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CRM systems connect and support front-office functions such as marketing and sales, advertising, and customer service. ERP systems support and connect primarily back-office business functions such as finance and supply chain operations. Enterprise resource planning (ERP) and Customer Relationship Management (CRM) are the two most common custom software solutions businesses use to automate their core business processes.
ERP connects financial and operational systems with a central database to help companies run successful businesses. CRM manages how customers interact. Both are vital data repositories. They both cover multiple departments, and while they may be built on the same platform, the software is usually purchased separately and then integrated.
Learn more about CRM and ERP. Find out the differences and if one or both is right for you:
- CRM and ERP software solutions drive business value by centralizing data, automating processes, and connecting it.
- ERP automates processes and operations, while CRM automates interactions with customers.
- When integrated, CRM and ERP systems improve business efficiency and productivity.
- Integration of CRM and ERP reduces silos in data and allows you to get the most from your systems.
This article will identify the main characteristics of CRM and ERP. It will also explain how they differ and whether a business requires ERP, CRM, or both.
What is CRM?
Customer relationship management (CRM) is an enterprise software solution that automates how a customer interacts and engages with your company. Customer relationship management is often part of a suite of CX applications, which may include marketing, advertising, ecommerce solutions, and customer service. A CRM system collects and stores customer data, such as communications between sales representatives and customers, proposals, purchases, and service requests.
Customer relationship management (CRM) is software that tracks all customer interactions with an organization. CRM features were initially developed for the sales department and are known as salesforce automation (SFA). Other systems were developed soon to manage marketing and customer service interactions, especially in the call centers -- or contact centers, as they became known once the telephone was no longer the only customer service channel. Software vendors started to combine these disciplines into one umbrella called Customer Relationship Management (CRM) through acquisitions and development. Some
CRM systems include sales performance management and incentive compensation, which are often sold separately due to their complexity. Most CRM solutions use third-party data sources to ensure that the contact information is accurate and complete. This data can be shared across an organization so that users better understand what occurred at each contact point. The best CRM solutions use artificial intelligence to analyze the customer's past and recommend the next steps for sales.
CRM Benefits
CRM promises to give businesses a central repository for all customer data and track all customer interactions. With this information, businesses can make better decisions about which customers they should pursue to increase revenue, the performance of their sales team, how best to serve customers, etc. With a central CRM system, for example, sales representatives can determine if the customers they are visiting have unresolved customer service tickets and respond accordingly. Customer service agents can also quickly determine if a caller has a high-value or potential high-value client and direct them to the right service level.
CRM systems automate customer-related processes, including day-to-day customer interactions, marketing campaigns, and the sales cycle. This gives businesses more time to focus on building better customer relationships and driving growth. Employees in sales, customer support, marketing, and other departments can share a comprehensive view of a customer's history and business with the company. These data can be analyzed to provide a more personalized and consistent customer experience and build the trust necessary to increase sales. CRM systems, when properly implemented, can:
- Improve Customer Service: by thinking about your last interaction with customer service. How long did you wait? You were shuffled between several representatives and had to repeat your information each time. By storing customer data centrally, CRM can create more accurate profiles of customers, which will speed up response time and improve collaboration between marketing, sales, and service representatives. These features increase customer satisfaction and, therefore, the chances that a new customer will become a loyal, repeat customer.
- Increased Productivity: CRM tools, automation, and data entry simplify mundane, common tasks such as updating customer information and entering data. It speeds up the processes, reduces mistakes, and allows employees to concentrate on more important work. CRM systems automate and digitalize many customer interactions. They deliver them via digital channels such as social media, email, chatbots, or live chat. Live chat tools, for example, allow customers to communicate with representatives instantly, which results in quicker responses. Chatbots, which connect AI with the knowledge base for sales, support, and service, are available 24/7 to improve customer satisfaction. AI can improve email campaign personalization and relevance to target outbound marketing efforts.
- Distill Insight: CRM generates and manages massive quantities of data, including demographics, preferences, interactions with your business, and buying histories. These data can be used to optimize different aspects of customer relationships, including managing invoices and forecasting sales. This data can give insight into customer demands and needs, allowing development teams to create better products and services. Analytics can also be used by sales and marketing teams to create personalized communications for customers.
- Increase Customer Retention and Sales: Sales can improve their efficiency by gaining a comprehensive understanding of the interests, needs, and histories of customers. They can also identify which customers are likely to generate additional revenue. The CRM system's consolidated view, which includes all customer transactions, interactions, contact details, and preferences, helps manage interactions with customers and prospects. These data can be used to gain customer insights and create more personalized relationships. CRM systems keep track of messages, conversations, interactions, and notes that representatives have had with customers. This allows them to maintain customer records and make sure they are up-to-date. Customers will not need to repeat their information or engage in repetitive interactions.
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What is ERP?
Enterprise resource planning (ERP) is a business software type that automates and connects back-office processes such as accounting and procurement. It also manages supply chain management and risk management.
