Why CRM is Important? Do You Really Need a CRM?

Why is CRM important? Is it even necessary? It’s possible that you don’t need a CRM system at all.

I often hear from CRM providers that “CRM is critical,” “It’s essential for business growth,” “If you don’t use CRM tools, you won’t survive past next year,” “AI is taking sales jobs,” and so on.

I also hear that CRM systems are important because they help you build your business around your customer data… whatever that means.

But what about practical terms? Why is it truly important, if it is at all? What does “building processes around the customer” really mean? And is it true that every company needs a CRM system?

I’m Jeff, a CRM consultant with almost a decade of experience, and in this article, I will help you understand why CRM systems are important, why you may or may not need one, and what some of those fancy terms actually mean.

CRM Strategy vs. CRM Solution

But first, what you know about CRM solutions may actually be… wrong.

CRM stands for Customer Relationship Management. Originally, this term appeared in the mid-1990s and was used to describe both business strategies and software solutions.

The rise of CRM systems coincided with advancements in technology, particularly in customer experience and database systems and enterprise software. Companies like Siebel Systems (founded in 1993), Oracle, and SAP began offering CRM software solutions that allowed businesses to collect and analyze customer interactions and identify customer pain points.

As a result, today, the CRM tool is rarely used to describe business strategy and is instead used to refer to marketing automation and software solutions. This has led businesses to seek software solutions exclusively, as if they are detached from business strategy.

However, business strategy is more important than the software solution. While developing a successful CRM strategy may be linked to the software solution and its features, the solution should not prevail. It should not dictate the CRM strategy.

When thinking about a customer relationship management (CRM) system, focusing solely on its features is a mistake. It’s not about what the CRM software offers in terms of functions but how it aligns with your business strategy and and integrates with your marketing efforts and campaigns.

There must be a clear business strategy behind the technology; otherwise, it won’t support the business. This will cause many problems with implementation in the future. Employees won’t use the software if it isn’t aligned with the company’s operations, and management won’t get the desired reports if employees aren’t using it. 

CRM Roles

Secondly, to understand better why CRM is important, I have to say that customer relationship management (CRM) as software is beneficial to two main groups of people. They are very different but couldn’t exist one without the other. CRM platform benefits its Operational and Management Users.

Operational users are sales teams, SDRs, customer service teams, and any other people who work with clients on the front line of your business processes. They input sales data into the system, which you, as a manager, will later use to make your decisions that boost sales and drive better customer retention. With easy access to CRM data, sales teams can streamline their tasks, better understand customer preferences, and tailor their interactions more effectively.

For Operational users, it’s more important how fast the system is, how good the user interface is, and how much it would help them close more deals and organize workflow so they can do more and get paid more.

For Management users, reports are more important than anything else. This is, by the way, the reason why so many corporate systems are so bad. Just compare any software made for consumers versus one made for corporate users.

Consumers will not fill in massive forms with a huge number of totally irrelevant and made-up fields. Employees of corporations simply don’t have a choice. They are paid for the job and have to use whatever management throws at them.

This is an eternal conflict. But understanding different roles in CRM software is a very big part of understanding why CRM systems are important and how to avoid the expensive mistakes managers make when deciding about CRM solutions.

Paying Attention to the Right Things

Knowing that, let me share the first and probably most important reason why CRM technology is important to business.

As a manager of the company or department, you have many things competing for your attention. You don’t have the privilege of deep diving into each and every separate process. Ideally, you have the ability to glance and get an instant picture and answer your most important question—do I need to pay attention here?

CRM’s core, vital—fundamental—importance lies somewhere there—in turning your attention to what really matters: connecting with potential customers, helping sales and marketing teams manage sales leads, and automating routine tasks to improve customer service.

To give you an example: Imagine sales meetings back in the day. The room would be filled with mature men, all sitting around a heavy oak table, the air thick with cigarette smoke. Each man would take his turn, flexing about the size of deals they had closed or were about to close. It was less about actual management and more about showing off, turning the meeting into a performance, with little focus on marketing tools or internal communications that could support business growth.

