URGENT: Before scouring the web for available CRM systems, you need to establish what types of CRM are suitable for your business. This categorisation is rarely considered or understood. Google is dominated by the mainstream CRM players and leaves some lesser-known options tucked away.

So, there exist fundamentally different types of CRM. If you understand what these differences are, you may save your business significant ongoing cost by not paying for functionality you will never need.

What is CRM

CRM today has become a common term and stands for Customer Relationship Management. CRM is the business of nurturing your customers from the first moment they hear about you, through their decision to buy, to many years of ongoing purchases. Your ability to manage this relationship defines your business’s ability to succeed.

Not surprisingly, most businesses manage their Customer Relationship Management process with the help of some form of CRM software. Modern CRM systems are powerful business engines that carry out a vast range of functions and tasks. It is worth taking a time-out to understand the key features of a CRM system. But for now, let’s summarise those benefits like this.

CRM software can help your business:

  1. Grow efficiently – as your business grows, it will absorb the extra workload
  2. Sell more effectively – it can automate customer communication and provide your salesforce with live, targeted information.
  3. Improve Customer Engagement – customers want to feel good about dealing with your business. They want to feel that they are dealing with one person each time they make contact, and CRM can make this happen.
  4. Maximise business continuity – CRM systems will keep your data secure and allow you to carry out business from any computer. Perfect for home working.
  5. Promote Business Intelligence – CRM can produce sophisticated analysis, reports and dashboards. Users can access this information quickly and in real-time (i.e. live).

Understanding what CRM can do for your business is an integral part of deciding with types of CRM will make sense for your business.

Do I need a CRM?

This simple answer is yes. As soon as your business attracts its first lead and you have thought about how you will manage it, you are in the business of CRM. So, the real question is, “what type of CRM makes sense for my business?”

At first, the thought can seem a little scary. You Google “CRM software” and are saturated with products such as Salesforce, Microsoft Dynamics, Sugar, Netscape, Oracle, SAP and so on. They all look unbelievably expensive (and in fact, some of them are!). CRM can’t possibly apply to your business.

You then Google for “small business CRM software”, and there is a glimmer of hope. Names such as Agile, Act!, Insightly, EngageBay, Daylite, Zoho, Pipedrive, Freshworks and HubSpot show up. These look a little more sensible price-wise, but it still feels expensive when you multiply that cost times the number of users.

Here’s the thing. If you understand the key features of a CRM system and match these up with the specific operational requirements of your business, you will end up with a powerful tool. The cost will then seem more reasonable because you will understand the system’s actual value, not just its cost. Incidentally, make a note to check out how to avoid the CRM price trap.

Is a spreadsheet a CRM?

If you create a spreadsheet to manage any part of your customer nurturing process, it is a CRM system. It might not be a very good one, but it might do for the time. Most businesses start on day one using spreadsheets to manage company data.

This early simplicity makes good sense because, at that point, you don’t fully know how your operational systems may work out and what data you need to collect. You also won’t be clear what actions you can take as a result of building that data. If your business processes aren’t yet established, it is challenging to construct a meaningful CRM system.

Starting with spreadsheets also makes good sense because, at start-up, you need to direct your total bandwidth to the significant issues confronting you, not get side-tracked into constructing a brand new shiny CRM system. That can wait.

In those early days, that spreadsheet will change and evolve. Updating a CRM system can be a slow and expensive process, so I always recommend that spreadsheets should be the weapon of choice on day one.

Why not stick with spreadsheets?

Your early spreadsheets will be loyal servants. They are easy to use in their simplest form, and most people know how to find their way around. And, by the way, they can cost nothing. But you will soon find that their limitations start to show through.

