What Is a CRM System

Date: 2023-09-14 | Time of reading: 6 minutes (1151 words)

CRM, which stands for Customer Relationship Management, is a tool that collects and stores data about customers, employees, their interactions, and automates processes within a company. Working with CRM is beneficial for businesses in several ways: it ensures data security, optimizes sales and marketing efforts, and simplifies staff activities.

In the article, we will explain why a CRM system is needed, outline its working stages, discuss different types of CRM, and help you determine whether it's necessary for your organization.

Pipedrive CRM system for businessesA CRM system for businesses by Pipedrive

Vtiger CRM system for businessesA CRM system for businesses by Vtiger

Why a CRM system is required

A CRM program is essential for simplifying the work of sales managers, marketers, and accountants. Here are the functions that a CRM system performs:

  • Data storage and structuring. It collects and organizes various types of information, including inquiries from different channels, phone calls, emails, payments, deal statuses, and more.

  • Data security. Different access levels to data are provided to personnel to ensure information security.

  • Automation of business tasks. It reduces time spent on repetitive tasks such as registering inquiries, generating templated documents, creating invoices, sending SMS messages, and tracking important dates.

  • Organization and regulation of work. CRM systems define service standards. New employees can quickly adapt to their roles, and experienced specialists can efficiently complete deals.

  • Marketing optimization. CRM segments customers, identifies their needs, personalizes offers, evaluates the results of marketing campaigns, and helps target marketing efforts effectively.

  • Employee performance tracking. CRM records manager-customer communication through various channels like chat, phone, email, and others. It collects data about employees, including call and deal counts, the duration of customer interactions, achieved goals, and more. This allows managers to monitor the effectiveness of different departments and individual employees.

  • Reporting and analytics. CRM analyzes work effectiveness based on key performance indicators (KPIs) such as Customer Lifetime Value (CLV), Return on Investment (ROI), Customer Acquisition Cost (CAC), the percentage of successfully closed deals, and average order value.

  • Forecasting. CRM systems track a company's profitability, predict revenue, and plan and adjust strategies.

How CRM works, stagesStages of CRM work

Stages of CRM work

The concept of a CRM program encompasses even the most basic system for collecting customer data and communicating with them. Each company decides which functions its CRM will perform. Let's look at a general mechanism of how CRM works:

  1. Lead capture. At this stage, various communication channels are used to capture leads. The program tracks where the potential customer came from, such as phone calls, emails, organic search, and more. The lead is then recorded and assigned to a manager.

  2. Strategy definition and funnel initiation. Depending on the customer's response, the system develops an action plan, which may include sending personalized offers, launching email campaigns, or scheduling meetings. An automated script is initiated to guide the employee on how to lead the customer towards closing a deal. The CRM system provides reminders for follow-up calls, generates contracts or invoices, and creates template emails.

  3. Deal closure. If the deal is successful, the individual becomes a permanent customer. In the future, they may receive special offers, promotions, discounts, and reminders.

  4. Performance analysis. In the final stage, the CRM consolidates the collected data and prepares reports on key performance indicators (KPIs), return on investment (ROI), customer lifetime value (LTV), and more. The sales funnel is analyzed at each stage, highlighting areas of improvement.

CRM systems classification

Main types of CRM systems

Operational CRM. These systems automate routine tasks such as handling incoming calls, website inquiries, invoicing, and storing and organizing customer data. However, operational CRMs are less common today due to their limited functionalities.

Marketing CRM. Designed for analysts and marketers, these systems offer the same functions as operational CRMs but also analyze sales results and forecast business outcomes. They help businesses make data-driven marketing decisions.

Combined CRM. These systems combine features from various CRM types and are popular among large companies. They offer customer communication tools, data collection and processing, website order tracking, online chats, social media integration, and also automate document management and assess the effectiveness of marketing tools, collecting reports.

CRM systems by data storage type can be:

Cloud-based version. In this setup, the CRM system is hosted on the developer's server. The company purchases the software, receives login credentials, and can start using it. The advantages of a cloud-based version include quick setup and cost-effectiveness. However, it can be more challenging to customize this type of system to meet the specific needs of an organization.

On-premises version. This version is installed on the company's own server, where all data is stored. This setup is considered the most secure but can be more expensive as it requires additional expenses for server maintenance and the work of IT specialists.

Who a CRM system is suitable for

CRM is beneficial for companies that sell products or services through a sales department, whether they operate in the B2B or B2C space. Examples of such companies include real estate agencies, e-commerce stores, salons, travel agencies, and others.

Your organization may benefit from CRM if you have:

  • a long sales funnel where customers don't make immediate purchases;
  • a large customer database;
  • multiple traffic channels;
  • long-term relationships with customers;
  • data analysis that consumes a significant amount of time.

CRM modules

CRM modules can vary depending on the type of business, but a typical CRM system should include the following core functionalities:

  1. Deals: Records the history of interactions with existing customers and captures new inquiries and requests.

  2. Sales: Includes the setup and tracking of the sales funnel, task assignment, and monitoring of deals at each stage.

  3. Business processes: This module is designed to remind managers of tasks, send emails, update customer profiles, and more at the right times.

  4. Analytics: Gathers data and uses it to create graphs, charts, and tables for informed decision-making.

  5. Task management: An essential tool for efficient organization. Task reports display completed and overdue tasks of employees, allowing tracking of each specialist's work performance.

  6. Integration: Connects the CRM system with email, messaging platforms, social media, and websites. Integration enables data exchange between programs, ensuring that inquiries from various sources are not lost.


CRM is an essential tool that helps manage the entire customer communication cycle. CRM is valuable for companies with a large customer base. There are cloud-based and on-premises versions of CRM, differing in data storage methods.

CRM software automates repetitive tasks in business and facilitates communication with customers. It also stores customer data, including their orders, preferences, and delivery methods, among other details.

Proper CRM implementation can lead a company to increased sales and loyal customers.







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