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What Is CRM? The Ultimate Guide (2023)

A customer relationship management (CRM) software gathers customer and lead data, then makes it visible to internal teams. The resulting holistic view of customers and leads allows business teams to create personalized buyer journeys. The result is a higher likelihood of closing sales and creating high lifetime-value customers. This guide tells what a CRM is, how it works, its benefits and disadvantages and how to choose the best one for your company.


What Is a CRM?

Customer relationship management (CRM) software offers tools and capabilities to manage a business’s lead pipeline and customer journey efficiently. It gathers personal data to form a holistic view of customers and leads, then makes this data visible to company teams like sales, marketing and customer service. Company reps can then use this 360-degree view of customers or leads to offer personalized experiences that close sales and build loyalty.

To begin, a CRM collects customer or lead data from website forms, emails, texts and meetings with your sales and customer service representatives, among other sources. It then offers visibility into that data to your reps. For example, if your website form indicates a lead is interested in a particular product, marketing can use that data to create targeted campaigns and sales reps can reach out to nurture a sale of that product.

4 Things a CRM Can’t Do

A CRM offers tools to help gather customers’ digital data, create efficiencies in external-facing functions and manage your customer journey or lead pipeline. However, to build and maintain a website, create internal-facing efficiencies or manage in-depth projects, consider alternative software. To minimize CRM limitations, ensure your staff is well-trained and accustomed to using your CRM consistently.

Here’s a closer look at what you should not expect a CRM to do for you.

Website Building & Management

CRM software offers the ability to manage the journey your website and other digital channels offer leads and customers. For example, it can help you gather information about website visitors’ product or content preferences, their demographic data and their contact information. However, it cannot build and publish a website. So, if you need software to help you build and maintain a website, it is best to consider a content management system (CMS) with a website builder.

Internal-facing Business Operations Efficiencies

A CRM helps to create efficiencies in external-facing functions like sales, customer service and marketing. For example, it can automate reminders for sales or customer service reps to reach out to leads or customers. However, if you need software that creates internal business efficiencies, consider enterprise resource planning (ERP) software, which can help manage internal processes like payroll, supply chain management and financial services.

In-depth Project Management

CRM software allows you to manage contacts and gain holistic visibility into lead pipelines and customer journeys. It even helps to manage journey progression. However, it does not offer key capabilities for handling other types of projects, such as product development. For this, consider project management software, which offers key tools and capabilities like team and document collaboration tools, Kanban charts, task management capabilities and more.

Offline Data Management

A CRM gathers data from across digital channels. Depending on the CRM software, this can mean gathering data from across social, ads, email, chatbots and your website. However, there are CRM limitations when it comes to gathering data from nondigital channels. These limitations, if not handled correctly, could mean lost revenue.

For example, if your field sales reps aren’t inputting notes about their face-to-face conversations with leads or customers, that data will not be made visible within your CRM for other business functions to access. This could mean a sale or upsell is lost as the missing data limits your company reps’ ability to create personalized experiences based on that data.

Types of CRMs

There are four primary types of CRMs. Operational CRMs automate processes, freeing your team to focus on their expertise. Analytical CRMs gather, store and analyze data so you can act on trends to improve customer experiences and, therefore, boost conversions. Collaborative CRMs manage interactional data so team members know how and where to best interact with leads. Finally, marketing CRMs offer data-driven campaign-management tools.

Here is a closer look at the different types of CRMs and their uses.

Operational CRM

An operational CRM helps to align your teams across marketing, customer service and sales via automation. In doing so, it allows these functions to work together using one customer or lead view and, ultimately, offer a smooth and positive experience while ushering leads from awareness to conversion and beyond. Its automation capabilities free up your team members to ditch repetitive, tedious tasks, so they can focus on tasks only humans can do.

