Everything you need to know about CRM systems.
Summary:
Definition: “CRM” stands for “customer relationship management”. A CRM system is a system used to store information and execute tasks for the purpose of managing customer relationships. It is an invaluable tool in your toolkit for sales and marketing.
What can you do with a CRM? Many different types of data about customers and prospects can be automatically collected and stored using a CRM system. That data can then be used to offer responsive, highly personal and granular communications at a scale that is otherwise impossible. This supports data-driven sales and marketing strategies at scale. It helps marketers target activities to minimise waste, maximise return on investment, create consistent customer experience and grow trust in their brands.
What are the risks? The benefits of capturing and using aggregated data about your customers generally outweigh the risks. The practice allows you to deliver the best quality customer experience at any scale, which is unachievable otherwise.
However, storing information about your customers means that data also needs to be protected with strong security and risk-aware access permissions. You also need permission from people about whom you collect identifiable data to store and use it for specific purposes. Australia is continually tightening its rules about privacy to catch up with technology, so don’t get caught out!
What is a CRM system?
It’s best to begin with a definition.
‘CRM’ is an acronym meaning ‘customer relationship management.’ Customer relationship management describes the way an organisation administers its connections with various customers and is not, per se, a technological intervention; all businesses must manage relationships with customers.
However, when we speak of ‘CRM systems’ we mean a specific kind of technology: a collection moving parts that does the heavy lifting of collecting and keeping data that relates to customers and how they engage with the organisation. This data is drawn from every interaction the organisation has with its customers and prospects, which ranges from clicking on a link on a webpage to actually making a purchase and beyond.
When this data is captured, it can be used to improve marketing and organise and close sales.
CRM data: what is it, and why is it important?
Data-driven marketing is a process whereby data gathered about a business’s market is used to inform marketing strategy and sales tactics. CRM data refers to data held within a CRM system, where it’s stored so it can be viewed and analysed by those within the organisation who need to use it. It’s important because using analysing clean and relevant samples of data relating to customer behaviour allows marketers and sales professionals to target and prospect most effectively, and boosts return on investment by ensuring the judicious allocation of resources.
What types of data does a CRM system hold?
- Identity information, which specifically refers to an individual, such as names, addresses, job title or contact information
- Quantitative data, like average purchase amounts, close rates, or Net Promoter Score (NPS)
- Qualitative data, like notes and answers to survey questions (like, for example, “what factors led you to purchase from us?”)
- Descriptive data, which includes information like their marital status, level of educational attainment, predicted income, psychographics, etc.,)
- Firmographic data, which is mostly relevant for B2B organisations using information like company size, location, industry, revenue, employee count, products and services offered, and even what technologies a company is using (sometimes referred to as technographic data)
- Metadata, including any information that describes the data within your CRM system, such as logs of edits or descriptions of fields
Marketers must understand and describe what information is held in their CRM systems, as this knowledge is key to data governance. In Australia, the use of individuals’ data for sales and marketing purposes is regulated by a range of legislation. The major laws include the Privacy Act, the Spam Act, and the Do Not Call Register Act. At the time of writing, Australia is also working towards significant privacy reforms informed by the digital landscape, so there are changes both recent and pending for the Privacy Act.
What is CRM marketing?
CRM marketing falls broadly under the category of database marketing. It’s a way of using technology to organise, segment, target and personalise your marketing efforts to ensure they’re as impactful as possible. By collecting extensive data about each interaction with customers straight from the source (the customer themselves), an organisation has a wealth of information collated which can then be used to drive more attractive and relevant marketing.
Why is CRM marketing useful?
CRM marketing supports a number of qualities and capabilities, many of which cannot be executed at scale without such a system.
- Consistency
Clean and accurate customer data supports consistent messaging across the whole customer experience, even at scale. Where inconsistent messaging creates uncertainty, consistency improves trust, and allows customers to develop expectations.
- Business intelligence for marketing tactics
Collecting data about customer engagement and behaviour at scale enables empirical tests that direct future campaigns. It empowers strong A/B testing, and means that marketers can compare campaign results in the certainty that they are using the same metrics, which have been measured the same way, each time.
- Personalisation
Personalisation is the low-hanging fruit of CRM marketing: even minor efforts at personalisation, such as using a customer’s name in a message, makes them more likely to engage. At the more advanced end, some companies now use machine learning to offer a hyper-personal customer experience — consider personalisation heavyweights like Netflix, which provides a robust recommendation algorithm based on previously-watched programming.
- Automation
A CRM system permits marketers and salespeople to automate extensively, and this is one of its most powerful applications. By creating automations, marketing and sales activities are sensitive to the timing of customer behaviour, not the staff member’s daily schedule.
While automation isn’t quite as “set and forget” as proponents sometimes make it appear, as it requires maintenance and reviewing, it can be a lot more efficient and certainly cheaper than the manual equivalent.
- Optimising spend
By collecting and centrally storing data about customers, a CRM system can help marketers optimise segmentation and targeting. By allocating resources in this more focused way, it can help reduce waste and boost ROI. A CRM system helps reduce the cost per lead when its used to target the right prospects with the right products and services at just the right time!
- Improving customer experience
By crafting a data-backed strategy that focuses on the needs and individual preferences of customers in a granular way that is only possible at scale via a CRM system, organisations can scale up while preserving an informed and highly personal customer relationship.
