Reasons you may need a CRM system
Consider replacing spreadsheets and handwritten notes with a more efficient CRM system if any of the following is true:
- Your customer information is scattered in more than one location. You're keeping spreadsheets, notes and casual records, and there is no central repository for all this data. You have no single view of your customers' contact information, orders, queries and general interactions.
- You're losing track of data. You're searching through miscellaneous documents, multiple hard drives and random folders, and none of the information is secure or organised. You realise you're missing valuable data on your customers.
- You have no remote access to your data. You're restricted to viewing it from a certain office or machine, which is causing problems when you're travelling or away from your desk, meeting customers and sourcing new prospects.
- You have no visibility of what your sales team are doing in our out of the office. You can't tell what customers they are approaching and how they are performing. You have no way of keeping your sales staff accountable and ensuring that they meet their goals.
- You struggle to create meaningful and actionable sales or customer service reports. You miss cross-sale and up-sale opportunities, and chances to target prospects. You struggle to identify best leads and convert them to opportunities.
- Your processes are rigid and unable to scale. Your productivity falls as your workloads increase, and you find yourself wasting time on tedious or repetitive tasks that could otherwise be automated.
A CRM system gives you visibility into your sales and marketing activities and allows you to deliver better overall customer experience. If you're still not sure if you need it, check out these business benefits of CRM systems.
How to find the right CRM supplier
Key questions to ask potential suppliers when choosing a customer relationship management solution
For many businesses, customer relationship management (CRM) can be a large investment. It is therefore vital to choose your supplier carefully. Making the wrong choice could be expensive and even jeopardise your business.
Questions to ask a CRM supplier
Before implementing a solution based on CRM technology, you might want to ask any potential suppliers the following questions:
- How long has the supplier been established?
- What are the specific costs associated with the product, ie a one-off purchase price, an annual renewable license, a charge per user etc?
- Does the supplier offer any form of evaluation software that allows you to try before you buy?
- How much do they charge for technical support?
- Does the supplier provide consultancy and, if so, at what rates?
- Is the system scalable? If your customer base grows, will the system expand to cope?
- Can the supplier recommend any third-party developers that make use of their core CRM products?
- Is there an active, independent user group where you can freely exchange experience and ideas?
- Can the supplier provide references for businesses in your industry sector that use their software?
- Do they offer training in the CRM solution and, if so, at what typical cost?
Create your CRM strategy
Understand the importance of a customer relationship management (CRM) strategy and why you should create one for your business
Building a successful customer relationship management (CRM) system isn't just about choosing the right technology. You will need to put in place the right strategy for implementation.
CRM strategy development process
To plan your CRM strategy, you should:
- Set your vision - Agree a clear, impactful and actionable statement that your team can rally around.
- Define your strategy - Decide on actions that will help you achieve your vision. Eg, offering superior after-sales service or innovative products.
- Define your objectives - Review and optimise your business objectives and processes to align them with the new CRM system.
- Lead your team - Provide training to help them develop the necessary skills and proficiencies before the new CRM goes live.
- Choose metrics - Define what metrics you wish to measure to track success, and how you will use them to prompt corrective measures.
- Think long-term - Find best ways to implement, measure and maximise the technology, and integrate with other IT systems.
CRM implementation plan
Once you've developed your CRM strategy, plan the implementation of the new system. This can generally take place in stages:
Stage 1 - Collect information
Capture the information you need to identify your customers and categorise their behaviour.
Stage 2 - Store information
Collect and store this information centrally. Some businesses use a relational database - see more on types of database system.
Stage 3 - Access information
With information collected and stored centrally, the next stage is to make this information available to staff in the most useful format.
Stage 4 - Analyse customer behaviour
Use data mining tools to analyse data and identify patterns or relationships. That way you can begin to profile customers and develop sales strategies.
Stage 5 - Market more effectively
Use CRM to understand which customers generate most profit. Learn about their needs and preferences, and reward and target your most valuable customers.
Stage 6 - Enhance the customer experience
Complaining customers can take up a substantial amount of staff time. If the CRM system allows you to identify and resolve customer issues quickly, your staff will have more time for other enquiries.
Remember - if you are collecting, using and processing personal information (of customer or staff), you must comply with the UK General Data Protection Regulation (GDPR).