The notion of enterprise resource planning (ERP) and customer relationship management (CRM) software seem to overlap. Both are utilized to automate a company’s internal business processes and improve the profitability of the company. But the core business logic of these two software are completely different. We, in this article, will help understand the conundrum around ERP vs CRM and answer a few top questions regarding the difference between ERP and CRM.
Through this article, you will learn more about :
What is an ERP?
What is CRM?
What is the difference between erp and crm?
Why is it crucial for a business to know which one of these two they need?
What is an Enterprise resource planning (ERP) system?
Ever searched for “ERP” on Google? The sheer amount of information will make you overwhelmed and not to say, confused. So, let’s try explaining what an ERP is in layman’s term. It is a unified software system which has different modules or core components and is designed to integrate the main functions of a business across the entire organization.
Before you understand this, you need to know the various business processes of an organization. Let’s take an example here :
Suppose you own a restaurant. Your day starts with galloping customers requesting for food and waiters running here and there trying to provide them with the best service - may be through an order management module.
You handle a high amount of cash transactions. Also, a high number of credit card transactions, so you need a credit card processing integration. Helping the economy go cashless, yeah ! So, your sales rep is maybe tracking sales on a sales management module.
Inventory is a must-have for any restaurant. So, there are people working on the inventory management module.
Apart from these, you need employee management, menu management, review management, marketing system and customer management. Maybe also a comprehensive analytics of all the data.
Now imagine having ten different independent software for the above purposes. It is going to be a hell of a ride then! But, generally that’s not the case.
Generally an ERP will be responsible for all the above core functionalities - everything starting from order management to customer management to inventory and sales management will happen through one system, unifiedly.
Also, if you have some existing system, your ERP will make sure they speak to that system to know what’s going on. This means one information will never be needed to be updated again because the system shares the data, in turn enabling collaboration between the organization's departments.
Though ERP has “enterprise” in it, it is widely being embraced by mid-sized and small businesses. This has accelerated with the emergence of cloud ERP systems and this is to accelerate further.
ERP helps reduce IT costs, increases efficiency and enhances collaboration. With an ERP solution, management and employees have access to data that they can leverage to make highly informed decisions. It also automates redundant processes and dramatically saves employee time.
Now that we know what ERP is, let’s move on to CRM.
What is CRM?
Businesses of any type, big or small, cannot run without customers. And in order to make sure that the customers are happy and satisfied, you got to have a strategy. A Customer relationship management software helps in the process.
A CRM is a system that identifies, acquires and retains targeted customers for the business. It then helps build a relationship with the customer, interact with them and improve the quality of customer service.
Again, let’s take the same example. You own a restaurant and you have galloping customers since morning. You need a Central customer management module that can help you find your best customers, email them new offers and analyze the outcomes, forecast sales, predict future demand and help you create personalized restaurant marketing campaigns. All these are taken care by a CRM.
If you are starting out with a few customers, excel works to keep a tab on them. But, if you want your business to expand and last, you need a customer relationship strategy. A CRM gives you an overview of your customers and a whole lot of data. These data can be used by the marketing team to better understand the sales pipeline and make better forecasts. A CRM also helps manage all the inquiries and negative feedback in one place without losing track of even a single one of them.
Read more : How to create a custom CRM for your business
So, now that we are more or less clear on the concept of what CRM and ERP does for a business, let’s move on to the differences between ERP and CRM.
What is the difference between CRM and ERP?
The approach that these two systems take to increase profitability of business and enhance workplace automation is different. Some differences are :
- The main focus of an ERP is to reduce overhead and cut costs. This system is developed with an aim to automate business processes and make them efficient. With CRM, the main aim is to improve customer interactions and client relations. CRM helps with brand recognition while ERP is more about internal process improvement.
- The primary users of CRM are the sales and marketing teams. Another major adopter of this system is the customer support team. These people don’t actually produce or fulfil orders, they just work towards increasing sales. In contrast, ERP users are more focused on the internal functions of the business - supply chain management, order management, finance, project planning etc. Rarely they do anything that calls for customer interaction. CRM focuses on increasing sales, but ERP gives emphasis on improving accuracy and effectiveness of the system.
- These two software differ in features too. While in an ERP, we wish to see features like workflow management, scheduling, invoicing, inventory, PO etc… , in a CRM it’s more about contact and lead management, ticket management, social media integrations, marketing automations etc. CRM can also be a constituent part of ERP, something we’ll discuss in a while.
What does your business need? A stand alone ERP? A stand alone CRM? Or an integration of both?
Let’s break this down :
Who needs an ERP?
- Business that are witnessing optimal growth along with widely distributed departments or a huge network of partners.
- Businesses that are acquiring new customers or companies on a daily basis.
- Companies using multiple software for every core functions.
- Product-oriented companies.
Who needs CRM?
- B2B Companies whose core business function is lead generation.
- eCommerce firms and product companies with huge customer queries.
- Marketing and advertising firms.
Now an ERP can also integrate with a CRM or have an in-built CRM for seamless connectivity and efficient collaboration.
When do you need an integrated ERP and CRM?
- An IT based company that needs to keep a tab on the internal processes as well as need leads.
- When you need a 360 degree view of your customers - from sales to support to finance.
- Increased collaboration between the marketing and other teams like, if the sales team needs a view of customer’s purchasing pattern to make effective marketing decisions.
- Eliminate data entry and duplication.
- Tracking the campaigns and providing insights to make business decisions.
So, whether you need stand-alone ERP or CRM or an integration of both depends on how robust your requirements are. If you are running a small business and you are happy with the software you are using for your internal process but you solely need to improve your sales and marketing, you need a stand-alone CRM.
On the other hand, if increasing the effectiveness and efficiency of your internal business processes is your major concern, it is better you invest in an ERP system.
If you think, you need to maintain one single database and combine both internal process and customer data in one system, you should go for ERP and CRM integration.
The Bottom Line
Any business, big or small, needs to have processes in place before thinking of building software to automate them. Also, it needs to make profits before thinking of ways to cut costs. Start with a CRM first and as and when the business grows, integrate an ERP. We hope this article provided additional knowledge about ERP and CRM and the difference between the two. If you have a requirement of custom developing either, you can drop us a line here and we’re happy to help!