ERP vs. CRM: Which one do you need? Or do you need both?

Originally published June 07, 2023, updated October 23, 2024

In the world of business software, two acronyms consistently grab the headlines: ERP and CRM. Deciphering this abbreviation mix-up can be quite challenging, but fret not! We're here to steer you through the maze.

By the end of this article, not only will you be informed all about what ERP and CRM stand for and what they do. You’ll also be an expert on the ERP vs CRM debate, and able to decipher which one is right for your business.

Breaking down the acronyms: ERP and CRM

Before we start getting into the nitty gritty of which kind of system is right for your business, it’s important to understand what the difference is in the first place.

What is CRM?

CRM, also known as Customer Relationship Management, is like having a superpower for managing customer relationships. It's a fantastic business software tool that focuses on sales, marketing, and customer service.

With CRM software you can centralise customer information, keep track of interactions, and hold smoother communication with your customers. It's all about building better relationships and making customers happier.

What is ERP?

ERP stands for Enterprise Resource Planning. It’s a comprehensive business software solution that brings harmony to your organisation.

It covers finance, supply chain management, human resources, and operations. ERP systems are all about streamlining processes, optimising resources, and making your entire business run like a well-oiled machine.

How are ERP and CRM systems similar?

ERP and CRM systems aren't as different as you might think. They actually have quite a bit in common.

Both systems aim to supercharge your business performance and enhance customer experiences. They offer centralised data management, making collaboration and information sharing a breeze.

ERP vs. CRM: What's the difference between CRM and ERP software?

Let's dive into the key differences between CRM and ERP software.

CRM systems are your personal sidekick for managing customer relationships, boosting sales and providing top-notch customer service. They give you the tools to track leads, manage contacts, automate marketing campaigns, and provide delightful customer support.

On the other hand, ERP systems are the ultimate multitaskers. They focus on optimising business operations such as finance, inventory management, procurement, and production planning.

While CRM systems are all about sales, marketing, and customer service. The primary difference between CRM and ERP lies in their core focus: ERP is about optimising your business, while CRM is about boosting sales and customer satisfaction.

Depending on your specific needs, you can choose either a CRM system to build stronger customer relationships or an ERP system to supercharge your business operations.

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Core features of modern ERP and CRM systems

To help you make an informed decision, here are the key features you should expect in modern ERP and CRM systems.

This list isn’t exhaustive, and only serves to illustrate the fundamental differences between what the two are used for.

ERP system features

Here are the features that you can expect from a typical ERP system…

Supply chain management

Think of supply chain management as your friendly guide in navigating the journey of goods and services. It's like a GPS for your business, helping efficiently transform raw materials into final products.

It's all about streamlining supply-side activities to deliver the best value to customers and get an edge in the market.

Financial management

Financial management is almost like your personal financial advisor. It's here to help you manage your organisation's financial resources and transactions.

With features like general ledger, accounts payable, accounts receivable, budgeting, and asset management, it's a real-time financial dashboard.

Plus, it ensures you're always in line with regulatory compliance.

Human resources management

Human resources management is your organisation's talent scout and coach rolled into one.

From recruitment and onboarding to payroll and performance reviews, it helps align workforces with your strategic goals.

Inventory management

Inventory management ensures you have just the right amount of stock in your inventory - avoiding overstock and outages. It keeps track of inventory levels, orders, sales, and deliveries.

Project management

Project management is here to help with planning, organising, and managing resources. Depending on the sophistication of the software, it can handle everything from estimation and planning to cost control, budget management, resource allocation, and even quality management.

Purchase management

Purchase management is needed for overseeing the purchasing process from vendor selection to payment. It's all about making sure your purchases are necessary, cost-effective, and within budget.

Ecommerce integrations

E-commerce integrations are your best friend, allowing you to integrate your e-commerce platforms, like Shopify and Magento, with the ERP system.

This integration ensures your inventory, orders, and data are always in sync between your e-commerce platform and the ERP system.

CRM system features

On the other hand, here are the features you’d typically find in your average CRM…

Contact management

Imagine contact management as a personal secretary, diligently storing and managing all your customer information. From contact details to communication history, it's a one-stop-shop for all interactions with your company, enabling a personalised approach and superior customer service.

Sales pipeline management

Sales pipeline management is your bird's-eye view of the sales process. It tracks and manages sales opportunities as they journey through the pipeline, providing visibility into each deal's status, forecasting revenue, and spotting potential bottlenecks in the sales process.

Customer service management

Customer service management helps keep the pulse on customer interactions, ensuring issues are resolved efficiently, satisfaction is improved, and valuable insights into service performance are gleaned.

Automation functionality

Automation functionality is a crucial feature found in modern CRM systems. It empowers businesses to streamline and optimise their sales, marketing, and customer service processes. Repetitive tasks like data entry, lead nurturing, email campaigns, and follow-ups can be automated, saving valuable time and increasing efficiency.

