March 07, 2018

What Is the Difference Between CRM and ERP?

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Running your business takes planning and execution. Your customers are the backbone of your business, and for that reason, you've got to be able to reach them and nurture your relationship with them to keep your business growing. Being able to manage these relationships requires organized, well-established business processes. Two tools that can be used to establish and manage these processes are Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP). In this article, we will explore both of these tools, how they work, and what each of them can do for your company.

Customer Relationship Management

In its simplest form, CRM is the combination of practices your company uses to interact with customers. This can include direct interactions, such as sales-related processes, and indirect interactions, such as gathering data to analyze and forecast customer trends. Overall, the goal of CRM is to enhance your customer experience.

Although the management processes themselves are customer relationship management, CRM usually refers to software that assists in applying these practices. CRM software takes care of multiple tasks from storing customer data and contact information, to tracking communication and points in the sales funnel, to helping you create reports for analysis and forecasting.

Pros of CRM

No matter what industry you serve, CRM software can benefit your business by making it easier for you to develop long-lasting relationships with your customers. CRM software does this by:

  • Improving information organization by providing one easily accessible platform for contact information across all departments.
  • Enhancing communication by tracking where that customer is in the sales (or service) funnel without having to start fresh each time.
  • Automating sales tasks such as form completion and report generation, which frees up time for closing more leads and addressing pain points.
  • Improving customer service by tracking customer preferences, past purchases, loyalty program participation, and other items relating to the relationship.
  • Increasing team efficiency by easily sharing data, information, and communication among team members.
  • Improving analysis and reporting by storing more data points for a richer generation of automatic and customized reports.

Cons of CRM

Just like all software, not all CRM platforms are equal. If you get the wrong one, you could find yourself searching for more time to deal with the system than the time it was supposed to free up for customer service. Some of the problems can be:

  • Improper set-up that doesn't address your company's needs.
  • Time lost to increased data entry.
  • Lack of focus if the program is more geared toward the sales manager than the front-line people.

Without a well-designed and implemented sales process for the company in general, CRM software can become just another tool that gets overlooked, misused or even forgotten.

Enterprise Resource Planning

Although your company couldn't survive without customers, it won't last long without the day-to-day business functions, either. ERP encompasses all of the processes behind the scenes that make your company work. Whereas CRM can be thought of as a front-end function, ERP is the back-end, making sure that the company runs smoothly. ERP systems manage functions like:

  • Payroll and finance processes
  • Supply chain management and procurement
  • Inventory management
  • Onboarding and human resources

Just like CRM, ERP generally refers to the software that helps make all of these functions happen. ERP systems integrate data through all your business processes so that issues in one area can seamlessly alert all the other affected areas.

Pros of ERP

Having one integrated software system can be a boon to some businesses. ERP can provide:

  • Greater overall control of the business by accessing all functions through one platform with 360-degree visibility.
  • Simplification of processes through automation and centralization.
  • Higher productivity by providing employees with information and tools to complete their tasks efficiently.
  • Integration of functions by connecting operations across departments and providing data easily.
  • Easy resource allocation through increased communication capabilities.

Cons of ERP

Because ERP software encompasses all operational aspects, it can be a much larger undertaking than individual department modules. Even in the cloud, it can take up large amounts of data and more time to construct. More points of entry can also pose certain security risks. This means it can be:

  • Expensive to implement
  • Easier to hack
  • Prone to failure

For these reasons, you want to make sure that you are prioritizing reliability, simplicity, and security when choosing the right ERP for your company.

Why Choose One Option Over the Other?

Even though both ERP and CRM address business processes that sometimes overlap, they each take a different approach to managing your business. They can work well together if you understand what each approach is capable of. Keep in mind that CRM is focused on front-end processes, whereas ERP focuses on back-end tasks. Here are some examples of each.

CRM Activities Include:

  • Organizing your marketing efforts
  • Streamlining your sales processes
  • Automating customer service tasks
  • Sharing sales and marketing collateral
  • Prioritizing leads
  • Tracking customer interactions
  • Viewing historical sales data
  • Calculating time spent on conversions and closings
  • Collaborating and managing sales teams

ERP Tasks Include:

  • Managing the distribution process
  • Managing the supply chain
  • Improving financial data accuracy
  • Assessing all business needs
  • Applying accounting and financial principles
  • Managing payroll
  • Reducing redundant tasks
  • Standardizing business procedures
  • Facilitating project planning and implementation
  • Managing human resources
  • Building an overall knowledge base

Every company has its own set of needs based on multiple factors, often depending greatly on where your company is in the life of the organization. To see how you can seamlessly get your front-end activities moving to bigger profits with the right CRM tools, try a free trial with Contactually today.