What is CRM? CRM 101 Part I: Definitions, ERP vs. CRM, and Strategy

Here’s a shocking statistic that keeps me up at night: 80% of CRM implementations fail. That’s not a typo – eight out of ten businesses waste time, money, and resources on CRM systems that never deliver their promised value.

As someone who’s spent years in the CRM industry, this isn’t just a number to me. It represents thousands of frustrated business owners, overwhelmed managers, and disappointed teams. But here’s the thing: most of these failures are completely preventable. The problem isn’t the technology; it’s the lack of fundamental knowledge about what CRM really is and how it should be approached.

If you are at the beginning of your research, considering implementing a CRM, or even a seasoned CRM professional, this article is for you because:

• I will be sharing evergreen fundamentals that won’t change with technology. While features and platforms come and go, these principles will stay relevant for years to come.
• You’ll gain knowledge that will help you make critical business decisions – knowledge that could save you or your company hundreds of thousands of dollars, hours of frustration, and even eliminate career risks for you as a manager.
• Most importantly, I will share my unique perspective, which will give you much more context and will guide you in making decisions or enrich your existing knowledge about CRM.

This article is Part 1 of a two-part series where I’ll break down everything you need to know about CRM.

In this first part, I’ll cover:

• What CRM is, and I will compare it to other business applications.
• A very brief history of CRM that will give you context on the topic.
• Finally, what is the difference between CRM software and a CRM Strategy.

This will lead us to the second part, where I’ll dive into the approaches you can take when deciding on CRM software. I will go more into technical aspects, but I’ll keep it simple and practical. I’ll explore fundamentals you can apply not just to CRM, but to your daily business operations and almost any software generally available on the market. Plus, I’ll share my proven approach to implementation that’s very simple and works 100% of the time, even in projects not related to CRM.

So make sure to keep reading my blog so you don’t miss the second part and my new articles about business applications and corporate technology.

Ready to dive into the first part of CRM 101? Let’s get started!

CRM Definition

So, what is a CRM? Essentially, it’s a business software designed to help you sell and provide customer service to your customers. It’s a tool, usually on the internet, where you log in and get access to your Accounts, Contacts, Leads, Opportunities, Quotes, and other things.

Over the years since CRM emerged, it’s become much more than just a tool to track sales or manage contacts. It has become a business’s operating system where you would do anything that is related to the client – from simple lead tracking to sophisticated quoting, invoicing, subscription tracking, and even order fulfillment.

To better understand what a CRM is, it is worth turning to recent history and examining how this software emerged and evolved.

History of CRM

Today, there are two main types of corporate software: ERP and CRM. But it wasn’t always like that. It all started with the need to keep track of big corporation books. It started with ERP.

If you’re unfamiliar with ERP, think of it this way: at its simplest form, ERP is accounting software. But at its most complex, it serves as a central hub for business operations – covering everything from accounting to warehousing, employee management, and more.

ERP is a software that supports business operations. Its name says it all. It stands for Enterprise Resource Planning. You plan and manage your resources. The most important resource? Money. Everything you have in ERP translates to money on your balance sheet.

An ERP is not always called an ERP. Sometimes it’s just invoicing software, quoting software, or other similar software. But for the sake of simplicity and education, I’ll use the term ERP.

ERP systems emerged as soon as computers reached corporations. While early versions were quite basic, their core purpose has remained the same to this day: these systems are designed to capture and record what has happened within the business. This includes issuing invoices, ensuring payments are received on time, managing warehouse stock, calculating payroll, purchase orders, and so on.

But there’s one limitation with ERP and similar systems. It’s the reason software engineers and business managers joined forces and decided that ERP alone was no longer enough. The issue with ERP lies in its timing.

ERP systems store historical data. For example, when you create an invoice after you’ve made a sale, you are reflecting a past event. Something that has already happened. Once something is entered into the system, it’s challenging to remove or alter that record. In the case of an invoice, you’d have to void it to remove it, which would still impact the P&L because it would appear as accounts payable before you void it.

Do you see where this is going? There was a need for a solution that would allow for more flexibility – something that would operate in less strict terms than ERP. This is how CRM systems were born.

The Distinctive Focus of ERP and CRM

Consider this: in the best case, a business might close one opportunity out of ten, which is a respectable conversion rate, by the way. Now imagine if every time a sales rep identified an opportunity, it resulted in creating an invoice. Your business would become hard to manage. You would have to cancel a lot of invoices, and at some point, this would become suspicious to tax authorities.

CRM is the solution to this problem. It allows you to create opportunities long before they are ready to be entered into an ERP system.

Think of it like this: ERP operates in the past and present. CRM operates in the future.

Now, let me put this into another perspective. Here are two examples:

Imagine you’re at a trade fair, meeting potential clients, and collecting business cards from visitors at your stand. After the fair, you follow up by calling each one. In CRM terms, you’ve gathered a set of leads and are now qualifying them, identifying which ones may lead to real business.

