Difference Between CRM & ERP, and How They Function

Enterprise resource planning (ERP) and customer relationship management (CRM) are often regarded as the same sides of the coin. In essence both these are similar considering the fact that they both help make a company work with greater profitability and thus are good for its health in both short term as well as long term. At times, these tend to be used interchangeably and may become fully integrated as well. However, it needs to be remembered that these concepts are basically different and this is why it is important that companies look at them as completely separate entities. When they are viewed like that it becomes much easier to see why they help a company increase its sales and levels of efficiency in general.

CRM explained

In layman’s terms, CRM is basically a system that records each and every interaction that takes place with a customer. The most prominent names in this regard are Microsoft Dynamics and Salesforce. These systems provide a method that is standardized and used for sharing and amassing data pertaining to customers. They also catalog customer interactions. The standardized nature of the data allows it to be shared in the company itself. Executives can also use this data to make sales projections.

Sales representatives can use this system in order to keep in touch with the clients and it can be used by shipping clerks for verifying addresses. The billing department can use CRM for creating invoice. The main aim of CRM is to provide a comprehensive database that has all the information regarding customers so that it can be used for increasing sales, retaining more customers, and bringing a greater level of efficiency regarding customer relations.

ERP explained

The main difference that ERP has with CRM is that the latter is solely focused on customers and the former is more geared towards the business in general. Its primary aim is to make the business systems in a company function with a higher level of efficiency. Just like CRM, it is possible to share a lot of information quickly within various departments of a company by using ERP facilities. The system is fed information by executives, employees, and managers. This helps in creating a snapshot that functions on a real-time basis and provides a picture of the whole enterprise. This system also ensures that if one area faces any problem other departments would come to know of it as well.

You may want to read on the history of ERP to gain more insights.

Thanks to this knowledge it is possible for departments to plan in advance so that the same problem does not affect it and, more importantly, it does not have the same problem. In case of ERP the focus is always on data instead of operations and this means that it is possible for companies to streamline all the processes across the organization. A number of ERP vendors such as Epicor, Microsoft, and SAP are also dabbling in CRM these days. At times, there are vendors that are coming up with a combination of the same.

Distinctions and differences

As may be clear by now, in spite of having a similar effect both these processes differ in terms of the approach that they take. The main aim of ERP is to bring down the overheads and reducing the expenses. ERP makes business processes function with a greater deal of efficiency and this way the capital spent on the processes go down. CRM aims at increasing the sales volume of a company and thus making it more profitable than before. Since it is a standardized storehouse of customer data it makes it convenient for various people in a company such as sales representatives and executives to improve relations with the clients. When a company is able to improve relations with customers it also helps in them being more loyal to the said brand and in turn this helps the company reap greater amounts of profits.

Can a company need both?

This depends a lot on how large the business in question is and how complex its operations are. Even if it is a small business it is always better to have a CRM system rather than a set of handwritten notes that have customer data strewn on them in a haphazard manner. In any business customer relationships are like the blood that sustains the body and with CRM this blood keeps flowing in a healthy state. ERP comes in handy as far as streamlining business operations is concerned. At times, it has been seen that companies may start at just one room or a flat. In that case the different departments will be located at the space of a room. At this point there is no need to have an ERP as it may be too much for the company. However, as and when the business grows there is a greater need to use ERP. At an advanced stage of the company’s operations it is always better to have ERP.

Which one is more important?

It is really hard to determine which one of them is more important than the other. It is like deciding between steering wheel and engine. CRM is basically the engine of a business. It makes the company more profitable by increasing the sales. Meanwhile ERP is like the steering of the business. It helps in the organization becoming more precise than ever and to avoid problems in the future by steering around them. When both are incorporated in the working setup it becomes easy for a company to reduce costs and also make profits.

Which one should be used first?