You may find that

  • as the spreadsheets become more complex, you are spending longer managing them than worrying about the business
  • sharing data is a bit hazardous, and having multiple users is hard to manage
  • it is hard to make sure everyone is using the correct version, i.e. the live one
  • you start to worry about data security, not just for your business but would your customers be happy to know that their sensitive information was floating around on a semi-protected spreadsheet?
  • understanding what the data is telling you becomes harder
  • you are duplicating data because it has little relational functionality (‘data redundancy’, but more of that in a minute)
  • storing the data doesn’t feel safe enough; perhaps an employee loses the master copy on their way home etc.
  • it is so easy to wipe data accidentally
  • you find yourself issuing special instructions for the quirks that the more-complicated spreadsheet now needs to work
  • you can’t see your sales pipeline very easily

So, inevitably, you will outgrow your spreadsheets and need to turn to something more fit-for-purpose.

At this point, it will help to understand the main reason your spreadsheet struggles with your growing data requirements. The key is that it is not a relational database.

What is a Relational Database?

We don’t need to get too bogged down in the workings of a relational database but, having at least some understanding, you may feel warmer to taking that next step towards a true CRM system.

Let’s imagine that the new company Fine Wines Importers Ltd (FWI) has created its first spreadsheet to handle its new customers’ data. It has also entered the details of its first customer, JBL Distributors (JBLD). The table might look something like this.

Types of CRM Clip 1
So far, so good.

JBLD has given FWI two new employees to contact. FWI have also added these details.

Types of CRM Clip 2
Immediately we can see a problem emerging. Can you see that for each new contact record, FWI has had to repeat the essential information for JBLD? This repetition is called data redundancy. Each time FWI updates JBLD data, it has to update the same data three times. Apart from taking up needless space, the chance of producing error has gone up.

Now imagine that your spreadsheet has hundreds, perhaps thousands, of records with multiple contacts in each. Also, imagine many more fields for each record. You can see the nature of the problem – the situation is unmanageable.

Now, suppose that FWI had created two tables; table 1 represents ‘Contact’ information and table 2 represents ‘Account’ information. The tables can be linked by a field which is common to both. In the example below, this is the ‘account_ID’ field’. This represents the ‘key’ field.

Types of CRM Clip 3b
Immediately, you can see that FWI only have to record account details once, which removes redundancy and error. It also introduces a lot more flexibility to how FWI continues to grow their database. This one feature exponentially expands the capabilities of a spreadsheet into today’s complex CRM business engines.

And that is as far as we need to take relational databases. The key takeaway is that, at some point, you need to transfer from a flat-file setup (i.e. a spreadsheet) to some form of relational database (i.e. a true CRM system).

The 5 Types of CRM

All leading CRM vendors use some form of structured relational database. From time to time, you may have seen names such as SQL, MySQL, SOQL, Oracle, DB2 etc. These are the major players in the world of relational databases.

The good news is that you don’t need to know how a SQL database works or even that it is there. But you do need to be aware of the types of CRM available to make an informed choice for your business.

Let’s be clear here. We are not choosing which CRM system is right for your business yet; we are learning which types of CRM might be suitable. Once you have established the correct type of CRM, you are then well placed to choose from the many CRM software options within that type.

There is another category of related software known as Enterprise Resource Management (ERP) not covered here as we are focusing on small businesses. If you are responsible for a large enterprise, you may like to check out the differences between CRM and ERP.

The main factors to consider when deciding which CRM type is right for your business are:

  • cost: a combination of setup and ongoing costs
  • ease of setup: ease and speed of setting up basic requirements without third-party help
  • ease of use: a user’s perspective
  • functionality: compared to the full range of a high-end CRM system
  • flexibility: the ability to make changes easily

When assessing each CRM type below, we will decide a 1-5 score for each factor. A high score is good news, while a low score isn’t.

But bear in mind that these are relative scores. For instance, one business may think a setup is easy because it employs software engineers while another might not because its staff aren’t technically minded. Similarly, the functionality score for a CRM type may be low, but if it fulfils your specific needs, then it is still an option.

So, the scores can only be relative to the other CRM types discussed in this article. By the end of the process, you should be able to see which CRM types could apply to your business.

