What is the Difference between CRM and ERP and How Can They Help Companies?

Posted by NYGGS on November 28th, 2023

Inside

1. The combination of CRM and ERP creates synergy in the company, boosting streamlined workflow.
2. CRM controls the relationship with customers and improves sales processes, while ERP deals with the company's internal processes.
3. CRM helps assess the potential of future business operations and discover business opportunities, while ERP helps assess the efficiency of internal processes.
4. CRMs allow us to understand how the company relates to its prospects and customers, while ERPs help formulate broader business strategies.
5. ERP usually involves a much higher investment cost than CRM.

Topic Covered

• Definition of ERP and CRM
• Purpose of a CRM and an ERP
• Main Differences Between CRM and ERP
• How Do ERP and CRM Help a Company?
• FAQs

Introduction

In business management, efficiency and profitability are crucial elements. What happens when you combine two fundamental systems to achieve these goals? That is the central question of this article. Here, we will explore the role of CRM and ERP Software in optimizing your business.

These two systems may appear similar in some ways. Yet, their goals and applications are different. Let’s learn, but first, let's cover some basics!

Definition of ERP Software and CRM Software

What do CRM and ERP stand for? What does each one consist of? This section answers these fundamental questions. Learn below.

• ERP (Enterprise Resource Planning) Software: When we talk about ERP software, we are referring to a solution that integrates and manages various areas of a company (such as finances, human resources, inventory, etc.). This system serves the purpose of improving efficiency and optimizing internal procedures.

• CRM (Customer Relationship Management) Software: CRM triggers long-lasting relations with customers. The system collects, organizes, and analyses data to improve customer satisfaction, ultimately boosting sales by providing personalized attention.

Let's make a comparison to understand it better.

Can I edit a photograph with PowerPoint or MS Word? There are two possible answers:

• Yes, with certain limitations, but I can make changes.
• To get a professional result, I must use a specific photo editing tool.

The same thing happens with these business applications. Can I manage my clients' contacts with both? Partly yes, but to make the most of its usefulness, I must use a CRM.

Thus, the ideal knowledge for companies is to use both systems, as each tool's focus is different. This is how you will achieve more effective operational management and maximize profitability.

What is the Purpose of a CRM and an ERP in a Company?

The short answer is:

ERP Software focuses on managing expenses to optimize costs, while CRM focuses on driving sales and, therefore, increasing revenue.

One thing to note is that CRM is mainly used for front-office activities, while ERP is used for back-office tasks.

To understand the differences between both systems better, below are some practical examples:

• In a retail store, a CRM system can be implemented to manage customer relationships. Through this tool, information about purchasing preferences, purchase histories, etc. is collected. This way, you would use this information to suggest personalized products and offers.
• Let's say that in a manufacturing company, an ERP can be used to manage internal processes. This tool allows the integration of inventory management with production planning and logistics. For example, upon receiving an order, the ERP automatically identifies stock in inventory. Also, it can give almost accurate data to plan production based on seasonal demand.

There are more factors that differentiate both systems from each other. Let's learn about them in the next section.

What Are the Differences Between CRM and ERP?

To understand their differences, we can divide them into several key aspects:

Software Goal

The purpose of each one is completely different. ERP Software controls and manages business resources and their economic efficiency. On the other hand, CRM focuses on customers to improve and optimize the sales process. This means that the ERP is a solution that can be used by all departments of a company, while the CRM is mainly aimed at the sales and marketing departments.

Implantation

Due to ERP's objective, the implementation of this system tends to be a higher priority. It is a more fundamental tool than CRM. Therefore, this system is somewhat complex and needs more investment as well as implementation time. While all employees are expected to familiarise themselves with ERP, only a few need to do the same with CRM. The knowledge gained from using the first tool also helps to implement the following one.

Target Company Size

The size of a company usually influences the choice. A complete accounting solution for many SMEs may be sufficient for day-to-day management. However, as inventory optimization, human capital management, and project planning are also significant, adopting an ERP System is more appropriate. The same applies when you have sales both physically and through various online channels. The more consolidation there is in the information, the greater the competitive advantage. So, CRM implementation is an excellent option for almost any type of business. Its main objective is to increase sales volume and improve customer relationships.

