Building and maintaining great customer relationships is at the core of any good business model. But staying on top of who your customers are and what their relationship with your business is at any given moment is difficult. And that’s true across the board—whether you’re a small business with a hundred customers or a large one with hundreds of thousands.
The best way to address the challenge is with the right tool, in this case a good CRM. But for anyone as yet unfamiliar with the CRM market, there’s a lot to learn. To start, there are three main types of CRMs: collaborative, operational, and analytical. To help you get your bearings, we’ll cover what a CRM is to begin with, how the three types of CRMs differ, and how to select the right product for your company.
What is CRM?
CRM stands for customer relationship management. While the term describes a larger strategy for working with customers, in practice the acronym CRM is most often used to describe the category of products that enables effective customer relationship management.
The most important thing about any CRM is right there in the first word—it’s about customers. A CRM should help you understand your customers better, and use that information to deliver the best possible customer experience (CX).
That’s a goal that’s gotten harder in recent years. Consumers now move between different channels (such as messaging, email, social media, and phone) to communicate with brands. With more ways to research products and make purchases, the buyer’s journey has grown in complexity. And for businesses selling lots of products to multiple audiences, the difficulties of managing it all are even more notable. The CRM category of products grew out of a need to address those challenges.
Why use a CRM?
At a high level, the reason to use a CRM is to improve the customer experience. That’s the simple answer. But CRMs do that by helping in a number of specific ways.
CRMs help with managing customer data
Web-based (SaaS) CRM tools enable businesses to more successfully collect and organize customers’ data. When the data is organized in an intuitive way in a tool everyone can access, employees across the organization can find relevant customer details the moment they need them. That’s especially important in the age of omnichannel support. An employee needs to know what happened last week when a customer reached out via email, even as they’re responding to a new question sent today over chat.
A good system for accessing customer data ensures that agents can see the contextual details they need to provide the most relevant support every time.
They bring automation to simple tasks
Humans are always central to providing a good customer experience, but automation technology enables humans to do their jobs better. Some CRMs offer automation features that reduce employee workloads. By taking over mundane tasks, they give employees more time to focus on the work they’re best at. That increases efficiency and leads to better results.
They break down silos
A CRM that’s accessible across departments keeps everyone on the same page, and allows them to collectively learn from the data you have. It also makes it possible to accurately track the relationship between marketing activities, sales numbers, and customer relationships by creating a single view of the customer journey.
Marketing and sales reps can reference it to stay up to date while moving potential customers through the sales pipeline. In the process, they collect and capture important data about those customers that customer support will have access to once they convert.
They make personalization possible
A CRM contains all the details about past conversations and interactions you’ve had with a customer, making it a powerful tool for personalization. When customer service agents know the specific products a customer has, any past support tickets they’ve opened, and any recent questions they’ve asked, they can incorporate that knowledge in the support they provide.
They reveal insights to improve your customer relationship strategy
Collecting all that data is good for the employees that need it for context, but it’s also valuable for analytical purposes. When you can see larger trends in your customer conversations, you can shift your larger strategy to better serve them. A CRM can put the data you have into a format that helps you turn it into key insights.
With that, you can make your customer relationship strategy more proactive by helping customers before they know they need it, and learn to spot signs a customer may be considering a competitor and needs some extra attention.
What are the types of CRM?
While all those benefits apply on some level to just about any CRM, customer relationship management includes a large category of tools. Different CRM products vary in terms of features and focus, and they can be divided into three main categories.
Collaborative CRM systems
A top focus of collaborative CRM systems is breaking down silos. Often the marketing team, sales reps, and customer support agents are all in different departments that feel disconnected. And for bigger organizations, each of those departments is further separated based on factors like geographic locations, channels they serve, products they focus on, or skill specialties. But in order to provide a seamless customer experience throughout the customer’s journey, you need a way to share information across the full organization in real-time.
Collaborative CRMs ensure all teams have access to the same up-to-date customer data, no matter which department or channel they work in. Not only does customer support have all the information marketing and sales teams collected when working with a prospective customer, but agents in a call center have updated data on customer interactions that happened over email.
That integration between departments and channels saves customers from the dreaded experience of repeating themselves each time they talk to a new contact. Each employee they interact with can quickly and easily pull up a record of all past interactions with the consumer to consult and learn all relevant details.
Operational CRM systems
Operational CRMs help streamline a company’s processes for customer relationships. They provide tools to better visualize and more efficiently handle the full customer journey—even when it includes a high number of touchpoints. That starts from their first interactions with your company’s website, through the whole lead management process as they move through the sales pipeline, and continues with their behaviors once they’ve become a customer.
