What Is Customer Relationship Management (CRM)?
Definition & Examples of Customer Relationship Management (CRM)
Customer Relationship Management (CRM) refers to the systems and tools that track a business's interactions with customers. Customer relationship management creates a complete picture of the customer experience, allowing businesses to make informed decisions about how to improve that experience and increase sales.
Learn what types of data can be collected through customer relationship management systems and how they can improve your business.
What Is Customer Relationship Management (CRM)?
Customer relationship management (CRM) is the systems and processes that a business has in place to measure and improve how the company interacts with and influences customers.
The goal of customer relationship management is to gather enough information about a customer and use it well enough to increase that customer's positive interactions with the company, thereby increasing that company's sales.
For small businesses, customer relationship management includes processes and systems for:
- Lead generation and conversion: Identifying and targeting a company's ideal customers; generating quality sales leads; planning and implementing marketing campaigns with clear goals and objectives
- Relationship building: Creating regular communication channels; building and improving relationships with customers; providing individualized attention to the most profitable customers
- Customer service: Providing employees with the information they need to understand customers' wants and needs, address concerns, solve problems, and increase customer satisfaction
CRM systems are collaborative. These systems are used to gather data through all phases of the customer relationship (marketing, sales, and service).
By creating a complete picture of the customer experience, customer relationship management systems allow business owners and managers to make informed decisions about how they can improve that experience and increase sales.
- Acronym: CRM
How Customer Relationship Management (CRM) Works
Customer relationship management tools include desktop and browser-based software and cloud applications that collect and organize information about customers.
Many accounting software packages either have available customer relationship management modules or integrate with third-party CRM add-ons.
Customer relationship management systems gather data about customers and how they interact with your business, which can then be used to:
- Improve customer service
- Guide the customer's buying journey
- Drive product development
- Personalize advertising
- Find new customers
- Increase sales
The key to an effective CRM system is collecting comprehensive data about your customers. There should be data capture points at every point where the company interacts with customers (or potential customers).
Types of Customer Relationship Management (CRM) Data
Depending on how and when your team interacts with customers, there are many points at which you can collect CRM data. The data you need will also vary based on what information about your customers is relevant to your business.
- Customer name
- Customer contact information (email, physical address, phone, website address, social media accounts, etc.)
- Preferred method of contact
- How the customer discovered your company (web search, social media, newspaper ads, word of mouth, etc.)
This type of information is often obtained over time as you grow personal relationships with individual customers. It can include things like:
- Family information (including birthdays, anniversaries, and other milestones)
- Hobbies (can be used to offer rewards or perks to high-level customers)
- Group memberships or associations (can be used to generate leads)
This CRM information is very useful for analytical purposes.
Purchasing behavior can be used to tailor product offerings to suit customer preferences. Customer responses to ad campaigns and promotions can be used to fine-tune your marketing strategy. Credit payment history can be useful when issues of late payment arise.
Valuable data about customer purchases may include:
- Products and services purchased, including date/time and transaction amounts
- Method of payment (Paypal, cash, check, debit or credit card)
- If purchases are made on credit, details of credit terms and history of credit payments
- Response to ad campaigns, promotions, etc.
Your CRM system should be linked with your email provider. Most CRM systems have built-in or third-party add-on capability to integrate with popular email service providers.
Collecting data about customer communication ensures that you can contact customers by their preferred method, send out reminders to encourage additional sales, and more. You may want to collect:
- Preferred method of communication
- Likely response to different types of communication (phone calls, text messages, email, etc.)
- Response to sales calls, emails, or promotions
- Customer complaints, product returns, and details of calls for support
- How customer services issues are resolved (follow-up communication, was the customer satisfied, was there a refund, etc.)
- Response to customer surveys
- Online ratings or social media reviews
- Lost customers (who leaves, which competitor they choose, why)
Do I Need Customer Relationship Management (CRM)?
Collecting customer data through CRM, and using it effectively, can help create stronger relationships with customers. This will in turn drive more sales and increase revenue. It can benefit any business, no matter the size of the company.
CRM data isn't just important for how you interact with customers. It can also help you discover where your business is functioning effectively and where it needs improvement.
For example, repeated returns or complaints can help you discover products that are defective. Customer communications can help you determine whether you are providing good customer service or pricing your goods/services competitively.
Effectively using customer relationship management will allow your business to better understand and improve your relationship with your clients, which will in turn allow you to grow your business.
- Customer Relationship Management (CRM) refers to the systems and tools that track a business's interactions with customers.
- Customer relationship management creates a complete picture of the customer experience, allowing business owners and managers to make informed decisions about how to improve that experience and increase sales.
- There should be data capture points at every point where the company interacts with current or potential customers.
- Depending on your business, there are many points at which you can collect CRM data.
- CRM data can also help you discover where your business is functioning effectively and where it needs improvement.