Can you imagine a company without sales department, where no one interacts with the customers? And a company with no operating department, where nobody manages the suppliers and the production?
That’s right, it’s impossible! Sales and Operations are two main pillars of every company. The same applies to the two software that help these two business areas, respectively the CRM for sales and the ERP for the operation management. CRMs and ERPs are two very different types of programs, which use different technologies and focus on complementary aspects of the company.
When choosing the right software for the company, these two software often trigger a large number of questions. “What are they exactly? Who needs them and what are their advantages? Do I need one or the other?” All reasonable questions! So let’s go beyond the acronyms to better understand the difference between the two types of software, answering the most common questions.
What do CRM and ERP mean?
CRM, an acronym that we know well in this blog, stands for “Customer Relationship Management”, i.e. the software that helps the company manage everything related to customer relationships: contacts, documents, sales cycle and so on. Sellf, for example, is a CRM, designed to help salesmen in all aspects of their job. You can try it for free by clicking here: Try Sellf free!
ERP, however, stands for “Enterprise Resource Planning”, i.e. the software that helps the company better plan all its resources: from the warehouse and the suppliers, to production, human resources and even sales. While a CRM is a unique software focused on the sales department, the ERP is a set of software modules, each one dedicated to a business function (warehouse management, personnel management, etc.). When setting the software, the company chooses which modules to implement and how to assemble them. Some ERPs have a CRM module, but it does not have all the functions of a standalone CRM.
What does CRM and ERP do?
As you have surely guessed, these two types of software deal with very different activities within the company.
The main tasks of a CRM are:
• Managing customer data from the first contact onwards. It collects their contact information, from the phone number, the address, the social contacts, to all the documents sent to the customer.
• Tracking the sales cycle. It maps the process of each client: how he/she starts as a lead, then becomes a prospect, then goes through the negotiation phase, completes the purchase and so on. Having a clear view of the process helps the sales team to act in the best way at every step and to forecast the sales results.
• Analysing sales data on procedures and results. Each CRM has a Reports Area with graphs and statistics about all the collected data. The graphs answer questions like: How many phone calls and how many emails were needed to close the deal? What stage of the buying process has the higher failure rate? What sources of client acquisition work best? The answers provide the management the basis for new sales strategies and to optimise the results. If you want to read more about it, we described the Sellf Reports Area in this article.
On the contrary, the tasks of an ERP are:
• Optimising the flow of information. Starting from suppliers and coming to corporate accounting, ERP has the task of ensuring that the business runs smoothly, with less waste in time and money.
• Managing the production. The ERP automates the company’s production phases: every time you get a new production order, the ERP issues the purchase orders to suppliers and plans the work of the production department, defining the product delivery date.
• Managing accountability. You well know how many data are generated every day from all the companies departments: orders to suppliers, arrivals to the warehouse, production documents, human resources activities and so on! The ERP collects these data and organises them to help the accounting department keep everything under control.
What are CRM and ERP advantages?
Both software help the company work better and reduce time waste.
In particular, the 3 key benefits of CRM are:
• Increasing productivity of the sales department. Think about how much time you lose to search for a phone number written on a Post-it, to retrace the past conversations with a client or to send email updates to your team mates! A CRM helps the sales department lose less time and be much more efficient.
• Improving customer service. Imagine a salesman who asks the customer his needs every time, or who makes a wrong sales proposal! Thanks to CRMs, sellers can offer their customers the best service as possible… as if they were the only ones!
• Reducing costs. How much time do sellers lose to coordinate and share the information within their team? Or, how much does it cost to miss a sales opportunity because the sales agent forgot to call the customer? Choosing the right CRM for your company, you will forget about these costs forever!
The 3 advantages of ERP are:
• Making production more efficient. When the information flows easily between the company’s departments, there is less waste of time and money for production errors, communication delays, and so on.
• Improving corporate decision-making processes. Being able to analyse all the data of the company together, the management can identify problems and take better decisions about how to optimise the business.
• Helping to coordinate the supply chain. When more companies work together, their ERPs could be integrated with each other, simplifying the exchange of data between one another.
How much do CRM and ERP cost?
The answer is… it depends. CRMs are certainly cheaper and easier to implement than ERPs, because they involve a single business unit.
For both software, however, costs vary depending on the company size, the desired features and the level of service.
In fact, in addition to the charges for annual licenses, for both software you must not forget the other necessary activities such as people training, maintenance and customer service (if you want to know more, we talked about it in detail in this article). Sellf, for example, offers a price plan that grows based on the size of your business: you can find out more by clicking here!
Who needs a CRM, who an ERP… and who both of them?
This is the most difficult question and the most frequent one at the same time.
Again, the answer is: it depends. In most cases both software types are required, in others it is enough to have a CRM and just rarely you can go with only an ERP. Let’s understand why!
First, all companies, of all sizes and industries (including freelancers!), have something in common: customers. The CRM is therefore the first software that every company should have to sustain the most important task of all for their business success: selling. For smaller and less complex companies, having a CRM is enough and they do not need an ERP. To help managing functions such as accounting and human resources they prefer to use dedicated software, that are optimised for these areas and cost less than a full ERP suite.
The ERP, however, comes into play when business complexity grows: when you have many employees and more teams, or when you start to open more offices or shops in several locations, when you have to manage many suppliers and/or a warehouse, or even when the production needs many steps. In short, with the increase of data flows between the company functions, it is necessary to have a more advanced management system, integrating your CRM with an ERP.
In fact, the two types of systems could be integrated with each other, because the data from one is useful to optimise the activity for the other. For example, the sales forecasting data or the acquisition of a new production order can help the ERP better plan production and supply requests.
“Wait, is there any company that may only have an ERP system without a CRM one?” You must be wondering.
Well, the only companies for which the ERP is more important than the CRM are the companies that have very few customers and for which the production is prevalent on the other activities. An example could be the B2B production companies that work exclusively as suppliers for one or two other larger companies. But when your customer base increases… the CRM becomes crucial!
Last thought: some companies think it’s enough to have an ERP with the CRM module, without having a dedicated CRM software.
From my experience, this solution could rarely work. Again, it could work only if the company has just few customers and does not have a full sales department. Otherwise, the CRM modules of the ERP suite have many limitations, because they are born as an extension of a larger company’s software. They are generally not flexible nor customisable, not designed with the salesmen problems in mind, and even worse they are not optimised to be used on mobile devices. Sales agents who work always on the go, need to access their customers data anywhere and anytime! We at Sellf know that very well, that’s why the first version of Sellf was a mobile application, perfectly integrated with the smartphone.
In conclusion, CRM focuses on customers while ERP has a broader view on the company, focused on operations and production. If your company does not have any information system, our advice is to start with a CRM and then gradually figure out if you need to integrate it with an ERP or not. With Sellf, our next-generation CRM, you can get started in just minutes: simply sign up for the free demo below!