What Is CRM? A Complete Guide to Customer Relationship Management

Woman on a phone.

Customer relationship management (CRM), is a set of practices aiming to deepen customer engagement. By applying CRM principles effectively, you can expand your sales pipeline, offer great customer service, and boost loyalty.

But what do CRM systems actually in practice? And how can businesses use top CRM software platforms to close more deals?

In this article, we break these questions down with practical examples. Read on for a detailed guide on CRM systems, as well as their benefits and practices.

What Is Customer Relationship Management (CRM)?

Customer relationship management—CRM for short—includes the processes, data, and technologies that help businesses engage with customers. Potential buyers, such as qualified leads and target prospects, usually fall under the CRM umbrella, too.

CRM strategies aim to enhance the entire customer lifecycle, from awareness to purchasing and customer support. You can measure their effectiveness using key performance indicators (KPIs) such as customer satisfaction, retention, and sales conversion rates.

CRM software, often referred to simply as “CRM,” is a key component of CRM strategies. Using features like pipeline management and task automation, your marketing and sales teams can engage customers in more timely and personalized ways.

How CRM Works

Here’s a snapshot of how CRM works across business departments.

Sales Teams: Maximize the Number and Value of Deals

Sales teams use CRM best practices to streamline sales processes and close more deals. As an illustration, a common B2B sales process typically involves qualifying and nurturing leads, building rapport, pitching, negotiating, closing, and up-selling or cross-selling.

Throughout this process—also known as pipeline stages—sales reps perform CRM tasks like:

  • Researching each prospect (for a B2B) and customer segment (for a B2C) to personalize communications, pitches, and product offers.
  • Neatly tracking lead communications to understand individual needs, objections, and feedback.
    Analyzing data including deal stage and value, plus lead demographics (B2C) and firmographics (B2B) to prioritize opportunities and identify winning strategies

Marketing Teams: Increase Awareness and Capture Leads

Both B2B and B2C marketing teams aim to add likely-to-buy leads to the sales funnel, plus raise general awareness of their brands and services.

Here’s how marketing professionals might apply CRM principles.

  • Identify and segment a target audience. For instance, segment a B2C 20-to-40-year-old target audience into value, standard, and luxury spending segments.
  • Identify and prioritize marketing channels for target segments. For example, research how different segments interact with channels like social media, email, influencer, and outdoor marketing.
  • Transfer qualified leads to sales teams. For instance, create lead magnets such as industry reports to capture lead details for sales teams.

Customer Service Teams: Solve Problems Effectively

Here’s how customer service teams use CRM principles to solve problems effectively and increase retention.

  • Create scripts and procedures based on common customer questions or problems.
  • Track and organize cross-channel customer inquiries and complaints.
  • Escalate customer issues to appropriate agents.
  • Collect customer feedback to improve support and products.
  • Monitor, analyze, and improve KPIs such as customer satisfaction and ticket resolution rate.

Why CRM Is Important for Your Business

Here are some tangible benefits of managing customer relationships effectively. CRM systems will help you…

Expand Your Sales Pipeline

Well-oiled CRM processes—including prioritizing marketing channels and tracking engagement metrics—help expand your sales pipeline. One study found that effective CRM use can increase conversion rates by 300%.

Here’s an example. Imagine that promoting an events business via online ads isn’t generating enough leads. Researching the target audience—for instance, through 1-to-1 interviews—reveals that target buyers value interpersonal relationships and trusted recommendations. So, strategies like face-to-face networking and incentivized referrals might boost lead numbers.

Close More Deals

Taking a detail-oriented CRM approach helps close more deals. According to a recent study, improved access to customer data helps speed up sales by 8 to 14%.

First, you can personalize B2B pitches and B2C product offers based on leads’ pain points and preferences. Say a business lead responds with a “no budget” objection. You might explain how your solution helps them cut operational costs, thus paying for itself.

Second, accurate pipeline and communication tracking enables you to follow up on proposals and negotiations without a hitch, so no deals fall through.

Provide a More Personalized Customer Experience

65% of customers want businesses to respond to their individual preferences, and around 75% spend more thanks to positive customer experiences. Luckily, CRM best practices help you offer current and prospective customers more personalized experiences.

For example, a B2B account manager can adapt their communication style to client needs and personalities. They might ask questions at the end of agenda items to prompt more introverted clients or invite specialist colleagues to meetings requiring product insight.

Boost Customer Loyalty and Retention

CRM systems can increase retention by up to 27% according to Salesforce, but it’s been shown that just a 5% increase in retention can lead to a 25% profit increase. Customers who feel you understand and promptly resolve their preferences and objections are more likely to re-purchase.

In practice, a B2C email marketer might group customers according to favorite products and automate offer emails based on past purchases. This increases re-purchase likelihood and encourages loyalty.

Customer Relationship Management Technology

To 70% of sales professionals surveyed by LinkedIn, CRM technology is “very important” to closing deals. That’s because CRM software lets you easily track and analyze customer data, leading to better sales decisions.

