Customer relationship management systems (CRMs) and enterprise resource planning systems (ERPs) are both extremely valuable business solutions, but what do they do that sets them apart, especially from one another?
While they can both grant easier access to sales data across different departments, their functions have different focuses. Knowing which system to start developing first is key to growth and productivity for small businesses.
In order to help you understand the key definitions and differences, we’ve outlined all the details below about what CRM and ERP systems are and how they complement different functions of your business.
What is ERP?
ERP is defined as software or systems used to manage and integrate all parts of a business into a greater whole. This includes manufacturing, financial processing, customer facing services, the core supply chain, and every other part of a business that works together to form the company itself. Under an ERP, all aspects of an enterprise are connected. Software built for this purpose helps project managers plan and budget each process of a business, which ultimately helps to improve a company’s financial health and internal communications.
While ERP is a relatively new term that surfaced during the 1990’s, ERP systems have been used by manufacturers for over a century and are still growing and changing today. Check out this post on ERP’s history.
The main purpose of an ERP system is to increase efficiency on an organizational level by improving how resources across the board are used. The less resources that are needed by each department without sacrificing quality and performance, the more a business’s growth and profitability can improve.
ERP software these days can come in a variety of formats, such as:
- On-Premise ERP – Software that is used within the physical office and is housed by computers and servers on the local network. Both the ownership and support for the software’s functionality are handled in-house.
- Cloud-Based ERP – Software with a more interactive approach between the software provider and the company. It uses a web-based solution to store data on any device that can connect to the internet.
- Hybrid ERP Software – This type of solution uses both aspects of on-premise and cloud-based ERP, using in-house software as well as cloud-based data and support to integrate benefits that neither type of ERP system has all by itself.
When choosing ERP software, it’s important to think about how well it will integrate into your current business. Problems can arise where old working processes are incompatible with the
new software or where there’s reluctance to move from one program to a new one. A successful ERP is ultimately an ERP that fits your current practices.
What is CRM?
CRMs are exactly what they sound like: technology and software that manages all of a company’s relationships and touch points with current and potential customers. The goal of a CRM is to improve business relationships, connecting customers to the company while improving profitability and streamlining marketing processes. It works through the whole lifecycle of a customer, introducing a product or brand, selling the product or service, and branching out to new customers to win more business.
The process of using a CRM can be heavily focused outward, managing external interactions and relationships that drive sales. Such systems can store a variety of important information, such as contact details, service issues and marketing content.
Anyone within the CRM’s system, from sales professionals to customer service representatives and business developers, can access the information as needed and adjust strategies accordingly.
CRMs can be critical for getting out key information from every relevant perspective. An active sales team of representatives has direct information from customers, but all too often, that critical information is lost or buried in various handwritten notes or computer files.
To compound the problem, customers are often interacted with on a variety of platforms, calling on phones, browsing on the internet, exchanging emails and posting on social media. Without a universal platform to manage all this information, it’s easy for business processes to get bogged down while customer concerns and issues are left unaddressed.
A strong CRM system can focus on your bottom line to get your business more lead conversion, sales and productivity. The ease of sharing and storing customer data can also lead to faster decision making and as a result, greater customer satisfaction with services.
Because each marketing decision is more informed in a CRM, sales can focus on the right customers and identify new leads quickly. The security built into these systems also helps businesses to be more reliable in handling data from customers.
ERP VS CRM: What’s the Difference?
ERP and CRM have a fair bit of overlap, especially in marketing automation, but at the end of the day, they still serve two different purposes. While ERP focuses on optimizing each individual aspect of a business, CRM orients itself on the customer interaction side.
ERP can still contain elements of CRM through the management of marketing, but most ERP focused software won’t perform in the same areas as strongly as CRM experts with its customer facing side of handling data directly from clients.
If you’re already content with the inner workings of your business and want to focus on improving sales, a CRM system may be all you need.
As you get farther down the road, however, you may find ERP systems that can help your company grow with more streamlined software and practices. To this end, many CRM systems are built with ERP compatibility in mind so you can integrate both into your business.
At the end of the day, any business can benefit from both practices, but it’s important to know the focus you want to take when investing in a new system for your business. Use the tools ERP offers to encourage productivity within every department of your company, and make the full use of CRM to develop new leads, more revenue and a stronger bottom line.
While it may not be feasible to introduce both at once, planning ahead for the growth of your business while looking at ways to better handle customers can put your company in the right place.