Customer relationship management (CRM)

What is customer relationship management (CRM)?

Customer relationship management (CRM) is the process of managing the interactions your company has with its prospects and customers throughout the customer lifecycle. CRM relies on tracking data from customer actions, such as purchases.

CRMs are most often used by sales and customer success teams for 1:1 prospect and customer communication. It can log contact points made by marketing, sales, and customer success teams, such as calls, live chat conversations, and emails.

What is a customer relationship management (CRM) system?

A customer relationship management system is software that helps organizations keep track of and communicate with customers. Functioning like a dynamic address book, a CRM platform holds rich contact information for individuals (prospects and current customers) and for B2B marketing, the companies these individuals work for. It also allows team members to log information about customers.

A CRM sometimes sits at the center of a marketer’s tech stack, like a control center that stores data and informs strategy. It also plays a crucial role in many sales teams, helping organize and visualize leads across different channels.

Some of the most common CRMs on the market today include Salesforce, Hubspot, Zoho, and Microsoft Dynamic 365.

What is the history of CRM?

Before it was called customer relationship management, businesses kept track of customer information in address books or in business card organizers like rolodexes. Eventually, this data moved to early computers. 

• 1980s: As computers got smaller and databases went digital, CRM software was born.

• 1990s: CRM software added capabilities for building lists and segmenting customers.

• Early 2000s: Internet-based CRM software arrives, along with integration with email and digital marketing tools.

• 2010-Present: Many industry-specific CRM software tools were introduced to meet specialized sales cycles and systems. CRMs introduced mobile apps for workers to keep customer information updated when they were on the go. The ecosystem of third-party tools that integrated with a CRM exploded to modernize everything from outbound sales calling to ingesting information into the CRM from a business card.

How do marketing teams use customer relationship management?

A CRM is helpful for all departments, but for marketers, it can be an important source of information for data-driven campaigns that they use to fill the sales pipeline.

A customer relationship management example

Imagine you work in marketing for a stationary company that sells paper products to small businesses. You’ve been tasked with re-engaging lost leads via email.

Where do you start? You comb through the data in your CRM. You look at small business leads that have at least one lost deal/opportunity record and haven’t communicated with the sales team in the last three months.

Then, you can further segment your potential customer list by other information in the CRM like lost reason, so your email campaign can speak directly to the last sales objection.

Now, it’s time to create email campaigns. You were able to segment the list into three groups by lost reason and create custom email copy for each. After you launch the email nurture sequences, you will collaborate with the sales team to get qualitative feedback on how the campaigns performed. You will also leverage reporting in the CRM to measure the future activity of these lost deals. 

Types of CRMs

While all CRMs help businesses nurture customer relationships, there are three types of CRMs. Some CRM platforms perform all three functions.

Analytical CRM

An analytical CRM gathers and interprets customer data. It tracks when a customer clicks emails, visits the website, makes a purchase, and more. Over time, as your customers interact with your business, you’ll get a more complete picture of their behavior. If you want to collect actionable data on customers and predict buying trends, an analytical CRM is for you.

Many analytical CRM platforms have customizable dashboards that help you track specific analytics — from purchases of a certain product to clicks on an email.

Collaborative CRM

A collaborative CRM system helps departments communicate. If you need to create seamless transitions as customers move through the sales pipeline (like when the sales team passes a new buyer to the customer service team), collaborative CRM can be helpful.

With a collaborative CRM, anyone on your team will be able to search for customers with specific criteria, like their region, email subscription status, last purchase, and more. Team members will be able to communicate about customers, using internal note features and task management that live on each customer’s contact record — giving all teams the same source of information.

Operational CRM

An operational CRM system automates workflows. Used by sales, customer service, and marketing departments, it allows you to build nurture campaigns, track leads, and automate emails to streamline customer communication.

With an operational CRM, an automated workflow could mean that when a prospect fills out a web form, it triggers an email to thank them for their interest. Then, a task is automatically created for a sales representative to give them a call the next day. Once the sales representative marks that task complete, another email automatically goes out to the potential customer.

How does a CRM work?

A CRM provides centralized data on individual customer behavior and larger customer trends.

Components of a CRM

• Customer data management: A CRM tracks and stores customer behavior at different touchpoints, tagging customers based on their behavior and helping show each customer journey. It also creates detailed dashboards that help visualize customer behavior.

• Marketing automation: Many CRM platforms contain essential marketing tools to reach the target audiences on various platforms. These tools can include audience segmentation, campaign tracking, and automated email and text capabilities.

• Sales: A CRM supports sales teams through centralized customer data, customer segmentation, lead tracking, communication automation, and lead nurturing. It allows sales teams to stay organized and consistent in their follow-up with prospects. CRMs can also help teams better visualize the sales pipeline.

• Customer support: Every time a customer reaches out, a CRM catalogs their chat history, phone calls, and service tickets. This tracking gives customer service representatives more context for customer conversations, which helps build customer loyalty and resolve issues faster.

• Data and analytics: CRMs allow teams to pull and visualize customer data so they can find trends and make predictions that guide future sales, marketing, and customer success decisions. For example, an arts organization may use CRM analytics to determine which communication channels drove the most ticket sales for performances. Then, when similar performances land on the calendar, they can recreate those emails for sales or marketing campaigns.

Should my team use a CRM system?

