The Crucial Difference Between Contact Management and CRM

The budget cuts and spending freezes resulting from the current economic downturn have reduced the number of legitimate opportunities for sales representatives; therefore, organizations are placing a renewed emphasis on cutting costs and customer retention to combat certain economic realities.

In an ongoing attempt to meet the expectations of prospects and improve the lifetime value of current customers, businesses are examining ways of unifying fragmented customer data and making this customer and account information available to the organization at large. Contact management (CM) solutions and customer relationship management (CRM) solutions are two primary technology enablers allowing organizations to gain better control of their information assets and processes.

CM solutions are productivity and sales automation tools designed to allow individuals or teams to manage contacts, opportunities, or account information more efficiently. CRM solutions, on the other hand, are process-centric, multi-module solutions that serve as a system of record for all customer interactions. Varying definitions and the lack of a standard definition between CM and CRM solutions have some organizations pondering which is a better fit for their business and why.

What You Need to Know

Over the past year, Aberdeen has surveyed thousands of end-users to better understand how sales interaction models influence technology purchasing decisions. The research reveals the choice between a CM and a CRM solution often boils down to the sales interaction model of the organization, as well as the business challenges the company faces.

For instance, an organization with a one-to-many interaction model, in which one sales representative targets multiple job roles within a company, may consider a CM solution in order to better organize account information and conversation details. On the other hand, a company with many sales representatives or marketing professionals targeting a single job role would prefer a CRM solution to log call activity and leave detailed relationship notes for one another.

Sales Models Influence Technology Adoption

Aberdeen has identified four common sales interaction models that require certain functionality from technology solutions.

  • One-to-One Model: In a one-to-one model, there is typically a single representative that is tasked with selling into a single job role. Insurance agents and stock brokers, for example, typically practice one-to-one selling.

    Take, for example, the following scenario: Bob, a sales manager at a small marketing services firm, believes that Jane, the founder of her own business, could benefit from his offerings. Understanding that Jane is the owner of the company and therefore the head of a small employee staff, Bob targets Jane as the job role with decision-making authority. A CM solution becomes Bob’s preferred solution because it allows him to keep accurate contact and company information on Jane’s business, as well as detailed notes surrounding their conversations.

  • One-to-Many Model: In a one-to-many model, one individual targets multiple job roles within a company.

    For example, say that a number of years have passed in our scenario, and Jane’s business has grown into a large national brand. No longer is Jane the one and only contact with purchasing power at the company; she now has a staff of decision-makers with buying power. Bob, firmly believing that his services can continue to help Jane’s business increase its exposure, targets the new CMO, COO, and EVP as he articulates his value proposition.

    With so many conversations taking place with different people within Jane’s company, Bob relies on his CM solution to keep accurate records of job roles, phone numbers, e-mails, and notes. An added bonus of Bob’s CM solution is that it allows him to discern the relationship between contacts based on his notes or, in the case of more advanced CM solution, through contact grouping or networking.

  • Many-to-One Model: In a many-to-one model, there are multiple individuals, such as sales, marketing and service professionals, interacting with a single job role at a company.

    For example, the growth of Bob’s business has resulted in the development of new products and services. In this example, Jane has placed a call into a service representative with a related question to a previous project. The service representative sees alignment between Jane’s question and the latest product release; therefore, Jane is invited to a webinar that showcases the new product.

    By using a multi-module CRM solution, Bob’s service professional can log the activity around Jane’s account and leave detailed notes so other employees, such as marketing professionals or accountants, know how and when to follow-up with Jane.

  • Many-to-Many Model: In a many-to-many model, there are multiple individuals interacting with multiple job roles at a company.

    For example, marketing individuals or service individuals at an organization target their counterparts at other companies to sell into. Bob, whose work with Jane’s boutique has catapulted his business into the spotlight, has filled out his own marketing staff and professional services offerings. These individuals on the marketing side target similar job roles at Jane’s company. This coordinated effort requires a heightened sense of internal visibility; therefore, Bob has replaced his CM solution with an integrated CRM tool. Bob is now able to access customer service information, accounting and billing details, and marketing data through his CRM system.

Interaction ModelDefinitionSolutionOne-to-OneOne individual selling to a single job role; for example, insurance agents, stock brokers, small businesses, or specialty salesCM solutionOne-to-manyOne individual selling into multiple job rolesCM solutionMany-to-OneMultiple individuals, such as sales marketing or service professionals, interacting with a single job roleCRMMany-to-ManyMultiple individuals interacting with multiple job roles; requires collaboration and intradepartmental knowledge sharingCRM

Recommended Actions

Organizations considering CM or CRM solutions must evaluate the sales model of their organization and implement the solution that aligns best with their business needs. If a company is primarily focused on taming information overload at the lowest cost and providing the greatest selling autonomy for their sales team, then a CM solution may be an ideal fit. On the other hand, if a company’s only hope at providing a 360-degree view of the customer to all parties within the organization is to integrate the data that exists in disparate silos, such as a contact center, marketing database, or accounting profile, a CRM solution may fit their business needs. As is the case with any technology implementation, the organizational processes and performance metrics in place often provide a foundation for success.

