What Is a Customer Relationship Management (CRM) System?

By Indeed Editorial Team

February 5, 2021

Customer relationship management incorporates all aspects of managing a business’ relationship with its customers. Traditionally, it just meant maintaining a simple database of customers’ contact details. However, customer relationship management today takes an integrated approach to handle customer support, interactions, marketing, sales and various other processes across the organization. A Customer Relationship Management (CRM) system helps businesses organize information and streamline processes pertaining to their customers.

In this article, we’ll define CRMs and discuss why and how to use them.

What is a customer relationship management system? 

A CRM system is a set of applications used to store, organize and process customer information, interactions and services. It is primarily used to collect and analyze customer information to understand the needs of existing and prospective customer and support sales and marketing departments, among others. Examples of CRM functions include customer account management, payment processing and returns and refunds.

CRM systems automate the traditional processes of manual documentation. With a CRM, you can retrieve contact information and communication pertaining to a certain customer from a database of thousands of customers in a matter of seconds. Initially, CRM software used to be kept on personal computers. Later, it moved to servers to benefit the entire organization, often spread across multiple geographical locations.

There are generally two types of CRM: 

  • On-premises CRM: This refers to the CRM software installed on your own server. It is mainly popular among small- and mid-sized businesses since it is more affordable and does not involve the complexity of implementing large-scale CRM on your premises.

  • On-demand CRM: This refers to the CRM software running on the cloud infrastructure of the software vendor. This CRM is usually priced on a pay-as-you-go basis. On-demand CRM makes a good choice for businesses looking for standard processes across the organization without having to worry about in-house maintenance and support. However, companies with sensitive customer data (e.g. a financial services company or a healthcare company) may be wary about trusting their data to a third party.

Why do companies use CRM software?

CRM software helps companies understand their customers’ requirements, preferences and personas. It provides a unified platform to interconnect customer information from different sources and departments like websites, emails, call centers, sales, advertising and marketing. CRM systems make it easy to analyze customer data and find out patterns so companies can best serve its customers. 

An effective CRM strategy connects various items of customer information to help you market your products better. For example, banks and financial institutions need to know the age and financial position of their customers to market mortgage, loans, credit cards and insurance policies right when someone is looking for it. Similarly, most banks use CRM software to identify customers with high net worth and provide specialized services to them.

Essential features and functions of CRM software

Almost all CRM software offers the following common functions:

  • Logs customer interactions: A CRM system logs customer information and interactions taken place with them on different communication channels, including phone, email and support tickets.

  • Manages documents: A CRM system stores and facilitates the sharing of various documents and paperwork.

  • Segments customer database: A CRM system categorizes existing customers based on various factors like age, location, income and preferences to help sales and marketing departments run targeted campaigns.

  • Synchronizes calendar and notifications: A CRM system sends reminders and notifications about calls and meetings with customers and integrates these with your calendar. In most CRM software, you will set reminders via email, SMS and desktop notifications.

  • Supports lead management: A CRM system manages leads at all stages of the customer life cycle. It captures, stores and segments the leads based on the marketing needs of the company.

Besides the above functions offered by a basic CRM, advanced-level CRMs are also capable of performing the following functions:

  • Automating sales: Modern CRM platforms can help you throughout the entire sales cycle. You can analyze sales, visualize trends and automate various tasks of your business.

  • Automating marketing: Modern CRM platforms are often used in automating marketing campaigns. They are most helpful in email drip campaigns (automated series of emails based on smart triggers). For example, new prospects that join your mailing list can automatically receive a welcome email followed by other personalized emails based upon their response to an earlier communication. Once a prospect shows an interest in buying a product, you can send them a sales pitch and a follow-up by the sales team.

  • Automating field service: Some modern CRM platforms can even provide real-time field support to customers. Service calls from customers can be directly routed to the nearest support technician. This process eliminates paperwork, reduces response time and increases productivity of the technical support team (since they can resolve more service requests per day).

  • Facilitating offline mobile access: Modern CRM platforms may even offer the flexibility to access and use the platform offline on mobile devices. This is especially helpful when there is no internet connectivity.

