The Tool Shed Blog

What is CRM? [The Complete Guide for Beginners]

When was the last time you had to remember someone’s phone number to call them?

CRM stands for Customer Relationship Management. It's a technology for managing a company's interactions with current and potential customers. It uses data analysis to improve business relationships, specifically focusing on customer retention and driving sales growth.

Some people don’t even know their spouse’s cell phone number, even though they talk to them every day. Once the data is inputted into their phone, they just tap their spouse’s name to give them a call.

And now, all you need to do is say their name into your phone and the voice search AI takes care of the rest.

Automation has permeated every nook and cranny of our communications infrastructure. Consumers are rapid adopters of technology, but many businesses are still relying on dated strategies and legacy systems to manage their customer communications.

That means they are slow to follow up. Their messages aren’t personalized and they’re wasting far too much time on old-fashioned processes like data entry.

CRMs were invented to solve this exact problem.

CRM was the largest software market in 2017, and the trend will likely to continue to grow as more and more companies realize the benefits of these innovative systems. According to HubSpot, engaging customers with a CRM increases the odds that they’ll buy more by 20 to 40%.

Despite their widespread availability, and even with the prevalence of free, open-source CRMs, not every business is taking advantage of CRM software. A few years ago, 18% of salespeople didn’t even know what a CRM was.And believe it or not, 40% of salespeople were still using Microsoft Excel or Outlook to store their lead data.

If you’re struggling with outdated processes or you’re frustrated with your current software, it’s time to get up to speed. Here’s a beginner’s guide to CRM.

What is CRM?

The term “CRM” stands for “customer relationship management.” As a concept, customer relationship management is a method of using data and analysis to optimize your company’s interactions with both your customers and potential customers. CRM is particularly focused on sales growth and customer retention.

Although it may not make sense grammatically, you’ll also see and hear the term referenced as “a CRM” or “the CRM.” In this case, a CRM is a type of software that helps you (you guessed it) manage your customer relationships.

When they first started hitting the market, you had to install CRMs on your business computers with a hard copy like any other type of software. But today, most CRMs are cloud-based tools that you can log into with an account. As the business world has become so complex and interconnected, CRM providers have expanded their software’s capabilities.

CRMs are now essential for growing your business in the digital age.

Some of the most popular CRMs include:

  • HubSpot CRM
  • Salesforce
  • Oracle CRM
  • Zoho
  • Sugar CRM
  • Agile CRM
  • Pipedrive

At the most basic level, a CRM is like a digital Rolodex. It stores data on all your contacts so their email addresses, phone numbers, names, job titles, and more are easy to access. This is the most common way to use a CRM for beginners.

However, today’s CRMs provide much more value. The best products can even integrate with almost all your other sales and marketing tools, even your third-party analytical tools.

Most experts agree there are 3 main types of CRM: operational, analytical, and collaborative. However, some of the most successful CRMs combine all three models, and new and exciting applications for CRM software are emerging all the time.

Operational CRM Software

Operational CRM software is built to streamline and optimize business operations. The primary function by which it does this is through automation — a computer technology that executes a task, or series of tasks, with minimal or no human intervention.

An operational CRM will support various business processes, such as sales and marketing, help desk support services, billing, and even HR. However, sales, marketing, and customer services are often the primary functions of an operational CRM.

Marketing automation tools track visitors on your website and record their actions, including any data they input into form fields. This gives you a clearer picture of who is interacting with your marketing assets and why, so you can sell to them more effectively.

Your CRM can then aggregates that data to personalize your messages when you’re doing email marketing and other forms out outreach, all without any manual processes.

On the sales side, automation helps you create workflows, score leads, and automate reminders for follow-ups.

Service automation tools help you filter customer activity, notify your agents of new tasks, and respond to customer service queries instantly. You can even update customer account data automatically, with minimal data entry.

Analytical CRM Software

Data is key to using a CRM successfully, but only if you know how to analyze it. Shockingly, up to 73% of company data isn’t used for analytics, according to Forrester. That means companies are doing a pretty good job of collecting data, they just don’t know what to do with it once they get it.

The analytical piece of a CRM will collect data automatically at specific touch points and correlate it with different contact profiles. For example, if visitor A arrives at your website, your CRM may record their IP address. If they show up again, your system might greet them with a message like, “Welcome Back!” if you have enough insight to utilize their data.

But the most important tools for analytical sales and marketing CRM software are segmentation and analysis tools.

Harnessing your customer behavior tracking data, you can segment different contacts, leads, and customers based on any number of criteria, from traditional demographics to actions they’ve taken on your website. You can then build marketing campaigns that are tailor-fit for those specific individuals in those specific contexts, based on your customer profile tracking data.

In terms of analytics, you need a way to measure the success, or lack thereof, of every action you take. This helps you calculate the ROI of all your efforts. Your CRM can compare contact data with campaign data, action point data, and other figures to tell you how your campaigns are unfolding in terms of your metrics and KPIs.

Collaborative CRM Software

In a legacy business model, most departments are siloed. In other words, your marketing, sales, and customer service teams may all be part of your business operations, but they might as well work at different companies. There is little communication between them and they each have their own initiatives and processes.