Operational CRM systems typically provide automation features. Marketing automation, sales automation, and service automation offload some of the work that your employees would otherwise have to handle. That opens up their schedule for the more creative and personal aspects of their jobs—the stuff that needs a human touch. And it makes it much easier for growing companies to continue to provide top-notch service to scale.
Analytical CRM systems
Analytical CRMs have the primary focus of helping you analyze the customer data you have to gain important insights. Digital tools and platforms now make it easy to collect large quantities of data. But data analysis—the step required to turn that data into something useful for your company—is a difficult feat. In fact, estimates suggest that over half of the data collected by companies never gets used.
Your customer data is too valuable for that. An analytical CRM provides features that help you use the data you have to see trends in how your customers behave. With that information, you can better understand what steps lead most successfully to sales, which increase customer retention, and what the most common customer problems are.
Differences between the 3 types of CRM systems
If you’re pretty sure your business needs a CRM, but you’re still in the research phase, understanding the differences between the three types of CRM systems available is an important part of the process.
While there’s a fair amount of overlap between the three categories of CRM, each one tends to focus on particular functions and features.
How collaborative CRMs work
For collaborative CRMs, the main functionality is two-fold:
- Getting up-to-date information to everyone through the same platform, across departments and locations
- Making sure it’s easy for people to find the right information they need when they need it
In comparison to the other types of CRMs, collaborative CRMs tend to be geared more toward customer retention and satisfaction than making sales. Nonetheless, for sales, marketing, and customer support teams, collaborative CRMs are the answer to the old challenge of data silos.
The knowledge sales and marketing gains about prospective customers will only have value to the customer experience team if the company finds a way to facilitate the spread of that information. And the same goes for getting customer support insights back to sales and marketing.
With collaborative CRMs, you see a few main features:
- Interaction management. A collaborative CRM makes it easy to track every interaction a customer or prospect has with your company, no matter the channel. The information in the product gets updated whether a customer got in touch via phone, email, social media, messaging apps, or even through an in-person meeting with someone at the company. Agents can record what the interaction was about, how it resolved, and add any important details someone might need to know for a future interaction with the customer.
- Channel management. Customers now expect brands to be available across multiple channels. It’s important to understand which channels your customers prefer, and figure out the best ways to meet them where they are. Collaborative CRMs help track which channels your customers are using for different types of contact, to ensure you’re available when they need you where they want you.
- Document management. Some collaborative CRMs also help companies consolidate where they store important customer documents. If employees may need access to a customer contract or proposal in the course of helping a customer out, this feature can come in handy.
Collaborative CRMs are good for:
Businesses with many departments that currently struggle to keep everyone on the same page. That particularly includes companies that have multiple locations and that provide omnichannel support. If your customers have ever grumbled about having to repeat themselves after being transferred from one department to another, a collaborative CRM is worth considering.
How operational CRMs work
Operational CRMs usually include the features common in collaborative CRMs but add features that are more about tracking, managing, and improving the full customer lifecycle. Where collaborative CRMs are a bit more focused on keeping customers happy and coming back, operational CRMs are just as concerned with how they first learn about your brand and all the steps that lead up to becoming a customer.
And operational CRMs are where automation features start to come more into play. In order to bring greater efficiency to all the processes related to managing customer relationships, operational CRMs frequently include features for sales automation, marketing automation, and service automation.
Marketing automation can save the marketing team time by creating email campaigns that trigger relevant emails based on specific activities the customer makes, rather than requiring manual work. Or similarly, a marketing automation tool can make tailored content recommendations on your company’s website based on where your prospective customer is in their journey. That means a more personalized, relevant experience for the customer while creating less work for your marketing team.
Sales automation features can simplify the lead management process by automating the lead scoring process, so it’s easier to identify which potential customers to prioritize. Operational CRMs can also automatically determine the best tasks to assign each sales rep based on priority level and serve automated notices for specific steps to take to move a lead down the sales pipeline.
And service automation can take all the information the operational CRM has about a customer’s situation and use it to determine the most important details an agent needs to help a customer quickly and effectively. It can also automate the process of sending surveys to customers to measure their satisfaction and help you figure out how your team is doing.
Operational CRMs are good for:
Businesses that want to get more out of the customer information they have, while making processes more efficient for employees. And businesses that want to gain a high-level view of the entire customer lifecycle and find ways to make your processes across customer-facing departments better.
How analytical CRMs work
Where the other two CRM types are likely to be used regularly by employees who interact with leads and customers day by day, analytical CRMs work best for high-level strategizing. Data analysis is how you take all the customer information you’ve collected over time and start answering questions with it.
