What is CRM (Customer Relationship Management)?

A central goal of every business is to serve its customers. For as long as there have been merchants, success or failure has hinged on this simple rule. Customer Relationship Management (CRM) is a way of using technology to do just that.

There are many pieces of software available that offer customer relationship management features, but in reality, CRM goes beyond software implementation. It's a business strategy that often involves using multiple pieces of software, as well as implementing policies that promote (1) the collection of customer information, and (2) the use of that information by individuals throughout the company in order to maximize customer service and increase sales.

The customer relationship management system is an enterprise system, which means that it spans multiple departments. Virtually all departments within a corporation have at least some indirect access to customers, or customer information; the goal of CRM is to collect that information in a central repository, analyze it, and make it available to all departments. For example, a company's call center may have a "screen pop," a small application that is connected to the phone system. This application, which is a type of CRM, automatically senses who is calling, and by the time the agent answers the phone, produces a screen on the computer that lists important information about the caller, such as what they have purchased in the past, what they are likely to buy in the future, and what products the company may have available that would go well with what the customer has already bought. This "screen pop" is made up of several bits of information from different databases; it may draw on information from the accounting department to show the agent what their current balance may be; it may draw on information from the sales department to show what has been purchased recently, and it may draw on information from the credit department to show the agent what terms can be offered.

Because a customer relationship management system is so complex, often involving multiple silos of information and multiple pieces of software, all tied together in a single interface, it's often hard to set up. Some larger companies use an integrator to put the CRM system together. Because of the complexity of CRM, smaller companies often see it as too expensive. However, even the smallest company can implement a CRM strategy. While a Fortune 500 company may spend hundreds of thousands of dollars annually on customer relationship management, a small one-man shop may even handle CRM with a box of index cards and a ball point pen. Midsize companies may use simple, off-the-shelf software such as contact managers and spreadsheets, and still have a very effective CRM system that can help them to serve customers in the best possible way, and to make the most advantageous use of information that has been collected.