In some of the worst cases, there may even be distrust and finger-pointing between the departments.

As bad as this is for your company and your culture, it’s even worse for your customers. Most customers expect a seamless and uniform experience when they interact with a business, whether they’re reading an email or speaking with a customer service rep.

They want you to know who they are and what they need immediately, and they won’t tolerate it if you’re missing information or they must wait while you process requests.

Collaborative CRM software brings all your teams together into the same system, sharing dashboards, analytics, and tools, so you can create a more seamless customer experience.

Have you ever wanted your sales team to write for your blog? Your teams can also collaborate on campaigns.

Terms You Should Know

Every CRM is different, but most of them share a lot of the same concepts, so much so that these terms have become standard in the business lexicon. Nonetheless, defining them will help you understand how they each relate to your CRM software.


An object is simply a data point in your CRM. For example, it could be a contact you have stored in your database, or even a piece of contact information associated with a contact, such as a phone number. Objects may change over time depending on how your customers move through the buying cycle.


Any individual whose contact information you have in your database is a contact. They could be a lead, a business partner, a supplier, or even your mom.


To marketers, a “conversion” may occur when a website visitor fills out a form or clicks on a CTA. To salespeople, a conversion may only occur when a lead has been qualified. Either way, a conversion is when an object in your database converts to something else — usually a status further down the buying cycle.


Experts debate about how best to classify leads. But one thing is for sure: Leads are contacts who have shown some interest in your business.

Leads in your CRM will most likely have converted on one of your marketing assets at some point, thus giving you their contact information. Leads are worth perusing, either with more marketing materials or with a sales call.


Specifically, an account is a company you wish to sell to. You may have several contacts in your database who are part of the same account.

In a CRM, keeping account information allows you to perform account-based marketing (ABM) more effectively. You can sell to multiple contacts across a single company and keep your campaign cohesive at the same time.


If a lead is very interested in what you have to offer, they may become an opportunity. Some CRMs break the process down even further into marketing-qualified leads (MQLs) and sales-qualified leads (SQLs) to get a better understanding of which opportunities are ready for a sales call and which are not.


Campaigns can house a series of deployed marketing assets, as well as metrics for the entire body of the campaign. You can launch multi-channel marketing campaigns through your CRM to effectively track its ROI, for example. Of course, you could also launch a sales campaign or a customer service campaign.


Workflows consist of a series of tasks that you have automated in your CRM system. They are made up of triggers and actions. The actions will not occur unless they are triggered first.

For example, if a lead qualifies themselves as working at a company with over 200 people, this may trigger a specialized email campaign for those types of companies to be sent to them.


API stands for “application programming interface.” An API is simply a set of programming standards that let you access a cloud-based software application.

CRM companies will often release their APIs so other companies can develop software that integrates with their own system, or vice versa. This way, such companies can build partnerships, reach new markets, and provide more value to their customers.

For example, if your company swears by the efficacy of Google Analytics, you won’t want to give it up just because you’re integrating a new CRM. Instead, you can find a CRM that integrates with the Google Analytics API.

It has even been foretold that by 2022, when it comes to enterprise software spend, CRM would take the top spot as the single largest revenue area.

What are the Key Features of a CRM?

When you consider the fact that sales representatives spend less than 36% of their time selling, you know there has to be a better way.

A CRM should save you from having to keep track of prospects on paper, but this is just its core functionality. A CRM wouldn’t even be a CRM if it didn’t help you manage your contacts, create calendar reminders, manage tasks, and create basic reports.

A CRM should also contain key features that help you build more efficient processes, make better use of your time, and achieve more desirable business outcomes. The best CRMs should also include tools for digital marketing, sales automation, and customer service optimization.

At the most basic level, your CRM should have the following features:

  • Custom reporting
  • Contact interaction tracking
  • Document storage and delivery
  • Mobile access (usually through an app)
  • Social media integration
  • Email integration
  • Workflows
  • Quotes and deals management

Best-in-class CRMs may also include some of the following features:

  • Call tracking and call center management
  • Social media marketing automation tools
  • Email marketing automation tools
  • Custom website forms
  • Website integrations (or its own content management system)
  • Ecommerce integrations
  • A blogging platform
  • Referral tracking
  • Product tracking
  • Sales automation
  • Help desk management tools

In most cases, a CRM provider will allow you to select from a list of 3-5 CRM packages depending on the size of your company and your needs. Each package will unlock a certain number of features in the system.

Enterprise companies may buy the most expensive package available, but smaller businesses can often do just fine with a smaller package.

Some providers will work with you after you’ve implemented your CRM. However, there may be premium costs associated with this type of consultation. That’s why many companies seek out help from agencies and other third-party consultancies.

Make the Most of Your CRM

If you're considering a new CRM for your business, you’ve got a lot of choices. There are hundreds on the market.

Simply selecting a CRM is hard enough. Onboarding it, integrating it into your existing systems and training your entire team to use it is a different story. In the end, you need to draw value from your CRM so you can realize true ROI.

It can be difficult to leverage a CRM for beginners. So schedule a call with us today to discuss your technology stack and your other marketing needs.

We are always happy to help!

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