Analytical CRMs provide reporting features that help you understand:
- What specific marketing campaigns generate the most leads
- What kinds of leads most often turn into sales
- What types of sales actions lead to a purchase
- Which types of customers have the highest lifetime value
- What issues customers most often contact support about
- The most frequent customer complaints
- What features and resources customers use and like the most
- How effectively your support team resolves customer issues
- How quickly your agents achieve resolution
The answers to questions like these are important for identifying weaknesses in your current approach and figuring out what changes to make for better results. Analytical CRMs are useful in this step because they use data mining—a technological process for analyzing large sets of data to find trends within them. It’s something technology is much better at than humans—especially as the quantity of data you have grows.
Analytical CRMs are good for:
Companies that have a lot of customer data and don’t know how to effectively use it.
Do you need all three CRMs?
Which type of CRM you need—or whether you’d benefit from investing in all three—depends on your particular business needs.
If your business is new and doesn’t have much customer data collected yet, an analytical CRM could be overkill. The need for a collaborative CRM comes most into play when you have a lot of departments and/or different business locations that need an efficient way to stay on the same page. And an operational CRM is most important for companies seeking to improve the processes related to the full customer lifecycle, and those who want to employ automation to introduce efficiencies.
And many of the popular CRM systems on the market will offer some overlap in the features associated with the different types.
How to choose the best CRMs for your business
Before you can figure out which types of CRMs to consider, it’s important to figure out your customer relationship strategy. What are the main challenges you face now? And what are the top goals you want to achieve? That will help you go into the process of choosing CMS software with an idea of what to look for.
Some of the most important factors to consider in your search for a good CRM software include:
How easy it is to set up and learn
Some CRM systems are difficult to install and configure. Some would even require you to hire someone to manage them on an ongoing basis. For a small business, investing in something your team never has the time to learn won’t be worth the cost. But even large companies will be better served finding something they can get up and running fast—and that employees can start using on day one without special training.
Integration with products
For CRM apps to provide the benefits previously discussed, they need data. And a lot of that data currently lives in products you already have. To get the most from a CRM system, you need one that integrates with all the other relevant products you use now—and ideally, one that’s pre-integrated with your top products so you don’t waste time figuring out how to connect them manually.
How well it connects separate departments
When a long-term relationship is the goal, collaboration between sales, marketing, and customer service is an important part of the equation. If you want all customer-facing employees to have access to up-to-date customer data each time they interact with a consumer, you need a CRM that connects everyone through one platform.
Cloud-based CRMs that use a subscription model for payment are the most common options. But you can also find some on-premise CRM products that you buy once for a certain number of users and then download to your onsite devices. The latter may seem like a simpler financial option, but it makes it hard for your CRM to scale with your company as you add more people, and it limits your access to product updates. Whichever CRM you choose, make sure you understand the payment model and know how it will fit into your budget.
Analytics your team can actually understand will enable you to improve your strategy with data-based insights. A CRM with powerful yet intuitive reporting features will help you find the trends and insights in your CRM.
Customer data is sensitive. While it has value for you, if it gets into the wrong hands, it can quickly become a liability. Any CRM you consider needs to promise the highest level of security, so you can keep your data safe and keep your customers’ trust intact.
Ability to scale
If you have any expectations that your business will grow months and years to come, you should be thinking now about how well the CRM you choose will scale. How easy will it be to add more customers or employees? As you add more tech products to your process over time, how easy will it be to connect them to your CRM?
You won’t want to start over from scratch because you outgrew the CRM you chose, so consider today the potential needs of your future.
How to measure the success of your CRM systems
Your CRM will help you measure the success of customer relationship management efforts, but you’ll also want to measure the success of your CRM.
When determining your customer relationship strategy, consider what goals to set for use of your CRM. That could include measuring:
- The level of adoption in relevant departments. Do you have employees that never bothered using it to begin with?
- What available CRM features you’re actively using, and any you’re underusing
- Whether sales increased since you implemented it
- Any change in customer resolution times or customer satisfaction (CSAT) scores
- Whether it has improved customer retention rates
The metrics you use to gauge success here will depend on the goals you set. But if you’re making an investment in a CRM product—especially if it’s a costly one—you want to make sure it’s paying off in the way you intended. If not, you may want to revisit the process of selecting a new CRM in the near future.
Choose wisely—for your customers’ sake
If you want to provide your customers with a genuinely great customer experience, good intentions aren’t enough. You need a way to organize and effectively use all the customer information you have. The right CRM empowers your team to deliver exceptional, personalized customer support. And it gives you the power to understand your customers better so you can adapt your customer relationship strategy to their needs and preferences.