Managed Data

While both CRM and ERP manage a pool of data, there is a thin-layered difference. An ERP manages internal company data, such as financial records, inventory information, purchasing, suppliers, staff performance, and production planning. In contrast, a CRM is responsible for managing customer data, including purchase histories, sales and marketing activities, and everything related to customer service.

Business Impact

Both systems bring many benefits to a business. The use of ERP software improves internal management, decision-making, and overall productivity. On the other hand, a CRM tool allows a company to increase customer retention and improve customer loyalty.

Users

Normally, the users who use one tool or another are different. The ERP is usually used mainly by the administrative and finance teams. Although it all depends on the modules that we have integrated, if we have a human resource management or HRMS module, the HR and recruitment teams will also use it. CRM is mainly used by sales and marketing teams. It helps them to launch campaigns, track sales objectives, control business opportunities, and so on.

We hope that you get an idea of how both CRM and ERP software are different. Next, do you want to know how these systems help a company?

How Do ERP and CRM Help a Company?

Practically, in all ERP, there is a CRM module integrated. Thus, the company can take advantage of both systems without having to install or purchase new software.

The combination of CRM and ERP software enhances work and results in different areas. Thanks to their single database that connects all departments through just one system. Furthermore, they help the company in more ways. Let's learn them!

Business Intelligence

One of the aspects in which CRM and ERP complement each other is in the management of business intelligence. The data it collects allows you to analyze it to make better decisions and define new sales strategies.

An example of this is the analysis of purchasing habits. With the registered information, it is possible to know what products or services are most in demand. Based on this information, you can develop strategic production plans.

Relationship with Customers

The fusion of CRM and ERP means that the customer life cycle does not end with the sale of the products. For example, after the purchase, you can track the shipment of the products from the warehouse to delivery. Additionally, these integrated systems can generate bills and invoices and send them to the customer directly.

Furthermore, providing comprehensive management to the customer increases their degree of satisfaction.

Marketing Management

Both CRM and ERP share modules to manage marketing. However, ERP software focuses on the operational part of marketing, such as budget control or planning of human and material resources.

CRM, on the other hand, is oriented toward the analysis and study of consumer behavior to design better marketing campaigns.

Screen with Customer Information

The integration of CRM and ERP helps establish a communication channel between the front office and the back office. The front office deals with customer service, and the back office manages the company's internal processes.

Thus, the information collected by the front office, such as complaints or suggestions, can be quickly transmitted to the responsible back office department.

Human Resources

CRM and ERP are tools that help optimize the work of the human resources software module. The data recorded by the customer relationship platform can be used, for example, to identify personnel with the best sales results.

Moreover, these data are useful for training new company employees and for paying the corresponding income into payroll software.

Inventory Management

CRM solutions within ERP also allow you to optimize stock management. Thanks to the recorded data, it is possible to have real-time information on stocks and orders.

In this way, you can avoid cases of understocking or overstocking. Also, you can gain data-driven insights when making new purchases of raw materials from suppliers.

Conclusion

CRM and ERP Systems complement each other. A thin-lined difference is that an ERP focuses on internal processes, while CRM deals with handling customers' needs.

These systems, when integrated, improve efficiency in daily operations, promoting fluid communication between departments and a broader understanding of the company among employees.

Both systems save time, reduce errors, and provide instant access to essential data for decision-making. In short, the combination of both maximizes benefits.

Lastly, at NYGGS, we offer a comprehensive ERP solution that allows you to make the most of this tool. It lets you create synergy across departments that optimize your commercial operations. Discover how NYGGS ERP Software connects all departments that help you achieve your business goals.

FAQs

Q1. Which should I use in my Company, ERP or CRM?

Ans. It depends on the needs of the business. If you need to manage internal processes such as accounting, human resources, or warehouse management, ERP software will be the best solution. However, if the main goal is to improve relations with customers and increase sales, you should opt for a CRM system.

Q2. How do ERP and CRM work together?

Ans. When CRM is integrated into an ERP it creates synergy for data management, sales automation, or the development of marketing campaigns based on the interactions recorded in the software. The combination of CRM and ERP systems allows us to have a global vision of the customer and offer a better experience.

Q3. What is better, an ERP and CRM in the Cloud or Locally?

Ans. Both options have advantages and disadvantages. The cloud allows these tools to be available at a lower cost, with greater scalability, and with access to customer information from any device with an Internet connection. On the other hand, the local installation provides more control over data and customization options.