CRM Type 1. Spreadsheet +

Types of CRM Clip 4ai
I have not included the basic spreadsheet as a CRM type because of its flat-file structure. We’re now dealing with relational databases, after all! I have, however, included what I have called the “Spreadsheet +”. Some software options allow us to continue to use familiar spreadsheet styles while giving us the additional ability to link tables. In other words, they are relational databases with all the additional benefits of removing redundancy, reducing error and increasing flexibility.

One example which I have been using is Airtable. You can see below a typical Airtable CRM template. Notice the spreadsheet format and how there are four tabs at the top – four ‘tables’. You can see that Accounts and Contacts form two of those tabs, as in our example earlier.

Types of CRM - Airtable
This type of CRM may suit the next stage of your business journey, but you may soon outgrow the limited functionality that it brings. However, you can be up and running very quickly, the cost is low, and it is easy to make continuous tweaks and changes. ‘Spreadsheet +’ may be a perfect option while you are still evolving your operational processes.

There are alternatives to Airtable, which I haven’t checked out yet. But be careful; most of the comparisons assume Airtable is a project management tool, which of course, it can be as well. In this case, though, we are interested in its table-linking capabilities to benefit our CRM.

CRM Type 2. Custom Database Solutions

Types of CRM Clip 4b
Customer database systems such as FileMaker Pro make it possible for small businesses to create a collection of automated business processes. They are an excellent means of centralising company data and putting that data to work. This feature makes them candidates for CRM.
Filemaker & Access

You may be able to create this CRM type without help, but often businesses team up with software partners who can do the work for them. They are essentially one step up from the **spreadsheet +** option. The downside is that there is generally more setting up than for a typical out-of-the-box CRM solution and more attention needed to nurture the data within.

Whilst your operational processes are still evolving, you may find the continuous need to update the system distracting from the core business issues. Alternatively, if you use an independent partner, you will experience ongoing cost to keep the database relevant.

Alternatives to Filemaker Pro could be Microsoft Access or Zoho Creator, but, again, be careful when trawling the net to ensure that you are not comparing mismatched comparisons.

You can see above that this category scores 3’s across the board. This score suggests that, while this CRM type may be suitable for particular businesses, it likely falls between the cracks on too many issues to make it relevant for most CRM seekers.

CRM Type 3. Entry Level CRM

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We have now arrived at what most businesses would recognise as CRM software. These are packages that are specifically designed to support businesses’ CRM strategies. They can range from nearly free to moderately expensive and are generally easy to set up. For this reason, this is where most small businesses will position themselves when moving on to select a specific CRM system.

There are two key issues to consider in this CRM type:

1. Functionality: Software vendors tend to stretch the boundary of what their systems can do. But because a vendor suggests that its software can do a specific task, that doesn’t mean it can do it for your business in the way you want it to – and often it can’t. So, functionality here is a minefield to be trod with caution.

Part of preparing for CRM should include a complete analysis of your current business operations and processes. When you match this to your understanding of what a CRM system can do for your business you will be pretty clear whether the quoted functionality satisfies your needs. Sometimes you will have to dig a bit deeper and perhaps run free-trial versions to find out for yourself.

The majority of businesses who deploy from this CRM type will set up the system themselves. Alternatively, development partners are generally easy to find if you prefer to go down that route.

If your business continues to expand, you may outgrow this type of CRM as it becomes evident that your current system cannot meet your increasing requirements. Don’t forget that your CRM system should work for your business and not the other way around. So don’t let your CRM’s limitations start to affect the way you do business. If that is the case, then it is time to upgrade.

Types of CRM - Allsorts
2. Choice: Believe it or not, there are hundreds (and according to some – thousands) of CRM software options in this category. Investigating them all would be impossible. When it comes to selection, I would suggest avoiding the free options and limiting yourself to the most common CRM software.

These include Agile, Act!, Keap, Nimble, Insightly, SalesFlare, Nutshell, Copper, EngageBay, Daylite (for Mac), Zoho, Pipedrive, Freshworks and HubSpot.

