There is a lot of hype about CRM and Gartner forecasts that adoption of Software as a Service (SaaS) CRM would reach 80-85% by 2025. Although the industry seems to acclaim the usefulness of CRM, questions still hover in our minds. What is actually a CRM? How does it work? What does it mean to the business? Is it really necessary? These are some of the questions that often intrigue us. Is all the hype worth it? Is it worth for money? Let’s deal with these questions to make the concepts clearer.
If you look at the meaning of CRM according to a marketing dictionary, it would define it as “an integrated business model for managing an organization’s interaction with the present and the future customers with the aim of increasing profitability.” Is it really so? Let’s see what a CRM does to know whether this definition works and if not what is a CRM and what it actually means for a business. To understand what a CRM is, let’s break down the definition into three key components namely customers, interaction, and profitability. Let’s now delve into three components and find out how these elements increase profitability.
The CRM programs normally work on the premise that you already have customers which mean there are consumers of your product or service already. CRM does not manage your prospects either. People may still have to spend some amount on Google ads to get more traffic on the website or may have to buy leads from lead generating companies. Then the question remains what does the CRM do? It doesn’t manage the prospects but it is a tool that convinces the customers to buy or helps in convincing customers to buy.
How does it happen?
CRM helps any organization speed up the marketing funnel by helping the sales and marketing people to convince customers. If you are wondering how it is done, it is achieved in many ways. Out of these, transparency is one of the major factors that is brought about in an organization creating a more collaborative and effective workflow. This kind of collaboration does not only enhances accountability but helps workers to do the job better. In turn, it helps the organization to be more customer centric and thus facilitates in increasing conversion rate.
An example would make the point clear. When a sales representative makes a follow-up client call, they would have access to information, whether the customer issued a support ticket, opened up emails, sent any emails, or any other actions taken by the company or the customer. So employees are better informed and equipped with the information and knowledge to help their clients to solve their issues, concerns and pain points. This ultimately makes an organization more customer-centric, systematic, and productive.
Interaction refers to the engagement between an organization and a brand and vice-a-versa. The CRM program facilitates the interactions between the organization, customers and the prospects with the aim of building a relationship which can be measured in terms of the success of those interactions. This may be by measuring the open rates or the click-through rates on the marketing communications or by any other means. The interactions can be enriched when there are segmentation and personalization of the customers. According to a study by Experian “personalized messages deliver 6X times higher transaction rates, however, 70% of brands fail to use them”. Here, the CRM program helps in personalizing the customers and facilitates effective interactions through segmentation and targeting the right customers by obtaining and analyzing the data. CRM also helps in relationship building and assists in enriching the customer interactions by triggering messages based on behavioral and demographic data. Results have shown that these automated and personalized messages and emails create higher engagement generating higher revenue.
The effectiveness of a CRM would surely be measured in terms of the profits it generates or the returns on investment (ROI). The measurement of ROI of a CRM may be hard to arrive at as it delivers more profits by increasing transparency, bringing a systematic approach, and predictability through analysis of data. The measurement of ROI of a CRM may be carried out by switching off the CRM and watching the effects on the profits. Nevertheless, organizations who have put CRM to use have found it indispensable after a short while due to the ease of work it brings to the table.
The compelling reason why CRM surges profitability is, it increases productivity by better utilization of resources as it helps in switching from performing repetitive tasks manually to a more automated environment. Thus, a CRM helps in attaining higher margins of profitability by driving engagement with the existing customers, prospective customers, and the internal customers as well.