What is a CRM system?

A customer relationship management (CRM) system is a way for your business to use your customer data to improve the service that you provide to your existing customers, gain new customers and consequently, improve your business’s profits. This guide provides an overview of CRM, the benefits and challenges of using CRM systems and aims to help you select the best CRM system for your business.

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The term ‘CRM’ stands for Customer Relationship Management and is an approach to gathering, storing and managing all of a business’s customer data on one place. A business’s CRM system brings together data on all of its existing and prospective customers, from all of its communication channels (e.g. website, email, phone, face to face, social) into a central database to create a ‘single customer view’ on each customer.

In addition to being a centralised contact management solution, CRM systems also provide a wide range of other valuable features and functionality including automating sales, marketing and customer service tasks, enabling employees to share and collaborate on customer projects, and providing data analysis and insight tools. Using a CRM system’s tools can enable a business to improve its existing customer relationships, increase lead generation and customer conversion, and ultimately grow revenues and profitability.

This article provides an overview of CRM, discusses the benefits and challenges of running a CRM system and provides guidance as to how to select the best CRM system for your business.

In this article

What is CRM?

A history of CRM

Business have been recording information on their customers for years often on traditional card and filing systems. Probably the most famous card system is the Rolodex, a rotating file device, invented in the 1950s which has become popular worldwide.

True CRM began in the 1970s, with the development of customer satisfaction surveys and database marketing (the gathering, recording and analysing of customer data), while commercial CRM systems began to be launched in the 1990s and have risen in popularity ever since.

A recent Gartner report stated that CRM software generated $48.2bn of revenues in 2018 and is the largest and fastest growing enterprise application software category in the world. In recent years the popularity of conventional on-premise (or desktop) CRM software has been overtaken by cloud CRM systems (CRM software hosted on, and accessed over, the internet) which now account for over 87% of CRM systems worldwide.

The different meanings of CRM

CRM can mean different things to different people:

  • CRM strategy: A CRM strategy establishes how a business wishes to interact with its existing and new customers.
  • CRM processes: CRM processes follow from a business’ CRM strategy and set out the steps for its employees to follow as they interact with customers and handle customer data.
  • CRM technology: At the heart of a CRM system is the CRM software which organises a business’s customer data and automates CRM processes.
  • CRM team: In most organisations there is no specific CRM team. However, sales, marketing, customer service, operations, finance, HR and technology employees all can, and arguably should, be encouraged to use a business’s CRM system.

Although CRM software features and functionality are often the main focus for businesses, the software is only as good as the CRM processes that a business has put in place and the employees that use the system, and can only be truly effective if the CRM system is aligned with the business’s strategy.

Today, CRM systems are used by all sizes of businesses from start ups and small businesses to multi-national conglomerates, in all industry sectors and by a variety of business functions – marketing, customer relations, product development and finance – not just sales.

Basic CRM system functionality

At the core of a CRM system is the customer contact database – a central repository of all your business’s customer information. This data can include:

  • A customer contact’s name, job title and contact details (e.g. address, email address, telephone number).
  • Information on your employees’ interactions with that person.
  • Previous sales to that person and/or their company.
  • Other notes on that person and the company.

However, a modern CRM system is more than just a digital Rolodex. It can integrate with other business systems (such as email, social media and phone systems) to capture and share data, it can automate a range of day to day processes (such as outbound emailing) and it can have powerful analysis tools to analyse data and create management reports.

The CRM system lifecycle

As is shown below a CRM system can become the central point for all of a business’s interactions with its customers:

The CRM system lifecycle

This infographic shows the CRM system cycle. It sets out six circles highlighting each CRM stage, around a central CRM system circle.

CRM systems can become integral to a business in helping it to:

  • Reach out to existing and prospective customers to generate awareness of its brands, products and services.
  • Generate new leads for its sales team.
  • Convert those leads into customers.
  • Provide excellent customer service during the delivery of its products and services.
  • Retain its customers so that it can upsell other products to them.
  • Develop customer loyalty so that customers refer the business and its products to new prospective customers.

The CRM data management process

A CRM system is a powerful data management and insight tool for your business. However, the system is entirely dependent on:

  • The quality of the customer data inputted into, and maintained within, the database and,
  • Using the CRM system and its tools to their full extent,

to generate the most useful outputs and return on investment for your business.

