ERP vs CRM: What’s the Difference?
Many businesses struggle to differentiate between a customer relationship management system (CRM) and an enterprise resource planning (ERP) system. These two software systems are the main solutions businesses use to automate their core business processes.
Both are valuable for improving revenue and productivity for businesses and organizations. Although both software systems overlap in some areas, they differ in terms of core functionalities. They can be completely integrated where needed.
However, it is best to view them as stand-alone systems unattached to each other to fully understand how they can separately play a role in improving the overall revenue and productivity of your business.
In this article, you will learn everything you need to know about the similarities and differences between ERP and CRM systems.
Let’s dive in.
What is CRM?
CRM is an acronym for Customer Relationship Management. When people talk about CRM, they refer to CRM tools and technologies a company uses to interact and stay connected with their customers.
The software works to simplify interactions made with customers. Businesses use CRM systems to streamline their processes for acquiring and converting customers. The CRM system covers the entire customer lifecycle from customer acquisition to the retention stage.
CRM is great for acquiring new customers, maintaining long-lasting relationships, providing quality and additional services, and improving productivity. Sales, marketing, and customer support teams use this tool to improve productivity and boost their sales pipeline.
A CRM system has various features such as lead management, contact management, sales management, customer service, human resource management, analytics, business reporting, and others.
Some of the best CRM software tools and systems include HubSpot, Salesforce, Freshworks, Zoho CRM, Nimble, and Keap.
Benefits of CRM
CRM has numerous benefits for businesses of all sizes. Different teams in a company can use CRM to efficiently manage their customer data and relationships for fruitful and lost-lasting relationships with customers.
Automation performs tasks automatically without human interference. The use of cloud-based CRM software helps in arranging and organizing customers' data.
CRM software tools improve productivity and save time by providing access to essential functions such as storing and accessing customers' details, automatic up-to-date records of call and email logs, and customer engagement.
2. Effective Collaboration
The collaborative tools in CRM are important for effective communication between the company’s staff and management, customers, partners, and stakeholders.
CRM boosts internal communication within the organization. With the CRM system in place, different teams and departments will find it easier to share and access customer data. Effective communication helps increase the company’s efficiency and service to customers.
3. Improved Customer Service
CRM provides you with information about your customers such as their behaviors, preferences, purchases, and communication records. You can use this information stored in your CRM system to improve your customer satisfaction rates.
In case of complaints or any problems encountered by customers, CRM helps to retrieve the necessary database of such customers thereby helping to find solutions.
4. Data-backed Decisions
Data is essential to every business. Businesses generate their data from different sources such as social media, Google Analytics, online surveys, and others. Data does not have much meaning until you sort, analyze, and make them actionable.
CRM helps businesses make sense of the various data they collect from their leads and customers. Businesses can use this data to make effective data-backed decisions.
Proper recording and inputting of data make it easier to detect errors and mistakes. CRM analyzes your customer data and automatically generates the necessary reports you need. Data analytics helps to make sense of data and supports decision-making in the company.
5. Retain More Customers
The reason why many businesses are using CRM is that it helps them retain more customers compared to other options. Customers will prefer to buy from businesses they previously purchased if they had a pleasant experience.
Retention and churn rates are key metrics that can determine the success or failure of a company. Regularly recording low retention and churn rates can affect the growth of the business.
CRM helps businesses to record higher retention and churn rates, which will lead to increased customer lifetime value (CLV).
Key Functions of CRM
CRM helps you nurture leads and manage your customer experience throughout the customer life cycle (from prospect to returning customers).
1. Lead Management
Lead management is the process of gathering and managing leads throughout the stages of the customer lifecycles. It involves finding quality leads, assigning leads, and following up on them.
Tracking and managing lead effectively is crucial to high conversion rates and results. Many businesses struggle to build quality leads or separate hot leads from cold ones.
Having a powerful lead management feature is a crucial element of a good CRM system. The lead management function helps you find information about your leads, manage and maximize the conversion process.
CRM provides you with automated leads and leads scoring tools that enhance your lead management. With automated leads, you can assign leads to specific sales reps based on your preferences.
The lead scoring tool analyzes the leads gathered and picks the hot leads from the cold ones. This lead management tool helps you know which leads to prioritize for better conversions.
2. Email Management
Email is an effective way of communicating with customers. Most CRM systems integrate with email marketing services to enable you to access important emails between customers and the company's staff.
Integrating your email helps to improve marketing, engagements, and dissemination of information to customers and team members. Some popular email marketing services your CRM system integrates with include MailChimp, ActiveCampaign, and AWeber.
Email management is an important part of any marketing campaign. A CRM with no email management or integration feature is a liability. Instead of wasting time having to switch tabs to access your email accounts, a good CRM system allows you to access, manage, and control your business emails from one tab.
Forecasting is estimating future sales revenue. The importance of forecasting sales and performance is to help you prepare for future sales. CRM system gives access to customers' information, purchase history, and inquiries to determine future sales.
4. Workflow Automation
The number of steps or actions needed to complete a task is known as a workflow. Workflow automation is the carrying out of tasks automatically without human intervention.
