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Customer relationship management software: What is a CRM database?

By Bryce Baer

Published March 31, 2020
Last updated July 14, 2020

Happy customers are the lifeblood of any business. And one of the most powerful ways companies can connect with customers and deliver the service and support they expect is with customer relationship management software, or CRM.

CRM software is a set of sales, support, and marketing automation tools that help a company manage all of its interactions with customers and potential customers in one place. Customer relationship management software can often be referred to as a CRM database, CRM software, CRM tools, a CRM solution, or simply CRM. Businesses that implement successful CRM systems and deploy thoughtful CRM strategies to manage customer relationships can gain a deeper understanding of customers, improve the quality of customer service, increase sales, and create more efficient workflows that connect multiple teams.

CRM solutions make it possible for companies to create long-term relationships with their customers based on fast, personalized marketing campaigns and high-quality customer service and support. CRM databases also provide companies with sales automation tools and deep, actionable analytics and insights that can help manage customer relationships over the long term.

CRM databases can help companies of all shapes and sizes improve its long-term customer relationships. In this article, we’re going to define CRM databases, outline the benefits of CRM systems, explore ways to keep a company’s data secure, and look at the top CRM solutions that are available.

What is a CRM database system?

Customer relationship management was once thought of simply as a sales tool executives could use to understand their sales pipeline and plan for the next quarter or the next year. For some companies, managing their sales information meant using simple tools like spreadsheets.

Modern CRM solutions have since evolved into powerful, complex databases that connect to all the software tools that a company uses to manage its relationship with customers. This can include help desk software, sales and marketing automation tools, customer shipping and billing systems and more. CRM automatically pulls data from these disparate systems and makes it available to a company in one customizable dashboard. In fact, CRM is a tool that is used by sales, customer support, marketing, product development, and management to get a holistic picture of their customers and manage their entire lifecycle.

CRM tools give everyone in a company access to all the information they need about their customer interactions in one dashboard—from social media posts and voice calls to messaging apps and accounting software. This makes it easy for support teams to solve customer problems with real-time data like purchases, support history, and other historical data quickly and efficiently, without shuffling them between departments. It enables marketing teams to understand the efficacy of their marketing automation efforts and seamlessly pass marketing qualified leads through to sales reps. It helps sales teams access analytics that allow them to understand the lifetime value of a customer, and find new cross-sell opportunities. And in addition to helping management to instantly see their sales pipeline, CRM databases help business leaders deeply understand their customers and what makes them happy.

While CRM software makes it easy for companies to get critical information and insights about its customers and their long-term relationships, the best CRM software is actually designed around the customer experience. CRM solutions should account for the fact that customers have never had more ways to interact with a company, from websites and social media to chat and self-service content—CRM connects these things seamlessly for customers.

What information is in a CRM database?

CRM databases are incredibly flexible tools that can be customized to meet the needs of nearly any business, no matter how complex. While every company will use their CRM solution a little differently, there are two broad categories of information that CRM solutions track—information about customers and information about employees.

First, let’s take a look at the kind of information that a CRM can capture about current and potential customers.

The most important thing about CRM is in the title—it’s about customers. The C is really the most important part—and then the relationships companies have with those customers. Are they a partner? Are they a small customer or a big customer? How much revenue is coming from this customer? The goal and the aspiration of CRM is to get a full picture of a company’s customers, all the ways in which it interacts with them, and everything it needs to know to serve them best.

CRM software can be used to store and analyze every interaction a company has with a customer. This can include things like a visit to a web site, signing up for a demo, contacting customer service for support, engagement with an online marketing campaign, interacting with the company’s social media accounts, a visit to a physical location, or their purchase history. Customer relationship management solutions can also be used to house demographic information, contact details, personal preferences, and attachments such as copies of contracts, receipts, and more.

CRM therefore makes it easy for anyone at a company to quickly and easily understand their customers, and provide them fast, personal service without having to hunt down information owned by different teams or departments or searching through multiple disconnected systems and databases. This leads to the second type of information stored in CRM systems: employee information.

Customer relationship management software is a powerful way for companies to organize and operate their internal teams, making it easy for everyone to be on the same page. Whether it’s through assigning and tracking tasks, tracking marketing automation programs, monitoring the efficiency of customer service or sales reps, or providing visibility into the company’s sales pipeline with real-time data, CRM brings together all the information teams need to deliver great service that helps establish customer loyalty.

For example, rather than have to make a series of phone calls to understand the status of a potential sale, executive management can simply pull up the data in the CRM dashboard and see that all the customer issues are being taken care of, and all the leads are being owned and addressed. Managers can also create rules for their CRM which will only alert them to key milestones, like a deal closing, or red flags, like a support ticket that has been open for three days and hasn’t been resolved by agents. This ability to focus on the details that matter most to a company is one of the most powerful benefits of a well-executed CRM strategy.