The CRM data management process

This infographic shows the CRM system data management process. The six CRM processes are shown as arrows travelling round a circle.
  • Collect customer data: If you are using a CRM system for the first time you will need to gather all your customer data from across your business. As your CRM system and processes are bedded in collecting customer data becomes a ‘business as usual’ task for all employees.
  • Cleanse and enhance the data: Customer data may not be ‘clean’ (for instance it may have the wrong details) or may be missing data points. These discrepancies should be rectified before the data is inserted into the system.
  • Insert data into the CRM database: With a new CRM system inserting data into the system can be a laborious task but it is important to be as comprehensive as possible. You should check with your CRM supplier to see what data migration tools they provide. Data can lose its value over time if it is not updated regularly so you should ensure that updating the CRM system becomes an everyday process for all employees.
  • Analyse the data: Your CRM system will have a range of analytical tools that can be used to analyse your business’s customer data and output findings into user friendly management reports.
  • Develop customer intelligence & insights: You can use the system’s management reports to create new business strategies and develop action plans including lead generation, marketing campaigns and product development initiatives as well as streamlining internal processes.
  • Share & act on intelligence & insights: The outputs from your intelligence and insight development can be shared with your teams on the frontline to put your new business strategies and action plans in to practice.

As your new activities are successful your teams will gather new and updated customer information to be inserted back into the CRM system.

GDPR and CRM systems

In 2018 the UK government introduced the Data Protection Act which implemented the European Union’s 2016 General Data Protection Regulation (GDPR). This legislation has had a major effect on how UK businesses gather and use customer data.

The legislation governs how personal data (including data on a business’s customers and suppliers) is collected, stored and used. The regulations apply to all business with more than 250 employees and also to those businesses that regularly make use of people’s private data, for instance, even small businesses that collect and use customer information for marketing purposes.

More information can be found at https://www.gov.uk/data-protection-your-business.

UK data protection legislation is complicated and time consuming to follow. CRM systems cannot remove your business’s responsibility to comply with data protection legislation but they can help your business to manage its obligations as effectively as possible:

  • Implementing your business’s GDPR policies: CRM software can be configured to comply with your business’s GDPR policies (e.g. what customer data you have determined your business may retain).
  • Customer consent management: Your CRM system can be seamlessly integrated with your business’s other communication channels (e.g. email, website forms, telephony) to record, coordinate and track customer consent centrally.
  • Data security: CRM software has comprehensive data security measures (e.g. data encryption and anti-hacking tools) to ensure that your customer data is held securely and to prevent data breaches.
  • User access rights: CRM software allows you to set and control different levels of access to your customer data (particularly important in relation to ‘sensitive data’).
  • Right to erasure: GDPR obliges businesses to delete customer data without delay on a request from a customer. CRM software will have one copy of the data held centrally which can be identified, accessed and deleted efficiently.
  • Monitor compliance: Your CRM system can provide a record of how your business has complied with GDPR in relation to its customer data.

CRM systems can be an important tool to help small businesses and large organisations effectively and efficiently comply with data protection obligations.

Recent CRM system trends

CRM systems have developed over the years to reflect the needs of the business community. In the last five years there have been a number of business trends which have particularly affected how these systems have developed and how businesses are using them:


  • Businesses are increasingly looking to outsource functions where:
    • They do not have the in-house skills and/or experience to manage those functions effectively and/or,
    • It is not cost-effective to build an in-house team and acquire the necessary technology and/or
    • They regard a function as non-core.
  • Outsourcing was once the preserve of government and large businesses but developments in communications and technology have made outsourcing increasingly accessible and cost-effective for small businesses and even start ups. 
  • A recent YouGov survey reported that 70% of UK businesses outsource one or more functions to a third party. Outsourced services range from IT support, payroll and accounting to marketing and customer service.

Broadband penetration

  • Internet connections have improved significantly in speed, stability and security so that many businesses now rely on the internet as their main communication channel with their customers and use online outsourced services to run many of their business functions.

Cloud services

  • Cloud services have developed rapidly over recent years, led by the widespread popularity of cloud data storage. Using a cloud service has become the standard way for business’s to deploy a CRM system with an IBM study showing that cloud solutions have grown from 12% of all CRM solutions in 2008 to 87% in 2017.

