Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) are two sides of the same profitability coin. ERP and CRM are similar in many ways, as they are both used to increase the overall profitability of a business.
These systems overlap in some areas, and can be completely integrated in others. However, as their core functionalities are completely different, it’s best for a business to first look at them as separate, stand-alone systems. When viewed separately, it’s easier to see how ERP and CRM each play a role in improving efficiency and increasing sales.
What is CRM?
Simply put, CRM is a system for recording and storing all information related to customer interactions.
Simply put, CRM is a system for recording and storing all information related to customer interactions. CRM systems like Salesforce and Microsoft Dynamics CRM provide a standardized method for collecting and sharing customer data and cataloging customer interactions. Since all of the data is standardized, it’s easily shared throughout the business. CRM can be used by executives to create sales projections, by sales reps to maintain contact with clients, by shipping clerks to verify addresses, and by the billing department to create invoices. The goal of CRM is to provide a comprehensive store of customer data that can be used to increase sales, improve customer retention, and make customer relations more efficient.
What is ERP?
Where CRM is focused on the customer, ERP focuses on the business. ERP is a system for improving the efficiency of business processes. Like CRM, ERP allows for the rapid sharing of standardized information throughout all departments. Executives, managers, and employees all enter information into the ERP system, creating a real-time, enterprise-wide snapshot. Problems in any area will automatically create alerts in other affected areas. This allows departments to begin planning for issues before they become a problem in that department. In short, by allowing the business to focus on the data, instead of the operations, ERP provides a method for streamlining business processes across the board. Popular ERP vendors like Epicor, SAP, and Microsoft either also make CRM software, or their ERP solutions directly integrate with CRM from other vendors.
A Distinction with a Difference
Though similar in effect, ERP and CRM systems use different approaches to increase profits. ERP focuses on reducing overhead and cutting costs. By making business processes more efficient, ERP reduces the amount of capital spent on those processes. CRM works to increase profits by producing greater sales volume. With a standardized repository of customer data, it’s easier for everyone, from executives to sales reps, to improve customer relations. In turn, those improved relations translate into increased brand loyalty and profits.
CRM? ERP? Both?
ERP focuses on reducing overhead and cutting costs. By making business processes more efficient, ERP reduces the amount of capital spent on those processes.
Whether a business needs both systems largely depends on the size and complexity of the business. Even for a small business, a CRM system is better than a haphazard collection of customer data stored on hand-written notes, in numerous emails, or, worse yet, contained solely in the head of a sales rep. Customer relations are the lifeblood of any business—CRM exists to keep that blood pumping freely.
ERP is an invaluable tool for streamlining complex business processes. Many small businesses start in a single room or small office. All of the “departments” may be within earshot of each other. At that point, software that can provide a real-time snapshot of every department may be overkill. As the business grows, the need for, and benefits of, ERP become clearer. If, at any time, a manager or executive doesn’t know what’s going on in the departments they are responsible for, the time for ERP has long since arrived.
Deciding which system is more important is like deciding between having an engine or having a steering wheel in a car. CRM is the engine that drives a business. It improves sales and increases profits. ERP is the steering wheel—it allows a business to be guided with precision, and to steer around obstacles well in advance. ERP and CRM working together make it much easier for a business to increase profits while reducing costs.
Which Comes First?
A business has to have processes before it needs to worry about streamlining them. And it needs to have profits before worrying about cutting costs. The most streamlined, efficient business in the world is still bankrupt without sales. That’s why CRM is often the best bet for a business’s first investment. Generating and maintaining sales is usually what makes everything else possible. By helping to maximize sales figures, CRM can enable a business grow to the point that ERP becomes a necessity.
Increased capital comes about in two ways: more sales or fewer expenses. Using ERP and CRM systems allows a business to pursue both of these avenues. The CRM system brings in more revenue through better sales figures, while the ERP system reduces overall operating expenses. Together, these systems can help a business pursue growth through efficiency and expansion simultaneously. Used separately, ERP and CRM can still be very helpful, but could potentially limit the business to a narrower avenue of growth.