They’d lean back in their chairs, telling stories and laughing loudly, each one trying to outdo the others with their successes. The atmosphere felt more like a stage where everyone was there to put on a show rather than discuss real business strategies for shortening sales cycles or improving customer satisfaction.

Of course, I’m exaggerating a bit, but for managers, such meetings were nightmares. It took all their soft skills to slow down high performers from bullying average ones, and it took all their energy to narrow down the focus to real issues that would require attention.

I’ll give you an example from a recent project of mine. A Middle Eastern agricultural company approached me with a substantial number of deals they were working on. These deals were spread across the year and had very different closing cycles. Some closed within a few weeks, while others took months.

The manager of the company turned to us with a challenge—he didn’t understand how he could pinpoint which opportunities his sales team should focus on each week. We introduced a simple field in the CRM database, which is a standard field by the way—Close Date.

I advised them to focus only on those sales opportunities estimated to close this week. It immediately removed “the noise” from their work. They became more careful with estimating close dates, and the number of opportunities they had to pay attention to immediately dropped from three-digit numbers to sometimes one-digit numbers per employee.

Bridging the Gap

Secondly, customer relationship management is so important because it bridges the communication gap between you—the manager—and an employee, whether they are a sales rep, service rep, marketing team member, or SDR, whichever roles are part of your team.

Let me circle back to that story with sales reps and the oak table. Put yourself back into that old-school meeting.

During those meetings, you would be forced to listen to all sorts of different stories from sales reps telling you how the market is hard now, how it’s on the low, and how competition is fierce and clients just don’t get back with answers. Oh, and don’t forget the discounts—you would have had to give infinite discounts to keep loyal customers.

Managers back then didn’t have any way to check what their employees would tell them, and there was no way to prove which sales rep was just not a good sales rep and which one really faced an issue due to lack of customer information or ineffective targeted marketing campaigns.

CRM system removes all that. It objectivizes data. It makes your picture clear, and you can see who does the job well, where the market issues are, and who is… well, not doing their job so well —all in just a few clicks.

CRM system simply removes lies. I know it sounds a bit strong, but it’s essentially what it does. It brings the truth.

Getting Your Strategy to Live

I’ve already mentioned that CRM system is a solution that could help you support your CRM strategy. Now, let’s take a closer look at this.

You may have already noticed that I love examples, so I made up one to illustrate how your strategy could be supported by software. Well, honestly, I’m bad at making things up, so I got inspired by a real case; still, I’ve added some elements to make it more illustrative.

Company ABC sells roofing materials, with its main customers being roofing contractors and homeowners. Their sales strategy is based on understanding the stages of construction when customers typically decide on roofing materials. By monitoring construction sites in the region and analyzing customer information, they identify the right time to reach out to roofing companies or homeowners using the contact information they’ve gathered.

In the old days, each sales rep would get assigned a specific area and would be responsible for that region. They would follow up with roofing contractors and homeowners and figure out the best time to sell, attempting to stay ahead of the sales cycle.

Seemingly, the system worked well until the company started to lose business. More often than not, sales reps started noticing that once they followed up with the client, it was already too late—someone else had contacted the client earlier.

After trying to figure out what happened, they realized that it was only the deals with roofing companies that they started to lose. So, the next logical move was to take all the roofing companies and contact them one by one to try to move those deals closer.

But there was a catch. There was no contact database or construction site database they could leverage to make this shift in their business strategy. All that knowledge was in the minds of their sales reps, and there was no real way of enforcing the execution of such a mission-critical shift in the sales strategy.

They decided to implement a CRM system, replacing their old, manual process with such a system. Now, each sales rep has a login, and when they access the system, they can view opportunities, with each one representing a construction site. These opportunities include details such as the estimated close date and associated account information.

Management created a report where they pulled only those opportunities related to roofing company accounts and moved their close dates by a month. Long story short—they won back part of the business in the next quarter and exceeded their sales quota in the quarter following that.