Remote working and mobile devices

  • Allowing, or even encouraging, employees to work remotely has become common place among UK businesses. An Office of National Statistics survey has shown that c.1.7 million people in the UK mainly work from home with 8.7 million people saying that they have worked from home at some point. There are also thousands of other workers who are out on the road regularly as a core part of their jobs.
  • Many remote working employees will use standard laptops for more intensive activities. However, devices, such as mobile phones and tablets, have become increasingly popular for business tasks, particularly for employees who travel regularly and/or need to work at remote locations.

Social media

  • Being able to integrate social media interactions across Twitter, Facebook, LinkedIn and a range of other social media platforms, with other more established communication channels such as websites and email, is becoming the norm for CRM systems.

The different types of CRM systems

CRM systems comprise three broad areas of functionality:

CRM systems will, in general, include functionality across all three of the areas set out above. However, some systems offer greater specialism and more functionality in some or all of these areas which may be relevant to your specific business needs.

Operational CRM

Operational CRM focuses on streamlining business tasks to make the process of engaging with your customers as efficient and effective as possible. Operational CRM has three components:

  • Sales automation: Sales automation helps a business to automate it sales processes to generate more leads and increase customer conversion. It includes lead management, contact management, automating sales tasks, and sales order management.
  • Marketing automation: Marketing automation helps businesses to make the most out of their marketing channels and includes campaign management and communication automation tools such as email automation.
  • Customer service automation: Customer service automation supports a business’s customer service activities including customer issue management, call management, customer self-service options, and service level management.

Analytical CRM

Analytical CRM focuses on aggregating customer data from multiple sources and analysing that data to help business managers make more informed decisions as to how to better meet their customers’ needs. Analytical CRM includes:

  • Data warehousing: Customer data is gathered from multiple channels into a centralised database.
  • Data mining: Data mining is used to analyse the customer data that you hold in your central database. One of the most common forms of data mining is to segment your customers into groups based on certain selection criteria e.g. value, product bought, region, industry, age.
  • Analytical processing: Analytical processing brings together the analysis from your data mining into actionable insights such as sales forecasting or managing performance against key performance indicators.

Collaborative (or Strategic) CRM

Collaborative (otherwise known as strategic) CRM is focused on making the communication of customer data across your business, and the collaboration between your employees on how to engage with your customers, as effective as possible. Collaborative CRM includes:

  • Interaction management: In addition to basic customer data, a contact management system, allows your employees to record all interactions with your customers in a centralised database – creating a ‘single customer view’ for each customer – accessible by all employees.
  • Relationship management: Customer data is accessible by employees in all business functions so that all team members can collaborate on improving customer service and coordinate on marketing messaging and activating communication channels to engage with your customers.
  • Customer documentation: All customer documentation – contracts, proposals, technical specifications – can be held in the central database, accessible and useable by any authorised employee.

Before selecting a CRM system, you should determine if your business has any specific needs or if a more generic solution would be sufficient.

The benefits of a CRM system

A CRM system can bring a wide range of benefits to any size of business:

Improved features and functionality

  • Improved customer contact management: One of the primary benefits of a CRM system is that it can bring together all of your business’s customer data (notes on face to face conversations, telephone calls, email, social media posts etc) into a single, centralised database accessible by all employees wherever they are located.
  • Better sales tools: CRM systems provide a range of up to date sales tools, including lead management and sales forecasting, to help your sales staff develop and convert more customer leads as efficiently as possible. They also often include performance tools so that your sales managers can monitor their teams’ performance against individual targets.
  • Better marketing tools: CRM systems offer campaign management and marketing automation tools to help your marketing team operate more efficiently and get the best return on investment, from their marketing budgets.
  • Process automation: CRM software allows your business to automate a range of sales, marketing, customer service and administration functions, improving efficiency and reducing costs.
  • Analytics & reporting: CRM systems can provide sophisticated analytical tools to enable your business to better understand and segment your customers, personalise your products, services and communications to each customer or customer segment, forecast demand and sales, and track your business’s performance with reliable data and easy to use reports.
  • Improved knowledge sharing and collaboration: CRM systems make customer data accessible in standard formats, templates and reports, and provide project management tools, allowing for easier collaboration between employees.
  • Remote working & mobile devices: Many CRM systems have been designed with remote working and mobile devices in mind so that customer data can be accessed and/or input by any employee, wherever they are working and on a range of mobile devices.
  • Integration with other business systems: CRM systems are designed to seamlessly integrate with wide range of business systems such as marketing, finance and telephony.
  • Customisation: CRM software is designed to be customised to meet your specific business and/or industry needs.
  • Compliance with data protection legislation: CRM systems provide comprehensive, coordinated and easier compliance with data protection legislation.