What is a CRM strategy?

While CRM databases are incredible tools for helping companies improve customer relationships, increase sales, and become more efficient, at the end of the day CRM tools are just that—tools. Having great tools is important, but they need to be backed by a thoughtful and comprehensive CRM strategy.

At its core, a CRM strategy is simply a plan for how a company will deploy a CRM database across its organization to manage relationships with customers. When developing a CRM strategy, it’s important to understand how customer relationships fit into a company’s overall business strategy. It’s also crucial to understand every step in the customer journey and how cross-functional teams including sales, marketing, support, and social media will interact with the CRM solution.

The first step for any company that is looking to develop a CRM strategy is to make sure it has a well-defined business plan. While it sounds obvious, companies should have a clear understanding of their business goals, know their value proposition, have demographic information on their customers, be aware of the competitive landscape, and more before developing a CRM strategy.

Once a company has a strong understanding of its business plan, the next step is to map the customer journey. It’s important to understand the different channels that customers use to engage with the company and the types of activities that take place in each. This can include the company’s website, phone, email, social media, live chat, and physical locations. The more the company knows about the customer journey between channels, the better equipped it will be to serve them.

Next, companies should define their sales process and understand the nuances of their pipeline. Understanding how phases like prospecting, first contact, demo, proposal review, and nurture fit into the company’s sales cycle will be key in how the CRM solution will be implemented. Once that is done, it’s important to evaluate the company’s organizational dynamics to plan how various cross-functional teams will interact with the CRM database and each other.

With a strong understanding of the sales process and the team’s workflow, companies should define their goals and key performance indicators (KPIs) that they will monitor to determine the efficacy of their CRM strategy. Goals and KPIs should be specific to each cross-functional team. A sales team might monitor revenue, marketing may track net-new prospects. A support team could track first response times or number of tickets resolved.

Once a company has reached this stage of planning, it’s in a strong position to define the components of its CRM. Here a company takes the time to identify the information that it wants to track in its CRM database, build workflows that match sales, marketing, and support pipelines and sets up its CRM systems, and is ready to roll out its CRM strategy.

Benefits of a good CRM database

Once a company has developed a thoughtful, comprehensive CRM strategy and deployed it across its organization, what can it expect? Of course, the number one benefit of implementing a CRM system is happier customers. But companies that deploy CRM software to manage customer relationships can expect to enjoy other benefits, as well.

For example, CRM can be game changing for sales teams by creating one centralized contact database. When all of a company’s prospecting information is accessible in one location, sales reps save time by accessing only the customer information they need, rather than combing through disparate databases for files and records.

Another benefit of CRM software is that every interaction with the customer, as well as every internal conversation that the company has about the customer, are stored in the CRM. This makes it easy for companies to have a holistic view of the customer’s relationship with the company.

CRM solutions also automate data entry, leaving sales, marketing, support, and social media professionals more time to actually engage with customers and do their work, rather than wasting time and resources updating call logs or inputing records. Meanwhile, CRM systems can also help companies segment their customers into groups based on any number of criteria, including size, geography, or deal stage.

An additional benefit of CRM is the ability to create sales reports and sales dashboards. This makes it easy for managers to get a snapshot of their sales pipeline and understand how they’re tracking against their goals. CRM also lets teams automate their forecasting with real-time data on KPIs including monthly recurring revenue (MRR) and year-over-year (YOY) growth.

Are there disadvantages of CRM databases, and can they be overcome?

While implementing a customer relationship system provides many advantages, companies should be cognizant of potential challenges. Those challenges have the potential to complicate a company’s business and workflows, but they can all be overcome with a little bit of planning and foresight.

The first thing that companies should consider when evaluating CRM solutions is cost. There are dozens of software options available and many pricing plans. The good news is that companies are able to get exactly what they need, but it’s important that they have a thoughtful CRM strategy so they’re able to match the features and depth of their CRM solution to their specific business requirements.

Companies should also consider the total cost of ownership for their CRM database so they don’t get hit with unexpected expenses down the line. When evaluating CRM software, companies should also think about any software subscription or purchase fees, upgrades like add-on marketing automation or reporting features, customization, IT resources required, hardware and software requirements, and any staff training that may be needed. By considering these items up front, companies can establish a realistic budget and avoid surprises.

A business that is evaluating a CRM solution should also consider its internal culture. Change management is a critical component of adapting new systems, and CRM is no exception. Companies should have a plan in place to onboard the various teams that will interact with the CRM software, including sales reps, marketing, customer service, social media, and management teams. A thoughtful transition to the new system will save the team headaches down the road.

