ERP vs CRM: Different Approaches to Meet Your Business Needs

Michael Zunenshine
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Introduction 

If your business hasn’t begun its digital transformation, then your likely falling behind your competitors, both in terms of sales stats as well as your degree of streamlined efficiency. 

That’s where CRM and ERP come in: Two different, but sometimes overlapping, sets of software solutions that let you leverage the data, the analysis, and real-time organizational powers to bring your company closer to the cutting edge of success.

So, what is customer relationship management (CRM) and enterprise resource planning (ERP)? How do they differ and how are they similar? Which one do you need? Let’s dig in.

 

 

What is CRM 

The main thing about CRM software is that it’s a front-facing set of tools focusing on your customers, both the ones you already have and the ones you hope to convert from promising leads.

It started as a sales tool and quickly merged the power of shared customer information with marketing and customer service. This creates a unified feedback circuit of contact knowledge where each department contributes data and shares it with the other departments in real-time syncing.

Think of it like this: Marketing uses CRM tools for outreach campaigns to target and identify prospective customers; the contact information of these prospects get handed over to sales to further engage them and nurture them through the sales pipeline; finally, customer service and support are ready with all relevant information about each customer and their purchasing history in case there are any issues that need quick resolving after the sale.

The point is that at every touchpoint throughout the sales lifecycle between contact and company—in other words, a customer’s full history of engagement activity—is readily available and always up-to-date. This ensures the most personal and speediest service, resulting in a top-notch customer experience. 

Additionally, a CRM system utilizes intelligent business processes to automate simple tasks. And finally, it has a full range of data crunching analytics which constantly provide R&D and marketing with new insights and initiatives to go out to the public and attract new leads.

Features of CRM 

  • Customer Management 

    • With CRM, you get a 360-degree view of all your contacts, leads and customers plus a clear history of all purchase activity, support issues, and engagements you’ve had with everyone on your list across all communication channels. There’s also real-time notifications when anyone updates their social profiles.

  • Pipeline Management 

    • When someone engages with a marketing campaign, their info gets handed over to sales. A CRM then lets you track them as they browse, research, shop and buy—giving you stats on their sentiments, and tips on when and how to nudge them along toward conversion.

  • Automate Workflow 

    • CRMs leverage business intelligence to take over redundant tasks, like data entry and cleanup; automatic text or email replies and reminders; converting quotes to invoices; updating order statuses; and other business processes. This frees up humans to focus on more high-level work to enhance the customer experience.

  • Analytics & Report 

    • A CRM system with analytics and report features can give you insights on things like what advertisements work; when to expect support issues; or what’s the best way to nudge a lead through the pipeline. Analytics can be useful for internal reports or to be shared with a third party to show your progress.

  • Email Integration

    • Much of the work of customer relationship management—like email outreach, reminders, and scheduling—used to be done in an inbox separate from your CRM. Today, many CRM solutions integrate directly into Gmail or Outlook as non-obtrusive widgets or sidebars, so there’s hardly a learning curve to upgrade that familiar email system into a more professional tool.

Introduction to ERP

If CRM deals with the customer side of your business, then enterprise resource planning (ERP) handles everything going on behind the scenes, ensuring the efficiency of your business processes of production, maintenance and distribution of your goods and services, as well as all matters pertaining to your workforce and third party partners.

ERP includes everything in the supply chain from the upkeep of your properties like office space, factories and equipment; the purchasing of all materials and resources that go into the goods and services; the hiring, onboarding and managing of employees; inventory, warehousing and shipping of orders; and most importantly, the internal accounting and financing of your operations.

Unlike CRM’s front-office trilogy of marketing, sales and support — which are generally closely connected — the various departments involved in the back-office operations of an ERP system are often more spread out and disconnected. That’s why data is so crucial for ERPs. It lets the numbers connect and coordinate a company’s many disparate activities.

Say, for example, a supplier is experiencing a delay. The purchasing department would enter this event into the ERP system, which would immediately notify the inventory department to expect a shortage. In turn, any orders affected by this would be notified so that shipping can update its records, and the customer won’t be waiting for an order that’s still not fulfilled. Of course, the sales department gets notified too (and here’s one example where ERP incorporates CRM), who will then notify the customer and perhaps put a note in that file to give him or her a special offer to make up for the delay. 

Features of ERP

  • Inventory Management 

    • While most companies could use an ERP solution, certainly good manufacturing practices benefit the most. ERPs organize the purchasing of supplies, the organization of warehouse space, and inventory management. If space is short, or shelves are empty, an ERP automatically sets in motion the necessary solutions.