Benefits of a CRM system

• Customer satisfaction and customer retention: When departments update customer contact records with the latest information, marketing and sales teams can create campaigns with more personalized messaging. Customer success teams can also forge stronger relationships with a complete picture of the customer journey, purchasing history, and previous interactions with the company.

• Targeted marketing: With access to more customer data, marketers can build segmented customer lists and tailored campaigns. This personalization can drive more interest and sales.

• Time saved: CRMs automate routine tasks, like creating to-dos, sending emails, and segmenting customers based on actions a customer takes (clicks, sign-ups, purchases, etc.). Without a CRM, you’d have to manually comb through data and send individual emails. With a CRM, a customer service representative could create an automation that sends customers an email survey one month after their purchase.

• More centralized customer data: By creating a single source for customer data, departments have access to the same information that’s always up-to-date. When someone in customer success looks at a customer contact record, they’ll see the same information as someone in sales.

• Data-driven decisions: Businesses can use the data collected by their CRM to refine their sales and marketing strategies, identify trends, and forecast future sales performance.

Challenges of a CRM system

• Set-up time: A CRM requires set-up to import customer data, create workflows, and build campaigns. This may involve coding or development work, and full implementation of a new CRM can take up to a year, depending your needs.

• User learning curve: CRMs are robust — they can include a wide range of tools, reports, automations, and more. Therefore, CRMs often require training across multiple teams and departments. Training takes time, but without it, you may find reporting errors, resistance to adoption, or failure to see the system’s return on investment (ROI).

• Lack of omnichannel view: CRMs don’t know everything about a customer, and most can’t set up cross-channel campaigns that run on social media and Google Ads. Usually, they only report on email and website behavior, as well as direct customer interactions from the sales and customer success teams.

• Data insecurity: Handling customer data requires strict security measures to protect against data breaches. When you only use a CRM to store customer data, you don’t necessarily have the ability to manage that data security (as opposed to a data warehouse that you control). With that in mind, it may not be possible to store sensitive customer information in your CRM. It’s also important to keep in mind whether your CRM can help you comply with important security laws like the California Consumer Privacy Act (CCPA) and the General Data Protection Regulation (GDPR).

• Data clean-up: Without someone doing regular auditing and clean-up of the CRM, data quality issues can compound resulting in issues from duplicate contact records to stale data like bounced emails. While consistent clean-up can solve this issue, it can be time-consuming.

• Manual updates: A CRM doesn’t know what happens with your customers offline unless you tell it. Sales or customer service representatives may feel that it slows them down to add customer notes to the CRM after meetings or in-person conversations.

• Scalability: As a business grows, its CRM needs may change, requiring other software integrations or a migration to a new platform. Moving all data from one platform to another can be high-risk, and historical data can be lost in the move.

CDP vs. CRM: What’s the difference?

What is a CDP and how is it different from a CRM?

A CDP (customer data platform) gathers information on a customer interactions from multiple online sources like website and mobile app and adds those to a customer profile. Then this activity can be synced to marketing tools and channels for targeting and conversion tracking. —

A CRM is generally limited to structured data within the channels housed in the software, such as emails, customer service chats, web forms, and e-commerce. It creates a detailed account of a customer’s direct communication with a brand. CRMs are more often used by sales and customer service representatives who work in a high-touch function with individual clients and prospects.

Can CDPs and CRMs work together?

Yes — many marketing departments use both composable CDPs and CRMs to marry high-level data with individual customer feedback and behavior.

A composable CDP sits on top of a company’s data warehouse, which is a single source of truth for customer data. The composable CDP then acts as an activation layer — using the customer information from the data warehouse, it can help craft audiences and sync those audiences out to marketing channels like CRMs, social media ads, or search ads.

A composable CDP can help marketers segment customer lists based on a wider range of data points. Then, they can push that data to a CRM to deploy a campaign or other automation.

How do I choose the right CRM for my team?

Not every CRM is a one-size-fits-all solution. Some CRMs are better suited to specific goals than others. Here’s how to find one that works for you.

What kind of data tracking do you need?

• Is structured, quantitative data from marketing and sales channels all you need?

• Do you need a solution that provides data points from a wider range of sources, like social media and offline behavior?

• Do you only need the raw data for reporting performance metrics, or do you want a solution that can create data visualizations and dashboards?

What are your marketing department's goals?

• How many contacts do you need to store in your database?

• How many marketing channels do you want your CRM to integrate with?

• Do you need a solution that includes web forms and landing pages?

• What sorts of campaigns do you need to build: Email? Text? Social media?

What do other teams need, and can you get their buy-in?

• How does your customer support team interact with customers? Will the CRM make those interactions with customers easier?

• What does your sales team need to track leads and the sales pipeline?

• Are your sales and customer service teams willing to migrate to a new platform for the sake of consolidating customer data?

What will you need in five years?

• Looking ahead, which channel integrations and features will your marketing, sales, and customer success teams need?

• How large do you expect your database to be in the future? Choose a CRM system you can grow into.

Top three customer relationship management tools

There are dozens of customer relationship management solutions on the market. Here are three top platforms and what they do best. 

• Salesforce: Salesforce is best for large companies that have a direct sales motion with dozens of sales executives.

• Hubspot: Hubspot combines a CRM with a CMS (content management system), commerce, sales and marketing. Mid-size and small businesses choose this option.

• Microsoft Dynamics 365: For Microsoft-Windows-based companies, Microsoft Dynamics helps connect sales and marketing teams.