ERP Vs CRM:: Which one is indispensable for your business?
Organizations worldwide often wonder what the difference is between a customer relationship management system (CRM) and an enterprise resource planning (ERP) system. The two systems are similar in many ways but they have different core functionalities. Both are valuable business solutions that help to improve, both revenue and productivity. So, are you ready to learn more about the differences? Let’s compare and contrast.
What is CRM?
CRM means Customer Relationship Management. CRM at its simplest is systems and processes for managing a company’s interactions with its current and potential customers. When we talk about CRM, we usually are talking about CRM Software. A CRM software is used to organize, automate and synchronize sales, marketing, and customer service.
CRM now has been developed to include all areas of the customer experience, keeping the customer happy and in turn keeping them loyal and more valuable to your business. It is the process of identifying potential leads/prospects, nurturing them, and guiding them through the sales process to close the business deal. Once they become a customer it ensures that you maintain that relationship and encourage repeat business – either more frequent orders or higher value.
CRM focuses on three key areas: sales, marketing, and customers. It can help your teams within these departments achieve the following:
- Nurture new leads/prospects and opportunities
- Provide timely, reliable, and consistent service to transform your prospects into customers
- Drive faster lead response time
- Create, measure, automate, and iterate marketing campaigns
- Streamline and optimize your sales processes
- Analyze customer behavior/ purchasing patterns including touchpoints
- Creates a high-quality and dependable customer service/support system
- Automate repetitive and mundane tasks
- Identifies cross-selling and upselling opportunities with your existing customers
- Transforms your repeat buyers into loyal customers
What is ERP?
ERP software is designed to streamline business operations. While a CRM focuses on the sales and customer service side of the organization, an ERP system is integrated and implemented across multiple departments within the organization.
At its core, an ERP system offers interconnected management of specific business processes. So, you can access standardized information throughout every department in real-time. Any issues can be sent as alerts to designated recipients.
The business can hence focus more on data and less on operations. There are fewer errors, and organizations can make better decisions.
The right ERP system will help your business and your team achieve the following:
- Track real-time critical business data within and across departments
- Measure your freight, transportation, and shipping needs
- Process orders, update accounts, and automate alerts for billing and order fulfillment
- Manage supply and manufacturing chains
- Create alerts and reports for every step of the supply and manufacturing chain
- Track employee productivity
- Track recruitment and hiring processes
- Send notifications about company issues and how it affects the different departments
- Manage benefits, payroll, and other information of employees and consultants
- Customize project workflows for the department and enterprise-level operations
How are CRM and ERP similar?
ERP and CRM are both business applications that store and analyze data in a relational database. Both are delivered either through a traditional on-premises model or through software as a service (SaaS), where the vendor manages the software in its own data center and customers access it through the cloud.
While NetSuite and Salesforce.com, the two pioneers in SaaS ERP and CRM respectively, got their start around the same time, CRM systems were quicker to move to the cloud because the systems proved simpler to build and businesses were initially wary of putting financial data in the cloud.
ERP Vs CRM – What’s the difference?
- CRM caters to your customers, while ERP caters to your teams and operations.
- ERP and CRM systems use different approaches to increase profitability. ERP focuses on reducing overheads and cutting costs. By making business processes more efficient, ERP reduces the amount of capital spent on those processes. CRM works to increase profits by producing greater sales volume.
- ERP consolidates the information provided by various functional groups of the organization through systems like CRM, Supply Chain Management (SCM), Human Resource Management (HRM), etc.
- Some ERP systems include a CRM component, while others do not, but CRM software systems do not include ERP components. For example, Salesforce.com is not an ERP system because it does not handle transactional data. It may access order history or invoices, but that data is brought in through an integration with the ERP system.
- Success metrics for CRM are about customer acquisition and retention. ERP tracks goals for accounting, order procurement, vendor management, distribution timelines, etc
Generally, you may have to choose between CRM and ERP. Your choice will depend on three critical factors:
- The size of your business
- The scale of your business
- The complexity of your business processes
For instance, smaller businesses may choose CRM systems to grow their customer base. In contrast, complex organizations choose ERP systems to cut operational costs and maximize ROI. Thus, your IT capacity, current, and future needs may also influence your choices. You might choose an ERP system to streamline processes. Or perhaps replace existing non-integrated applications. Other businesses with a focus on their customers and want to sync sales and marketing functions may choose CRM systems.
Deciding between a CRM or an ERP system
For companies who want to maximize their growth, they often wonder which system to implement first. It can be a difficult decision because they each have unique advantages. To scale, companies must increase sales and profit–so, that requires a CRM system.
On the other hand, an ERP system drives the business with precise and accurate inter-departmental data. Before organizations can cut costs, they must have profits. Moreover, a company can be extremely organized yet not make enough in sales to continue operating. Business processes are only possible with consistent sales revenue.
So, what’s the answer? Well, you need both. A CRM system drives sales, and an ERP system helps to streamline operations and reduce overall costs. Working together, a CRM and an ERP can maximize business growth.
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