CRM workflow automation increases productivity and limits any form of error. Every department in a company benefits from this automation because it is operated virtually. Workflow automation functions in areas like sales, marketing, customer services, and human resources.
5. Contact Management
Contact management is the recording and organization of customers' contact information such as name, address, and contact numbers in a database. This helps to track your deals with customers.
Managing contact with CRM makes it easy to look up customer details. All forms of communication like emails, audio messages are documented in the CRM database for reference.
A good CRM helps you manage all your contacts across multiple channels including your social media and email interactions.
6. Customer Service and Support
As organizations expand and grow, it is necessary to upgrade interactions and management of customers. Tracking customer interactions allows for better communication, quick response to inquiries made by both current and aspiring customers.
Information about purchased goods, dates of purchase, pricing, and feedback are all tracked by the CRM software. CRM systems help you provide excellent customer service and support to customers which is essential for converting prospects and leads into customers.
The customer service and support function offered by CRM helps you retain existing customers. A good CRM system boosts your customer experience and integrates with help desk software such as LiveAgent, Freshdesk, EngageBay, and Zendesk.
7. Sales Automation
Many sales teams spend lots of time handling administrative tasks, which leaves them with little time to do the major assignment of selling. The CRM system helps your sales team automate many tasks which enables them to spend less time on administrative duties and more time on priority tasks.
A good CRM system with a sales automation function is a huge boost for any organization. Businesses will record higher ROI and productivity levels when they use a good CRM system.
What is ERP?
ERP, which is an acronym for Enterprise Resource Planning, is a management software used by an organization to manage daily activities in critical parts of the business like marketing, sales, and finances. Many organizations use ERP for activities such as reports, accounting, and billing.
Enterprise Resource Planning is the control, management, and integration of business processes using a single or centralized system. The purpose of implementing ERP is for adequate planning, decision making, reduction of errors, cost reduction, and easy collaboration between staff in an organization.
Benefits of ERP
ERP offers several benefits for organizations.
1. Information Integration
ERP connects an organization's business applications, marketing tools, stock control, and every other database to get access to information and every area of the organization. This increases workflow and gives way for information circulation. There is access to customers' information, orders, demands, and feedback.
Since it provides a single and shared database for all financial and operational data in the organization, employees can use it to uncover insights without needing the aid of other teams to conduct the analysis. Businesses can make better decisions faster backed by the data provided by the ERP system.
2. Improved Productivity
ERP automates tasks, keeps records, and calculates quickly. Organizations use it to track inventory and handle data. Using the ERP system saves time and allows employees to concentrate on other important tasks.
3. Cost Reduction
The availability of a central database reduces the cost of setting up various database centers. This also improves workflow and business operations. The use of ERP increases productivity because more work is done in less time.
4. Data Sync
Data synchronization is the process of synchronizing and updating data between two or more devices automatically. With ERP, you can easily meet customers' needs, keep data private and secure, and keep data records consistent and free from errors.
5. Streamlining Operations
Streamlining operations is the act of simplifying complex tasks to improve an organization's efficiency. Using the ERP software helps to simplify work processes, allows remote access to business resources, and aids the achievement of goals.
Key Functions of ERP
The functions of ERP vary from one ERP vendor to another. Despite their varying features, ERP systems share some common capabilities.
1. Accounting and Financial Management
A major focus of ERP is in accounting. The ERP system helps to manage your money and resources. There is proper analysis and records of business costs and financial information.
ERP helps to make financial and non-financial decisions. A good ERP system helps you prevent errors, reduce costs, and ensure your data are accurate.
2. Customers Relationship Management
Enterprise Resource Planning helps businesses to maintain customer relationships. CRM stores customers' data and purchases, predicts customers buying habits, and learns to interact with customers and promote long-term patronage.
3. Human Resource Management
Human resource management is a crucial part of an organization that deals with recruiting and managing employees. Maintaining safety, processing payroll, training of staff, conducting policies, and disciplinary actions are all processes you can automate using the ERP.
A good ERP system helps an organization to focus on staff management without affecting other departments in the company.
4. Workforce Management
Workforce management is similar to human resource management. It provides solutions to budgets and oversees the staff of an organization. ERP helps to enforce workforce management.
An effective ERP system maximizes the performance level of employees, assigns allocated duties, and manages skills. The ERP system provides other essential functions such as accurate forecasting, performance recognition, and provision of adequate training.
5. Marketing Automation
Marketing automation is the use of technology to automate marketing tasks. This helps to grow revenue and improve work efficiency.
You can apply marketing automation single-handedly or as a part of the ERP system. Marketing automation helps you manage marketing campaigns on social media, email, and the internet as a whole thereby increasing sales.
6. Inventory Management System
The use of ERP in managing inventory helps to organize, plan and supervise the sales, sourcing, or storing of a company's inventory. This helps to make better decisions concerning available products and raw materials.
The ERP system helps reduce the complexity of tracking the inventory manually. This helps to manage inventory costs, and inform customers of available stocks and improve customer services.
