CRM vs ERP: What’s the Difference and Which is Best for Your Business?
If your task is to automate business processes, or you know you will inevitably run into that task in the nearest future, it is very important for you to find a clear-cut answer to this question.
The growing demand from various companies for tools used for business automation has caused an adequate market reaction. There are many software options applicable to solving such issues, and they are subdivided into two main types: CRM and ERP systems.
It may be rather difficult to understand how they differ and which option will be the best for your business. Let us give definitions of what a CRM system is, what we can call an ERP system, and how they differ among themselves.
What is CRM?
CRM stands for Customer Relationship Management. The software helps to store and systematize customer data, applications, and transactions, as well as exchange them with other company’s employees.
Trying to provide the simplest definition, CRM is a system designed to track and store all data related to customer interaction processes.
When implementing such a system, the main task is to systematize and provide customer data to employees to improve the service quality, boost sales, increase customer retention rate, and ensure the growth of their loyalty.
CRM implementation has several advantages for a company:
- Sales processes standardization and optimization.
- Real-time employee activity and lead quantity monitoring, as well as monitoring of interactions with customers.
- The possibility to track the sales funnel and create customized reports based on the relevant data. For example, it is possible to create separate reports on all directions in which the company is engaged.
- Building communications among employees. It is possible to set tasks, assign responsible persons, and monitor the task implementation.
- Assess advertising channels efficiency. For example, it is possible to calculate the sales funnel conversion at each stage.
- Upload data to other services for further analysis, or collect everything in a single management center, connecting third-party services using integration.
- Automation of recurring tasks, which minimizes the human factor risks and increases the company’s reliability and efficiency.
However, all of this applies only if we are talking in general. In fact, most CRM systems are able to efficiently solve only some of the tasks listed. That is why it is worth choosing a product like this based on individual needs and the priority of specific objectives.
What is ERP?
ERP (Enterprise Resource Planning) is a data system that integrates all the company’s activities in order to optimize resources, work processes, and their monitoring. CRM and ERP mainly differ from each other in their practicality for business: CRM is useful for any company, and ERP is a tool primarily meant for large businesses.
Such software stores, processes, and maintains a single company database, synchronizing the activities of all its units. Once entered into the service, the data becomes available to all users. This way, it is possible to organize a single data environment for all the staff employed by the company.
ERP implementation has several advantages for a company:
- Integration of all company processes in one interface – from sales to project management, from bill payments to communications among employees.
- Providing easy data exchange between different departments and the possibility to coordinate their actions.
- Global monitoring: in the ERP system, the company management sees what is currently going on in a particular department and the company as a whole.
- By allowing focusing on common data instead of individual operations, the ERP system allows making decisions necessary to optimize business processes in all directions.
This complex system is not self-configurable. In fact, a team of specialists is necessary to introduce it. The ERP system is aimed at keeping resources under control and turning certain parts of the company into a single mechanism.
Let us conclude: When is it better to choose CRM over ERP, and vice versa?
As you can see, there is a difference between CRM and ERP systems, and, sometimes, it can be very significant. Actually, CRM focuses on the processes dedicated to interaction with customers, and ERP focuses on business.
It is impossible to give a decisive answer to the question of which one to choose because the solution depends on individual needs, opportunities, and business size.
Here is what must be taken into account first of all:
- A specific direction or a wide range of objectives? If you want to organize the process of interaction with customers, organize sales, or manage tasks, it will be enough to start using a niche CRM. If you have to monitor and optimize the operation of the entire company and not just a specific department, this will be the task for an ERP system.
- Business processes complexity. ERP will be a good choice for large-scale production or a company where projects gradually move from one department to another. However, a CRM is more suitable for an online store working according to the “buy-and-sell” model since efforts are focused on building interactions with customers here.
- Available budget. CRM systems are more affordable, and it is easy to set them up independently. However, an ERP system needs software customization to meet specific business needs, organize documentation on business processes, implementation, and staff training to use it.
For most companies, a CRM system will suffice. Moreover, the modular nature of most leading products of this type almost always allows integrating CRM into ERP in the future when your business becomes large and complex enough to allow the scale effect to recover all the implementation costs necessary for such products.
If you do not really like ready-made solutions available on the market, we can develop an individual product for you. It will be completely focused on solving your particular business objectives. Contact us, and we will advise you on all issues.