Customer Relationship Management: Understanding Its Purpose and Benefits

Customer Relationship Management (CRM) refers to the practice of strategically and effectively managing the relationship, including interactions, between you and your audience. The goals of CRM are to retain current customers, increase their spending, and convert prospects into new customers. A CRM system, meaning it’s software, is used to manage audience information, such as a summary of each interaction, indicators of intent to purchase, and purchase history. Analytics are also used to provide real-time insight into cross-selling and upselling opportunities at the individual customer level.

Of all the acronyms you’ll encounter in marketing—like B2C, CPC, or CTR, to name a few—one of the most important is CRM. After all, it’s what keeps your business viable in the long term.

CRM meaning: What is a CRM?

CRM is the strategic managing of interactions with potential and established customers. The quality of these interactions determines the quality of your customer relationships, which in turn determines whether you have a robust customer base or are constantly looking for new business.

The term can refer to any aspect of the relationship management process, but people most often use it to reference particular systems and technologies. These are the tools that collect and analyze consumer data so that it can be useful to marketers.

Who should use CRM technology?

Businesses that can benefit from CRM technology include those who:

• Use any form of digital marketing, including email marketing
• Have sales teams that have to manage leads
• Communicate with customers on a daily basis

However, any business can benefit from a CRM system that allows them to build upon existing customer retention strategies and increase customer lifetime value (CLV). You can find better ways to grow your audience, enhance customer service, and increase engagement by interacting with your customers strategically and meaningfully.

Why consumer data matters

It’s no secret that personalization is an important tool in marketing. Just take a look at the following statistics about personalized marketing:

• 71% of consumers expect a personalized shopping experience.
• Companies that use personalized marketing strategies are more likely to increase their revenue by 40%.
• 76% of consumers become frustrated when personalized interactions fail or don’t happen.

Data also revealed that people who find personalization appealing are more likely to become repeat, loyal customers.

If you don’t have the data that lets you target your marketing to individual contacts, your customer relationships may suffer.

How data and CRM systems work together

You can’t personalize your service if you don’t know anything about the people you’re serving. But you can’t physically knock on your customers’ doors and speak to each one individually, either. That’s where CRM can help.

Collecting data

Collecting data on customers can help you gain valuable insight into their needs.

Consumer data collection usually takes 1 of 3 forms:

1. Direct customer surveying
2. Customer behavior tracking
3. Interpretation of existing studies or external data

Behavior tracking is one of the most effective methods in customer relationship development. When you collect data that tells you what people do when they’re on your website or social media pages, a CRM tool can classify shoppers into interest groups or demographic profiles.

Interpreting data

If you had to do all of this processing and aggregating yourself, you wouldn’t have any time left to run your business. Fortunately, CRM systems and tools can scan through the data you collect and pull out what’s important. These data snippets let your system create customer groups known as audience segments.

A segment is a group of customers that shares 1 or more qualities. For example:

• Demographic segments are based on characteristics like age, gender, income level, and occupation.
• Geographic segments are based on customers’ home location. Boundaries may be as broad as a nation or as narrow as neighborhoods within a city.
• Psychographic segments are based on shared characteristics at a psychological or emotional level. Examples include values, beliefs, interests, and motivations.
• Behavioral segments are based on how customers interact with a brand, from purchase patterns to loyalty.

Any of these segment types can be useful to a marketing team. When you group customers according to particular qualities, you can create campaigns that feel personalized.

Applying data

To picture how this works, imagine your company wants to create separate promotional programs for a few specific types of customers:

• Repeat browsers
• Recent first-time buyers
• Lapsed customers
• Loyal shoppers

Your CRM strategy collects behavioral data and classifies customer information based on the number of purchases and the date of the customer’s last purchase. You can then create promotional offers that are geared toward each group and send them to the appropriate people.

The same process would apply if you wanted to create campaigns for particular store locations, age groups, or preferred product types. The possibilities are endless!