Improved productivity

  • Generating and converting more sales leads: Better customer segmentation and analysis can allow your business to create more, higher quality sales leads while sales tools will help your sales teams to more effectively convert those leads into paying customers.
  • Better customer service & customer satisfaction: Up to date, centrally held, customer data allows your business to improve customer communication (e.g. minimising multiple email shots to the same customer from different departments) and to modify your products and services to better meet your customer needs. Having comprehensive customer data in one place also allows your employees to respond to customer queries quickly and accurately, improving customer service and increasing customer satisfaction.
  • Time saving & efficiency: CRM systems offer standardised data templates, automation tools and time management functionality that significantly streamline internal processes, improves productivity and saves administration costs.
  • Enhanced products & services: Analysis of customer data can assist in better targeting of your products and services to your customers’ needs, driving up sales and increasing profitability.
  • Monitoring employee performance: CRM systems provide tools for you and your managers to monitor your employee performance and help set incentive targets.
  • Protecting your business’s knowledge base: Customer data is stored in the CRM system not in your employees’ heads or their bespoke spreadsheets. If/when an employee leaves your business the knowledge of their customer accounts remains within your business rather than leaving with them.

A CRM system should support your business in increasing sales and revenues, generating efficiencies and cost savings and, improving profits.

Which business functions can benefit from using a CRM system?

CRM systems have conventionally been sales tools. However, your business can drive significant gains from encouraging the use of its CRM system by many business functions:

  • Sales teams: CRM systems allow sales teams to maintain accurate information on leads and sales opportunities with existing and prospective customers, monitor individual sales team member’s performance against sales targets and reduce sales support administration.
  • Marketing teams: CRM systems help marketing teams to get a clearer view of the customer journey, assess the impact of current marketing campaigns and effectively plan new marketing activity.
  • Customer service teams: CRM systems centralise all information on a customer into a ‘single customer view’ which customer service teams can use to quickly and accurately respond to customer queries.
  • Operations teams: CRM systems can support an operations team in managing a business’s supply chain efficiently by having accurate, centrally held information on all of their interactions with suppliers.
  • HR teams: CRM systems can help HR teams to monitor employee performance against incentive targets.
  • Finance teams: CRM systems enable finance teams to monitor sales pipelines, input into financial forecasting and monitor key performance indicators.
  • Management: CRM systems help management understand their customers better and tailor their business strategies and products to better meet customer needs.

Challenges to fully utilising a CRM system

Implementing any new technical solution comes with its own challenges. However, as with many technology projects, problems often come from a lack of clear and robust business processes and/or engaged, supportive employees rather than the technology itself.

We have set out below a number of common blockages to successfully implementing a CRM system and associated solutions.

The CRM system does not achieve your objectives

  • Choosing, customising and installing a CRM system for your business can be confusing, time consuming, expensive and may not end up in meeting your initial goals.
  • Businesses often set up a project team (including key departmental heads) to take responsibility for selecting, customising and implementing the new CRM system in line with your business strategy.
  • The project team should manage the project against a defined project plan, key milestones and an agreed budget.
  • We have set out later in this article guidelines to help you determine your unique business requirements and assess the CRM systems available in the market against those requirements.

Poor employee engagement

  • Staff may be used to old ways of working, have joined from businesses that use different CRM systems, or just see using the new system as added an unnecessary administrative burden.
  • Your departmental heads can take responsibility for communicating the benefits of the CRM system to their direct reports.
  • You can provide your employees with regular training on the new CRM system, incentivise them to engage with the system while also incorporating its usage into their targets so that the system becomes an everyday working tool.