ERP software may include enterprise performance management, which helps an organization plan, budget, forecast, and report its financial results. These business processes can be consolidated into a single platform to streamline operations and simplify workflows. ERP systems collect shared transactional data across multiple sources to enable data flow between departments. They also eliminate duplication and ensure data integrity.
Material requirements planning (MRP) was the precursor to enterprise resource planning. It allowed manufacturers to understand better and manage their resources to run a successful company. ERP is a database that all parts of the organization can access. This financial system includes the general ledger, accounts payable, receivables, payroll, and financial reporting. ERP is not limited to just inventory management. It also includes order management, supply-chain management, and data about service organizations. ERP also includes procurement, production, and distribution. ERP systems can also include Human Resources Management Systems, CRM, and ecommerce.
An ERP is the most effective way to integrate a company's people, processes, and technologies. The benefits are virtually endless:
- Connect and integrate departments in your organization.
- Data sharing between departments can streamline processes.
- Standardize critical business processes.
- Inventory costs can be reduced.
- Better project planning
- Automate processes to increase throughput
- Track progress and productivity with accurate data and reports.
- More jobs delivered on time
- Reduced purchasing costs
- Eliminate purchasing errors
- Increase the user adoption rate through a common user experience and design.
- Improved data integrity and financial control reduce risk.
- Reduced operational costs
- The accuracy of financial data can be improved.
- Cost-effectiveness of job costs
- Accounting processes can be simplified.
- Manage human resources
ERPs provide accurate, real-time information that helps you improve your business's performance and increase efficiency.
ERP Benefits
ERP systems can benefit by combining all financial and operational information into a single database. This has a major impact on reporting, both monthly static reports and ad-hoc reports requested by management. Employees can also drill down into the reports to discover financial insights without relying on IT or finance teams for analysis and reporting. It allows companies to make data-driven decisions faster, impacting everything from profits to growth to efficiency.
A faster financial close is another benefit that companies often cite when moving to an ERP. The finance team tabulates the results of all expenses and income at the end of each month or quarter. This is commonly referred to as closing the books. Closing books with spreadsheets or basic accounting systems requires much manual work. It also involves data entry and reaching out to different departments. Companies have reported a reduction in the time it takes to close their books each month.
ERP systems can also introduce greater financial controls within an organization. A centralized system with role-based permissions allows only those with the right job functions to access sensitive data. This improves audit trails and reduces financial risk. ERP systems store and collect data from various back-office departments into a single database. It unifies crucial business functions and breaks down data silos.
Employees can then make more accurate decisions in financial management, supply-chain management, human resource management, and others. ERP systems can also speed up business processes by automating manual tasks such as data entry. ERP systems are also able to:
- Saves Money: ERP reduces operational costs by consolidating several business functions and automation across the entire organization. ERP systems reduce or eliminate administrative and operational costs. For example, redundant processes or manual data entry. It allows staff to spend more time on innovative projects and less on administrative tasks. Blue Shield of California, for example, saved almost $500,000 by implementing an ERP cloud system.
- Boost your Efficiency: Modern ERP software uses artificial intelligence and process automation to optimize repetitive, manual tasks susceptible to human error. Companies can save days by automating their finance and accounting processes using ERP. This allows them to concentrate on strategic activities. ERP helps companies track all materials at every stage of their inventory lifecycle and customer orders on a single system. This increases visibility and helps plan the supply chain. It also ensures that customers receive the right product on time.
- Improved Decision-Making: An ERP system of enterprise-class offers users a comprehensive overview of financial and operational performance. It provides customizable reports, real-time insights and eliminates the need for manual report generation. By simplifying processes and reducing time spent searching for information, it can reduce the amount of time required to complete certain tasks. Combined with automated systems and connected processes, this helps teams quickly get accurate information to the decision-makers so they can react to changing economic and business conditions.
- Encourage Collaboration: ERP systems offer a single data source and a common user interface that allows users to share information across departments and improve tasks like financial planning, inventory and sales management, logistics, and workforce planning. Instead of departments working with multiple software solutions that only one group can access, teams can work proactively and access information independently--rather than requesting it from another part of the organization. For example, HR and finance teams overlap in several business functions, including workforce planning and payroll. A single employee record shared between these teams will help align their efforts and reduce errors.
- Reduce Risk: An proven ERP system can ensure data integrity and enforce controls over financial matters. Only the appropriate employees will have access to sensitive data with a central system and permissions-based access. This improves audit trails, reduces financial and operational risks, and increases employee productivity.
CRM vs ERP: Understanding Key Differences
What is the difference between CRM and ERP? Can one replace another?
The biggest difference is that ERP is used primarily for financial data, operations, and sales. CRM is used to support customer service and sales. ERP systems are primarily used to support back-office operations (such as procurement, HR, and compliance). In contrast, CRM is used for front-office activities (such as marketing, sales, and customer service). Many ERPs include CRM features. CRMs, however, do not have ERP features and cannot handle transactional data. CRM and ERP play a critical role in a successful IT system for business and cannot be replaced.
