CRM vs. ERP: What’s the Difference & Which is Best for Your Business?
Spend even a little time in the business tech space, and you’re bound to hear the question: “which is the better investment, CRM or ERP?”
Both CRM and ERP offer powerful tools to boost your organization’s profitability. And yet, a surprising number of business owners aren’t really sure what each system can do.
Some seem to think the two systems are mutually exclusive; others see them as two sides of the same coin or even two names for the same thing.
Both CRM and ERP offer powerful tools to boost your organization’s profitability.
And to a degree, that confusion is understandable. After all, some CRM and ERP features often do overlap, and many systems are integration-compatible with one another. Some ERP systems even include lightweight CRM or CRM-like features.
But as is so often the case, the truth lands somewhere in the middle. Despite their similarities and overlaps, there are real, important differences between the core principles and functionalities of CRM and ERP.
Understanding those differences is key to making the decision to invest in either system (or both!) intelligently, correctly, and profitably.
So in this article, I’ll explain the fundamental differences between CRM and ERP, as well as what those differences can mean for your business.
What is CRM?
CRM stands for “Customer Relationship Management.” CRM is specifically designed to increase sales from both new and repeat customers. It helps you improve customer relationships by enabling you to create a consistent, high-quality experience for both customers and prospects.
Strong relationships create loyal customers, and loyal customers increase your long-term profitability.
CRM is also about improving your ability to connect with prospects, and then ensuring timely, reliable, consistent, and quality service as those prospects become customers. Better prospect and customer relationships create loyal customers, and loyal customers increase your long-term profitability.
Put simply, CRM gazes outward, to where your team interacts with customers and prospects. CRM is therefore particularly useful to your sales, customer service, and marketing teams.
A well-implemented CRM system can help your team:
- improve response time
- pursue new leads and opportunities more effectively
- create, automate, evaluate, and iterate marketing campaigns
- standardize and streamline the sales process
- analyze customer interactions and purchasing patterns
- facilitate consistent, high-quality customer support
- automate repetitive tasks
What is ERP?
ERP stands for “Enterprise Resource Planning.” ERP is designed to improve the efficiency of your business processes to reduce overhead and cut costs.
CRM gazes outward; ERP gazes inward.
But while CRM focuses on prospect and customer interactions, ERP focuses on all aspects of your business. And while CRM focuses on boosting sales, ERP focuses on reducing costs, increasing visibility, and streamlining processes.
So whereas CRM gazes outward, ERP gazes inward at what your team is doing and how efficiently they are doing it. ERP, then, can benefit any division in your enterprise.
Properly utilized, ERP can help your team:
- enter and track real-time business process information within and across departments
- alert team members when issues elsewhere in the company may affect them
- plan department- and enterprise-level strategy based on enterprise-wide knowledge
- process orders, update accounts, and trigger automatic alerts to fulfill and bill those orders
- manage manufacturing and supply chains while creating records and alerts at every step in the process
- track recruiting and hiring initiatives
- manage payroll, benefits, and personal information for employees
CRM or ERP?
If you’re choosing between CRM and ERP, there are three main factors to consider:
1. needs
2. investment
3. scale
There are a lot of similarities between CRM and ERP, but each serves different needs: CRM is built to boost raw sales numbers; ERP is built to reduce the cost of each sale.
CRM systems also tend to be much cheaper than ERP systems, so while neither is a small investment, ERP is typically a much larger investment.
And finally, both systems scale very differently. CRM tends to provide proportionally greater benefits to small and medium-sized businesses with room to grow, and for which a boost to raw sales numbers can be a bigtime boon.
ERP, on the other hand, provides proportionally greater benefits to large, complex organizations for which a cost-cutting, efficiency-driven system can scale well enough to provide potentially huge returns on your investment.
While CRM focuses on boosting sales, ERP focuses on reducing costs.
Of course, those larger organizations aren’t likely to turn their noses up at increases sales, either, so many organizations use integrated CRM and ERP systems.
The good news is, even if your business isn’t ready to take full advantage of ERP now, you can always start with CRM and then integrate with a compatible ERP when you’re ready.
For example, Microsoft Dynamics 365 Customer Engagement, a CRM system, integrates seamlessly with Microsoft Dynamics 365 Business Central, an ERP system, and you can do so years down the road to grow into the need and spread out both your risk and your investment.
And if you work with an experienced CRM partner, odds are good they can refer you to a trusted ERP partner if and when the time comes to add ERP to your business strategy.
For example, the company I work for, Azamba Consulting Group, focuses exclusively on CRM, but we have been working with and referring customers to some of our ERP partners for more than a decade!
The next step
Now that you know the fundamental differences between CRM and ERP, I hope you’re in a better position to determine whether one (or both) would benefit your organization.
But if you’re still not sure, you can always request a FREE consultation or demo, and our staff is also happy to answer questions or respond to comments below.
Originally published at https://www.azamba.com on July 2, 2019.
