Advantages and Disadvantages of CRM

CRM Advantages and Disadvantages

Many successful companies have implemented CRM. However, what features CRM has, and the specific advantages and disadvantages are not yet well known.

One of the reasons is that there are many types of CRM software, SFA, and other similar tools, so there are hurdles in understanding and selecting the right one.

In this article, I will explain the basics of CRM, implementation points, the differences between SFA and CRM, and the advantages and disadvantages of CRM in an easy-to-understand manner.

See also:

What is CRM?

What does CRM mean?

First of all, I will briefly explain CRM itself.

To determine the benefits of implementation, you need to know what exactly you will do.

Many companies have somehow implemented CRM but have not established it.

So I will explain CRM, including the difference from SFA, which is often compared. There are three specific explanations:

  • CRM is a method to maximize profits by focusing on customers
  • CRM as an IT tool
  • Typical functions of CRM

Now, let us check the overview of CRM.

CRM is a customer-centric approach to maximize profits

Simply put, CRM is a management approach that aims to maximize profits by developing business with the customer in mind.

To add a little more, it is an approach that aims to accurately understand customers and implement the most appropriate strategies, as values are becoming more diverse and markets are becoming more fragmented.

CRM may be an image of IT tools, but it is essentially a sales management that aims to build good relationships with customers.

CRM, by the way, is an abbreviation for Customer Relationship Management.

And the reason why CRM has become more necessary because it is reliable and efficient to make profits in this era.

CRM as an IT tool

In a broad sense, CRM is a management method itself, but today it is more often used to refer to IT tools.

This is because the development of IT systems has made it possible to accumulate and manage a vast amount of customer information and to visualize the results of customer information analysis.

With the advent of CRM as an IT tool, it became possible to apply optimal sales to each customer, and visionary companies adopted it to develop customer-centric businesses.

The effectiveness of CRM has become well known because many companies have achieved several times better results and significantly reduced unreasonableness, waste, and inconsistency.

I will introduce specific functions from the following.

Typical Functions of CRM

The following is a brief introduction to the typical functions of CRM:

  • Customer management: Manage most basic information of each customer, purchase and response history, etc., in one place
  • Customer analysis: Analyze sales trends and acquire new customers
  • Inquiry management: Identify common inquiries and automatically generate forms
  • Email distribution: Automatically send email newsletters, product information, and other information
  • Attracting customers to seminars and events: Selecting potentially interested parties and automatically creating lists

While the effects and functions of CRM are becoming more and more widespread, why it leads to increased sales and why it will become increasingly necessary in the future are still unknown.

Since it affects the optimal CRM selection and on-site retention, I will explain the background that leads to sales and profit increase by implementing CRM.

Why do people use CRM?

The following are three reasons why successful companies have been able to achieve results through the implementation of CRM:

  • Changes in the domestic market due to diversification of values
  • Existing customers tend to be taken over by other companies
  • Necessary for know-how accumulation and inside sales

Let us look at each of these in detail.

Changes in the domestic market due to diversification of values

Today’s market is becoming more fragmented and changing due to diversifying values, and the need for CRM is increasing.

In short, if you do not have an accurate understanding of who needs your products and why you will not be able to sell them.

If you remember the situation before the development of the Internet and smartphones, you will realize that it is getting harder to grasp the actual situation of customers.

During the period of high growth and the bubble economy, it was easy to acquire new customers in any industry. We could regain customers who switched to other companies by creating high-quality, low-priced products.

But now the situation is changing. Many successful companies have begun to adopt CRM because they feel the need to know what exactly their customers are doing.

Existing customers tend to be taken over by other companies

In many industries, existing customers are the primary source of sales, but there is a tendency to lose existing customers in modern times.

That is why you need CRM to know exactly how your existing customers are doing and continue to take the optimal approach.

The increased risk of customers being taken by other companies is due to the rapid changes in values and the rapid evolution of technology.

The fourth industrial revolution, which will fundamentally change social conditions and values, will eventually occur, but we cannot control the external environment.

So this is why we need a CRM that can aim for corporate activities that can continue to provide value to existing customers while being cautious of the external environment.

Essential for know-how accumulation and optimal marketing

One of the reasons behind the success of CRM is that it can meet the demands of companies that want to visualize their success formulas and optimize their marketing.

CRM can accumulate and analyze information for potential customers, existing customers, and excellent customers, leading to optimal sales and information provision.

In other words, you will be able to find your unique success formulas and optimize your marketing.

If you can prepare a CRM for your inside sales force, it is possible to nurture them into the best customers (lead nurturing).

Inside sales, like CRM, is a field that has been attracting attention for its ability to produce significant results.

Differences between CRM and SFA

Now that you have a better understanding of CRM, I will give a brief explanation of SFA.

