• September 13, 2017

What is CRM / Customer Relationship Management?

Customer relationship management, also known as CRM, is software that helps sales teams and companies organize their interactions with prospects and customers and provides visibility across the organization for better support of a company’s goals.

What Goes Into CRM?

To understand what CRM really means let’s look at what type of information about customers and prospects are organized.

The core of any CRM is contact information. At a minimum you need to track the name of a customer or prospect, their phone numbers and email addresses. For companies that ship products, perhaps having a mailing address might also be worthwhile. Many companies also track information about the contact, like how they were introduced (the “source”), the different types of products that the contact is using, or even their kids’ names or assistant, which can be used for rapport building.

For organizations that sell to businesses, tracking company information is also critical. Key information includes the physical address for the company, their main phone number, their website and their industry. Many CRMs allow you to track additional information about the company like their “status” (e.g. are they a customer, prospect, competitor, etc.), the size of the business, and the primary contact.

Contacts and companies are linked together, so you can easily see the contacts that work for a company, or on each contact you can see their company and information about that company.

One of the most important features of CRM is often organizing the interaction history with contacts and companies. Each phone call, email or SMS is associated with a specific contact and is aggregated together under the company as well. This way it is easy to understand the recent communication with the prospect or customer without pulling information together from various sources. Many CRM applications also allow you to take notes on contacts or companies, and include them in the interaction history.

Interaction history is information based on past activity, and Customer Relationship Management systems allow you to set reminders for future activity. For example, a reminder might be to call a contact on a certain date or find out more information about a company by a certain time. Additional information associated with reminders might be the type of future activity needed, the priority of the reminder and who is responsible for completing the reminder.

What makes CRM more than just a simple contact management application is its tracking of leads and opportunities. 

A lead is typically an inbound request for information by a contact that might turn into a customer. An opportunity is typically a potential sale with a company or individual. Opportunities are tracked through various stages — also called sales stages — to show their progression and their likelihood of conversion.

Some Customer Relationship Management systems don’t distinguish between leads and opportunities, treating a lead as a very early sales stage.

CRM allows sales teams to track all of their opportunities, project when they are likely to close and work on associated reminders with those opportunities. Opportunities typically include information such as “amount” (the value of the sale), the expected close date, and other information that helps the sales team understand the deal they’re chasing.

Most Customer Relationship Management applications also allow sales managers to generate analytics reports about their team’s performance and the company’s sales forecast.

Benefits of CRM

Companies that successfully use CRM find that the benefits fall into three primary categories: increasing sales, decreasing costs or increasing customer satisfaction.

According to the analyst firm Nucleus Research, for each $1 invested in CRM, companies on average return $8.71 in benefits.

Companies see increased sales coming from CRM due the fact that their sales teams are more organized. With all of the information about opportunities in one place, sales teams become more effective with their follow-ups and are less likely to let deals fall through the cracks.

In some sales organizations, CRM provides a productivity boost that enables the same sales team to handle more leads and opportunities. In this case a company decreases its costs to handle each prospective customer and can increase profitability.

Customer Relationship Management software can also be used to increase customer satisfaction. When properly utilized, CRM has a lot of information about customers and prospects; sales teams can use this to make prospects and customers feel understood and taken care of. Customer satisfaction will increase because the sales and customer service teams will be able to establish a better relationship with their clients.

Integration With Marketing Automation

The most common integration between CRM and other applications is with marketing automation software. This category of software products tracks information about prospects, typically before they become a lead. Products like MailChimp or Pardot allow you to send email campaigns and create leads in CRM when contacts express interest.

CRM Adoption Challenges

While CRM can provide great benefits for companies, it can be a struggle to get their sales teams to use CRM.

Salespeople often hate CRM because it can require extensive data entry. Although it might be very beneficial to the organization to track each call and email, record notes about companies, etc., it can be very painful for the individual salesperson who needs to do all this work.

This problem is compounded by the fact that most salespeople’s earnings are tied to their actual sales performance, which means they are disincentivized to do data entry work.

Another problem that drives poor CRM adoption is the perception of the sales team that CRM isn’t a tool to help them. They tend to view it as an oversight tool — and one that is used to by their manager to micromanage their days.

Salespeople also don’t like to enter data into Customer Relationship Management software because they believe it gives them job security to keep all their opportunities and customer relationships in their head.

Future of CRM

Customer Relationship Management software has been in existence in one form or another since the late 1990s. It has evolved since then, taking advantage of new technologies as they developed.

We believe that the future of CRM is about the application being proactive and helping salespeople and sales managers achieve their goals with less effort.

For example, AI-Powered CRM should suggest to a salesperson who they need to call right now to close more deals. For sales leaders, it should advise them on which sales team members need the most help, or which opportunities their personal involvement could impact the most.