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Editor's Note: This article has been updated to reflect changes in CRMs and to add new information.

Customer Relationship Management (CRM) platforms have been around since the '90s. Back then they were mainly an combination of database marketing and contact management. Over the last decade, they have evolved to include artificial intelligence, machine learning and improved features and functionality.

HTF Market Intelligence reports that the customer relationship management system market worldwide was valued at $16.6 billion in 2020. The market is projected to reach $19.35 billion by 2027, a CAGR of 3.9% over those seven years. This strong growth reflects the popularity of online marketing and the increasing importance of digital tools.

But what's a CRM platform? What is its primary purpose, and how do businesses use CRM software to increase sales and turn leads into customers? In this article, we will answer those questions and tell you why you may need a unified CRM in your martech stack.

What Are Customer Relationship Management Platforms Used For?

Customer Relationship Management (CRM) platforms are most often used by sales and marketing professionals and customer service staff. They help these workers manage and refine a brand’s relationships and interactions with prospective leads and current customers. CRMs manage the relationship that a brand has with its customers through the entire customer lifetime. They start with the sales funnel and follow the customer from inquiry to their first order and repeated orders. Companies can use a CRM platform to engage customers depending on their level of interest and their past experience with the brand.

While many brands are now using Customer Data Platforms (CDP) to unify customer data across all channels, CRMs are still popular. Enterprise businesses, in particular, favor CRMs. A recent report from Stellaxius revealed that 91% of businesses with over 11 employees use a CRM.

Who Can Benefit From a CRM?

Almost any organization can benefit from a CRM. However, these platforms are particularly useful for companies with a longer customer lifecycle. Any company that requires repeated touch-points with customers to convert them into regular buyers could benefit from a CRM.

The more customers a brand has, the more useful a CRM platform is likely to be for them. Sales staff can manage a small number of customers themselves. However, as they get more prospective clients on their books, they'll likely find the helping hand that CRM platforms offer is useful.

"As brands grow and become more sophisticated, their use of a CRM grows with them," said Tony Kavanagh, CMO at Insightly. “CRM has an increasingly broader remit which goes beyond sales to include marketing, service & support, field service, e-commerce and analytics,” he explained. “Customer experience, by definition, relates to every interaction a customer has with your company from unknown website visitor to full happy customer for life. CRM should be looked upon as the technical backbone to help manage this entire journey,” added Kavanagh.

Addressing the Data Silo Problem

Older CRMs had the problem of siloed customer data. This often resulted in a highly fragmented view of customers, which negatively affects a brand’s ability to engage customers in a timely and consistent manner. “The way to address this is to consider moving to a unified CRM platform so that all customers' data sits in one secure place. [Creating one place] on which all the required CRM applications of sales, marketing and customer service & support are available. This will ensure that all customer-facing teams are looking at the exact same set of the most recent customer data. [This results] in higher rates of responsiveness from both sales and customer service reps and higher customer satisfaction and retention rates,” said Kavanagh.

CRMs are also used to provide customer service professionals with instant access to every interaction a customer has had with a brand. Agents can see a customer's chat history, purchase history and customer service tickets. Access to this information allows customer service personnel to provide well-informed, immediate responses that should leave customers feeling satisfied.

Data Protection, Privacy and Customer Relationship Management

One challenge organizations face is privacy regulations. These rules can be particularly confusing for organizations that operate globally or internationally. For example, companies that operate in Europe have to comply with GDPR rules. And now the U.S. is slowly catching up to technology with a patchwork of legislations in effect in different states and more in the pipeline.

Organizations that process customer data in-house may not be operating in compliance with the data protection rules for their area. Outsourcing data storage may help with this. However, the complexities of international trade mean a company could still fall foul of local regulations.

Cathrine Davis of SuperOffice explains that GDPR and privacy laws in particular aren't just something large organizations need to worry about. She notes, "if you use a database to store prospect or customer information, you cannot ignore GDPR."

Fortunately, most CRM software handles GDPR well. Davis explains, "If you use a CRM software, then it should support the collection and management of personal data in a secure way."

Businesses that are unsure about the privacy and security policies of their chosen platform should consult their vendor to confirm how data is processed. For example, consent management and privacy are particularly important for organizations handling data of customers within Europe.

The 3 Types of CRMs

There are three different types of CRMs: operational, analytical and collaborative. Although all CRMs share some core functionality, the primary roles of each are different:

Operational CRMs: These streamline and automate sales, marketing and service processes. They are used to generate leads and convert them into contacts while at the same time capturing all details. They also help to provide service throughout the entire customer lifecycle.

