What is customer relationship management (CRM)?
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Updated: 02 April 2024

Contributors: Eda Kavlakoglu, Teaganne Finn, Amanda Downie

What is CRM?

Customer relationship management (CRM) is a set of integrated technologies used to document, track and manage an organizations relationships and interactions with existing and potential customers.

CRM supports the sales process and advances enterprise resource planning (ERP) initiatives. CRM software helps companies measure and get control of their lead generation and sales pipelines.

Customer relationship management software helps companies measure and get control of their lead generation and sales pipelines. It can also be used for lead management, sales forecasting and managing communications with potential customers and for sales teams on the road who are in need of quick, efficient data. For example, within a call center environment, a sales CRM system can analyze the frequency, volume and outcome of follow-up communications with new leads. This can lead to better customer retention over time and an improved customer experience. The data is then used to research and analyzes the overall customer relationship and improve workflows.

Today CRM solutions include multiple technologies relative to deployment size, business model and industry verticals to enhance the customer experience. CRM suites can also offer tools, such as online chat and document sharing apps. In addition to supporting e-commerce and marketing tools like Mailchimp, CRM applications offer order, revenue, social media and opportunity management.

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The value of CRM

Forrester’s CRM Playbook (link resides outside ibm.com) indicates that 61% of global software decision-makers were implementing, had implemented, or were expanding their implementation of customer service software. Meanwhile, 58% of software decision-makers intend to do the same for sales force automation (CRM) applications; 17% of decision-makers plan to adopt customer service software within the next year; and 18% intend to adopt sales force automation.

When properly integrated into your system, a good CRM adds value to your business in two significant ways:

  1. Business strategy enhancement: An effective CRM strategy identifies and develops business objectives, benefits customer service protocols, clearly articulates CRM features and processes, and addresses functional needs. It should include customer information, customer service goals, employee roles and strategic opportunities. In addition, a CRM strategy should include metrics relative to company initiatives and overall goals. The CRM data is pertinent to the success of the business.

  2. Cloud agility and adaptability: As more CRM platforms and solutions migrate to the cloud, their workflow automation and the infrastructure on which they run becomes more critical. For example, Salesforce augments its sales cloud on Amazon Web Services (AWS), while Microsoft augments on Azure. Each cloud platform has a distinct suite of analytics and machine learning (ML) that greatly influences insights and determines CRM results.
The benefits of CRM

When quantifying the business value of CRM, its benefits should address revenue generation and cost-efficiency. Therefore, your CRM should support existing business processes and technological capabilities. According to Forrester, CRM benefits fall into three distinct categories (link resides outside ibm.com):

  • Higher revenue: Increase your revenue by improving product mix, value and price realization.

  • Lower direct costs: Reduce exposure to unprofitable customers and enhance operational efficiency and sales productivity.

  • Lower indirect costs: Improve vendor contracts and technology support by consolidating CRM instances, minimizing CRM application customization and increasing technology adoption and usability while reducing user training times.

These benefits help build customer lifetime value, which ultimately increases customer retention. In fact, CRM automation alone increases customer retention by as much as 15% 1.

Types of CRM solution

The CRM needs and capabilities of a business-to-business (B2B) enterprise differ from those of a business-to-consumer (B2C) enterprise, as the CRM needs and capabilities of small businesses differ from those of large companies. Some CRM suites cater to individual business owners and small teams (for example, contact management tools, social channel engagement, email marketing campaigns). Vendors can also provide end-to-end CRM solutions for salespeople, customer service reps and marketing teams.

There are three main types of CRM systems and a better understanding of each can help business owners determine which is best suited for them. 

Operational CRM: An operational CRM system is the most common and has the broadest reach in terms of its functions. It focuses on front-end customer interactions and optimizing business operations. The main purpose is to help teams understand their customers on a deeper level and in turn optimize the customer experience so that a stronger customer relationship can be built.

The operational CRM system takes customer details and uses that data across different disciplines within the business, such as through marketing automation, sales automation and service automation. As the success of operational CRM depends on an organizations data entry, it might be a worthwhile, albeit time-consuming, process. Below are some benefits of operational CRM: 

  • Sales operations: The operational CRM helps businesses automate their entire sales cycle and helps them keep track of important points, such as customer interaction and sales projections. 
  • Customer service: By giving access to customer information to all employees in an organization, operational CRM empowers businesses to improve customer interactions across the entire business. 
  • Marketing: With operational CRM organizations can automate marketing tasks and create tailored promotional campaigns that can accelerate growth. The customer-specific information provided by operational CRM helps to personalize marketing campaigns and design them as you see fit. 

Analytical CRM:  The main purpose of analytical CRM is to help an organization sort and manage large amounts of data and turn them into actionable insights to improve customer experience. The data typically kept by an analytical CRM can often include data trends, channels and customer preferences.

This type of CRM is likely going to be best suited for a mid to large-size organization that has a large amount of data that needs to be analyzed. While this can be an extremely productive CRM, it can become quite technical, so having the proper staff on hand will be important.

