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What is CRM (and how do I use it?)

Updated: Jan 29

CRM on a computer

If you want to learn what CRM is and how to use it, you're in the right place! I will review the foundational parts of a CRM system and some of my observations using it for the last decade. 

CRM stands for customer relationship management, and it's not the best name for the tool because it doesn't truly capture what a CRM software package does.

So what does it do? In short, a CRM tool manages future and existing sales opportunities and information about the customers tied to those sales opportunities. And with AI, a CRM will actually guide a sales person what to do with those opportunities on a daily basis!

How a CRM system works in practice.

To understand how it works, let's go through an example. Let's say you own a plumbing business. Your employee, "Plumber Ron,” visits a customer to fix a clogged toilet. While at the customer's house, Ron says, "Hey, do you mind if I take a look downstairs in the basement for a moment? I just want to make sure that all of the piping going to your sewage line looks fine.” The customer says, "Sure, that's fine," so Ron goes downstairs to the basement and looks at a few things.

He looks at the sewage line, the water heater, and the piping. He notices the water heater is eight years old, the age when it should be replaced. So, he comes back upstairs, finishes his work on the toilet, and tells the customer, "I noticed that your water heater is eight years old. Usually, water heaters have a 10-year life span and replacing them early is a good idea to avoid potential flooding. Would you like me to give you a quote for a new one"? 

At this point, several things have happened here: 

1. Ron proactively found an opportunity for his employer. 

2. Ron brought the problem to the customer with a solution. 

Now the customer has to decide: 

1. Do I take care of this problem right now and get it over with.

2. Do I say no and deal with it later? 

Either way, a valuable interaction occurred for the plumbing business and the customer.

The customer says, "No, thank you, I don't need a quote.” Ron replies, "Well, would you like us to follow up with you when we have a special on water heaters?" and the customer agrees.

Ron can now enter this interaction into his CRM as an opportunity with a follow-up alert to remind the sales team at the business to contact this customer in a year with a discount.

The CRM will store and organize the lead for the business to act on. If the customer wanted a quote, even better, Ron could send out the quote right there and even book the installation. 

Managing sales opportunities is what a CRM does at its most basic level. It allows employees to enter sales-oriented information for a specific customer. Most commonly, it can quote a customer for a service or enter an opportunity for a potential sale in the future. CRMs can also give insights into the types of products customers will buy or have bought.

In this simple example, a routine job through a plumber turned into a significant opportunity to replace a water heater, and all it took was a proactive and vigilant employee to notice a potential need that the customer had and then log it into a CRM system. 

You can see how training a salesforce or a service team can create a process to generate new business and can quickly increase revenue. I'll go into more depth on the outcomes of properly using a CRM and changing a company's culture to become customer-centric, but this tool can transform a business.

Benefits of using a CRM.

Creating quotes

Let's talk about some benefits of a CRM system. So, the first feature that you notice from the example above is creating a quote. Being able to manage quotes is an essential part of the CRM. It lets you see the history of quotes you have presented to a single customer or a large group of customers. Depending on the functionality of your CRM, you can also see the different prices for which certain products have been sold. 

The quotation function in a CRM system is essential to taking a business to the next level. In the example I provided above, Ron could quote the customer on the spot with the CRM and close the sales opportunity right there. This means the customer won't shop around, and Ron can close this piece of business for a slightly higher price than typical.

Organizing and quantifying quotes.

Earlier in my career, I had to quote customers using Microsoft Word to create quotes, and this can be quite common for small businesses. Unfortunately there needed to be a way to effectively organize all the quotes I had sent out and to have quantitative measurements around them. A CRM system solves this problem by giving you greater insight and analytics into the different products of your business and how much you can charge for them. It also gives you historical pricing sent to a specific customer or account.

Promotions on open opportunities

So let's say in the plumbing example that the customer decided to get a quote for a water heater, but they never purchased it. Access to all the quotes allows you to run a report on all unused quotes for water heaters between one and two years old and send all those customers a special promotion for 20% off. Once you see how many of those customers took advantage of the promotion, you can start to understand how elastic your pricing is. Price elasticity refers to how much sales volume changes based on the price change. 

Finding price elasticity

As most business owners know, it's crucial to balance the margin you're making versus the amount of business you are taking on. Knowing how much customers are willing to pay for different services will significantly help you make better pricing decisions depending on where you want to take the business and how much capacity your business currently has. You want to ensure your hit rate is not too high or too low. If your hit rate is too high, your lead times are too long, or you're turning business away. You need to charge more for your current capacity.

A CRM system can allow you to experiment with product margin by capturing the price levels at which customers have bought your products. You're going to have to increase your sales efforts so that you have a lot of opportunities coming in and then play around with different pricing levels so that you're able to maximize your margin on each of your product lines to the point where you're coming close to the capacity at the highest margin available. Understanding your close rate for different product lines will also help with forecasting and managing inventory. 


Another way that you can use CRM is for cross-selling, selling an additional product to a customer. Sometimes, the products that you cross-sell are complementary goods, and they go together, such as shoelaces and sneakers. For cross-selling a complementary good, you can run a report for the quotes sent out for a specific product and then create a marketing campaign to sell the associated product. You can also cross-sell a product that is unrelated, but that is usually present when the first product is present. For example, you know that for all the water heaters you've quoted, those same customers are probably in homes at least 10 years old and may need to replace their sump pumps as well. 


Another feature of a CRM is leads. Leads are pretty straightforward, but they come from any event where you meet somebody and express interest in a product but a quote is not generated. A lead is often wasted and needs to be acted on with a high sense of urgency. It would be better if leads were quoted on the spot instead of making a lead for a follow-up to quote eventually. 