Here’s how CRM platforms improve relationship management. With CRM software, you’ll be able to…

Leverage Cross-Channel Customer Data

The best CRM software collects customer data from different touchpoints, including emails, support tickets, web forms, manual data entry, and social networking platforms. For example, some platforms let you create landing pages and automatically store web form data. Others offer or integrate helpdesk platforms and live chat tools.

It’s easy to search and update customer records, including names, phone numbers, and communication history. You can also create custom data fields to enhance your sales tracking. For instance, a publishing business might create a data field titled “advertiser industry” with options including luxury retail, automotive, and hospitality.

This customer database acts as a single source of truth for your departments. In other words, you avoid the miscommunication risk and data silos inherent to spreadsheets and email threads.

Manage and Prioritize your Sales Pipeline

CRM platforms let you track each deal opportunity across pipeline stages like qualification, proposal, and negotiation. You can usually tailor the stages to your business needs for extra precision. For instance, you might add a “post-purchase nurturing” stage to plan retention efforts.

You then assign stages, estimated deal values and probabilities, and sales reps to specific opportunities. Many platforms let you standardize task lists for each deal stage, such as emailing, calling, and conducting demos, to increase team productivity.

Pipeline management also helps you prioritize and personalize your approach to different accounts. For example, you might invest more time building rapport with qualified, rather than unqualified leads.

Automate Tasks and Communications

CRM tools save you time and money by automating manual tasks. Here’s a sample to-do list you could automate.

  • Score leads from 1-100 based on factors such as company size, purchase likelihood, and lead source.
  • Assign sales reps to leads based on data including job title and geographical region.
  • Progress leads to new pipeline stages based on trigger events like booking a demo.
  • Add contacts to customer groups based on factors such as average transaction amounts and most recent transaction dates.

Automating manual tasks frees up time to build deeper customer relationships and collaborate with other departments. As a bonus, task automation also reduces manual error risk like calculation errors.

Some CRMs let you automate customer emails, too. These platforms either have built-in email campaign features or integrate with email marketing software (e.g. Mailchimp) and email clients (e.g. Microsoft Outlook).

You could, for instance, automate tailored emails based on contacts’ company revenue and job titles. This means you send large comms volumes in little time, while the data-driven personalization increases response rates. Some platforms use AI to scan emails and proposals, along with engagement metrics, to suggest top-performing sales content.

Analyze Customer Insights and Forecast Revenues

CRM reports help you better understand your contacts by grouping them according to characteristics including:

  • Demographics such as age and geographical location
  • Firmographics like job title, tenure, and company revenue
  • Pipeline factors like stage, sales rep, and deal value

Once customers are segmented, you can analyze purchasing behaviors. For example, you might spot that senior stakeholders progress through the pipeline more quickly than middle-management ones.

On top of reporting, CRMs offer admin dashboards that visualize your sales activity through charts. You might see, for instance, your deal closing rate and top-performing sales reps.

This bird’s eye view informs strategic decisions, such as which opportunities to prioritize and how to train underperforming team members.

Finally, top-notch CRMs also forecast revenue based on past deal data and current pipeline opportunities. Some offer AI assistants, usually on higher-tiered plans, that analyze past sales workflows, including lead characteristics and communication timing, to recommend revenue-maximizing next steps.

Next Steps 

CRM includes the strategies, processes, and tools you use to nurture relationships with current and prospective clients. This includes segmenting your audience and tailoring communications to help you better understand customer needs and increase conversion rates.

To this end, CRM software is a key tool, enabling you to shorten sales cycles and close more deals. Using tools like pipeline tracking, task automation, and in-depth reporting, you avoid deals falling through and increase sales rep productivity. 

Learn more with our guide on CRM software benefits for small businesses.

Ready to find the right CRM platform for your business? Use our free CRM software comparison tool


What are the three types of CRM?
The three types of CRM software are operational, analytical, and collaborative. Operational CRMs help you manage pipelines using lead tracking and scoring, workflow automation, and communication management. 

Meanwhile, analytical CRMs use your business data, including ecommerce, cross-channel marketing, and accounting data to produce 360-degree customer profiles and sales forecasts.

Finally, collaborative CRMs enable teams to share information, and track customer journeys holistically across marketing, sales, and customer support channels.

What is an example of a CRM?
Examples of CRM software include Salesforce, Hubspot, and Zoho CRM. While features can vary, many CRM platforms include contact and pipeline management, workflow automation, and reporting. Some also offer AI-powered recommendations, revenue forecasts, and email marketing.
What is the main purpose of a CRM?
The main purpose of CRM, whether as a technology or a set of strategies, is to drive sales growth and customer retention. For example, tailored communications and high-quality support incentivize clients to re-purchase, while prioritizing sales opportunities and automating manual tasks help close more deals.
Written by:
Ioana holds a BSc in Business Management from King's College London and has worked for 4+ years as a management consultant in the technology, media and telecoms industries. Alongside her freelance writing work, Ioana also works as a marketing consultant, where she has the opportunity to use a variety of CRM, email marketing, and lead generation platforms. Her passion and talent for sharing knowledge of these topics has led to her work being published on TechRadar and a selection of other B2B, SaaS and fintech sites.