The benefits of CRM

CRM systems can help all businesses, including B2B and B2C companies looking for a better way to engage customers and track them in the sales process. Some benefits of CRM include:

Build customer loyalty

Because CRM systems increase the relevance of marketing campaigns, they improve customer engagement and help build loyalty. This is the relationship element of “relationship management.”

Automate communication efforts

CRM systems also automate the execution of your strategies to save you time and money. For example, if you want to send out email campaigns based on promotions in your brick-and-mortar stores, a CRM system can trigger those emails based on customer location. As a result you won’t need to spend your valuable time manually organizing spreadsheets by town or state.

And it doesn’t stop there. Let’s say that a customer takes action on those emails and orders an item to pick up at your store. Your CRM can trigger an automated “Thanks for picking up your order” email with an invitation to a customer satisfaction survey, a coupon for a discount on a future purchase, or a link back to review the item on your product page.

Enhance customer service

As a business owner, you understand the importance of customer service and how quality customer service can improve customer satisfaction and retention. A CRM helps you easily communicate with customers, whether or not you’re by a computer to resolve inquiries. This ensures that issues are responded to in a timely manner.

Improved reporting

Since data is a necessary part of marketing and sales, you must not only collect but understand customer data. CRM systems offer simplified reporting to help you interpret data and make better business decisions. With CRM software, you can start to understand how people are interacting with your business.

Types of CRM Systems

Depending on the needs of your business, you may choose between 3 different types of CRM systems. Some are more robust than others, but what you decide ultimately depends on the features you’re looking for.

• On-premise CRM. An on-premise CRM allows companies to keep information and data close to them. On-premise CRMs often require a license, but you’ll use the software on company computers and servers.
• Cloud-based CRM. A cloud-based CRM stores data in the cloud, allowing you to access it at any time. Cloud CRMs are an affordable option, and businesses are charged monthly or annually.
• Open source CRM. Open source CRM systems use open source code, allowing anyone within the organization to modify it depending on their needs.

What makes a CRM system effective?

A CRM system allows you to collect, organize, and analyze your customer data in ways that make your job easier. It needs to be able to:

• Provide a central hub where sales and customer service professionals can access customer data.
• Connect smoothly with your marketing channels for effective personalization.
• Organize campaigns based on specified criteria.
• Track how audiences are interacting with a campaign and how individual customers are progressing through the pipeline.
• Aggregate existing customer information to help you identify high-potential new markets.

Every company’s needs are different, so you should make sure that your CRM integrates with the tools that you are already using. And remember: CRM is designed to help you grow, so a system is only as useful as the highest level of growth it can support.

How to start using a CRM system

Once you’ve purchased your CRM system, you can begin implementing it throughout the organization, allowing marketing teams and salespeople to work together to generate more revenue.

Use the following instructions to start using a CRM:

1. Implement it in your sales process. When your CRM is ready for use, add all of your salespeople to it so that they can begin using it to track leads.
2. Create custom stages. Every lead will have a stage within the sales process to inform salespeople. Your CRM should also house valuable customer data, including names, email addresses, phone numbers, birthdays, job titles, and more, to help improve relationships and make more sales.
3. Integrate with marketing and sales tools. If you’re using any other marketing or sales tools, including a website, integrate those tools with your new CRM to ensure leads are all in one place. You should also migrate any existing customer data.
4. Create dashboards and reports. CRMs allow you to create custom reports to ensure you’re reaching your goals.

Start building stronger customer relationships

Personalized marketing doesn’t have to be difficult. CRM can help you create segments that target specific groups of customers based on their interests, demographics, behavior, and more. That way you can communicate with your entire audience while still making your marketing unique for every customer. All businesses can benefit from CRM because it helps improve relationships that lead to sales and customer loyalty.

Mailchimp’s CRM software allows you to connect all your data in one place, making it easy to organize your contacts and segment them based on different categories. With automated insights, you can learn different ways to improve your marketing and sales processes and trigger automatic messages when specific criteria are met.

Read how Mailchimp’s free CRM for small business compares to the competition.