Another feature of a CRM is a pipeline. A pipeline consists of all your current quotes that have yet to expire. Many businesses calculate a forecast from their pipeline by coming up with an estimate of the percentage of the whole pipeline that will close. Viewing a pipeline in this manner has limitations and can be improved by considering different product close rates. CRM can allow you to create a forecast considering all those factors in certain circumstances.


The third feature that most CRMs use is a contact management system. It has all of your contacts, and you can put all different types of information into this system, which allows you to export this data and do a hardcopy mailing or an email campaign. You can also store all different types of information for each of your customers.

Calendar alerts

Some advanced features include a reminder system with calendar alerts so you can set different follow-up dates for opportunities; that way, you can follow up with customers in 30 days or 90 days. This feature helps keep sales opportunities organized. Follow-ups don't generally bring in a lot of business for currently quoted products, but depending on the type of follow-up you're doing, it can benefit your business. 

Following up with customers for recurring-type companies can be a great tactic. An example of this would be a septic pumping business that has regular intervals with its customers, such as pumping out the septic every six months. They could set up a reminder feature that contacts the customer a month earlier and offers an additional service, such as a drain field inspection, as part of the upcoming pumping service. A reminder can also be put into a scheduling system, but using a CRM for this activity is also a good idea, as your quotes all live in the CRM system.

Customer interactions

Another feature commonly held in CRM-type systems is customer interactions, primarily meant to monitor activities that don't necessarily become an opportunity for quoting. This type of feature is more of an administrative feature used to monitor the actions of a sales team. Still, it generally does not generate income, and this type of activity creates a lot of frustration with employees as they prefer to see a direct link between tasks performed and creating revenue. 

 CRM best practices

Now, let's get into best practices for CRM. In any business, the key to maximizing sales is to take care of the customer and to create a culture where every employee is in sales. That's why, in the example I gave above, the plumber doing work at home also took a moment to notice what other services his company could provide, and then he mentioned it to the customer. This is the type of culture that a CRM system can help to create if implemented correctly and if all the different employees of an organization are trained and taught about the purpose of a CRM. 

Process for using CRM

That's why the first best practice will be creating a process for employees to use when dealing with customers. The process can be as simple as when speaking to a customer, making sure to end the conversation by asking if there is anything else that the customer needs a quote on. Also, asking customers for referrals from friends and family that they might know that they need a particular service is a crucial behavior to include in a process. Putting every employee into a sales mode drastically improves the amount of sales opportunities that are generated in the pipeline. Also, be bold and pay customer service agents and repair crews commissions on new jobs they bring.

Sense of urgency

Another best practice is to use a sense of urgency when dealing with a customer's need for a quote or any other request that is being made. Many purchases are made on impulse, and the quicker you can provide the customer with pricing and gain a commitment, the higher the chances you will acquire that business. In my sales career, I have always trained new sales reps to get quotes out to customers before they do anything else, and I've heard horror stories where quotes and even orders were never fulfilled but were left in a desk drawer and lost for who knows how long. 

Using analytics

Use the quotes and analytics of quotations for your marketing initiatives. Sometimes, it's a lot easier to send out a mass email of a promotion when business gets slow, but if you can custom tailor your promotion to specific product lines and send it out to customers who showed interest in those products in the past, you can get some insightful pricing data back from the marketing initiative. This strategy also allows you to run a marketing campaign that leaves little money on the table, as these customers were interested in the past but didn't purchase.

Margin improvement and forecasting

We briefly discussed some of the reasons to use a CRM and the benefits that can be derived from this software package, but let's dive a little deeper. One of the main drivers of a CRM is the ability to grow your margin. It can help you accomplish this by providing analytics of your hit rate based on price for specific product lines. As you see the price elasticity of different products, you can start to make more informed decisions about which products are more profitable after price adjustments. A shift to selling higher profit products could allow your business to become more profitable, streamline operations, and focus where your competition isn't currently.

Culture shift

A significant contributor to why a CRM system is helpful in a business is it helps to put a process around a company's sales activities. This process can also be crucial in changing the culture of a business to one where all employees are part of the sales team. This can be instrumental, especially for a business looking to be acquired that must have as many business processes in place as possible with up-to-date tools. 

Potential misuses

CRM for managing employees

Some of the most significant issues that arise from using a CRM usually come from poor management. It's very tempting to use the CRM system as a management tool, but that is not what it's meant for and using it in that form can ruin the data in the tool. See this article for more depth on this topic. When you use CRM as a management tool, you're encouraging poor data to be entered into the system, which has a cascading effect on all the tools available in the software package. It's much better to use it solely as a revenue-generating system and commit to yourself never to allude that you're tracking how many quotes, opportunities, or any other metric individual contributors make. This might sound odd, but it eliminates motivation to enter and fabricate data that will skew your forecast and sales activities. I know of a large company whose invoiced sales are 15% of what sales reps confirm as won business in CRM. Having that much inaccurate data in a CRM nullifies half of its benefits.


A CRM allows a business to have more efficient marketing activities and a streamlined way of managing customer relationships to drive long-term loyalty. Marketing initiatives can be costly, and spending a lot of money on MARCOM can take away resources that could be better or elsewhere to further enhance profitability or drive revenue.

This guide gives you a good feeling about what CRM does and how it can help businesses. In all my experience in sales and using different CRM systems, it's a foundational piece of software for any business. Even a mom-and-pop type service business can significantly be enhanced by a CRM system that helps them manage customer needs and opportunities.



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