Now, what’s the moral of this story? It’s the sales strategy that put the company back on track.

Did the CRM solution have its fair share in the success of this project? Yes, undoubtedly, but it was the management’s customer strategy that worked. The software only supported the strategy.

The strategy remained the same. They were still selling to the same roofing companies and homeowners by tracking construction sites. It was the how that changed, not the what.

Building Around the Customer

Okay, I believe you are now ready to hear the most transformational part of this story: how CRM tools transform businesses and customer strategies.

I believe you have often heard CRM vendors, like Salesforce, promote the idea that you can build your process around the customer. But have you ever asked yourself what that means?

It took me quite a while to figure out what it is, and it took me even longer to understand the profound effect it has on a company.

And, as always, let me give you an example.

This time, let’s take a manufacturing company and its sales processes. Typically, my existing customers would describe the manufacturing company’s sales process like this:

1. First, we get an inquiry.
2. Then, we make a quote.
3. Then, we make an estimation and approve it with the manager.
4. Then, we send the estimation to the client.

Seemingly, this is a nice process, but what’s wrong with it? This process is built around the company, not the customer. Confusing, but bear with me for a second.

I’ll ask a simple question: Do you know what probability is? More specifically, sales probability. Common sense tells us that it’s the probability of a sale. That’s a correct answer, partially. But I’m not going there right now.

What is of interest to us is that a sales process built around a client is a process that increases the probability of a sale with every next stage.

It means that a deal, or opportunity to be precise, has progressed and that our relationship related to this particular opportunity has progressed.

“Every next sales stage should increase the probability of sale.”

With that said, let’s look at how the process would look for the same manufacturing company if we shifted it to be customer-centric rather than process-centric. 

1. We first qualify if this project fits us.
2. We analyze the customer information and needs.
3. We deliver the quote.
4. We get feedback on the quote.

At first glance, this is the same process. But when you start digging deeper, you will notice that:

1. We first evaluate if we want to get involved in the business instead of just getting an inquiry. We know our target customer, and we evaluate if we can deliver the best customer experience if we get involved.
2. Instead of just making a quote, we find out as much information about the client as possible to adjust the future quote and better meet customer expectations.
3. We make sure that the quote is received and understood. We don’t make quote approval the most important part of the process. We make presentation and delivery the focus. 
4. Finally, we get feedback on the quote, and once we receive it, we move the deal.

Take a closer look. Every step increases the probability of closing the deal. Because if we move forward, something on the customer’s end has happened, indicating that this deal is progressing.

This subtle shift in mindset is much more fundamental than you might think. It requires the whole company to change over time because the priority is shifting. Internal processes are no longer important—what the customer thinks is.

Once this piece of knowledge is digested by the people inside the company, I see a titanic shift in how the company does business. The level of bureaucracy decreases, decisions accelerate, and eventually, as a side effect, customer loyalty strengthens, leading to improved customer retention and increased sales growth.

And I personally think that this is the most important thing customer relationship management software does for businesses. The rest is just a side effect.

Final Word

So, getting back to the question at the beginning: Is CRM solution critical? Well, if we are talking about software, it’s not. Your customer strategy is, but if you run a business and you have paying clients—most likely, you already have some sort of customer strategy. It may require tweaking; it may be done better, but you are not doing badly. You can live without CRM software, for sure.

Is CRM software important? Yes, it’s a great tool, just like a shovel. The shovel won’t dig the earth for you, just like a CRM system won’t grow your sales without a solid customer strategy first-hand.

I understand CRM vendors all want to sell their product. But let’s be critical thinkers and pragmatic.

If you like this article, make sure to find me on LinkedIn and follow me there. I share almost daily wisdom about sales, process automation, and CRM systems.

Yet, if you need advice on your business growth, want to discuss your challenge, or are just looking for a pair of understanding ears—leave your contact information on the contact us page now, and I’ll drop you a line to schedule a meeting.

On that note,
Cheers,
J.