What is CRM? Customer Relationship Management Explained

Author: Tim Berry

Tim Berry

Tim Berry

8 min. read

Updated May 10, 2024

Many small businesses are turning to customer relationship management systems(CRM) to better understand customer wants and needs. CRM applications, often used in combination with data warehousing, eCommerce applications, and call centers, allow companies to gather and access customer information. All of this is done so that they can better anticipate what customers will want with the goal to instill greater customer loyalty.

What is CRM?

Customer Relationship Management is a technology designed to help your business manage customer relationships and interactions in an organized way. It’s a system that can help you build a database of customer information, stay better connected to customers, and streamline your overall processes. 

This typically involves a CRM system or tool that helps automate and aggregate various customer touchpoints. It helps remove some of the busy work so that you and your team can focus on relationships. This is not limited to just customers and can include your colleagues and suppliers as well.

Who is using CRM?

Virtually everyone across your organization can leverage a CRM system. It gives your sales, customer service, business development, marketing, HR, and any other teams direct access to shared information with a better way to manage interactions with customers. This makes collaboration far easier and ensures that there is a visible record of when and how customers have interacted with your business.

Here are just a few of the use cases for CRM systems:

Identify customer segments

Enable your marketing team to identify and target your best customers. This can help them better manage marketing campaigns with clear goals and objectives. It also makes it easier to attribute specific marketing spending toward individual segments and generate quality leads for the sales team.

Share information

Optimize information shared by multiple employees, and streamline existing processes. This can help improve account and sales management across multiple devices while ensuring customer experience is maintained between employees.

Strengthen individual customer relationships

Allow the formation of individualized relationships with customers, with the aim of improving customer satisfaction and maximizing profits. Leverage sales and interaction data to identify the most profitable customers to provide them with the highest level of service.

Make connections

Provide employees with the information and processes necessary to know their customers, understand their needs, and effectively build relationships between the company, its customer base, and distribution partners.

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Why is customer relationship management so important?

91% of companies with more than 11 employees use a CRM system. For those just starting or growing a business, this means that more and more of your competitors have or are adopting a CRM. Like anything in business, this means that if you aren’t at least considering CRM systems as part of your strategy then you’re already behind.

In its simplest form, a CRM will help you increase customer retention, which in turn increases profits. However, this impact can be felt throughout your organization in the following ways.

Organization and operations

Having all of your customer information organized within a single system helps your business become more efficient. It automates simple tasks, sets reminders and checkpoints, and even allows you to integrate directly with other analytics platforms. Being able to simplify these common processes allows you to focus on more complex initiatives with peace of mind that your data is organized and easy to understand. 

This organizational efficiency opens up the opportunity for you to leverage your CRM as an operational tool. Typically, this is most valuable for marketing, sales, and service teams who are actively working on lead generation. It can automate specific communications, help simplify the transition between team members and help track campaigns, purchases, and customer satisfaction


Throughout the life of your business, you want to be actively learning more about your customers. The more you can segment specific customers into diverse niches, the better you’ll be at addressing their needs and retaining them as long-term customers. With a CRM in place, you can simultaneously serve customers while learning more about them and why they are doing business with you.

This can include data points like their purchase history, how they communicate with you, customer service interactions, and even notes from conversations. The value for your sales, customer service, and marketing teams is that you have direct access to the full history of your customer interactions. This means that you can avoid duplicating messages, making incorrect claims, and reference distinct elements that may be important to that customer.

More broadly, you can look at purchasing, communication, and feedback trends. The more well organized your data is the easier it will be to review and uncover specific insights and similarities. 


As we’ve mentioned throughout this article, one of the core benefits that drive the many uses for CRM software is collaboration. However, this can expand beyond your internal teams working together more efficiently. It can actually expand to you and your business collaborating with other businesses.

In this circumstance, you’ll leverage your CRM to share and integrate customer information with outside companies. This can be direct business partners, vendors, or even affiliates that you identify a mutual benefit from sharing data. Doing this can help create an even more customer-friendly experience by giving you and your partners access to information you wouldn’t have otherwise. 