Analytical CRMs: These are used for the analysis of customer data that has been collected from various touchpoints in the customer journey. They enable brands to make more informed decisions. For example, they enable marketers to evaluate the effectiveness of their campaigns. This can also help sales professionals increase sales and customer service agents improve the quality and efficiency of support.

Collaborative CRMs: These enable a brand to share its customer information between departments (sales, HR, marketing, IT, customer service and others). They also enable all of a brand’s departments to share the same goals. For many businesses, that is to improve customer service, increase customer loyalty and acquire new customers.

Sridhar Jayaraman, VP of Engineering at Qentelli, views a CRM as a “one stop platform.” These tools are used to capture conversations with or about a brand’s customers, including those that occur during and after the sales cycle. “Every professional involved in these conversations captures the information in the CRM, so it becomes the single source of truth!” said Jayaraman.

Self-Hosted vs SaaS for CRM

One common question asked by midsized organizations is whether it's better to opt for self-hosted or Software-as-aService (SaaS) for common software deployments. This question applies just as much to communications and collaboration tools as it does to CRM platforms.

SaaS has some clear benefits for organizations that lack an in-house IT team. Adrien Tobey, founder of marketing specialist Groundhogg explained in a blog that SaaS just works: "You do not need to keep anything updated or install anything." He also adds that SaaS deployments don't "have any dependencies on other tools, meaning you can use SaaS regardless of your preexisting technology stack."

For organizations that aren't IT-focused or that have smaller support teams, the option of simply logging into someone else's server can be appealing. SaaS customer relationship management deployments are managed services. You pay a monthly fee and get ongoing updates and tech support.

The downside of SaaS is that you're stuck paying a monthly fee for the service. That fee could increase as your business grows, and the service is always under someone else's control. You have to raise tickets for all problems, questions and feature requests. All the data is hosted on someone else's server, and you're relying on them to manage their server properly.

Balancing Budget and Risk

If you're trying to decide whether to work with a third party or host your own software, it's important to be realistic. It can be tempting for organizations to try to do everything themselves, but processing customer data is an important job.

If you don't have the resources to handle privacy, security, backups and software updates in-house, working with expert CRM providers makes sense. Salesforce, HubSpot and other major CRM platform providers offer a managed experience that would be hard to replicate in-house.

Most platforms also offer tiered pricing. This means small or midsized businesses pay per seat, keeping the cost of the platform as low as possible for them.

Key Functionalities of CRMs

Although the three types of CRMs have different uses, there are three functions that are common to all CRM platforms:

  • Contact management
  • Interaction tracking
  • Lead management

Contact management is used to store customers’ contact information in a searchable database, including names, phone numbers, addresses, email addresses and social media accounts. Interaction tracking is used to input notes and track customer interaction history, which is used to document conversations with specific customers. Lead management allows businesses to manage the process of converting prospects into leads. It helps with identifying, scoring and moving prospects through the sales funnel.

Additional functionality that many CRMs provide may include:

  • Email marketing integration and templates
  • AI-based decisioning
  • Workflow automation
  • Third-party integration support
  • Reporting/dashboard and analytics
  • Sales forecasting
  • Live chat
  • Conversational AI chatbot
  • Call center integration
  • Document management
  • Sales pipeline management
  • Mobile CRM functionality
  • Quote and proposal management
  • REST API support
  • Social media management

Some CRMs also have the ability to send automated emails to customers. For example, a brand may send a message after a specified number of days since the customer’s last purchase. This allows a business to remain in contact with a customer through personalized emails that deliver relevant content, coupons, offers, incentives and seasonal promotions.

Customizable email templates can be triggered to be sent based on events, including purchases (“Thank you for your order.”), product inquiries (“You asked about this product.”), shopping cart abandonment (“We noticed you left several items in your cart.”) and customer service calls (“We hope we were able to solve your problem.”), among others.

Automating Workflows for Extra Efficiency

Other CRMs use AI and process automation to identify customer sentiment through analytics and rapidly respond to customer service inquiries and social media posts. There are some CRM platforms that are able to intercept complaints on social media that could threaten a brand’s reputation by using social listening. Businesses are able to respond instantly to customer complaints before they can cause damage to the businesses’ reputation.

Many brands use a CRM as a way to gain a deeper understanding of the effectiveness of specific marketing campaigns. “Marketing professionals use the CRM platform to create and track campaigns. To gain insights into which campaigns are working and channel energies to drive many such campaigns. This will generate quality MQLs that can be sent to the Sales teams,” said Jayaraman. The CRM is also useful for contract management and forecasting. “The sales process involves efforts from multiple resources. While identifying the probability of a particular opportunity, a CRM platform can offer visibility to the sales leadership." Jayaraman gave the example of offering "a monthly or quarterly review of best- and worst-case scenarios.”

