ERP vs CRM: Which One is Best for Your Business?
The rise of technology is helping organizations automate business processes for better efficiency. Two of the most common automation tools you’ve probably heard about are- ERP and CRM systems.
People looking to shop for software often confuse both systems. While these two may appear similar in creating centralized data systems, they are stark differences in their functionalities. Both CRM and ERP improve efficiencies by streamlining critical business procedures, but CRM focuses on sales, marketing, and customer service departments while ERP focuses on the accounting and Human resource departments.
In this article, we’ll do a comparison between ERP and CRM to clarify misconceptions and show you which is best for your business and why. Let’s dive in!
ERP vs CRM- Differences
What is CRM?
CRM stands for customer relationship management. They are systems are designed for businesses to create seamless, efficient, and cordial long-term customer relations. Basically, CRM systems deal with the lifecycle of customer experience.
CRM software consists of tools and functionalities that help to organize, manage and automate sales, marketing, and customer support. It is considered a front-office tool to help build a solid customer base by tracking the journey of the customer from prospect to lead, and qualification. This can also be used to encourage repeat business.
CRM systems integrate existing customer information like name, phone numbers, address, email, as well as their history of interaction with the company including purchases, inquiries, technical support, etc into a single database. This pool of information is handed to the employees managing the client so that they can have personalized sales communication that satisfies the customer’s expectations. It may also include information about prospects such as their needs and preferences. This allows for efficient ad targeting that captures the interest of potential customers.
CRM Features and Benefits
The basic function of CRM is to improve sales and marketing efforts. However, here are some benefits you can enjoy from its core functionalities:
CRM tools enable you to have a dynamic view of customer data. The program stores information such as complaints, contracts, purchases, invoices, and other relevant info associated with the customer. All this can be handed to a sales or support rep and added to different accounts. This inevitably helps build efficient customer relationships and an enjoyable customer experience. A CRM system also gives spot-on updates on customer profiles. For example, when they change their social media information, you can get notified.
A CRM tool helps you track the activities of employees and customer interactions to improve your sales process. This allows your sales team to segment current customers and potential customers based on intent, buying behavior, and other demographic information as well as payments.
- Marketing and campaign management
As ad targeting becomes more important in today’s marketing strategy, the CRM system is essential for streamlining marketing strategies. It can help you find potential campaign targets by creating leads from those who engage with your content. It also helps you manage marketing across different channels including social media and email. It helps you schedule posts for times suitable to increase engagement.
- Pipeline marketing management
CRMs are efficient when it comes to managing your sales pipeline. As part of sales force automation, you can generate leads from different channels including landing pages, emails, or referrals. Then, these are automatically put into the pipeline. You see how leads progress to different stages of your funnel through pipeline tracking. You can assign these leads to sales reps who would get tips on when and how to keep engaging. It provides real-time data on where prospects back out or experience challenges in your sales funnel. This historical sales data are great for building more seamless customer experiences and efficient marketing campaigns in the future.
Your customer service department can give high-quality service using CRMs. CRM system provides many tools for multichannel customer communication, service, and support. It uses a centralized system to call center, emails, messages, and live chats under a single dashboard. It also issues tickets that allow you to easily track customer interaction. Customer service departments also use CRM systems to easily set up self-service helpdesks.
- Central Database management
A CRM system allows multiple departments within the organization in different locations to access information on a smooth, centralized system. This is useful to create clean data and reduce unnecessary duplication.
You can teach your CRM system to automate simple and redundant tasks. This includes automated replies, reminders, invoicing, or customer routing. It also has features for data entry and cleaning.
Examples of CRM software
What is ERP?
ERP stands for Enterprise resource planning. They are systems designed to manage both the front and back end of the operation. They are essential to facilitating critical business processes. Basically, ERPs help to create organizational interconnectedness through the automation and unification of core business processes, centralized information, and data analysis. They reduce the paper handling required for managing financial data and facilitate smooth business management.
ERP system contains functionalities that help in streamlining business processes and centralizing information across multiple departments including accounting, human resources (HR), inventory management, manufacturing, marketing, sales, and supply chain management. They may also include the CRM component. All these help in making business processes easier. It also helps create efficient internal communication and smooth data exchange.
An ERP system allows both large and small businesses to focus on data and less on operations thereby improving profitability and efficiency. Organizations can also be sure to make fewer data-related errors, increase collaboration and make better decisions in no time. Departments can pre-emptively plan using the standardized industry-related reports, enterprise-wide overview, and procedure updates provided by ERP solutions. Also, check out B2B sales, SaaS sales and tech sales.
ERP Features and Benefits
Depending on vendors, the features of ERP systems vary, but here are some of the core functionalities you’ll find across systems.
- Human resources management
While CRMs are good for the customer service department, ERPs are essential for the human resource departments. It can help automate employee life cycle from hiring to onboarding and payroll management. ERP solutions can also help to schedule work hours, and approve paid-time-off (PTO) and leave requests. Some ERP software also offers functions that allow you to allot time and resources to employees for certain projects. This is especially good for large businesses with many employees in multiple locations.
- Inventory and Supply chain management
An ERP system can be beneficial when it comes to automating material procurement, reordering, and setting notifications on low stocks. This is especially good for manufacturing companies as it helps to organize warehouses and lower purchasing costs. ERP also covers functions such as purchase management, distribution, quality control, regulatory compliance, and manufacturing. ERP systems are also useful to keep track of suppliers and other third-party partners.
