Guide to Customer Relationship Management (CRM)

Updated June 24, 2022

Key takeaways:

  • A customer relationship management system, or CRM system, is a tool companies use to track and optimize important customer data that helps them build relationships and improve sales. Common types include on-premise and cloud CRM programs.

  • While often used by sales and customer service representatives, CRM systems also can benefit those working in marketing, human resources, finance and information technology (IT). Centralized data, simplified analytics and improved customer service are some of the advantages of using a CRM program.

  • As CRM systems evolve, new features involving artificial intelligence and external integration are being introduced to further help businesses.

Many companies use software programs to help organize, track and optimize valuable data. A customer relationship management (CRM) system serves a variety of purposes for businesses hoping to maximize their customer impact. In this article, we explain how a CRM works, types of CRMs and their uses and benefits, as well as what business functions typically need a CRM.

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What is the meaning of CRM?

CRM stands for customer relationship management. In the past, some companies might have used the term CRM to describe the physical system or procedure they had for moving customers through the sales funnel. Now, CRM almost exclusively refers to software or another computer-based program that manages customer information and performs other related tasks.

Read more: What Is a Customer Relationship Management (CRM) System?

How does a CRM system work?

CRM software helps team members across multiple departments and stages in the customer life cycle to maximize their relationships and improve sales. CRM systems often include a range of features, such as:

  • Customer tracking: CRM software allows you to input customer data, like names, phone numbers and how the customer found the company, to help cultivate client relationships.

  • Information processing: This can increase the likelihood of a sale by reminding you when you need to contact a client or creating reports about customer interactions.

  • Task automation: This includes sending automatic responses to emails, alerting users about meetings and other workflow conveniences.

  • Lead management: A common feature is the ability to easily track leads and see where they are in the sales funnel.

  • Marketing automation: You may be able to connect your CRM software to other marketing programs, making it easier to target specific customers at integral points in the sales funnel.

  • Sales automation: Most CRM programs offer sales tracking and automation, allowing you to quickly and easily see patterns in leads or customers' actions.

  • Analysis: Data analysis applications provide users with metrics and data reports to help make informed decisions about customer interactions.

  • Optimization: Powerful artificial intelligence (AI) systems can parse information and provide suggestions for optimizing customer contacts.

  • Customer experience: Most CRM programs allow you to create customized experiences for your clients, particularly through marketing and advertising.

Related: 25 Client Management Software Programs for 2021

Types of CRMs

Your company can use an on-premise CRM program or a cloud-based one:

On-premise CRM

Companies that host their CRM systems on internal servers usually have high-level security and data protection since there's no reliance on external storage and safety. Additionally, companies usually purchase on-premise CRM software completely upfront rather than paying an annual subscription fee. This approach is beneficial in managing long-term costs, but it can come with the need for in-house upgrades or other technological updates.

Cloud-based CRM

Companies with cloud-based CRM programs host their CRM off-site in remote servers. Usually, cloud-based services can't offer the same level of security as an on-premise system. Most companies subscribe to a cloud-based service on an annual basis, which usually includes updates and system upgrades, potentially reducing the need for internal IT resources.

Related: 5 Examples of CRM (Plus Stages and Categories)

Who needs a CRM system?

CRM software is often directly aligned with some departments, but many in your company can benefit from integration, including:


Marketing staff can make targeted marketing or engagement plans like automated email marketing for individual clients using a CRM system. They also can evaluate how their widespread marketing efforts have positively or negatively impacted customer progress through the sales funnel.

Sales and customer service

The CRM program is perhaps most vital for your sales and customer service teams. With it, salespeople can track specific customers, monitor their tasks and maximize their impact on closing sales. Customer service personnel can address any customer problems to improve overall sales goals.

Human resources

One of the primary duties of your human resources department is to manage personnel and track performance. Access to the company's CRM system gives human resources managers important information about employees in other departments, including their sales, customer interactions and adherence to assignment deadlines.

Related: What Is Human Resource Management? (With Duties and Tips)


Giving those in the finance department access to CRM software is crucial. This department evaluates the company's investments and financial practices to ensure they're providing enough benefit to justify costs, including that of the CRM system.

Related: ERP vs. CRM: What's the Difference?


Because CRM programs are complex, it's helpful to include or even delegate your IT staff in the system’s ownership and maintenance plans. IT team members can also help quickly resolve any technological or user issues to keep the CRM program running smoothly.

Related: 8 Steps To Developing a CRM Strategy

Benefits of CRM systems

A CRM system can have lasting effects on your business. Consider some of the following benefits:

  • Improved customer service: A CRM program focuses all actions and decisions on the customer—keeping them first. When customers seek assistance, service representatives in your company can easily access all their previous interactions with the customer to better serve them.

  • Simplified analytics with centralized data: Because all customer data is in a centralized location, it's easy to analyze and produce trend information.

  • Automation potential: Many CRM programs automate time-consuming tasks, giving employees more time to focus on sales-driven or other assignments.

Related: 7 Ways To Use Customer Relationship Management

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Evolution of CRM uses

As companies become more comfortable with and reliant on CRM software, usage trends can impact available features. Here are a few recent advancements in CRM systems:

  • Customer experience: Many companies are increasing their focus on customer experience and using their CRM programs to improve customer interactions.

  • Artificial intelligence (AI): CRM programs rely more on AI to provide feedback and automation throughout the sales process.

  • Mobile access: Allowing CRM software use on mobile devices can increase the system's capabilities and flexibility.

  • User-friendliness: Given the increased complexity of CRM software, many system designers are focusing on keeping the technology user-friendly and easy to navigate.

  • External integration: Because some company departments use other types of software to manage their daily tasks, many CRM programs now allow for integration to make it easier to share information across products.

  • Social interaction: As more customers communicate directly with companies through social media channels, CRM programs are opting to include social media functionality.

  • Central communication: With so many methods for communicating with customers—email, phone, social media and more—many CRM programs centralize all communications into a singular channel for simplicity.

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