7. Marketing Reporting
A marketing report is a set of data used to measure the rate of progress made in achieving a certain goal. A good ERP system offers marketing reporting functions. This saves resources and also gives ideas for improvement.
What is the Difference Between CRM and ERP?
Organizations rely on both CRM and ERP systems. However, while their functions may overlap in some instances, there are significant differences between these systems.
1. Investment Cost
CRM is budget-friendly, cheaper, and easier to install since it covers a minute part of the organization (customer service and support).
The ERP system is a complex software with high costs of installation and maintenance that covers many parts of the organization. ERP costs include the cost of software licensing and implementation costs.
The CRM system is built to manage relationships with customers and provide good customer service. CRM is customer data used by the customer service and sales departments.
ERP primarily focuses on financial data and is used chiefly by the finance and accounting department. The ERP systems help to improve and manage the whole business including customer relations.CRM focuses on sales growth while ERP functions in various departments through interconnection.
The recording and storing of information on customers' activities are done by the CRM, giving accurate and error-free data. ERP deals with the requisition processes, payrolls, and training of employees.
3. Number of Users
Small businesses make use of CRM software as a standalone solution because it is cheaper to set up. Some of the best small business CRM software tools include Salesforce Essentials, Odoo, Capsule CRM, Less Annoying CRM, and Freshworks CRM.
Big organizations need an ERP system as it helps to manage numerous business tasks and processes. ERP systems are more suitable for large enterprises with a large number of employees.
4. Profit Orientation
The CRM system increases profits by increasing the number of people patronizing and keeping long-term customer relationships thereby increasing sales. CRM maximizes the amount of money spent.
In comparison, the ERP system increases profits by cutting down unnecessary expenses and reducing operational costs.
The CRM system also makes profits by using inbuilt tools like marketing campaigns to engage interests while ERP uses tools like barcodes to reduce errors and breaches.
How are CRM and ERP Similar?
CRM and ERP systems work together to streamline business operations, increase profits and reduce operational costs. The main purpose of implementing either or both systems is to offer solutions to possible errors, reduce the manual handling of tasks to improve performances.
2. Software Applications
ERP and CRM are both business applications that gather, store, and analyze data in a database. Both can take the form of on-premise applications (where the business manages the software and data center). They can also take the form of software as a service (SaaS) where the vendor manages the software in its own data center hosted on the cloud.
Do I Need CRM or ERP or Both?
Selecting between CRM or ERP depends on the needs of the organization. However, the functions of an ERP system include that of CRM. This means as long as you have an ERP system, you get to benefit from the functions of CRM as a plus.
The CRM software does not include the functions of the ERP system. You can get a CRM system but later have to integrate it with the ERP system.
Using both CRM and ERP maximizes the growth of the business, improves sales, speeds up administrative processes, streamlines operations, and reduces costs altogether.
Both business software solutions walk hand in hand to give automated support in handling all tasks, build more strategies and provide effective outcomes.
However, as a small business, the CRM is more affordable and should be implemented until your business expands. After expansion, installation of the ERP system can be made or better still, integrating both the ERP and CRM systems.
Whether you first invest in an ERP or CRM system will depend on your business model. If you have a small number of high-value customers and complex financials, the ERP system is a more suitable choice.
Companies that have simpler financials and a large customer base will choose a CRM system to effectively manage the customers. However, both ERP systems and CRM systems are essential for many organizations.
Integration of ERP and CRM Systems
Integrating ERP and CRM systems offers more benefits for organizations compared to separately maintaining them as standalone systems.
ERP and CRM systems need to share information. Information like inventory, financial information, purchase history, and customer information are linked together.
The ERP system manages important parts of a business, simplifies the business approach, and streamlines the process of operations. On the other hand, the CRM system works to benefit sales because it promotes long-term relationships with customers by managing the customers' information and orders.
Various departments may need access to different data provided by these two systems. For example, a sales rep may need to access a customer's order history to effectively upsell or cross-sell that customer. The finance department may need information from the CRM system to calculate sales commissions and bulk order discounts.
Integrating both systems shows transparency, improves customer relationships, quickens sales, and allows collaboration between staff, and leads to productivity.
Building a CRM system on an ERP platform provides several key advantages for businesses. A unified CRM and ERP system is less expensive than purchasing both systems separately.
Another advantage is that it updates all information in real-time and it is better able to handle large transactional processes.
Business leaders profit from such integration and can use it to examine their pricing strategies, and manage KPIs such as customer lifetime value (CLV) and customer acquisition costs (CAC).
ERP vs CRM: Which System Is Right For You?
The choice of what system is right depends on the model of your business. If your business is concerned with finances and has a small number of high-value customers, getting an ERP system is best.
However, if your business is concerned with dealing with customers and has less complex financials, the CRM system is the right choice.
A company that wants to scale must increase sales and profit, and the best system suitable for such an objective is the CRM system. The ERP system provides accurate inter-departmental data needed to drive the business. This is crucial for cutting costs and organizing the company’s processes.
Integrating both the ERP and CRM systems provides massive advantages for companies. A CRM system focuses on sales while the ERP system focuses on streamlining your business operations and reducing costs. Using both systems can maximize your business growth.