But, for now, we are concentrating on CRM types, not specific software.

CRM Type 4. Power CRM

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When you decide that the limitations of your current CRM are dictating your business processes, or if you are confident from the outset that you need a robust CRM system, then this is the place for you.

This CRM type is a significant step forward from the previous. CRM systems in this category can usually manage most of the available functionality in competitor systems and probably provide more than enough capability for your requirements.

In line with the significant uplift in functionality is cost. These systems can seem very pricey. But as I mentioned earlier, before judging, be clear what a particular CRM system could do for your business so that you can contemplate value, not just cost. If your new CRM system saved you two employees but only cost you one employee’s salary per year, doesn’t that sound like great value for money?

If you are on fast-track growth or if your business has achieved scale with perhaps ten or more employees/ colleagues, this might be the right place for you.

You will invest time and money in getting your CRM system up and running. You would prefer to be able to stick with it for the foreseeable future rather than migrating again. But you may have overlooked a future requirement. Perhaps it is a future requirement that you couldn’t have known from the outset. Come to think of it, that functionality might not have even existed in any CRM system at the time.

In other words, at this level, you need to consider the commitment and strength of the company behind the CRM. Is it committed to CRM? Does it have a range of other products which may take preference? Is it likely to react quickly and effectively to new technologies within the CRM umbrella? Is it financially sound?

Salesforce Microsoft Sugar
The two behemoths in the category are Salesforce and Microsoft Dynamics. If you want to future-proof your CRM capability without question, then don’t look any further. If we talk about functionality as having breadth and depth, then these two have both. Salesforce benefits from a first-mover advantage (and charges accordingly) whilst Dynamics is a priority within the Microsoft stable. You will need a sharp intake of breath when you see the price, but don’t forget – value v cost. And again, beware of the CRM Price Trap.

I will also make an honourable mention to SugarCRM. SugarCRM just falls short of the power of Salesforce and Microsoft, but only just. But, it is cheaper (cheaper, not cheap!), which allows more small businesses to benefit from a power CRM. Definitely worth a look. (Note: Apple uses SugarCRM, so don’t feel you are short-changing yourself!)

These systems have massive capability. If your needs fall within the out-of-the-box solution, then your costs – while still being high – will remain in check. If, however, you need some personalisation and ongoing tweaks, then beware. You will almost certainly need to employ the services of a verified CRM partner, and budget for some potentially lumpy ongoing charges. But, again, value v cost.

These power CRMs provide businesses with extraordinary capability and can significantly reduce costs. But, as with all CRM types, the key is to match your business requirements to the CRM’s capability. You can see why it is essential to establish first what CRM types are relevant to your business.

CRM Type 5. Industry-Specific CRM

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We have seen earlier that costs start to spiral as soon as you move away from the out-of-the-box offering of any CRM software. This deviation means that if you are in an industry with complex or unusual requirements, you are likely to spend some funds tailoring one of the systems mentioned above.

However, if you are lucky, you may be in an industry that has attracted specific CRM solutions for your business. You could benefit from a powerful system at a lower cost, and you would be up and running quickly.

But be careful. You stand the risk of straight-jacketing yourself into a particular system. Your business could start to operate to the needs of the CRM rather than the other way around. Personalisation might prove costly, and what happens if that CRM vendor goes out of business? These CRM systems aren’t necessarily cheaper because their accessible market is much smaller. Think very hard before choosing this option.

And so…

With the number of CRM systems running into hundreds, it is critical to start your CRM journey of discovery by working out which types of CRM you should be considering for your business. Ensure that you aim for the minimum viable product and are not tempted by the bells and whistles of the more expensive categories. Your costs will unnecessarily ramp up.

The key to getting your choice right is to understand your operational requirements, match them to known CRM capability and make sure you differentiate between must-have and nice-to-have functionality. With careful planning, you should end up with an excellent CRM system to boost efficiency and profits.

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