- Trust
Brand trust can become a major differentiator in a challenging market, and customers know that a brand that delivers a consistent, responsive experience is more likely to deliver on its other promises, too.
Is it time for your business to get a CRM system?
The question is less “should you use one?” and more “which one should you use?” Unless you’re a sole trader operating on a very small scale, it’s likely that your business would benefit from using a CRM system.
However, there are some clear symptoms that merge when the scale of your business is beginning to outstrip your ability to manage customer relationships in the absence of supporting technology — and that’s when you urgently need to start considering CRM systems.
The top five signs that you might urgently need to consider a CRM system for your business are as follows:
- Disorganised sales
When a business changes or scales up, there comes a point at which staff struggle to understand the internal sales landscape. They might not know where to direct their attention or how to prioritise closing when the lead is hottest. These struggles are failures to access up to date, organised and accurate pipeline information — a clear signal that the business needs to find a new way to store and access it.
- Customer profiling is hard and your market seems confusing
Sometimes a business has plenty of customers, but achieving visibility over their behaviour and characteristics has become so challenging that developing customer profiles seems impossible. That visibility is attainable through use of a CRM system, which will provide a very clear idea of who is using a product or service. And depending on the system, some of them will even use machine learning principles (often lately rebranded as AI) to automatically create those profiles by finding trends in customer data.
- Your customer experience is poor
When customer records are not available when and where a business needs them, and there’s no easy access to information about customers, customer experience suffers. Customers may be presented with messages which are too broad, inapplicable to them, confusing or contradictory. Customer service becomes disjointed and retention grows more and more challenging. A CRM system can help manage customer data in such a way as to ensure consistency of messaging and granular segmentation and personalisation to drive a gold-star customer experience.
- Collaboration between marketing and sales is poor
Poor collaboration between marketing and sales can lead to missed opportunities and lower revenue. Communication between teams is key to ensuring that goals and activity aligns across a business, of course, but that communication can be centralised and facilitated via a well-operated CRM system. The data captured in a CRM system can also be used to describe and track a business’s sales pipeline and review performance metrics.
- Forecasting and reporting is laborious
In many organisations, the end of the month is a time for extracting CSV files from an array of systems, transforming and collating data, and slowly arriving at a report that describes the same information that was presented last month. These reports are usually necessary, but they don’t have to cost hours upon hours of administrative labour. Most CRM systems can be used to generate and supply reports that meet specific information requirements automatically. This saves hours.
What functions does a CRM system actually enable?
While a CRM system stores customer information, it offers greater utility than simply being a repository for that data. Although the integration capabilities of CRM systems vary across products, they typically speak to manifold other marketing and sales systems, connecting services and automating important tasks.
- Automation
A lot of activities can be automated using a CRM system. Tasks like following up a call with a personalised email, introducing a newly converted customer to an account manager, adding CRM contacts to communication lists or assigning them to a sales associate, sending customised reports at the end of the month — all of these can be automated. The capabilities of individual systems vary and range from those which require every automation to be created step-by-step in a dedicated builder, all the way through to those which employ machine learning to offer automations based on user behaviour.
- Segment customer data
Using the data stored in a CRM system, an organisation can segment its customers and prospects into groups and ensure that only the most relevant messaging reaches each recipient. Segmentation can be based on
- Personalise communications
Personalisation improves relevance and makes customers more likely to engage with marketing content. It has been known for many years that even something as basic as a personalised subject line can make recipients more likely to open an email.
- Track engagement with marketing content across a wide array of channels
Ranging from forms and landing pages to social media, email, SMS or direct mail, this tracking helps businesses identify what kinds of inquiries come from which channels and where customers are most likely to make contact. This helps marketers streamline the allocation of resources.
- Offer automated lead scoring
Lead scoring is a way of measuring the degree of engagement a prospect has with an organisation. A CRM can help a company categorise leads as cold, cool, warm or hot and guide sales representatives and marketers to make the right offers at the right time. A CRM system can also provide support for rewarming cold leads.
- Store templates centrally to ensure consistency
Consistency in branding preserves trust with your customers, and ranges from elements of written tone to graphics, sounds or colours. A CRM system can store templates for communications that help maintain the image the company presents.
- Store unsubscribes
In Australia, when communicating to a list of customers through SMS or email, we must comply with the Spam Act, which requires that marketers retain sufficient contact information to prevent them from contacting people who have unsubscribed. A CRM system can store this information and ensure no accidental spam is sent.
- Manage communication preferences
Many marketers employ preference centres that empower customers and prospects to granularly manage the kinds or frequencies of communications they receive. This averts unsubscribing and provides further insight into customer interests than can inform segmentation and personalisation. This is also data that can be stored by a CRM system.
- Track important metrics for sales and marketing teams
Metrics such as the deliverability of communications and unsubscribe rates (which can impact sender reputation), sales converted, cost per acquisition, average dollar amount per sale, return on investment, or attribution to specific sales or marketing activities are important to sales and marketing teams. They are significantly easier to track when a CRM system is used to store relevant data.
The extensive capabilities of a CRM can improve sales for a lot of organisations, but organisations looking to scale up or support their current scaling efforts are particularly likely to need to find a technological solution to offer customers the kind of consumer relationship to which they’ve become accustomed.
If your organisation is in this position, and you’re wondering what kind of CRM system might suit your needs best, you’re in luck: the DCA team recently wrote a blog that addresses just that question.