Marketing tasks that operational CRMs help to automate include designing, distributing and tracking email campaigns and sequences. Customer service and sales automation examples include sales forecasting, tracking customer conversations, ticketing systems that assign complaints to experienced reps, task assigning, chatbots that receive complaints and the automated delivery of helpful content to answer customer questions.

As an example, a customer might interact with a website chatbot to complain about a product defect. From there, a ticket is created and routed to a sales rep who specializes in resolving the issue. After the assigned sales rep resolves the issue, the conversation with the rep triggers a follow-up email with a survey to ensure the issue has been resolved satisfactorily, along with a coupon code to entice the customer to buy again.

Analytical CRM

Analytical CRMs focus on data. It gathers data about each customer or lead, then offers an analysis of that data so marketers, sales reps and other functional members of your company can better serve your leads or customers. Example data includes customer and lead contact information, preferences, behaviors and interaction history with your brand and its reps.

More specifically, analytical CRMs first gather customer or lead data, then store that data in one place where all internal stakeholders can view it. Finally, analysis dashboards highlight data trends like how customers interact with your website or where they are located. This data is available on a customer-by-customer basis or as an overview of a large customer base. It reveals patterns your internal teams can use to improve the customer journey.

For example, your data may show that 25% of your customers in Florida searched for a particular product during beach season. They even put it into their online carts. However, 50% of those searchers did not buy but, instead, abandoned their carts. This insight can help you know how to offer them personalized marketing campaigns that convert, such as flash sales delivered via a triggered email when a cart is abandoned.

Collaborative CRM

Collaborative CRMs allow teams in and around your company to work together more seamlessly to create better customer experiences across customer touchpoints with your brand. Such teams include internal teams like your sales, customer service, technical support and marketing teams. It also often streamlines communication across your company’s vendors, technical support reps, suppliers and distributors.

To help companies manage interactions, a collaborative CRM stores all interactions between customers or leads and your company. It does so by sourcing data from all channels, including website, email, phone, social media and even face-to-face interactions. From there, the data is analyzed to tell your team how and where to best interact with customers and leads for the best customer experience.

For example, your sales representative sold a customer a hot tub. In that interaction, your team member learned that the customer prefers to interact with your company via text and notes this in your CRM. So, when it comes time to upsell a new accessory or schedule a regular maintenance visit, your marketing or technical support rep will know to also reach out via text to interact with your customer over their preferred channel.

Marketing CRM

Marketing CRMs, such as other CRMs, gather data on your customers and offer you a holistic view of each customer. But they go further with marketing tools that help you target and automate campaigns. Then, tools like blog publishing, SEO, ad tracking, social media and video production tools allow you to respond to the collected data by giving you insights into the preferences your customers want in campaign content and product offerings.

Tools like landing-page and form builders allow you to collect customer data and segment customers. Then, marketing automation tools help you nurture leads and customers to convert or purchase again. All behaviors and preferences related to each customer or lead are captured in the marketing CRM, allowing all team members across your departments to know where the customer is in the conversion journey, then seamlessly nurture them from there.

For example, your data may show that a lead made a first purchase, becoming a customer. In response, you can use your CRM’s marketing segmentation and automation tools to nurture that customer to become a repeat buyer. Simply segment the customer into a category specifying their “new customer” status and their product interest. Then, create and launch an email sequence to automatically nurture more sales from that customer and similar ones.

9 Reasons Why You Need a CRM

A CRM offers businesses many benefits that help them boost revenue and lifetime customer values, increase sales, nurture leads, improve customer service and product offerings, reveal data trends and sales forecasts and save time.

Here is a closer look at these benefits.

Cut Down on Time-consuming Administrative Tasks

Automation tools eliminate repetitive tasks from your marketing, sales and customer service team members’ to-do lists, freeing them to focus on what only humans can do. This means more time for your team members to improve their pitch, stay on a little longer to support an upset customer or A/B test to learn how to build the most engaging marketing campaigns.