Now, consider a different scenario. An existing customer calls you, asking for a new product or service. You sit at your desk, prepare a quote, and send it over. In CRM language, you’ve just created an opportunity – a potential deal that could turn into revenue if it’s successful.

In both situations, you’re not guaranteed to close the sale. But if you do, that’s when you’ll create an invoice and move the record into ERP.

This difference is key: ERP systems handle transactions – each transaction impacts the organization’s records, potentially affecting financial reports or triggering other actions. CRM, on the other hand, works with records that don’t impact your bottom line directly unless customized to do so.

The value of CRM lies in reporting, analyzing, and managing these records to help you track leads, opportunities, and all sorts of client interactions. ERP’s value, however, is in capturing the transactional impact across the organization, helping maintain financial integrity and operational accuracy.

As technology evolves, the lines between the two are fading, making it sometimes difficult to tell where one ends and the other begins. So to simplify this a bit, you can safely say that: ERP is a business operations hub while CRM is the businesses’ commercial hub.

CRM as a Strategy, Not Just Software

A very important foundational step that’s too often overlooked is strategy. Without a guiding strategy, any discussion about CRM software is pointless.

It’s like trying to cook a new dish without first deciding on the recipe. Just think about it – going into a kitchen with a plan to cook something out of available ingredients without any experience in cooking. Just imagine, you never cooked before and now you are trying to come up with something. It’s ridiculous.

Just as you wouldn’t expect your kitchen appliances to cook for you, you can’t expect software alone to build customer relationships or drive your commercial goals. That’s where CRM strategy comes in, setting the groundwork long before any technology is in place.

CRM is a software. It can’t do the work for you. But it wasn’t always viewed this way.

The concept of customer relationship management (though not explicitly called CRM) existed in practice long before it became a technology-driven term. For decades, businesses recognized the value of building strong, loyal relationships with their customers, which often meant focusing on personalized customer service, attentive follow-ups, and loyalty-building strategies that were not tied to databases or software.

In the pre-digital era, businesses cultivated customer relationships through personal interactions, record-keeping on paper, and direct customer engagement. This focus on relationship-building could be seen in small, family-run businesses and large enterprises alike, where customer loyalty was driven by service quality, personal rapport, and trust.

The shift from this people-focused approach to the technology-centered CRM as we know it happened in the 1980s and 1990s, when databases and computer systems made it possible to manage larger volumes of customer information more efficiently. As a result, while the practice of managing customer relationships predates technology, the term CRM became synonymous with the technological solutions.

When corporate software started to arise and companies like Oracle, SAP, Siebel, and later Salesforce needed to sell it, they almost ultimately started to own the term CRM. Years of their marketing were so successful that CRM effectively became a term that is used only in the context of software solutions, as if it is detached from the business strategy. But it shouldn’t.

CRM is your strategy. It’s your way of selling, serving, and making your clients happy. It doesn’t matter if you are in B2B, e-commerce, B2C, or even B2G. You already have your ways of working, and your clients love you for that. Your strategy is what makes way for your company to the market, retains your customers, and helps you attract new business.

CRM as a software should be used as a way to scale your existing customer strategy and give you abilities in your customer strategy that earlier were not available to you.

Think of CRM software as similar to a camera: buying a new, high-tech camera won’t make you a photographer. Just the opposite. Without skills, your pictures on your iPhone will look better than those taken with a professional camera.

Likewise, simply adding CRM software won’t solve mismanagement issues or automatically improve customer support. CRM software is most effective when paired with a clear, customer-focused strategy that guides its use. Alignment of customer strategy and software allows your business to leverage technology to retain and attract customers effectively, much like a skilled photographer makes a product in a picture look better than in life.

Now in this article, I will not go into the depth of how to build a successful customer strategy. I honestly, have no idea. It’s not in my competence. Where I can help you is digitalizing it.

When approaching CRM, you should keep in mind that you should have a very clear vision for at least one of the following parts of your customer strategy:

• Customer acquisition.
• or
• Customer Service and Retention.

If you are in doubt about one of these or both, you should revise your customer strategy, implement it and then turn to tools, like CRM. It may happen that you will need a tool to implement your strategy, and that is fine, but at least you will know what you are doing.

I see too many companies looking at CRM software as a solution to a poorly managed process. And I understand why. CRM vendors are promoting an idea that you will grow your sales, customer satisfaction, number of clients, average order value and all other thinkable commercial parameters. But that’s not true.

CRM can help you scale your existing strategy. But by any means, it will not help you systemize your sales or customer service processes on its own.

To Sum Up

In this first part of CRM 101, we covered three essential fundamentals:

• CRM as a business software for managing client relationships
• Where CRM stands in the realm of business software
• And most importantly, why CRM must be a strategy before it becomes software

In Part 2, we will get practical. I’ll dive into CRM fundamentals, approaches to CRM implementation, and guide you on how to choose the CRM that’s best for your business.

Make sure to check out the next article to learn more about practical CRM strategies and implementation tips. And in case you’re ready to implement a CRM system in your business and need the help of professionals, feel free to reach out to us. We will be happy to assist you and help make your CRM implementation smooth and successful!