Another potential pitfall that some companies experience when adopting CRM is over complicating their system. Much of CRM’s power comes from its ability to adapt and be customized to support just about any kind of business. While it’s important to customize CRM software, it’s equally important to think through what kind of information is absolutely critical to collect and what isn’t. Companies should avoid adding hundreds of variables that aren’t necessary for managing the long-term relationships the company has with its customers. A bloated CRM database becomes more burdensome for employees to use and makes it harder to connect the dots and gain insight on the most important metrics.

Top CRM database systems

There is an incredibly wide range of CRM solutions available, so naturally, there are a number of things for companies to think about when evaluating the best CRM database for their business. It’s important to line up the right features, with the right level of customization, with the right price.

The first thing that many companies consider when choosing the best CRM system for their business is the type of software solution that makes the most sense for them. One solution “on-premise CRM,” which means that the software is installed and operated locally on a company’s servers.

Generally on-premise CRM solutions come with source code for the software, so companies are able to make dramatic changes to the customer relationship management database. This flexibility can allow companies to create highly customized software that confirms to its exact needs and specifications, whether that includes adding sales and marketing automation, specialized sales pipeline reporting, or more. An additional element of on-premise CRM is that because the company’s data doesn’t live on a cloud-based, third-party server, it can maintain complete control of its data.

However, while on-premise CRM has its benefits, it also comes at a cost. It’s generally the most expensive option for CRM databases, and it can be difficult to install and configure. It also requires dedicated hardware and staffing resources to run and operate. On-premise CRM needs ongoing routine maintenance and updating that requires specialized IT support, including robust security measures. For many small companies, the cost and resources required to operate an on-prem CRM or build their own solution using an open-source CRM product is too high to make it a viable option.

For companies that lack the capital or the staffing resources required to implement and operate on-prem or open-source CRM solutions, cloud-based CRM is often an excellent choice. Cloud or web-based CRM is generally offered to companies through a software-as-a-service model (SaaS).

One of the biggest benefits of web-based CRM is the price tag, as it is considerably less expensive than comparable on-prem CRM solutions. Rather than pay a large upfront cost for the software, companies pay to access the CRM solution online over time. This is a great solution for small companies because they pay only for the services they need and can always scale usage and features up or down as their business grows and evolves.

Cloud-based CRM also offers nearly seamless installation. Employees can just get online, log in to the service and start using it right away. Businesses that use cloud-based CRM don’t need to invest in expensive servers or dedicated IT people to operate and maintain the database, as all that work is performed by the CRM service provider as part of the software package.

Web-based CRM also gives companies anytime, anywhere access to their data. Since the cloud is accessible 24/7 from just about any connected device, cloud-based CRM tools make it easy for companies to get that critical piece of customer data day or night. That need for accessibility means that cloud-based CRM systems tend to have high levels of data security. CRM SaaS vendors have many levels of robust security to protect customer data, including round-the-clock security experts who monitor and constantly upgrade the CRM database with the latest security measures.

How to manage data security for a CRM database

One of the top concerns for most businesses that are considering implementing CRM software is data security. Since a CRM database is filled with a company’s information about its customers, including credit card numbers and personal information like social security numbers, CRM data can be a lucrative target for many hackers. But there are steps that every company can take to maintain the security of that data.

The first thing companies can do to protect their data is to work with a trusted CRM partner. Look for companies that have experience working with enterprise-grade security solutions, and research the specific protocols that the company uses to defend against cyber attacks and hackers. The best CRM partners will have many layers of robust security in place.

Cloud-based CRM firms invest heavily in online security and have full teams of experts who constantly monitor, assess, and upgrade the security features for the CRM database, as well as rapid response teams tasked with handling incidents quickly and transparently. For smaller companies that don’t have the resources, expertise, or bandwidth to maintain an on-premise solution, working with a cloud-based CRM is the equivalent of having the resources of a global enterprise on call 24/7 to keep your data safe.

But even with strong cyber security measures in place, there are steps that every company should take to assure the security of its customer data. Companies need to have a strong training program in place to help employees safely work with customer data, and those workers need to understand the importance of not sharing credentials and log in information, as well as other best practices for working with sensitive customer information. Employees should also be trained in basic online security measures, like not opening suspicious attachments in emails or clicking on suspicious links, all of which can serve as gateways to data breaches. A company should also be thoughtful about which employees are able to gain access to its CRM system.

Another simple, common sense step that companies can use to protect their CRM data is to have a strong password policy that requires unique passwords that are changed at least every quarter. It’s also important for a company to secure its CRM database with two-factor authentication whenever possible to help protect access to its data.

For companies that work with a cloud-based CRM solution, any breaches or security issues will be immediately flagged by the provider. Meanwhile, companies that manage their own on-prem systems must constantly review those databases for suspicious activity and maintain dashboards to monitor security KPIs.

For companies that lack the resources or expertise to manage their own security protocols required to protect their customer data, web-based CRM databases are an inexpensive, highly secure alternative. With a great partner, and a little common sense protections, companies can sleep well knowing their data is in good hands.