Automation ensures consistent and timely communication with customers, delivering relevant information at the right moment.

Marketing campaign management

Marketing campaign management is your marketing maestro, conducting the planning, execution, and tracking of marketing campaigns. It ensures the right audience is targeted, marketing activities are managed effectively, campaign performance is measured, and return on marketing investment is maximised.

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Lead management

Lead management in CRM is vital for tracking and managing potential customers or leads. It helps capture leads from various sources, track their activities, and nurture them through the sales process until they become paying customers.

➡️ Find the list of the best lead management software in our article!

Reporting and analytics

Reporting is your business's crystal ball, only a lot less magical and much more data-driven, providing insights into your business's performance. It enables the creation of custom reports and dashboards to track key metrics, empowering you to make data-driven decisions.

Social media management

Social media management is also present in CRM systems for managing your company's interactions on social media platforms. They provide CRMs for Instagram or LinkedIn to track the performance of your social media activities.

Mobile CRM

Mobile CRM is your CRM system's pocket-sized powerhouse. It's designed to access CRM data on the move, allowing salespeople to access customer information, update records, and communicate with customers from their mobile devices. It boosts productivity and customer service.

➡️ Find the 14 key CRM features to add to your CRM shopping list in our article.

Understanding the differences between CRM and ERP is vital when evaluating the needs of your business. Although the lines between CRM and ERP can sometimes blur, each system is designed with a particular focus.

ERP system vs CRM system: What does your business need?

Choosing between an ERP and a CRM software, or deciding to merge them into one CRM/ERP system, depends heavily on your business's unique requirements.

ERP: The choice for large enterprises

ERP software is a powerhouse for managing operations and resources, making it a suitable choice for large enterprises with complex processes.

These organisations often have diverse operations spread across multiple locations, and ERP software can bring much-needed cohesion and streamlined management.

The benefits that ERP provides a business with are numerous:

✅ ERP systems eliminate repetitive processes and reduce the need to manually enter information. This leads to an increase in overall business efficiency.

✅ All the necessary business data can be stored and accessed from a single location, ensuring data across departments is consistent and up-to-date.

✅ ERP systems provide top-tier tools for data analysis and reporting, allowing business leaders to make informed decisions based on real-time data.

However for small businesses, ERP might seem like overkill. Here are a few downsides of implementing one if you're just starting out:

❌ ERP systems are typically complex and pricey, which might not be feasible for small  businesses. Small businesses often operate on tight budgets without the financial resources for such a system. The cost of training employees to use the system can also be prohibitive.

❌ The comprehensive functionality of an ERP might be unnecessary for small businesses with less complicated processes. Simpler operations require less sophisticated tools. Implementing an ERP system could simply disrupt existing workflows.

❌ The transition period can lead to temporary loss of productivity. If not managed well, it could have a long-term impact on the business operations. Furthermore, small businesses often lack the dedicated IT staff required to manage the implementation and maintenance of an ERP system.

CRM: The essential tool for SMBs

CRM system is the answer if your goal is to increase sales and customer satisfaction. CRM is not just for big businesses — it's a crucial tool for businesses of all sizes. At the end of the day, customer relationships are the lifeblood of any business, regardless of its size.

Furthermore, in today's competitive business environment, understanding and meeting customer needs is paramount, and a CRM system can be instrumental in achieving this.

Here are some of the benefits of CRM:

• CRM systems focus on managing customer relationships. They provide a centralised platform where all customer interactions can be tracked and managed, ensuring a consistent and personalised customer experience.
• CRM is typically less complex and more affordable than ERP systems. This makes them a more accessible option for small businesses that may not have the resources for a fully-fledged ERP system.
• CRM systems provide valuable insights into customer behaviour, helping businesses customise offerings. By analysing customer data, businesses can identify trends, anticipate customer needs, and deliver personalised experiences to enhance customer loyalty.
• CRM systems are instrumental in enhancing sales performance. They streamline the sales process, shorten the sales cycle, and increase conversion rates. Additionally, they can assist in identifying potential upsell and cross-sell opportunities.
• CRM systems play a key role in improving communication. By recording and making all customer interactions easily accessible, they ensure that every team member can provide consistent and informed customer service, regardless of who previously interacted with the customer.
• CRM systems are vital for effective marketing. They help businesses understand which marketing efforts are working and which aren't, allowing for more targeted and effective marketing campaigns. This leads to a higher return on investment.

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What's the verdict in the ERP vs CRM debate? The ultimate decision depends on your specific business needs.

A CRM system is essential for businesses of all sizes. Whether you're a small business looking to improve customer relationships or a larger organisation aiming to integrate your operations with a CRM/ERP system, CRM is an indispensable tool in your software arsenal.

The lines between CRM and ERP are becoming increasingly blurred, with many ERP systems now including CRM functionality, and vice versa.

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