Subscriptions and Marketing Using CRM Platforms

One of the most valuable options offered by CRM platforms is the opt-in marketing list. A good CRM system will allow customers to opt in or out of marketing and to set their preferences in a granular fashion.

Cathrine Davis explains that "segmented email campaigns significantly improve email marketing results." It's not enough to harvest customer contact details and use them for scatter spray outreach. Emails must be targeted and relevant to get results.

Email marketing has been around for a long time, but it's often neglected by modern marketers. It's important not to underestimate the potential of this tool or how relevant it still is. Around 42% of emails are opened on smartphones or tablets. A savvy marketer could use that knowledge to reach mobile workers who are actively interested in a product and in a position to buy.

The Value of CRM for Marketing

Marketing is one of the primary uses of any CRM system. Giving your sales team access to your CRM tools helps them nurture leads and turn them into customers more efficiently.

The developers of email marketing system MailChimp emphasize the importance of CRM tools for capturing, organizing and processing customer data. The more information an organization has about its customers, the better it can tailor the customer experience.

However, it's better for organizations to use CRM software in the way it's intended. Protecting the integrity of the customer database is an important part of that.

Nontraditional Uses of a CRM Platform

While a CRM is valuable for its traditional functionality, there are many nontraditional uses for a CRM. The cross-department transparency that a CRM provides ensures that every salesperson can see the interactions each customer has had with the brand. This means that customers won't be overwhelmed with multiple sales calls. It also ensures department leads can easily see the effectiveness of their sales and marketing department, and it makes it easier to determine which marketing channels are most effective. Other uses include historical market and sales analysis. These help brands anticipate the needs and spending habits of their customers, increase the efficiency of marketing campaigns and identify and capitalize on trends.

Many brands use a CRM to keep their customers up-to-date as they go through the stages of the sales funnel. Amazon is a strong example of this. Once the customer places an order, they receive an email letting them know the order has been received. Once the order has been packaged and shipped, the customer receives another email that tells them their order is on the way. Where possible, this message includes a tracking number. When the order is delivered, the customer receives an email letting them know that their order has arrived. Finally, a follow-up email is sent asking the customer if they would be willing to write a review or provide feedback about their order. Also included in the follow-up email are offers for related products or services that the customer may be interested in. These offers are based on their personal shopping history with the brand. This is a great way to keep the customer engaged, emotionally satisfied and loyal to the brand.

What Are Some of the Top CRM Systems?

There are several popular CRM systems on the market today. The most well-known is Salesforce. Other popular CRMs include Zoho and HubSpot.

What is Salesforce CRM?

Salesforce CRM is an integrated system that brings all the data about an organization's customers together. It includes information from the marketing, sales, commerce and service departments. This cloud-hosted platform helps with lead management, support, ticketing and billing. Salesforce CRM markets itself as being accessible to companies of all sizes. Since it's a cloud-hosted platform, it's easy for organizations to get up-and-running.

What is Zoho CRM?

Zoho is a multichannel, cloud-based CRM system. It promises to be a single repository for all of an organization's customer information. It brings together sales, marketing and customer support information in one platform. As a hosted platform, Zoho CRM is easy to use and requires very little in the form of technical expertise or investment. There are pricing tiers for businesses of all sizes, from small organizations to large enterprises.

What is HubSpot CRM?

HubSpot's CRM is popular with online marketers. The system has a free-to-use basic offering that is surprisingly feature-packed for free software. Of course, there are some limitations to the free solution. For example, you'll be limited to just five documents and one meeting scheduling link with the free version.

This means you'll miss out on a lot of the tools and flexible marketing features of the premium tool. However, the free version is useful enough that you can try it out and see what you think. Should you feel the free trial is too limited, you can upgrade easily. Upgrading will give you access to the premium automation and sharing capabilities. It's these tools that HubSpot promises will really help you take your marketing strategy to the next level.

There are other organizations offering self-hosted CRM tools and Software-as-a-Service (SaaS) platforms. The ones listed above are merely the most well-known in the CRM space today.

Final Thoughts

The Customer Relationship Management platform is an extremely useful tool for marketers, sales professionals and customer service representatives. CRMs enable brands to manage and build stronger relationships with prospective leads and customers. They can enhance customer service, increase transparency between departments and eliminate departmental data silos.