Once an organization makes the decision between a CM solution or a multi-module CRM, the following recommendations will allow organizations to maximize technology spending:

  • Contact Management Users:
    • Formalize and document sales processes. According to Aberdeen data, only 39 percent of CM users, compared to 57 percent of CRM users, have formalized and documented sales processes in place. There is no doubt that technology enablers can help a company automate key sales tasks; however, the proper organizational foundation is necessary to ensure that companies maximize the effectiveness of technology. Companies must ensure that sales processes are well-aligned with the organization’s sales goals.
    • Formalize and document sales KPIs (key performance indicators). In order to determine the effect technology enablers have on performance, organizations must formalize and document sales KPIs to be used in ROI (return on investment) analysis and performance measurements. By identifying the metrics that an organization hopes to improve through technology implementation, organizations can understand what, if any, changes have occurred in performance and where to dedicate additional resources in the future. Currently, 28 percent of CM users, compared to 64 percent of CRM users, have key performance indicators and metrics that measure sales effectiveness. Furthermore, companies must measure sales performance regularly. Thirty-five percent of CM users measure sales effectiveness on a monthly or quarterly basis. Sales performance should be assessed on a real-time or daily basis to effectively manage forecasts.
    • Model individual best practices and replicate through training. There is a wealth of valuable information that exists in the minds of an organization’s top sellers. Rather than letting this knowledge walk out the door toward retirement or another job opportunity, savvy organizations are capturing these best practices for the purposes of knowledge management and training. Only 5 percent of CM users and 14 percent of CRM users currently use enterprise social networking tools to allow sales representatives to quickly find the thought leader or information they seek. Finally, 54 percent of CM users, compared to 68 percent of CRM users, have a sales training and employee education program in place. In order to effectively get new hires on board and utilize the collected best practices, organizations must have a program that educates sales representatives on internal processes and best practices, thereby allowing new reps to achieve quota at a quicker rate.
    • Evaluate solutions that meet both the current and future needs of the business. A problem that CM users often encounter, particularly those users who opt for a “freeware” solution, is the ability to grow the business and solution concordantly. As a business generates more and more sales opportunities and contacts, it is important for companies to keep an eye to the future and avoid the usage or contact caps synonymous with free CM solutions. Several solution providers, such as Sage Software with their ACT and SalesLogix products, provide different offerings that suit an organization’s current and future needs. While 62 percent of CM users surveyed indicated that their solution will grow with the business, an additional 38 percent indicated that they have already outgrown the solution. Whether it be a CM or CRM solution, businesses must ensure that the solution they implement not only fits the current needs of the organization, but also has the scalability to grow with the company.
  • Customer Relationship Management Users:
    • Customize CRM to match unique business processes. Successful CRM adoption is ultimately about two things: obtaining a 360-degree view of the customer and allowing for increased visibility into internal processes. Companies must customize CRM solutions to match unique business processes and ensure that the organization has a solution that is best suited to its daily operations.
    • Create a system of record for sales interactions. A key feature of a CM solution is the ability to keep detailed notes on conversations with prospects. This functionality is also included in CRM solutions, thereby allowing sales representatives to keep an accurate system of record for all sales interactions. By keeping these records, sales representatives can access information regarding a prospect’s wants and needs months after the initial call and use this information in subsequent follow-up conversations. Fifty percent of CRM users indicated that improving sales representatives’ knowledge of products and customer needs is a top strategic action. A system of record for sales interactions allows representatives to log first-hand information regarding a prospect’s or customer’s needs as they articulate them.
    • Create a common language for internal customer-related communications. The purpose of formalized sales processes, for example, is to ensure that all sales representatives follow the same process during a sales cycle. To ensure that these processes are not interrupted or delayed, companies must create a common language for internal customer-related communications. Typically, sales and marketing professionals use the same phrases in different contexts. For example, a “qualified lead” may mean one thing to a rep and something entirely different to a marketing professional. By standardizing the internal language used to describe customer-related communications, companies can present a unified front to their customers. Thirty-eight percent of CRM users also leverage internal wikis to create a dynamic glossary of company-specific terms. The benefit of collected information extends beyond its intended purpose; 51 percent of CRM users also use such wikis to on-board new sales hires.
    • Create a learning, knowledge-based, sales culture. The culture of an organization is not something that is easily altered. Changing the culture of an organization requires the commitment of senior management and willingness of employees. Further complicating the issue is the fact that, traditionally, sales representatives are reluctant to change. One of the benefits of a CRM solution is the opportunity to integrate information from various third-party information sources. By integrating key account or industry news directly into the daily workflow of sales representatives, companies begin to change the “selling mindset” of an organization and create a knowledge-based sales culture. Currently, 68 percent of CRM users have a sales training and employee education program in place, compared to 54 percent of CM users. Companies must be sure to provide an outlet for sales representatives to document best practices or frequently asked questions and then leverage this information in training exercises. In addition to their usefulness in on-boarding and training, these forums become a repository for sales representatives hoping to improve their personal performance by heeding the advice of their peers.

Andrew Boyd is the chief research officer for the Aberdeen Group. Alex Jefferies is an Aberdeen senior research associate.

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