Customer Relationship Management (CRM) is only about 20 years old. Before computers and advanced software became a fundamental part of most businesses, CRM was an unheard-of concept. So ingrained is the role of information technology (IT) in CRM that it would be hard to imagine it without today's software, hardware and the databases that populate these systems with relevant and timely information.

The role of IT in CRM, as well as its limitations, is more easily understood if you look at its evolution — from paper to chatbots — over the past 20 to 30 years.

The Role of CRM in Business

While different organizations can use CRM solutions for different purposes, at its core, the role of CRM in business can be summarized with four common goals:

  1. To get more customers.
  2. To retain existing customers.
  3. To increase profitability.
  4. To increase customer loyalty.

Technology in itself isn't a magic wand that can help you achieve these things. The most important part of CRM is your company's goals, practices and policies. However, technology can enhance CRM tremendously in three important areas.

Customer Insights: CRM not only gives you the ability to track customer engagements, including the most recent emails and sales calls, but it can also give you insights into their buying behavior individually and as a whole.

Data Collection: Customer purchases, abandoned online shopping carts, social media interactions and even location data from mobile devices reveal a wealth of information about customers and prospects. The result is a nearly intimate knowledge of customers with resulting predictions of buying behaviors.

Improved Communication: CRM not only enhances your ability to understand a customer's wants and needs, but it also allows you to communicate with them quickly using their preferred channels, from email to instant messaging to social media. You can now be notified of a problem instantly and respond to it within seconds.

The Early 1980s: Analog Technology and CRM

Before computer systems became prevalent, the closest anyone got to CRM was an address book or a Rolodex (rolling index cards). These were staples in most offices in the 1980s. Entries included names, addresses and telephone numbers. Savvy businesspeople and sales reps would often write down other important details like birthdays and spouse's and children's names.

If you had a lot of customers or made regular calls to clients and prospects, you might also have a call log, often a notebook in which you jotted down when you contacted someone, what you spoke about and when you were to call back if asked. Loyal customers would be rewarded with gifts or discounts as well as handwritten notes and printed letters of gratitude.

The Late 1980s: Early Customer Tracking Systems

As computers, spreadsheets and databases became more widespread, companies were able to become more sophisticated in their management of customer relationships. Customers could be grouped into basic categories depending on their buying patterns. Reader's Digest, for example, began promoting its books to print subscribers using return-mail order forms. Based on past purchases of books, they knew which books to offer customers later.

Contact management software began to emerge in the late 1980s. ACT!, for example, was released in 1987, giving small businesses the ability to place customers in a computerized sales funnel and to organize callbacks to move them through the selling process. You could now track more customers efficiently and retrieve information much faster; however, most of the work was still done manually. Lists of customers to contact, for example, were routinely printed and the names checked off or crossed out before updating the data in the software.

Many small businesses still use this computerized-manual hybrid approach to manage customer relationships. A repair shop, for example, may book appointments on a printed Excel spreadsheet and jot down telephone numbers to remind them the day before.

The 1990s: Client-Server CRM

During the 1990s, large companies were investing heavily in their networks with more powerful servers and desktops, which gave them the ability to begin using client/server CRM architecture. The terms "customer relationship management" and "CRM " were first used in 1995. By 1998, there were a dozen CRM solutions available from companies like Oracle, Salesforce and SAP. Anyone who needed information on customers could now access the same shareable data, including data on:

  • Buying patterns.
  • Customer preferences.
  • Delivery schedules.
  • Customer feedback.
  • Account status.

Instead of just making customer information easier to access, CRM software could now create reports that gave managers the information they needed to analyze and predict buying trends. The CEO and CMO to sales reps and customer service reps could access the same information and, as needed, the same reports from their desktops.

Many companies continue to use in-house server-based CRM software that's managed by their own IT staff because it gives them control over data security and privacy. Even the larger companies who are now adopting cloud-based solutions still use their own in-house CRM as well, in a hybrid form where the two systems work together.

The 2000s: Software-as-a-Service

By the late 1990s, Software-as-a-Service (SaaS) was becoming more popular, due to faster internet speeds and more powerful desktop and laptop computers. Over the next few years, these CRM solutions became more and more affordable to small businesses that didn't have the advanced architecture to fully host their own. The year 2007 saw the first cloud-based CRM solution, which was released by Salesforce. Today, SaaS is often called cloud services, and any business can use CRM in this model for about $10 per month, per person.

Not only do companies no longer need their own servers or to purchase software, but they also don't need to hire IT staff to set up and maintain the systems. The software is hosted by the software company who maintains it for their customers, allowing multiple customers to share the resources of each server. Server maintenance, upgrades, security and data backups are handled by the vendor's technicians at their location.

Moving Forward: CRM Moves and Gets Personal

CRM is continuing to evolve. Today, CRM technology continues to be offered in the SaaS model but is also more modular, offering microservices that businesses can subscribe to on an as-needed basis. Small and large businesses can customize CRM as needed for their business model. There are now different types of CRM designed for specific industries, as well as for B2B or B2C businesses.

CRM now routinely connects to a company's social media accounts to monitor brand mentions and other forms of engagement as well as to connect with customers instantaneously. Instead of grouping customers into categories, CRM is now moving toward individual relationships with each person, including instantaneous communication, whether that's with a customer service rep using automated schedulers and dialers or with artificial intelligence, such as chatbots.

Combined with mobile technology, social media provides a wealth of data on customers, giving companies access to their likes and dislikes and even where they are in the store. However, mobile accessibility isn't a one-way street. CRM vendors now offer apps so that business people can access the core features of the CRM service from tablets and smartphones wherever they are.