Updated on 13/10/2022
The relationship with the customer is one of the most critical aspects of business. Today more than ever before, the system of relationships in which brands operate, whether B2B or B2C, has become even more relevant with the spread of digital technologies. So, what is customer relationship management or CRM? Customer Relationship Management, is a well known term that indicates a consolidated and pervasive reality and reflects the position of absolute pre-eminence assumed by the customer. In this post, we’ll try to answer the question “what is Customer Relationship Management” and explain why today the adoption of a CRM system is not only indispensable to the efficient functioning of company processes, but represents an incredible opportunity for growth and enrichment for any organization.
What lies behind the success of CRM systems?
Within the answer to the question, what is Customer Relationship Management? and how essential it has become, we need to address the two interconnected phenomena that have led to its success: the first is cultural and the second is technological.
The model of consumption changes, the business philosophy evolves
In the last 20 years, purchasing processes have changed a great deal. Touchpoints have multiplied and a new model of consumer has emerged, one that is better informed, more aware, and, above all, has more opportunities to participate in the conversation with the company. These transformations have coincided with a profound change in corporate philosophy. In an increasingly richer and more flexible context, customer loyalty has become the ultimate and essential objective of communication and sales strategies.
The urgency is one above all: to develop new and more sophisticated ways of managing customer relationships. Customer Relationship Management systems are designed to offer fundamental support to different business functions, through:
- Managing contacts
- Automating the most repetitive and lowest value activities
- Workload distribution
- The activation of all those operations, both programmable and replicable, that are necessary for generating leads
Not only is centralizing contacts with customers the best way to optimize processes and save time and resources, managing consumer relations is essential above all because it strengthens the bond with existing customers and minimizes the risk of customer churn, positively impacting the functioning of the entire company, starting with marketing and sales activities.
How digital transformation revolutionizes customer management
CRM also means, by extension, the technological system used to optimally manage customer relationships. At the dawn of the digital revolution, in the late 1990s, Salesforce was the first to put the term CRM (Customer Relationship Management) into common use, referring to the tools that make it possible to create personalized documents in large volumes.
Nowadays, given the advanced stage that digital transformation has reached, all operations that allow the organized management of customer relations can in practice be carried out by software. In fact, a CRM system is all the more efficient if it is articulated in a complete set of digital solutions, thanks to which it is able to effectively support every phase of the customer journey: sales, services, marketing.
To take a deeper look at the answer to the question of what is Customer Relationship Management, let’s look at the current context for a moment. The global size of the CRM software market, which was more than $120 billion in 2021, is continuing to grow, and forecasts are for sustained expansion through at least 2027.
The industry is driven by the demand for Software as a Service (SaaS) increasingly employed in the implementation of customer relationship management suites and solutions. Mature customer service, the use of highly automated modes, improved customer experience, and the exponential increase in digital operations are some of the factors fueling and vertically differentiating the demand for CRM solutions across industries. In addition, the development of cloud computing technology and the availability of various service models such as SaaS, Platform as a Service (PaaS), and Infrastructure as a Service (IaaS) also look set to increasingly emerge as market drivers (source: grandviewresearch.com).
Who needs Customer Relationship Management systems?
CRM systems are often associated with the work of sales teams. Over time, however, these solutions have expanded their reach and have been integrated within the toolkit employed by many other business functions, such as marketing, administration, and customer care, to name a few.
CRM evolves by constantly collecting customer data, analyzing that data, and using the insights gained to deepen relationships and improve business results. Any customer-facing employee (or anyone who supports customer-facing employees), regardless of the department in which he or she works, has a tremendous communication advantage. By using an accurate, profiled picture of the customer situation, they can open and maintain a vital channel to the consumer, giving them the information they actually need.
If we were then to try to give an initial answer to the question of what a CRM is, we could perhaps define it as a system which is fundamental for company performance, especially for sales. Thanks to the deep knowledge of the customer that the CRM system allows, companies can:
- Help sales teams offer new additional products at the right time, in the right way and at the right price
- Help service teams solve problems faster
- Help development teams create better products and services
How a CRM system works: From data collection to customer loyalty
Although CRM software had already surpassed database management systems both in revenue and in the adoption priority of corporate decision-makers by the end of 2017, the starting point of a Customer Relationship Management project remains the implementation of a complete and structured database, whatever the specific needs of the enterprise.
In fact, it is from databases that it is possible to build platforms – which in the most evolved contexts are integrated with Artificial Intelligence services – for the collection, organization, and analysis of data coming from a variety sources: online, offline, and from third parties. Customer data can then be aggregated to populate commission models, sales forecasts, territory segmentation, campaign design, and product innovation -all useful knowledge for developing targeted activities for sales, marketing, and service teams.