For example, marketing teams can rely on automation to segment customers, then design, publish and report on targeted campaigns. Likewise, sales reps can automate customer data entry and interaction history, then use the insights to nurture leads via preferred channels.

Boost Sales via Increase Lead Follow-up

Using your CRM for lead tracking, you can gather leads’ preference and behavior data as they go through the sales funnel while also collecting notes on each interaction they have along the way. You can even tag leads based on their stage in the funnel. Then, automate all follow-up tasks and reminders. With all notes in one place, the next steps can be completed expertly by anyone on your team. In the end, more personalization means more conversions.

Tap Into Greater Personalization Through Segmentation

Lead tagging and scoring allow you to define audience segments based on their personal data or stage in the buyer journey. By working on a segment-by-segment basis, this segmentation makes it easy to personalize audience journeys with your company via targeted outreach. In the end, personalization through segmentation leads to better customer experiences and, therefore, more conversions, higher customer retention and even higher customer lifetime values.

You can define leads based on their industry, location, purchase history, conversion stage or how they learned about your brand. Then, use those tags to act on each segment, offering personalized sales outreach, marketing campaigns or upsell opportunities your customers will love. For example, you can launch a marketing campaign that targets leads with sales that make your brand seem in-tune with their in-the-moment needs.

Democratize Stakeholder Knowledge

Your sales and customer service reps often store a plethora of valuable information in their notebooks, heads, calendars and contact lists. Sadly, this means that if a key salesperson leaves, so does this valuable data—data that can otherwise be put to use to drive conversions now and in the future. A CRM works to capture all of that information so that anybody in your company can take the proverbial baton and run with it.

Automate Data Analysis and Reporting

Large data sets, when handled manually, often overwhelm company reps, leading to dropped qualified leads and undervalued customers. A CRM fixes this by capturing leads consistently and customer data automatically, then tracking every interaction or touchpoint with little effort on your team’s behalf. From there, automated data analysis kicks in, creating instant reports that reveal actionable opportunities and reminders to take advantage of them.

Offer On-point Customer Support Every Time

A CRM’s automation tools scale superior customer support. You can use website chatbots to receive complaints or tap into your CRMs knowledge base to automate answers to repeat questions. Then, to elevate complaints, you can use the chatbot to trigger a ticket within your CRM, routing customers to team members who can best respond. Centralized customer notes and histories then help team members anticipate needs and prepare stellar solutions.

Create a Feedback Loop

Your CRM gives you all the capabilities you need to gather interactional data from leads and customers. When CRM data is visible across departments, this data can reveal insights that lend easily to better product or service offerings or more in-tuned marketing campaigns going forward. As such, data insights can be looped back into your lead nurturing and sales processes.

For example, your sales reps may repeatedly make CRM notes revealing that leads hesitate to purchase once prices are discussed. Your CRM can highlight this trend, thereby alerting your marketing team. In response, marketers can create campaigns that highlight newly added or competitive features, making those price bumps seem like bargains. In turn, when newly qualified leads hit the conversion stage, that point of hesitancy is nixed before it forms.

Boost Customer Lifetime Value

CRM software helps businesses offer superior customer support. In addition, they pinpoint upselling and cross-selling opportunities through customer and lead segmentation. They also create feedback loops that consistently lead to improved offerings and free your team members’ time to interact with customers more consistently. In the end, these benefits lead to delightful customer experiences that keep customers coming back to buy more.

Forecast Sales

At some point in our lives, most of us have reflected on how much easier life would be if we could see the future. A CRM offers companies that capability via sales forecasts. Instant reports reveal if you are likely to meet or exceed sales goals. Perhaps even more importantly, CRM sales forecasts tell businesses if they are likely to fall short of sales goals, giving businesses the time and insights to pivot their strategy to get back on track before it’s too late.

How CRMs Work

CRM software offers a set of tools and capabilities for creating, tracking and managing great customer journeys. The software begins this process by gathering information about leads, then putting that data to use so sales, marketing and customer service teams can offer personalized interactions with leads, ultimately turning them into high-value customers.

