June 7, 2022    •    7 min read

CRM vs ERP: What Exactly Is The Difference?

Traditionally businesses have been relying on ERP systems as a one stop solution for all their business processes. With the advent of CRM softwares which are hyper specialized towards customers, many firms are making the system. Let's understand the basic differences between them in this article.

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Automation is the buzzword for entrepreneurs now and if you don’t tap into its maximum potential, then you are setting yourself up to be behind your competitors. Chances of you not coming across the terms CRM and ERP are pretty low if you are managing a corporate business in today’s age.

But, with a plethora of innovations emerging in the world of business every other day, it is undoubtedly difficult to keep up with everything or to understand them at their core. How can you make the right choice between two software systems when they seem pretty similar on the surface?

Let’s systematically figure them out one by one before you make your final call.

What is CRM?

An abbreviation for Customer Relationship Management, CRM at its core, is software that helps manage the relationship of an organization with its current and prospective customers. Aimed at boosting sales and improving the overall performance of the business, it tracks the functionality of an organization.

It is the go-to tool for dishing out quality customer service while also automating and synchronizing marketing and sales. It plays a pivotal role in not only keeping your customers happy but also retaining their loyalty.

What is an ERP?

ERP stands for Enterprise Resource Planning and represents a holistic software program that helps in managing the varied business processes of an organization. It contributes to enhancing the performance, productivity, and overall profitability of an enterprise.

ERP is an evolved form of MRP (Material Requirements Planning) that was earlier used by entrepreneurs to assess, tackle, and manage the resources needed to run a business smoothly. Although at its core ERP involves finance, it also parlays into the other aspects of a business such as order management, data service organization, production, distribution, and inventory management, among others.

Before figuring out the key differences between CRM and ERP, let us brush our memory with what makes them resemble each other. Let’s find out their similarities.

Similarities between CRM & ERP

The elements that surround both CRM and ERP are what make them similar to each other. Both of them are business software that helps in storing, analyzing, and managing data in a relational database.

From an access point of view also, they show stark similarity since customers can access both of them through the cloud once vendors upload data to their data center. Of course, this is in the case of Software as a Service (SaaS). They can also be delivered through traditional on-premises models as well if the vendor wishes so.

At the end of the day, CRM, as well as ERP, aims at bringing attention to automation, higher productivity, and revenue generation.

Differences between CRM & ERP

While both CRM and ERP aim at improving the overall performance of your organization, their approach, mechanism, and functionality separate them from each other. Let’s try and break it down.

Focus

The fundamental difference between CRM and ERP is that the former deals with customer data while the latter deals with financial data. As such, they revolve around customer service and financial departments respectively.

CRM focuses on improving the branding and marketing presence of your organization through customer interactions, customer touchpoints, and overall customer management. In simple terms, it deals with the front office activities.

ERP, on the other hand, deals with back-office activities. It focuses on managing and automating every major functionality that goes behind running a business, thereby inadvertently leading to cross-departmental improvement.

Platform

CRM is a single platform dedicated towards turning potential customers into loyal customers while also retaining the existing ones. On the other end of the spectrum, ERP is a centralized system that is built to streamline all business-related processes.

CRM is a web-based solution that is a subset of SAP (System Application Product) whereas ERP is a web-based application, regarded as a superset of SAP.

Methodology

To increase profit, both CRM and ERP employ different methodologies. CRM works towards increasing the pool of customers for your business, which ultimately contributes to higher sales and larger service volumes. As such, it is more about bringing more money to the business.

ERP increases profit margin by eliminating overhead and operational costs as much as possible. So, it concerns more about decreasing costs for your business, leading to you, as an entrepreneur, spending less.

Metrics

Coming to metrics of success, CRM is defined by the quantifiable, measurable goals set by your business that revolve around retention of existing and acquisition of new customers. Examples of these goals can be ensuring an increase in e-newsletter subscription, more followers on your business’s social media channels, and closing 12% higher sales than last quarter, among others.