An example of analytical CRM is SAP. IBM Consulting activates SAP's enterprise-grade CX solutions by using data and AI to create world-class customer experiences. Below are some benefits of analytical CRM: 

  • Data mining: Analytical CRMs typically use data mining techniques for mapping trends and giving clear, more in-depth insight into the customer journey. There are several approaches to data mining, including correlation, classification and monitoring objects. 
  • Sales opportunities: By analyzing a customer's data, an organization can learn customer preferences and trends. This information can then transfer into personalized marketing and sales techniques. Analytical CRM gives organizations a chance to continuously monitor sales activity and marketing campaigns. 
  • Trend prediction: Analytical CRM gives organizations the data that it needs to dive into historical sales trends to compare with current market conditions. This information comparison helps to monitor purchasing behavior and forecast trends, such as the speed of trend development. 

Collaborative CRM: As it states in the title, a collaborative CRM involves multiple teams working collaboratively within an organization to share customer data. Sometimes referred to as a strategic CRM, this system uses the same basic data about a customer to then create a clear and concise approach to managing the customer relationship. The collaborative CRM system is typically made up of two components; interaction management and channel management.

It is best for organizations that operate in multiple locations so that they can better communicate and share customer information. An example is Microsoft Dynamics 365, which in collaboration with IBM Consulting, can help clients tailor their secure hybrid multicloud journey and use the full potential of AI and Microsoft Cloud. Below are some benefits of collaborative CRM: 

  • Integrated data: The beauty of collaborative CRM is that it connects your customers through different platforms. By integrating data, it helps to streamline interactions and link call center activities with other departments within the company. 
  • Retainment of clients: Through this software an organization can build a customer profile specific to the consumer. Equipped with the right data and up-to-date information, an organization can retain existing clients and drive customer engagement. 
  • Streamlined work process: With customer interaction data all in one place, employees across different departments in an organization can spend less time searching for information and more time viewing individual case files. Instead of having to track down one person who might or might not have the information you need, collaborative CRM allows for real-time data available to everyone in the organization. 

Smaller organizations typically only need one CRM tool, whereas larger organizations might require more CRM applications and third-party integrations. Regardless of company size, versatile CRM platforms that unify data entry, business processes and security within various departments are becoming more prominent in the market:

  • Marketing: Multichannel messaging and distribution.

  • B2B/B2C: E-commerce and sales cycle automation.

  • Support: Customer engagement and satisfaction.

Other types of CRM worth mentioning include on-premises, cloud-based CRM and customizable CRM. There are many different CRM options to choose from and can fit any type of organization, from a startup all the way to a global company with multiple locations. There is a CRM option to fit your business needs and enhance the customer experience throughout the entire customer lifecycle.

Challenges with CRM

The transformations of customer engagement and customer loyalty are among the primary benefits of CRM, and it must be achieved in increments. Forrester identifies three important areas of risk associated with CRM implementation1:

  1. Size: Organizational project management teams tend to be less accurate with CRM pricing and benefit estimates for larger projects versus smaller ones. The larger the project, the wider the range of risk.

  2. Vendor risk: Organizations, at times, must replace a CRM vendor because their product is no longer meeting their business needs or the vendor has been acquired. In either case, CRM costs can significantly increase.

  3. User adoption: Organizations must properly prepare and train their sales reps to operate a new CRM application, otherwise they are less likely to accept the new user experience. Therefore, sales management is a key part of a successful CRM adoption.
AI and CRM

To remain competitive and achieve customer satisfaction, companies must adopt innovative CRM tools from vendors offering feature-packed products and services that are often industry-specific and leaning into the newest technology, such as AI CRM. The AI customer relationship management software takes both the power of AI and traditional CRM tools to enhance the customer experience and customer interactions. 

An example of AI CRM in action is IBM and Salesforce working together with teams of trusted consultants, designers and engineers to apply deep industry expertise that will ultimately change the way work is being done. The project improves the employee experience and better addresses customer needs.

With the availability of multiple solutions, it is important to consider what is driving your overall business objectives. Whether it be the technology, architecture, functions and usability of your application, the overall cost, risk and speed of your project, or the product vision and partner services provided by your selected vendor, your CRM is critical to the present and future development of your enterprise.

AI for customer service

AI-powered virtual agents use natural language processing (NLP) to interact with business systems and provide new customers with high-level solutions across messaging platforms, applications, channels or devices. These virtual agents can guide human support agents to the information they need to resolve customer queries, thus improving the overall customer and human support agent experiences. When conversational AI is paired with ML-driven speech-to-text capabilities, first contact information and resolution during voice interactions are improved.

Some virtual agents can integrate with your existing CRM and customer care systems, helping you improve issue routing by connecting customers to the right agents the first time. Some examples of use cases include agent assist, customer self-service and employee self-service. Automated customer experience and real-time insights from customer data are among the benefits of AI for customer service.

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1 Quantify The Business Value of CRM (link resides outside ibm.com), 3 March 2021