CRM vs. ERP
CRM vs. ERP
Which is best for YOUR business?
Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP) systems share many important similarities. This is not surprising: CRM and ERP didn’t truly split off from one another until the contact management systems of the 1980s gave way to the far more specialized software of the mid-to-late-1990s.
At their most basic, both CRM and ERP offer you powerful tools to track and streamline your business processes and boost your profitability. Most systems offer at least some overlapping features, and many can be fully integrated with one another.
Despite these similarities, the differences between CRM and ERP lie in each system’s core functionalities. It is important to understand precisely what each system is designed to do, how they differ, and what those differences mean for your business in order to make the right decision between CRM and ERP.
What is CRM?
CRM stands for “Customer Relationship Management.” But CRM does more than simply manage your customer information and interactions.
CRM is specifically designed to increase sales.
CRM enables you to create a consistent, high-quality buying experience for your customers, and structured, high-value marketing, sales, and service processes for your team.
Essentially, CRM helps you increase profitability and build customer loyalty.
Properly utilized, CRM can help your team:
- identify new leads and opportunities
- create, automate, and evaluate marketing campaigns
- standardize and streamline the sales process
- analyze customer interactions and purchasing patterns to tune sales and marketing efforts
- facilitate high-quality customer support to build loyalty
- automate repetitive tasks to increase reliability and productivity
Not all businesses use CRM for every one of these purposes, and some customize or integrate their systems to do even more in one or more areas. But put simply, CRM is specifically designed to increase sales.
What is ERP?
ERP stands for “Enterprise Resource Planning.” Like CRM, ERP is designed to improve your business processes and increase productivity and profitability. But while CRM focuses outward on the customer, ERP focuses inward on all aspects of your business.
ERP is specifically designed to reduce costs.
ERP enables you to improve the efficiency and visibility of business processes across departments to reduce overhead and cut costs.
ERP can benefit every division in your enterprise, including sales, marketing, accounting, manufacturing, order management, distribution, human resources, etc.
Properly utilized, ERP can help your team:
- enter and track real-time business process information across departments
- alert team members when issues elsewhere may affect them
- plan department- and enterprise-level strategy based on enterprise-wide knowledge
- process orders, update accounts, and trigger automatic alerts to fulfill and bill those orders
- manage manufacturing and supply chains while creating records and alerts at every step in the process
- track recruiting and hiring initiatives
- manage payroll, benefits, and personal information for employees
In addition, many ERP systems are integration compatible with existing CRM systems. Some even include CRM or CRM-like features. But unlike CRM, ERP is specifically designed to reduce costs.
Choosing between CRM and ERP
When choosing which to invest in, the difference between CRM and ERP is mostly one of investment and scale:
If your business is large and complex enough for a cost-cutting system to scale well and give you a good return on your investment, then ERP may be for you.
ERP systems are typically more expensive and more expansive than CRM systems, and prioritize reducing costs and improving efficiency. While it’s true that streamlining your business practices can often lead to a better customer experience, that is not the focus of ERP systems the way it is for CRM. Because of this, ERP is best for large, multifaceted enterprises that scale well with its benefits.
If your business is better served by boosting raw sales numbers rather than cutting costs, CRM may be the better bet (at least for now).
CRM systems are typically more affordable and more focused than ERP systems, and prioritize increasing conversion rates and building customer loyalty. This means CRM is ideal for anyone who runs a business with room to grow. You do not need to run a multifaceted enterprise in order to see a worthwhile return on your investment. That is the most important difference between CRM and ERP for most small- and medium-sized businesses.
And because of the modular nature of most industry-leading CRM systems, you can almost always integrate CRM with ERP later, when your business is large and complex enough to warrant it.
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David Marincic is head of publishing at Azamba. He focuses on education and outreach, and manages and edits Azamba publications and social media channels.
David believes in the importance of good planning, sound practice, effective communication, and continued education in order to get the most from any technology solution.