In other words, the most sophisticated CRM systems allow you to obtain a complete and dynamic overview of the customer situation, useful not only to optimize business processes but also in a properly creative sense, to devise new products and services. Above all, this analytical and all-encompassing view is indispensable if we take a fully customer-centric view, the only one capable of guaranteeing medium- and long-term results in customer acquisition and retention.
A CRM system organizes, connects, and analyzes all the data collected along the path of a specific customer, both quantitative and qualitative: from the master data to the information that comes from interactions with the company, from recording transactions made to requests for service, from feedback to suggestions. The system thus provides an interface that, starting from the sharing of data and information, allows users a comprehensive view of their consumption and their position with respect to the brand.
From this enhanced perspective, which is progressively enriched through the experience of the different touchpoints, comes greater understanding. And it is ultimately through this understanding, which corresponds to consumer empowerment, that the foundations for truly solid relationships are built.
What critical issues can CRM systems can address?
CRM software is designed and developed to solve a series of critical issues related to customer relationship management. They enable companies to take early action on the reasons that have led or could lead to a decline in sales, an increase in customer churn rate, or stagnant growth. Below are five of the main challenges that CRM systems help address and overcome.
1. The firm is failing to successfully upsell and cross-sell
An effective customer relationship management system sorts, analyzes, and manages large amounts of data and makes it accessible so that those who need it urgently – primarily salespeople engaged in upselling and cross-selling – have all the information they need to prioritize leads and capitalize on each opportunity.
2. Customer profiles are difficult to build
We mentioned it at the beginning of this post: the new model of consumer produced by digital disruption – which can express itself as never before on consumer choices, even influencing the production of brands – must be included in every communication, marketing, and sales strategy designed by the company. To be able to intercept their needs, expectations, and desires, it is therefore necessary to exploit CRM data for increasingly personalized communications. In fact, a customer relationship management system can allow for more accurate profiling, on the basis of which it is possible to decide the right incentives and the most suitable activities. It can help you keep track of contacts within a company and integrate account data, even those generated by third parties, so that all information is complete and up-to-date.
3. Customer service is in trouble
If the rate of customer retention is falling, the Net Promoter Score (NPS) is bad, and contact center management times are unforgivably long, it means that customer care is failing to work proactively. A CRM system can provide customer care services with a customer history, which operators can access in real time, in order to extract the most useful and appropriate information.
4. Marketing and sales departments don’t work together
A good CRM contains all kinds of information and is the meeting point for different departments within the company. The lack of interdepartmental cooperation creates situations of information asymmetry, redundancy, and difficulty in retrieving data. The coordination of sales, customer service, marketing, and even some back-office roles (such as billing, inventory, or logistics) see their potential weakened due to a siloed data structure. Without regular cooperation between all teams, there is no seamless flow of information and it’s customers who suffer the most. With a single CRM, on the other hand, all employees can access, use, and add data, and they can share insights, leads, issues, and activity history.
5. Forecasting and reporting are overly complicated
If reports and statements consist of dozens (or hundreds) of spreadsheets without a centralized production and sharing system, there is a risk of a proliferation of documents that often do not adhere to a single standard and are therefore difficult to interpret and inaccurate. Inaccurate, inconsistent measurements and ambiguous meanings inevitably lead to incorrect planning and forecasting. And time-consuming administrative tasks prevent the sales team from doing what it’s supposed to do: sell. A good CRM system, whose performance can be measured through certain KPIs, stores data in a centralized, easily accessible location, enabling accurate, real-time reporting and forecasting.
Why are customer relationship management systems so important?
So far, we’ve seen what a CRM is. Now, to answer the question in the title of this paragraph, let’s take a look at two typical brand-customer interaction scenarios. Our “guinea pig” is called Elena and she has just bought and registered a product from a company of which she is already a customer. The product doesn’t work, and before returning it, Elena would like to understand why. She contacts the customer service department.
- The operator she is talking to does not know who she is, what she bought, or when the purchase was made. Elena then has to repeat the information she provided during registration, such as the product model or serial number. The result? The experience is a waste of valuable time and an unsatisfactory one: Elena is perceived as irrelevant within the relationship with the brand.
- The operator takes note of the customer’s name and quickly verifies that Elena is who she says she is. The operator has Elena’s entire purchase and service history available and can answer all questions in a timely manner. She can get the answers she needs, quickly. Elena will still have to return the product, but the experience has been positive: The brand has shown it knows her and has assisted her in the best way possible, offering her the gratification that will drive her to further purchases.
The most advanced CRM systems support the second scenario. This is why they are important: They contribute substantially to a more positive customer experience. In fact, every CRM-based interaction creates an opportunity to deliver a more personal and engaging experience, create stable and ongoing relationships over time, increase revenue, and ultimately improve and consolidate business results.