The metrics of success for ERP incorporate all the major departments of businesses, such as vendor management, order procurement, accounting, and distribution, among others.

Users

Most of the users of CRM are from the marketing and sales support group who are primarily tasked with handling customer operations.

As for ERP, the users tend to be departmental heads who are tasked with making executive-level decisions related to business processes. This stems from the fact that the ERP system pertains to operational logistics and cross-level production.

Does Your Business Need a CRM or an ERP?

Ideally, it is recommended for businesses to incorporate both CRM and ERP in their systems. Small companies that begin with spreadsheets for accounting often turn to an ERP system when their own growth becomes overwhelming for them to keep track of. ERP acts as a robust tool that doesn’t have any other valid alternatives.

The same spreadsheet example can be applied to those who use traditional methods for managing their relationships with their customers.

As per what would govern your decision between these two depends solely on your business model. If your business deals with high-end complex finances but a relatively small set of valuable customers, then opting for an ERP system is the wiser choice. Conversely, if you are dealing with straightforward finance flow but high variability in your customer diversity, you should choose a CRM system.

And if you happen to worry about shifting to a new CRM tool from whatever existing platform you are using, then there are solutions for that as well. CRM systems like CloudFiles are built with the integration first concept which allows you to use its platform without shifting from your existing platform.

For instance, if you are using HubSpot or Google Suite currently, to name a few, you can directly integrate CloudFiles into these without shifting altogether.

Licensing Costs

It should come as no surprise that ERP systems tend to cost more than CRM ones simply since the former offer a broad range of services across more departments. Add to the fact that ERP systems can be heavily personalized to your needs, and you got yourself an expensive web application.

Not to forget, the type of integration required for hosting the plethora of services on the cloud in the case of ERP also adds to its expensiveness. Most reliable ERP systems in the market are available in the range of $80 to even $1000 per month. And this doesn’t even include the considerable development expense.

CRM, on the other end, is comparatively budget-friendly, being available in the $20 to $80 per month per user range. In fact, many standalone CRM systems are even available to you free of any cost. Of course, there are also those that would cost you thousands of dollars yearly that come with your preferred levels of customization based on features, flexibility, and user count.

As such, small and emerging companies often can benefit from non-enterprise level CRMs for smoothly tracking their customer engagement.

Pros & Cons

Evaluating the pros and cons of both these systems will further help you make the most optimal decision for your business.

The pros of CRM are as follows:

  • Meticulous identification of client behavioral pattern.
  • A thorough analysis of the interactions between customers and sales representatives.
  • Optimization of scheduled tasks.
  • Automatic tracking and collection of customer data.
  • Faster customer conversion rate.

The cons of CRM are as follows:

  • Requires regular clean-up processing.
  • Lack of human touch when it comes to bulk mailing.
  • Improper handling may lead to data loss.

The pros of ERP are as follows:

  • Enables team players to access data from any device anywhere.
  • Reduces operational costs.
  • Improves managerial skills
  • Seamless consolidation of data across various departments.
  • Minimizes chances of human errors.

The cons of ERP are as follows:

  • Can get ineffective if separate departments don’t adhere to transparency while sharing confidential information.
  • Making adjustments to the business to match the settings of ERP can be taxing.
  • May take time for employees to figure out the logistics of its working.

Final Thoughts

If you want your business to not get stagnant and always be open to evolving, you have to resort to using CRM or ERP, or both in your daily operations. Whether it is to reduce operational costs or retain existing customers, whether it is to boost your e-commerce sales or study the behavioral pattern of your clients, both of them serve multi-beneficiary functionalities to improve your business.

Your final choice will boil down to your business model and your current development stage. For modernizing your sales and marketing strategy, CRM is the tactical choice. However, if your business is already at an established developed stage and is on the lookout for a more complex solution, ERP is your answer.

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