What is a CRM Application?

A customer relationship management (CRM) application is a software program that a business can use to track customer behavior. It helps the company's sales, marketing, customer service, and management better understand customer needs, preferences, and buying habits. Businesses can also use it to improve customer service and retain existing customers.

Typically, a CRM application integrates information about the company's transactions with each customer. The company collects and inputs data throughout the prospecting, acquisition, development, and retention stages of its interactions with a customer. Analysis of this data reveals factors that contributed to success or failure in each interaction and phase of the relationship.

The software lets the business create queries that show important correlations and historical trends. CRM application software also provides a way for businesses to communicate helpful information to its customers in a timely manner. Generally, CRM information and marketing products go beyond the traditional holiday card or annual calendar. Using a CRM application positions a business to anticipate customer needs, respond to customer inquiries, and capitalize on sales opportunities.

Data collected from customers can point a business toward opportunities to increase its revenue from an existing customer. Analysis of customer data provides information about the potential for upselling. It can reveal opportunities for a business to provide solutions that result in customer demand for additional product lines.

CRM applications range from products geared toward small- and medium-sized businesses to full-featured enterprise suites. Larger companies may be able to justify the expense of purchasing and maintaining customized CRM applications, designed for specific industries. Smaller firms traditionally use Web-hosted applications and services that have lower entry costs. Some also have limited features and fewer customization options.

The security of sensitive customer data is always a concern for businesses, whether the company's CRM application is on the Internet or hosted on the company's own servers. Both types of software use some level of encryption to protect the customer data from hackers and competitors. Few applications have safeguards that can protect a customer's data from a disgruntled employee who decides to trade or destroy the data files.

One shortcoming of CRM applications is that they cannot help a business develop a strategy to counter competition for its customers. The technology cannot replace human interaction either. Some consumers who have privacy concerns are critical of CRM applications. The consumers object to the amount of personal data that businesses collect and store about their customers.