First, a CRM automates lead and customer data collection. Such data can include where they are in the customer journey, the channels they use to interact with or share opinions about your brand, their preferences, interaction and purchase history with your company, demographics and more. In addition, notes kept by your service or sales reps are also stored within your CRM, revealing context on each lead’s or customer’s relationship with your brand.

For each lead, this data is made available across sales, marketing and customer service. This allows all company functions to offer a seamless journey from lead development to customer retention. For example, if marketing learns a warm lead prefers a certain product line, once a hot lead, sales can reach out for a conversation focused on that product line. Automated tasks can alert sales reps when leads are hot and it is time to reach out.

Once collected, your CRM begins to also track the data within it on a large-overview scale. It can, for example, track leads from acquisition to closing, conversion rates, customer retention, sales forecasts and customer turnover. Then, analytics tools within your CRM software create real-time reports on overall trends. In doing so, you learn what your company is doing well and areas that are ripe for improvement across your customer journey.

How To Choose the Best CRM for Your Business

To choose a CRM for your company, first evaluate your budget, goals and the features you need in a CRM. Consult your team when doing so for a thorough analysis to get the best results. Use this data to choose the best CRM type for your business, then the best CRM within that CRM type. Finally, perform a soft rollout of your chosen CRM to ensure it meets your company’s needs before making a final decision.

Here is a closer look at how to choose a CRM software.

1. Evaluate Your Budget

Any good business is constantly juggling costs against revenue so company efforts produce profits. Choosing a CRM budget should align with this plan. While most small-business CRM plans start at around $10 to $50 a month, those prices can be deceptive. This is because many CRM plans offer a set price per user. If your company needs a CRM for 50 people to use, you must often multiply that per-seat price by the number of people who will use the CRM.

So, look at how much your company can spend on a CRM overall. Then, work backward. To do so, determine how many people within your organization would need to use the CRM actively and determine your overall budget for a CRM. From there, divide your overall budget by the number of people who will need to use your CRM to land on a per-person price your company can afford.

2. Delineate Your Goals

Look at your business and list your sales, customer service or marketing weaknesses. These can be the foundation of improvement goals. From there, make a list of the goals you want to accomplish when managing your lead and customer relationships. These goals could include increasing sales or all or particular product lines, improving customer service, attracting more leads or increasing your customers’ lifetime values.

While most CRMs have a standard set of key features—like pipeline management and marketing automation—others have standout features that fit certain companies and their goals best. Standout features might include, for example, advanced customer or lead segmentation, a ton of marketing automations or ad tracking. Your goals can help you decide which standout features you need come time to focus on feature offerings.

3. Consult Your Team

Your team members are experts in how to do their jobs successfully and, more importantly, how their jobs can be done even more successfully via added efficiencies. So, at a minimum, consult with your marketing, sales and customer service teams. Ask them to list their customer and lead relationship-management goals in order of importance. With importance scoring, if budget-related compromises must be made, a satisfactory solution will be easier to delineate.

Next, to ensure nothing is missed, dig deeper. Ask team members what limitations they currently experience when nurturing customers or leads to purchase, then convert those limitations into goals. For example, if they report they often lose track of who they need to reach out to and when to close more sales, have them convert that limitation into a goal, such as “better track outreach opportunities to close more sales.”

4. List Must-have and Nice-to-Have Features

Now that you have a list of your goals and those of your team, you are equipped to make a list of the CRM features that would best help you reach them. Be careful to ask team members to list their must-have and nice-to-have features separately. This will help you stay within your budget if compromises must be made.

