Customer relationship management (CRM) systems have become important tools used by businesses of all sizes to strengthen customer retention and increase productivity.
Reports show that the CRM software market is among the fastest-growing industries, and is expected to grow at a compound annual growth rate (CAGR) of 13.3% from 2022 to 2030. Consumer demand for better customer service, richer customer experiences, and automated engagement is driving this growth.
This article will explore what customer relationship management is and provide detailed information on how CRM systems can benefit businesses. It will highlight how making customer relationships a business priority will serve to ensure business success in the long run.
Table of Contents
What is CRM and what are CRM systems?
5 ways CRMs can benefit your business
Recommended CRMs for small businesses
Tips for selecting the right CRM for your business
Make customer relationships a business priority
What is CRM and what are CRM systems?
CRM is an abbreviation for “Customer Relationship Management” and represents the process of businesses managing their relationships with prospective and current customers. The goal of CRM is to cultivate a long-term relationship with customers, better understand them, and optimize sales and marketing processes and operations.
CRM systems represent the tools, technology, and solutions used by businesses, typically in the form of online software, to organize, track, and manage customer interactions and touchpoints in a centralized way. This is done with the intent of guiding prospects through the sales or buying funnels and strengthening the business’s customer service organization-wide.
Using CRM systems, businesses can store and track a range of customer data and metrics on user behavior, sales interactions, engagement spans, and purchase records. The data can be acquired through the business’s official website, its social media accounts, as well as digital marketing campaigns.
Businesses can choose from the following three types of CRM systems:
- Collaborative CRM systems: These types of CRM systems work to break down silos within the business by connecting and sharing information in real-time with different departments and channels throughout the organization. They help all teams in accessing up-to-date customer data.
- Operational CRM systems: These systems help to streamline the business’s processes related to customer relationships. They come with tools that help teams visualize and handle the full customer journey more efficiently, even when a high number of touchpoints are included.
- Analytical CRM systems: These types of systems help businesses analyze their customer data to gain key insights. The CRM enables users to see trends in customer behavior to optimize sales processes.
5 ways CRMs can benefit your business
1. Improving customer service
CRM systems have several functions that serve to manage business contacts while gathering key information about customers, including demographics, previous interactions across multiple channels, and purchase records.
All this information is organized in a centralized database that helps sales representatives and customer service staff across the organization to access the data when needed. Customer service teams will have what they need to know about customers at their fingertips, and this helps them to offer better customer experiences.
This can become a significant competitive advantage as customers will enjoy personalized experiences where brand representatives know their names, history with the business, and at times even birthdays. These customer profiles help the business to tailor services to the customer, and this can improve overall customer satisfaction.
2. Increasing sales
CRM tools help to streamline the business’s sales processes. Because of the centralized database, sales teams can access sales data in a centralized location. CRM systems offer key sales metrics such as customer lifetime value, sales cycle duration, customer acquisition cost, and marketing campaign return on investment (ROI).
They also provide metrics around click-through rates, demographic information, and bounce rates, enabling businesses to evaluate the success of marketing campaigns and optimize them accordingly for greater conversion.
CRM platforms such as Zoho claim that using their systems, businesses can potentially see a 300% improvement in lead conversion rates, a 27% increase in customer retention, and a shortening of sales cycles by 24%.
When it comes to the effectiveness of CRM systems in driving up sales, a 2021 survey conducted by HubSpot showed that 61% of the overperforming businesses surveyed reported using CRMs as a means of automating at least part of their sales processes, compared to 46% of underperforming ones.
Because CRMs can track the activity of your prospects, they help sales representatives to determine when to follow up with prospects, increasing the chances of conversion through efficient lead nurturing. All these functions are significant in helping businesses increase their sales and the overall productivity of their sales processes.
3. Strengthening customer retention
It is one thing to convert leads into customers, but retaining these customers over time is what encourages a business’s long-term profitability. Studies show that businesses that manage to make at least a 5% increase in their customer retention could potentially boost their profitability by 25–95%.
CRM systems provide useful tools such as automated ticketing, user behavior tracking, customer sentiment analysis, and customer support automation. These tools help businesses determine problems customers have and respond to them quickly.
The automated functions that CRM systems come with allow customer-facing staff to always stay on top of their interactions with customers. By providing features such as automated reminders, staff can be reminded to send follow-up emails and reach out to previous customers who have not been contacted in a while.
Email marketing campaigns, thank-you messages, and special birthday messages can also be sent out. All this serves to sustain the interest of customers and maintain their loyalty to your business.
4. Enabling better customer segmentation
Most CRM systems allow businesses to create dashboards that help them organize their customers based on certain characteristics or demographics, and more advanced systems can even automate lead qualification.
This is useful as the customer segments can work as contact lists that enable faster and more efficient brand-customer communication, or they can enable targeting of specific audiences for different marketing campaigns. Detailed segmentation and potential targeting allow businesses to increase their ROI by targeting specific prospects who have higher chances of conversion.
5. Generating sales reports and enabling sales forecasting
One of the greatest benefits that CRMs provide are automated sales reports that allow businesses to make data-driven decisions. CRM systems will usually have sales dashboards that offer reporting features based on the sales data that has been collected over time.
On the team-member level, the staff can evaluate their sales performance and track their progress against sales quotas. On a management level, sales managers can review the number of deals that have been closed and the revenue generated.
The data retrieved, as well as the sales reports generated on a monthly or quarterly basis, help businesses evaluate their past performance, identify key trends, and make strategic plans for future sales cycles based on data-informed projections.
Recommended CRMs for small businesses
- Salesforce: Industry-leading CRM, best for data-driven sales teams
- Zoho CRM: Best CRM for start-ups
- Zendesk Sell: Best CRM for customer support
- Insightly: Best CRM for project management
- Freshsales: Best CRM for lead management
- Pipedrive: Flexible and cost-effective sales CRM, best for simplicity
Tips for selecting the right CRM for your business
- Determine what you need the software to do
- Find a system that is easy to use and roll out
- Identify a solution that is scalable
- Choose a system with easy mobile access
- Settle on a system with good-quality reporting
Make customer relationships a business priority
Prioritizing the cultivation of strong, long-term relationships with your customers is as crucial as prioritizing customer acquisition. CRM systems are efficient, centralized, and data-rich management tools that make it easier for businesses to prioritize building good customer relationships.
A CRM system will help boost the productivity of sales representatives by enabling them to nurture leads more effectively and close more deals. It will also help to deliver better results for marketing campaigns through specific customer segmentation and targeting. In the long run, this will all serve to positively impact your business’s bottom line.