The ERP system is used for the organization's financial data and is the back office. CRM, on the other hand, is the front office. The back office is often referred to, while the front office is called. Some ERP systems have a CRM component, while others don't. CRM software does not include ERP components. Salesforce.com, for example, is not an ERP because it doesn't handle transactional data. It can access invoices or order histories, but this data is only available through integration with an ERP system.
Read More: Top ERP Software & Tools in 2023
Integration of CRM and ERP
The company's and its customers' interactions can be dozens or even hundreds. They are spread across departments, each with their own goals and charters. It is ideal for providing consistent interactions at all touchpoints and giving customers a unified experience. To deliver a modern, frictionless customer experience, companies need to integrate their ERP and CRM systems to share data effectively instead of maintaining two separate data sets.
Consider ecommerce. The back office (finance) after a customer has paid for products or services online, the back office (finance) records the transaction details and revenue. When the CRM and ERP systems don't work together, they can make mistakes, lose orders, and fail to report profits. By combining and analyzing CRM data from the front end with ERP data in the back office, companies can better understand their customers' habits, improve forecasting, provide a faster and more personalized experience, and anticipate future needs.
Sales reps can track new opportunities and create quote requests. They can also merge new quotes into existing accounts. The integration of CRM and ERP can also increase profitability. Nucleus Research, a technology research firm, found that CRM integration brought productivity increases in sales, service, and operations and a 20-30 percent increase in business. ERP and CRM systems need to share data. This is best done by integrating the two systems rather than maintaining separate data sets.
When attempting to upsell or cross-sell, a sales representative, for instance, may want access to a customer's credit status, order history, or outstanding payments. Finance departments may need to access the CRM system to calculate sales commissions for payroll or bulk order discounts. Business leaders may also benefit from a CRM system built on an ERP platform. They can use it to consolidate their pricing structures and track KPIs such as customer acquisition costs or lifetime value.
Configure, Price, Quote (CPQ) is a common process requiring CRM and ERP integration. The CPQ tool requires information from both CRM and ERP systems. It is vital to many businesses. Most of the larger CRM and ERP providers offer pre-built integrations between them or with a third-party partner. These integrations are expensive and hard to maintain when upgrading the CRM or ERP systems.
What Are The Similarities Between CRM and ERP?
Both ERP and CRM store and analyze data using a relational database. Both can be delivered through an on-premises or software-as-a-service (SaaS) model, where the vendor manages and hosts the software at its data center. At the same time, the customers access it via the cloud. CISIN, and other SaaS CRM and ERP systems, were launched around the same period. However, CRM systems moved to the cloud faster because they were easier to develop. Initially, businesses were hesitant to put financial data into the cloud.
Select the Best Solution for Your Business
Leaders need the right tools to adapt to modern business demands and gain a competitive edge. After learning the differences between ERP and CRM, you should be able to make an informed decision. CRM and ERP systems can help businesses improve customer retention, streamline their accounting, increase sales, or better manage supply chain issues.
They do this by unifying all data onto a single platform and providing a detailed overview of every process. It makes it easier for employees and customers to work with the business. Many companies use AI and predictive analytics to improve customer service, streamline common tasks and keep up with the latest trends. Use a cloud platform with a single view of all customer interactions and dollars spent.
Do We Need ERP or CRM, or Both?
Both software systems are essential for nearly all small and large manufacturing businesses. Both CRMs and ERPs can help improve the profitability of your business, but they do so in different ways. Both software types automate and streamline your core business processes.
A CRM primarily focuses on the sales department, while ERP systems are integrated across departments. Each has its purpose and will help you increase efficiency, reduce costs and improve profitability. Nearly all growing companies, whether small or mid-sized businesses (SMBs), enterprises, or even SMBs, will need an ERP system and a CRM platform -- or one platform to do both.
Accounting software like QuickBooks and spreadsheets are often used by companies who find that their current systems limit their growth or could be more efficient. Businesses can manage customer relationships using spreadsheets, email clients, or contact management software used by individual sales representatives.
A company's business model will determine whether it invests first in CRM or ERP. If a company has a few high-value clients and complicated financials, it might invest in an ERP system first. However, if the company has many customers who require frequent contact and relatively simple financials, they might do the opposite.
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Conclusion
Custom software development companies often concentrate on the finance module, which automates basic accounting and allows stakeholders to view the available cash flow and money. But a CRM can help improve customer communication. ERP systems that include CRM are a great way to increase efficiency. Unified CRM and ERP systems are often less expensive than buying point solutions separately.
The unified data model also means that all information can be updated in real-time without waiting for batch uploads and middleware connections. The systems built from the ground up for ERP are better equipped to handle transactional tasks. This means easier programming, customizations, and third-party software.