Inaccurate, missing or old data

  • The CRM system is only as good as the data that is stored within it. If customer ‘contact’ data is out of date, incomplete or just wrong, the system will not be able to be used effectively.
  • In implementing the new CRM system your business will need to carry out an audit of its existing customer data and rectify any errors before the data is migrated across.
  • Customer data processes will need to be put in place and communicated to all employees to make inputting clean and accurate data into the CRM system on a regular basis, a business usual process.

Failure to use core analytical features

  • A CRM system’s analytical tools can sometimes be unused if they are seen as too complicated, having no immediate benefits or if employees or management are too busy to use them.
  • Your business’s managers will need to be encouraged and incentivised to take time to familiarise themselves with your CRM system’s analytical tools, create appropriate key performance indicators and management reports, and build CRM reporting into their day to day working practices.

Over use of automation

  • Task automation tools, in particular customer facing tools such as email automation, can be overused leading to customer dissatisfaction e.g. feeling that they are being ‘spammed’ with constant but irrelevant email communications.
  • Marketing teams in particular need to carefully tailor the frequency and content of their communications so that they can get the benefits of automation while retaining a feeling of personalisation with your customers.

Limiting use to a core CRM team

  • CRM systems are often left in the ownership of sales teams who may be the heaviest users of these systems.
  • To get the greatest return on investment from a CRM system, and underpin a business wide customer focused strategy, all employees should be trained on, and encouraged to use, the system. Not only sales and marketing teams but also right across your business including operations, finance and HR.

Determining your business’s CRM system needs

Choosing the right CRM system will depend on a range of factors unique to your business including:

  • Does the CRM system need to have a particular specialism (e.g. collaborative, operational or analytical CRM functionality) or is a more generic system preferable?
  • Are there any requirements specific to your industry that the system needs to reflect?
  • How many users will you have now and what are your growth plans?
  • What features and functionality do you require?
  • What level of customisation and flexibility do you require?
  • Do your employees need to access the CRM system remotely?
  • What other systems (e.g. website, email) do you need the CRM software to integrate with?
  • What training will your employees need?
  • Your budget?

Once you have determined your business’s unique needs you can compare the different CRM systems available in the market.

Assessing the right CRM system for your business

We have set out below a range of criteria to help you select the right CRM system for your business:

Features & functionality

  • Is it an on-premise of cloud CRM system?
  • Does it have any specialisms (e.g. collaboration, analysis, operational)?
  • Does it cater for any specific industry requirements?
  • How customisable is it?
  • What data security and GDPR compliance measures does it provide?
  • How much storage is provided (e.g. if it is a cloud CRM system)?

Installation & use

  • How easy is the system to install/set up?
  • What data migration functionality does the system have to ensure that existing information can be seamlessly uploaded?
  • How easy is it to integrate with your business’s other systems (e.g. email, phone systems, finance)?
  • How user friendly is the system?
  • How scalable is the system as you add more users?


  • What are the upfront installation/set up costs?
  • What are the monthly running and/or maintenance costs?
  • How transparent is the charging model? Are there any hidden costs such as data storage, customer service or early exit fees?

CRM system supplier's track record

  • What level of customer support is provided?
  • What employee training is provided?
  • What is the supplier’s reputation and credibility in the market? What are the customer reviews? Will the supplier provide references or case studies?
  • What are the contractual terms being offered?

What CRM systems are available in the UK market?

There are a variety of CRM systems available in the UK market:

  • On-premise CRM software: On-premise CRM software is installed and run on your business’s own IT network. Until recently, on-premise CRM software had been the conventional way to run a CRM system and had tended to be affordable only by larger businesses.
  • Cloud CRM software: This is CRM software that is run ‘in the cloud’ on a CRM supplier’s own servers in their data centre and accessed by your employees over the internet. Cloud CRM software is now by far the most common CRM solution with 87% of CRM systems being hosted in the cloud.
  • Open source CRM software: Open source CRM software is designed using non-proprietary software which can be changed or enhanced by the user and tends to be used by businesses that want a high degree of customisation for their CRM system. It usually can be deployed on-premise or in the cloud.
  • Free CRM systems: CRM systems are often offered on a free trial basis for a limited period of time. However, in some cases, CRM systems are free for an unlimited period of time although subject to certain other limitations.

If you are interested in finding the right CRM system for your business read our article Guide to UK CRM software.

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