CRM vs ERP: What’s The Difference, Which One Do You Need

Illustrated cover image for an article by MKTR.AI comparing CRM and ERP tools

CRM and ERP – these are two of the most widely used SaaS tools in the industry today. 

In fact, CRM software is now the biggest software market in the world and the growth isn’t slowing down. 91% of North American companies with more than 10 employees are using CRM software tools today. On the other hand, ERP software has also received wide acceptance. 81% of the companies have either implemented ERP software or thinking about implementing in the near future.

Why is almost every company in the world implementing these tools? We will definitely get into that, but if you are up in the air about the difference between CRM and ERP, let’s understand that first.

Note: If you haven’t read it yet, you should read our Comprehensive Guide To CRM Tools

Illustrated cover image for CRM guide from MKTR.AI

In this article, we cover:

  • What Is CRM?
  • What Is ERP?
  • Difference Between CRM and ERP
  • How Are The Two Related?
  • Which One Do You Need?

What Is CRM?

CRM stands for Customer Relationship Management. CRMs are systems that manage information about customers— interactions with customers, past purchases, and interests. Customer relationship management tools are mainly used across sales, marketing, and customer service departments. 

Customer relationship management software tracks leads and inquiries from customers, stores a history of all correspondence and sales to a customer, and allows for tracking of outstanding issues with customers.

What Is an ERP?

ERP stands for Enterprise Resource Planning. An ERP provides centralized, integrated software applications to help manage and coordinate the ongoing activities of the enterprise, including manufacturing and distribution, accounting, finance, sales, product planning, and human resources. 

ERPs are basically business management software. They automate and facilitate the flow of information or data throughout the company. ERPs provide a powerful link between the customers and suppliers in a complete supply chain. They also balance the demand and supply provides a high degree of cross-functional integration among various departments of a company, and much more.

Image source: workwisesoftware.com

Difference Between CRM and ERP

At this point, we understand that there is still some confusion surrounding these terms, because both of them are often used by vendors to denote multiple meanings. Don’t worry, we are here to shed some more light!

The key differences and similarities of ERP vs CRM software are important to understand, and that importance is only going to grow over the next few years. So let’s start…

From their own definitions, CRM and ERP are both are quite different. The major user percentage of CRM systems are of the sales and support organizations who are revolving in and around the CUSTOMERS

Whereas, the ERP users are among the factory management team, production schedulers, buyers, supply chain, and finance-related authorities. ERP users are mainly involved with internal and supplier-facing activities.

With respect to functionality, CRM software focuses on the fulfillment of the customer-side activities. CRM manages every customer information relevant to the company. This information is later used by all business departments from sales to managers, later by accounting personnel.

On the other hand, ERP software turns the business processes into a more effective and efficient format. An ERP encompasses all the key functionalities of the business like their accounting, warehouse, inventory, supply chain, human resource, etc. ERP not only provides the departments with updated and pertinent information but also provide companies with a clear and precise picture of their standings.

To better understand their key differences and functions, here’s an infographic by #codesolutions

Yes, it’s true that CRM and ERP are related to each other…

As you can see, some of the functions of a CRM software are already included in the description of ERP software. As a buyer in need, you might also get confused between what to choose between an ERP and CRM software. Let’s end the debate…

First off,  both ERPs and CRMs play a pivotal role in business success and overall profitability. They are designed to automate and streamline processes in a business. While CRM is a system for managing the front-end of the business, ERP is involved in managing the back-end. 

The relationship between ERP and CRM is that these are two systems that need to work in conjunction with each other in order for the front and back office of the business to work effectively and efficiently. 

But there’s more to it…

The benefits of integrating CRM software with ERP software can ensure optimal investment returns and initiate the employees to make better decisions in their work. Ultimately, CRM within ERP software ensures that the expectations of the customers and finally the business goals are met on time. The integration guarantees that all internal departments under the organization are working together in sync. 

Which One Do You Need?

In reiteration, the biggest users of CRM software are naturally those organizations with a customer base. A CRM is a sales team’s greatest asset, giving them access to all the data they need to generate leads and close deals while ensuring that the customer experience is as positive as possible.

Additionally, a CRM can be used by many different departments and business types. If there is a relationship to manage, no matter who with, a CRM can help. So If you’re just looking to improve your sales and marketing processes, and you want to make your business more efficient, then you probably just need a new CRM system.

On the other hand, if you’re looking to overhaul all of the software your business is using, or you’re in a period of growth, then you should consider investing in a new ERP system. ERP systems will allow your company to achieve actual business process automation, managing important tasks on a daily basis across an organization and freeing up staff to focus their efforts on more critical initiatives which require personal attention. 

Apart from that, if your business uses multiple software solutions, each for a specific task, you can benefit from adopting an ERP system because of its ability to track suppliers info, bill of materials information, and info on the product life cycle. Inventory monitoring and order management features can be pretty helpful for those companies that sell products. 

This not only boosts productivity, but also dramatically reduces operating and overhead costs. Without ERP systems, you can’t have cross-departmental collaboration and prudent workflow execution.

Bottom line: Both CRM and ERP software have their own importance. Both contribute to profits to a great extent. Of course, ERP software is a bigger investment compared to a CRM, but it carries irreplaceable importance for many enterprises out there.

Depending on the type and volume of business, your company may need either or both. And at the end of the day, it all depends on your company needs…

Summary

What makes CRM different from ERP is their core functionalities. Both have their own set of characteristics and features exclusively working for the betterment of what they are designed for. Both of them are also intended to increase the profits of your business, but to reach this goal, these systems use different approaches.  

In a nutshell, CRM is the software that optimizes the relationship with the customer and manages the business relationship between the company and the customer himself. ERP is the complete business management solution that automates all the internal processes of the organization.

So there… Now that you’ve learned the exact difference between these two software tools, you’re equipped to make an informed decision!

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