To get you started in brainstorming your list, here are some common CRM features and their functions:

  • Integrations: Integrations allow you to use third-party apps like Mailchimp or Outlook with your CRM to work to reach business goals more seamlessly.
  • Sales analytics and reporting: Analytics and reporting dashboards show you which goals you are meeting and which you are not, enabling you to shift strategies to stay on track. They also report key data points to help you target customer or lead segments better and, ultimately, close sales.
  • Automations: Automations allow your team to scale lead and customer management by automating repetitive tasks, such as role assignments, email sequence outreach, data gathering and report generation.
  • Sales forecasting: Many CRMs offer reports that forecast sales levels, helping you to understand whether you are likely to meet your sales goals.
  • Email marketing: Most CRMs offer email marketing tools and automations like email templates, email sequencing, automatic email personalization and email tracking and reporting.
  • Collaboration tools: To help companies align sales, marketing and customer service, many CRMs offer collaboration tools like Zoom integrations or real-time document collaboration capabilities.
  • Complaint tickets: To scale great customer support, when integrated with website chat bots, CRMs receive complaints from customers or leads. They either then offer content to help resolve the issues or route those complaints to human reps who can resolve them best.
  • Website forms: Many CRMs offer website form templates that your team can use on your website to capture customer and lead data.
  • Lead and customer segmentation: Many CRMs offer the ability to segment leads and customers easily based on their purchase or interaction history with your brand. This allows your company to interact in personalized ways at scale.
  • Task management: Using the task management features in a CRM, you can set reminders to help you manage lead and customer nurturing better. For example, you can set reminders to reach out to leads at certain intervals or assign leads to new reps once they hit certain stages in the lead pipeline.
  • Lead scoring and opportunity management: This feature allows your team to know instantly and automatically which leads are more likely to purchase from your company in the end. Knowing this score tells your sales reps which leads to prioritize.
  • Mobile CRM apps: A mobile CRM allows your customer service and sales reps to reference and capture information about leads and customers even if they are away from their offices. This added data visibility means company representatives can offer personalized experiences across all lead or customer interactions with your brand.
  • Call center automation: Call center automations help customer service representatives serve customers or leads in a personalized manner more easily. For example, when a person calls into the center, based on their phone number, their contact records might pop up on the screen automatically so that reps can begin a personalized conversation instantly.
  • Marketing campaign management: CRM campaign tools may include marketing analytics, campaign scheduling, social media and ad tracking, campaign workflows and email templates and A/B campaign testing, among others.

5. Choose a CRM Type

With your and your team’s goals and desired features in hand, choose a CRM type. Look at the list of CRM types in this guide. Find the one that aligns most closely with reaching your goals and offers the necessary features to do so.

For example, if your goal is to boost sales and a common limitation reported by your team members was not tracking outreach opportunities well enough, consider a collaborative CRM. However, if your team needs to attract or qualify more leads on your website, social channels or via email, then consider a marketing CRM.

6. Research Highly Reviewed CRMs

Now that you have a good idea of the type of CRM you need, your required features and your budget, search for the right CRM for you. Many publications offer guides on the best CRMs for your business size—and even industry—based on the current year, the software’s features and pricing and customer reviews. Using your favorite search engine, locate these guides to discover the best CRM software available. For example, you might search for terms like “best marketing CRM 2023.”

Here are a few examples of such guides to get started in finding the right CRM for you:

As you look at the options in these guides, find the CRM options that align best with your company’s goals, industry, budget and feature requirements. Make a list of them.

7. Do a Soft Rollout To Make a Final Decision

Many CRM software offer free versions or trials you can use to test the top CRM choice list you put together in Step 6. Sign up for these trials or free versions and let a sampling of your team members across all relevant business functions use the respective CRMs. Gather feedback on the user experience reported by your team members, then make a choice based on that feedback.

To gather feedback, ask questions like:

  • Does this CRM help you to meet your top goals?
  • Is this CRM intuitive to use?
  • What changes would you make to this CRM’s user experience?
  • What features do you most like about this CRM?
  • What features do you feel are missing from this CRM?
  • Do you think this CRM is a good fit for our business needs? Why or why not?