  • Tracking & Visibility 

    • Once a sale has gone through on CRM’s end, the ERP systems kick into gear. ERP makes sure the products are available, monitors the fulfillment of the order from the warehouse to shipping, and keeps track of the delivery schedule utilizing GPS for full visibility.

  • Data Analysis 

    • Numbers keep the disparate parts of the whole enterprise connected. ERP software not only lightens the load of manual data entry it also helps coordinate future activity, tightens efficiency, and makes sure whatever progress or setbacks occur in one area are immediately known in every other affected sector.

  • Payroll Management 

    • While sales departments using CRMs keep an eye on invoicing, enterprise resource planning looks at the much wider payroll, finance and accounting figures of a company. This includes purchase orders, budgets, salaries, insurance, and every other asset and liability that falls on either side of a ledger’s double-entry bookkeeping system.

  • Human Resource Management 

    • A large enterprise is composed of more than marketing teams, sales reps, and support staff. ERP manages the hiring, training, insuring, and employee relations issues of a wide variety of workers—whether they’re salaried, executive or contract-based—over many locations.

Differences between CRM & ERP 

So what is the core difference between ERP software and CRM software? Each software aims to improve your bottom line and boost business, but there are two different approaches to go about that.

In short, ERP improves your efficiency of business processes, which keeps costs down. It minimizes wait times, optimizes space usage, streamlines shipments, and maximizes the human output per work hour. 

CRM boosts sales and improves the flow through the sales pipeline by improving the quality of your customer interactions, as well as winning new clients, which generates more revenue.

One works hard to efficiently manage finances while the other helps you generate more revenue coming in. 

Another difference worth noting is how each system approaches business intelligence. CRMs use not only real data of marketing engagements, sales stats, and ticket-support records, they also offer future data projections to help plan further product developments and outreach strategies. 

ERP, on the other hand, relies strictly on the hard numbers that go into every step of the operation, which don’t as easily lend themselves to more creative-predictive planning. Also, ERP’s data is much more highly structured and quantifiable, while CRM can also include “unstructured data” like human-entered notes and comments.

Finally, most ERPs (like Microsoft Dynamics or SAP) are bigger and pricier sets of software solutions. Likewise, some CRMs are moving into the ERP space (like Salesforce), while other standalone CRMs can be extremely light and simple, and some of them even free. Then there are mega-platforms that seem to do it all (like Oracle).

How to Choose Between CRM & ERP 

The point above regarding the scope and price of ERP vs CRM is one place to start when wondering which business management system is right for you. 

If you’re a large company or organization, with the time and resources to implement more complex systems with a decent budget for such software solutions, then an ERP is probably the way to go, especially as many include basic CRM tools.

However for a startup, a solo entrepreneur, or just any company in the budding stages of growth, then a CRM is a great place to start. No business can really get off the ground without customers, and CRMs put customers first. 

In other words, you probably want to increase profits first, then focus on the operational efficiency of your supply chain management.

Another distinction to think about is what kind of products are you offering: goods or services? 

A manufacturing goods company with more fixed capital like real estate and machinery has a lot more resource planning to do, like purchasing materials, equipment maintenance, warehousing, and shipping, all of which are squarely part of ERP’s core functionalities. 

For service-based businesses, especially ones offering personal, creative services, or even one-on-one based services, CRM software is surely the better option. Think of small businesses like freelance coders or designers, therapists or coaching services, academic helpers, entertainers, or care workers: All of which use customer data management, social media planning, and scheduling to satisfy their main business needs.

Conclusion 

With the digital transformation, we’ve entered a sincere business culture that puts customers and CX first and foremost. This is one of the huge reasons for the impressive ascendancy of customer relationship management software.

And yet, behind the front-office emphasis on CRM, many businesses still have a heck of a lot of enterprise resource planning to keep their back-office operations as efficient and as on-budget as possible. 

So the eternal chicken-and-egg question is: ERP or CRM? Or both? 

We’ve suggested a few solid approaches to this question: A factory operation needs ERP more than a consultancy firm. Small companies, independent startups, and solo entrepreneurs should probably start with a CRM system. If boosting sales is your current goal, get a CRM. If cutting costs and streamlining operations is your main goal, ERP is the way to go.

And yes, many ERPs contain basic tools to manage customer information, and you’ll even find some CRMs including features to help with accounting or inventory. 

Digging into the vast CRM and ERP vendor research arena might seem daunting at first. The first step is understanding each software’s core functionalities, differences, and similarities. This guide should help you prepare to take those first steps toward discovering the software solution that’s perfect to streamline your business, boost sales volumes, and crush it in the 21st century.

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