To briefly explain the differences, CRM specializes in marketing and SFA specializes in sales activities, but knowing the differences between them will help you make a better choice.

So, let me briefly introduce the features of CRM and SFA.

Features of CRM

The core functions of CRM can be broadly categorized into the following three categories:

  • Customer database management (customer information, case information)
  • Promotion function (approaching customers)
  • Reporting functions (work efficiency, PDCA cycle)

In addition to the traditional quantitative information, such as the company name and name of the person in charge, CRM can also manage customer attributes such as purchase purpose, orientation, and needs.

It can also manage information on purchase performance, budgets, and prospects for the next fiscal year. 

CRM is a marketing system that nurtures customers based on such information.

Not only salespeople but also managers of sales departments and marketing departments can utilize the system. So you can carry out integrated activities to increase sales within the company.

Features of SFA

The core functions of SFA can be broadly classified into the following three categories:

  • Customer database management (customer information, deal information, negotiation information)
  • Visualization of sales activities and figures to facilitate the understanding of the current situation (progress management)
  • Functions to streamline sales activities (document creation, management functions, process, and information sharing)

SFA supports sales activities by recording and accumulating information on sales activities such as deals and negotiation information.

SFA can also be called a system for sales that improves operational efficiency by using data as a reference for planning strategies, sharing data within departments, and reducing the need for paperwork and reporting.

Advantages and Disadvantages of CRM

In this section, I will explain the advantages and disadvantages of CRM.

I have explained the necessity of CRM, but the fact is that CRM is not a panacea and has its advantages and disadvantages.

So, let us take a closer look at the advantages and disadvantages of CRM.

Advantages of CRM

The following are the three main advantages of CRM:

  • Centralized management of customer information allows for departmental collaboration
  • Improves customer satisfaction
  • Accelerate the execution and improvement of the PDCA cycle

Centralized management of customer information allows departments to collaborate.

Customer information managed only by sales representatives may be poorly managed, or follow-up may not be appropriate by each person in charge. 

However, by centrally managing the information in CRM, you can visualize information and perform appropriate follow-ups.

Also, by applying analysis to the shared information, customers who have no contact with the person in charge may become a list of customers with the potential to become prospects.

It can also be used as virtual model data for marketing, leading to new strategies.

Leading to increased satisfaction

Customer information can be shared within a department or company, allowing multiple departments and staff to collaborate to create a quick and more effective approach. Also, by visualizing customer information, it is possible to accurately grasp customer needs and make proposals at the optimal time.

Besides, by using the marketing function, you can limit the number of potential customers with a high degree of certainty, so you can pinpoint and reach out to those who are highly motivated to buy.

From the customers’ perspective, they can receive information about products and services they have purchased in the past and useful information that matches their attributes, such as service and support.

Also, even if the salesperson changes, the system is centrally managed so that there is no information leakage and no stress with appropriate follow-up.

Accelerated execution and improvement of the PDCA cycle

From the history accumulated in CRM, you can analyze customer trends and effects and execute the PDCA cycle that leads to process improvement. 

By repeatedly executing the PDCA cycle, processes and strategies will be better improved, and the system will be flexible enough to change.

Disadvantages of CRM

The following three are the most common disadvantages of CRM:

  • Labor-intensive to build customer data
  • Implementation and operation costs are high
  • Not immediately effective

I will explain each of them in an easy-to-understand manner.

Building customer data is labor-intensive.

Simply implementing a CRM system is not enough.

To succeed in customer-centric businesses, you need to work on reforming your systems and processes as well.

For example, a company that shares only a business card database with the person in charge of managing customer information must change the process to centralize customer information as soon as possible.

Implementation and operation costs are high.

CRM systems have various fee structures depending on the number of accounts, functions used, and data capacity, on-premise or in the cloud.

In general, high functionality, fast processing, and higher data capacity are more expensive.

On-premise and open source systems also have running costs, so the relatively inexpensive cloud-based system services are popular.

No immediate effect

CRM is not something that shows effects immediately after implementation.

The purpose of CRM is to improve customer satisfaction and develop and maintain excellent customers, so it is difficult for the effect to appear immediately.

CRM can only be effective when firmly established. After implementation, it takes a period of trial and error, such as reviewing internal processes, until the system is firmly in operation.

If the effect is hard to appear, it is easy to be reluctant to implement and operate a system, so it is necessary to continue using it until the system is established with a clear purpose and to build a system that you can use continuously.

Three key points to choose the best CRM

What should be the criteria for selecting a CRM tool? Below are some points to consider when selecting and comparing CRM tools. Select the best one for your company:

  • Ease of use and visibility
  • Does it have all the functions you need?
  • Know-how and support

Ease of use

First of all, the system must be easy to use. CRMs that are difficult to use and difficult to view information may become a burden to the salespeople who use them in the field. For example, it is necessary to have a system that is easy to use and does not burden the user, such as easy input, the ability to work outside the office with smartphones and tablets, and good operability.