Analytics and optimization

Of course, the main functionality of a CRM is to analyze customer data

The core function of consumer analytics is to improve customer satisfaction in order to reduce churn and increase return sales. Your CRM tool will typically provide some level of pattern recognition. However, it’s likely that you can also integrate other analytics platforms to increase your visibility into customer interactions. 

All of this is meant to help you optimize the customer experience. This may be simplifying specific processes, refining communications, or making more drastic changes due to customer feedback. Things like customer reviews, LTV, and churn will be your go-to data points to start with. While the data that you care about will likely differ based on your business type, you can bucket it all under general customer satisfaction metrics. 

How to choose a CRM for your business

Are you ready to explore integrating a CRM into your business operations? Here’s how to thoroughly vet your options and choose a CRM.

1. Identify your business needs

To find just the right CRM for your business, you need to start internally and identify specific business needs. Review your current operations, sales pipelines, daily activities, and your overarching strategy to identify potential problems and opportunities that a CRM can alleviate. Where are your current pain points? Where do you see customers dropping off? 

List out these and any other problems that involve team collaboration, customer relationships, and general data management. Be sure to hold a review meeting with your full team with representatives from every department that may end up touching the CRM. Ask about their experiences and generally what could make their work more efficient and help them better achieve their business goals.

2. Review CRM features and tools

Generally, a CRM should include contact management, campaign automation, and lead tracking tools for monitoring sales activities. Depending on the CRM option you choose, the actual features within these broad categories can wildly vary. Some may include an integrated email software while others may include ad creation and A/B testing tools. 

You also need to look into how well a CRM will integrate with any other 3rd party tools that you’re currently using. Are they direct partners with dedicated support? Or are they not listed as compatible or generally unsupported? The more easily a CRM can integrate or replace your current tools, the more cost-effective it will be.

Lastly, be sure to explore any add-ons or different tiers within the CRM. Most will have differently priced options based on business size, a specific suite of tools, or the scope of specific tools. If there are more advanced tiers that you can upgrade to, this may allow the CRM to better grow with your business. This can help you explore what upgrades you may need in the future and how they may fall into your budget.

If you’re not sure what features to look into here are a few options to keep in mind:

  • Contact management
  • Sales and customer opportunity management
  • Lead management
  • Reporting and customizable dashboards
  • Sales analytics
  • Mobile-friendliness
  • Sales automation
  • Sales forecasting
  • Email integration
  • File sync and share
  • Data storage
  • Sales performance management
  • Chat integration
  • Marketing automation
  • Web analytics integration
  • Role-based views
  • Testing environments
  • Social media integration 

3. Explore CRM trials

Once you’ve done your research and identified a few viable options, don’t just pull the trigger. Instead, opt-in for a free trial or onboarding walkthrough. This may be something simple like a test instance of the software or as hands-on as a live demo session. At this stage, be sure to ask any outstanding questions. Be sure to bring in those same team members that you initially asked for feedback from.

If you can, get them access to a trial instance as well. They can then walk through the functionality and see what issues they come across. It’s at this stage where you should determine if the features you want work like expected and if the user interface is effective and friendly. Additionally, if there are any customization needs, be sure to ask what it will take to implement and if it’s even possible. 

A CRM is a complex but worthwhile investment

Deciding to explore CRMs and actually research which one is best can be a lengthy and complex process. However, with more and more small businesses leaning into more insightful customer relationship management, it’s becoming more of a necessity rather than a novelty. Be sure to take your time researching and testing your options before making a decision. 

This is a very intricate and integral system for your business which can be difficult and costly to switch after being implemented. As always review your current budgets and financial forecasts to determine if now is the right time to make such a purchase. It’s also wise to revisit your business plan and strategic milestones to make sure a CRM is truly useful for your needs and business growth now or if it can wait.

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Content Author: Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.