Accounting and Financial applications are at the core of ERP systems. The financial tools in ERP provide sustainable software solutions for effective budgeting. You can keep track of orders and cash flow. The accounting tools allow you to keep track of accounts payable and accounts receivable. They also help you with tax calculators and financial forecasting.
An ERP system provides real-time data on a company’s growth and provides forecasts that can prevent bottlenecks. Interestingly, ERP data analysis, since it’s integrated across different departments in different locations, can help one department prevent the challenges that occur in another department thereby increasing overall profitability.
Instead of having diverse teams managing disparate data, ERP system offers software solutions that compile information in a central database thereby granting the entire organization 360 visibility. This eliminates the problem of errors, minimizes data redundancy, reduces the chances of fraud, and allows for more accurate analysis and efficient operations.
- Customer & partner management
With an ERP system, you can strengthen relationships with company partners and customers. It can integrate business contacts and provide insights on suppliers, shipping carriers, and service providers. Some ERP systems also provide CRM to manage returns, support tickets, survey responses, and more to ensure customer satisfaction.
Managers and team leads benefit immensely from using an ERP system. Since all workflows and information are in one place, they can track the status of projects and the performance of different business functions. Other employees too can increase the efficiency of their collaboration as the system allows for faster and easier access to documents without repeatedly asking colleagues for updates.
Examples of ERP
- Abas ERP
- Aptean ERP
- Microsoft Dynamics 365
- Monday.com
- Oracle NetSuite ERP
- Quickbook
- Sage M3
- SAP R3
- Tally
- Workday
While flexible and easily configured ERPs like Quickbook and Monday.com, is good for small businesses, large businesses can use large-scale or complex ERPs like SAP R3 and Sage M3.
However, ERP software is often categorized into three major types based on deployment options.
- On-Premise ERP software: this is installed onsite and maintained in physical office space within an organization. It is hosted on the company’s computers and servers for full customized control and ownership.
- Cloud-based ERP software: this is a Saas (Software as a Service) solution. It is a web-based solution where an organization accesses and stores data on any device using an internet server. This is usually done through the purchase of a subscription and the software provider continually provides support, updates, training, and flexible customizations to the organization.
- Hybrid ERP software: this refers to a combination of on-premise and cloud-based ERP system solutions. This deployment model can provide organizations the flexibility to migrate between different delivery models or integrate the benefits of both on-premise and cloud-based ERPs.
Cons ERP vs CRM
While both ERP and CRM are very essential to the success of business processes, they aren’t without their cons. It is especially important to bear in mind these cons to avoid wasting resources resulting from the failure of the systems.
CRM cons
One of the major cons of a CRM system is that it is dependent on proper setup and solid processes. Research shows that 70% of CRM systems fail because organizations expect the system to think for itself and make strategic decisions, rather than guiding it to think. To make it successful, CRM should be integrated into commercial strategies, not the other way round.
Also, with CRM systems, organizations often eliminate the human element from the customer service equation. Instead of having a human speak to customers on the phone, they receive automated messages which might not be personalized enough. In this regard, it’s important to integrate human contact with automation. While the CRM system might handle query tickets for proper tracking, the sales rep should be at the end of the complaints.
For larger established companies, they may witness employee resistance when trying to integrate CRM into their process. The process of training might also hinder productivity. So, it’s important to gain employee buy-in
There is also the data security issue associated with CRMs. This may lead to loss of internal data in case of server issues, hacking, or employee incompetence. So, it’s important to have encryption safeguards and backup systems.
Third-party CRM companies can also obtain sensitive data when you use their applications. Although they are required to treat your data with utmost privacy, you must conduct due diligence before choosing a CRM company.
ERP cons
A major concern to ERP deployment is the cost of integration, licensing, and ongoing subscription associated with the technology. EPRs can be expensive to purchase, implement and maintain, especially for smaller companies.
When you consider on-premises ERPs, your organization has to factor in the human capital and infrastructure costs, including IT support, server, and hardware.
Also, for companies with diversified spreadsheets and piles of paper files, there may be a long data migration process that needs hiring an integration specialist.
The resistance from employees is also common when deploying ERPs, you need buy-in from all departments and heads to smoothly introduce the new processes and technology.
ERP and CRM: Similarities
Both ERP and CRM solutions streamline operations and improve efficiencies. CRM and ERP can handle contacts, manage business and customer data, manage complaints, track orders, and give quotes, invoices, and forecasts.
Both ERP and CRM solutions can be deployed through on-premises or cloud-based models, where a SaaS vendor manages the software through its own data center, and client-organization access it through the cloud.
Both systems have overlapping functions that can increase profitability. And this is where organizations often get confused. While most ERP systems will have integrated a CRM solution, they will not operate in the full capacity that standalone CRM systems can. For example, an ERP system may lack key CRM features such as social media management or call center support. While the absence of those features may not hinder overall performance, they may be detrimental to customer experience and hinder sales processes. Check out some sales related guides, sales funnel templates, sales analysis report, sales qualified leads and more.
Conclusion
Do you need both?
If you’re a small business, starting with a standalone CRM would be your go-to. Although you’ll eventually need both as your business grows.
If you’re a large company with complex operational needs and many employees in multiple locations, the answer is YES. An ERP will help you gain efficiency with financial and operational systems while CRM helps you gain higher sales volume.
Overall, if you have cost concerns, choosing a unified ERP and CRM solution tends to be less expensive with more straightforward programming and customizations.