Ease of viewing

Ease of viewing is also directly related to ease of use. It is also necessary to easily and quickly check the collected data in graphs and tables. Lack of essential functions is a problem, but be careful not to have too many functions that are difficult to use or information that is difficult to see.

Know-how and support

The effect of CRM does not appear until it becomes established.

When selecting a product, you should consider the environmental support for CRM implementation and the know-how and follow-up services provided until the product becomes established.

Choose a vendor that has the know-how and is well-equipped to support you.

How to use CRM after implementation

By storing and utilizing information in CRM, you can efficiently manage KPIs. This section will introduce how to use KPIs, essential points for setting KPIs, and examples of CRM applications.

Clarify what your goals and challenges

To create a strategy for using CRM/SFA and to set KPIs, it is necessary to clarify: what your issues are and what you want to achieve by implementing CRM/SFA.

In many cases, companies considering implementing CRM/SFA do not have a clear idea of the specific issues, the ideal image they want to achieve, and the indicators to measure them.

It is not easy to clarify issues without visualizing the processes at the sales floor, and there are many cases where people start by organizing data but end up at a loss.

So make sure to clarify the goals and issues.

Organize the issues and clarify the key performance indicators

Once you have sorted out the issues and clarified what to do to achieve the goals, you will naturally know which indicators to set KPIs.

KPI is an intermediate indicator to reach the goal, and the specific value of KPI is a feasible target value derived from past sales and other data.

Review the progress of the strategy as needed while monitoring the achievement of KPIs.

For example, in the sales department, it is necessary to visualize sales information by clarifying the points you should check.

In the case of the following example:

I want to reduce the amount of administrative work to ease the burden on sales staff working overtime.

It is necessary to define the indicators (amount of action and time) related to business efficiency.

And in the case of the following example:

I want to improve the sales order rate and increase the productivity of each salesperson.

It is necessary to define indicators related to the quality and quantity of sales (closing rate, number of deals, etc.).

Start by accumulating information and sharing it

If you have successfully implemented a CRM, the basis of using CRM is to manage and analyze customer information. However, running a CRM from scratch requires a certain amount of money and effort. As mentioned earlier, implementing a CRM does not necessarily mean that it will be effective immediately.

It is common for companies that have not implemented CRM to record customer information in their customer database. A customer database in general operation is limited to customer contact information and purchase history.

In many cases, further information is left to the person in charge. With this, it is difficult for a company to make effective use of customer information.

The difference between CRM and a mere customer database is that there is a big difference in the amount of customer information accumulated and the ability to analyze it for business.

CRM allows you to manage very detailed information. For example, quantitative data such as company name, department name, and name of the person in charge (key person), and qualitative data such as purchase purpose, orientation, and needs are included and managed as customer attributes.

Also, register information about purchased products/services, purchase results such as transaction volume/amount, frequency, and budget, and room for expansion such as next purchase prospects. The use of CRM begins with accumulating all this information and sharing it internally.

The purpose of CRM is to increase customer satisfaction by providing the most suitable products and services to each customer and to build good relationships with customers to maintain their purchasing behavior. For this purpose, CRM should accurately accumulate detailed information about customers.

From existing customers to excellent customers

To get the benefits of CRM relatively early, it is a good idea to start by applying it to your existing customers.

Analyze the information of your existing customers and provide products and services that meet their needs individually. By doing this, you can increase customer satisfaction and increase the number of potential customers.

If your existing customers grow into potential customers and continue to purchase your products and services, you will be able to secure a certain number of sales and profits. Targeting existing customers will also contribute to cost reduction.

Acquiring prospects as new customers is several times more expensive than retaining existing customers, so it is better to look at the management status and effectiveness of existing customers.

When customer information can be visualized and analyzed from multiple perspectives by utilizing CRM, it becomes easier to find bottlenecks. Since it will be easier to find the next strategic material, it is possible to speed up PDCA in the above series of steps.

Identify the issues in your department and select the right CRM solution

CRM is a customer information management system designed to improve customer satisfaction and brand power. Therefore, there is no immediate visible effect, such as sales increase once CRM is implemented.

However, if you continue to use CRM, it will gradually lead to sales and business results by developing potential customers and acquiring new customers. For this reason, it is necessary to select the most suitable CRM solution for your company and continue to implement it without rushing the results from implementation to establishment.

See also:
Reasons for Failure in Implementing CRM Tools
Open Source CRM Software and Tools
Customer Relationship Management Tools / CRM Software
CRM System
What is PDCA? – How to Implement the PDCA Cycle

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