Benefits of a CRM system

A CRM system offers the following benefits:

  • Retrievable customer data: A CRM system gives access to a searchable customer database. Businesses can use this information anytime they need it. Many CRM systems synchronize this data across different channels and devices to provide the user with updated information.

  • Reporting and analytics: A CRM system offers an actionable insight into customer behavior and market trends. You can create various reports to track and analyze the performance of your campaigns.

  • Customer service: A CRM system lets you handle customer complaints and queries most efficiently. It usually has a built-in ticketing system that assigns a unique number to each series of interactions. This also makes it possible to merge duplicate queries from the same customer received across different channels.

  • Process automation and streamlining: A CRM system increases coordination between different departments by standardizing processes, especially those related to customer service, marketing and sales.

  • Product development: A CRM system lets you understand your customers’ preferences and needs. This helps in developing a new product or in aligning an existing product to the market trend.

  • Cross-selling: Since a CRM system logs your customers’ purchase history and other relevant details, it becomes easy to cross-sell other products to them. For example, you can cross-sell annual maintenance contracts to customers who have bought a packaged air conditioning system from you.

  • Retaining existing customers: A CRM system helps in the timely identification of unhappy customers. Businesses can then take remedial action before it is too late to prevent the exit of existing customers. For example, you can tag all account closure requests from customers as a rush priority. Upon receiving such a request, the customer support team can contact the customer to find out the exact reason for the closure. If the customer is consistently facing a technical problem, the tech support team can be alerted to resolve the issue.

Thus, CRM systems provide and sync customer information to boost revenue and generate more profits. They help businesses create a customer-centric environment and deliver personalized services. Since all departments access the same information from a centralized system, the chances of ambiguity and miscommunication are automatically minimized.

Many robust CRM systems are available on the market today. They are highly flexible compared to the basic CRMs meant for keeping customer records. They are highly customizable and capable of doing almost anything you want them to.

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Recent trends in CRM

CRM software is constantly evolving. Software vendors are adding various new features to their CRM packages. Many of these features are useful for many businesses, while some of them may be specific to an industry. Following are the popular trends seen in the customer relationship management landscape.

Social media integration

Modern CRM packages come with social media hooks to facilitate social media marketing. Businesses can manage their social media campaigns with real-time tracking of performance right from within the CRM. Trends have shown that both small and large businesses are increasingly using social media to reach a wider audience, which should increase the demand for social networking CRM.

Artificial Intelligence (AI)

Integration of AI takes CRM software to the next level. Using chatbots for live chat with customers is a common example of AI usage in customer relationship management. This is a development already seen with some businesses, but the trend will likely continue to grow.

Predictive interaction

Predicting customer behavioral trends allows businesses to take proactive measures even before the customers come up with any purchase queries. Predictive interaction offers better opportunities to cross-sell and upsell your products.

Industry-specific add-ons

Several CRM platforms have started to support industry-specific add-ons and customization. For example, a CRM system designed for the travel industry may include a customization option for flights, hotels and car rental businesses, which may make it possible for a flight-booking company to recommend frequent fliers to specific destinations.

Things to consider when implementing a CRM 

Implementing a CRM system can be a complex process and involve several challenges:

User adoption

Proper training is crucial to efficient and effective operation of the system. For example, if the sales team is trained thoroughly about the benefits of the CRM system, they should be more likely to input all the essential customer data into the system, which should result in accurate analysis and customer relationship improvement. 

Data integration and access

Users of a CRM system should be able to access the data entered by others. Data entered into the system should be integrated and accessible across all users and departments. This may sound challenging initially, but once accomplished, the payoff would be worth the efforts.

Related: Computer Skills: Definitions and Examples

Budget vs. requirements

Having a budget to implement a system that meets your organizational requirements is a challenge many small businesses encounter. Hence, be sure to include the implementation cost in your budget while choosing a CRM system for your business.

Timing the transition

How smooth your transition is to the new CRM system implemented in your organization also depends a lot on its timing. You may want to avoid implementing a CRM system at a busy time of the year. For example, the sales team may work hard to meet their goals during the closure of a financial year. Learning a new CRM could take the time that would be better spent on their current efforts.

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