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UNDERSTANDING CUSTOMER RELATIONSHIP MANAGEMENT

FROM MANAGERS' AND CUSTOMERS' PERSPECTIVE:

EXPLORING THE IMPLICATIONS OF

CRM FIT, MARKET ORIENTATION, AND MARKET KNOWLEDGE

COMPETENCE

BY

JOUNGHAE BANG

A DISSERTATION SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS

FOR THE DEGREE OF DOCTOR OF PHILOSOPHY

IN

BUSINESS ADMINISTRATION

UNIVERSITY OF RHODE ISLAND

2005

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DOCTOR OF PHILASOPHY DISSERTATION

OF

JOUNGHAE BANG

APPROVED:

Dissertation Committee:

Senior Professor

DEAN OF THE GRADUATE SCHOOL

UNIVERSITY OF RHODE ISLAND

2005

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ABSTRACT

Customer Relationship Management (CRM) has received a lot of attention and

come to occupy a central place as a vital strategy in organizations. Well-managed

customer relationship management (CRM) systems have clear economic payoffs and

offer significant possibilities for creating and sustaining ideal, highly satisfying

customer relationships. On the flip side, however, poorly managed CRM can spell

disaster. According to Gartner Group, nearly 55% of CRM projects during 2002-2006

are expected to fail.

Given its potential and the high cost, the focus of CRM practice and research has

been mostly on technology. The focus, however, has been shifting to other factors due

to the high failure rate. Not many in-depth studies have been conducted to investigate

the organizational and behavioral CRM factors that lead to usable and effective CRM

systems that achieve the basic CRM goals of developing and maintaining good

relationships with customers. This study attempts to answer such questions by

examining CRM in multiple, multidisciplinary ways: businesses' and the customers'

perspectives, and employing Marketing and MIS concepts.

First, this study identified critical factors for successful CRM for a business

including CRM Fit, Market Orientation, and Market Knowledge Competence.

Because of its extensive reliance on CRM, the hotel industry was chosen as the

empirical context. Based on hotel managers' responses, the relationships between

these factors and CRM performance were examined. Second, based on the research

model developed for the businesses, a reflected model of hotel customers'

perspectives were developed and tested.

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As expected, not IT but well-designed CRM process was found to be critical for

CRM performance in businesses. For customers, it was the maintenance stage of CRM

process that mostly influenced customers' commitment/satisfaction. market

knowledge competence was found to have significant impact on CRM process.

Interestingly, it was found that the influence of CRM practice worked differently for

those customers who were reward-program members of hotel chains than for

nonmembers.

These findings highlight the importance of well-designed CRM processes and of

understanding the perspectives of customers in relationship building. The results imply

that managers should be aware of the different effects of each stage of CRM process

and of planning appropriate strategies for members and nonmembers to generate and

reinforces satisfaction and commitment.

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ACKNOWLEDGMENTS

I would like to take this opportunity to express my sincere gratitude to

everyone who has always been a big supporter for me and made this journey pleasant.

Even though not every moment was easy, every single moment of this journey was

worth it. Without the supporters, I would not have been able to go through this journey.

I would like to thank the professors in my dissertation committee, Professors

Nikhilesh Dholakia, Albert Della Bitta, Joseph Rossi, and Seung Kyoon Shin. I have

to deliver special thanks to Professor Nikhilesh Dholakia, my advisor, for his ceaseless

stream of supports and encouragement, invaluable comments, and the inspiration. I have

you have been a mentor, sage counsel, tough critic, and good friend guiding me through all

phases of my doctoral program. I would like to place on record my deep appreciation

for Professor Albert Della Bitta for his thorough review and comments, insightful

discussions, and wise judgments. I owe a huge debt of gratitude to Professor Joseph

Rossi for his invaluable comments and guidance and for the hours he spent discussing

statistical analyses. I thank Professor Seung Kyoon Shin for his endless support and

comments.

I am grateful to all the faculty members and staff in the College of Business

Administration, and my colleagues in the Ph.D. program in Business Administration

for all their support and friendship. I am also grateful to all my friends in Rhode Island

for their warm-hearted care, love, and support.

I cannot thank my family enough for their continued love, care, and

encouragement. In particular, I thank my parents, my brother, Sooho, my parents-in-

iv

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laws, and brother-in-law for being patient cheerleaders from halfway around the world.

I am deeply grateful to my husband Joo-Hyun for always being there and encouraging

I forward and for all the sacrifices I have made for the completion of my doctoral

program

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DEDICATION

To My Lord

saw

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TABLE OF CONTENTS

Page

ABSTRACT................................................. .................................................. ................... ii

ACKNOWLEDGEMENTS................................................ ............................................iv

DEDICATION................................................. .................................................. .............. I saw

TABLE OF CONTENTS................................................. ................................................vii

LIST OF TABLES.............................................. .................................................. .......... x

LIST OF FIGURES................................................. .................................................. ......xii

CHAPTER 1 INTRODUCTION: CHALLENGES OF CRM...................................1

1.1 Background................................................ .................................................. .................1


1.2 Issues raised.............................. .................................................. .................................... 3
1.3 Research Objectives................................................ .................................................. ... 6
1.4 Theoretical Basis................................................ .................................................. .............7
1.5 Organization of the Dissertation................................... ...................................................8

CHAPTER 2 CRM: A MULTI-DISCILPINARY REVIEW................................................9

2.1 Customers in CRM................................................ .................................................. .....10


2.2 Definition of CRM ....................................... .................................................. ...........11 2.3
Framework of CRM.................................... .................................................. .................13
2.3.1 Industry Experts' Approach................................ .................................................. .13
2.3.2 Academic Studies................................................ .................................................. ..
14 2.3.3 Integrated Framework of CRM.............................................. ...................................17
2.4 Literature reviews based on CRM framework......... ...................................................19
2.4. 1 Literature Review - Technology Aspects.............................................. ..............19
2.4.2 Literature Review - Managerial Aspects................................ ............................ 28
2.4.3 Literature Review - Customer Aspects............ ...................................................31
2.4.4 Summary of Literature Reviews.............................................. .............................3. 4

viii

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Page
CHAPTER 3 CONCEPTUAL FRAMEWORK AND HYPOTHESES................36

3.1 Conceptual Framework - Managers' Perspective................................................... .......37


3.1.1 CRM Performance.................................... .................................................. ......39 3.1.2
CRM Fit.............................................. .................................................. ....................... 41
3.1.3 Relationships among CRM Systems and Process, Fit, and Performance... 50 3.1.4
Market Orientation................................ .................................................. ................51 3.1.5
Market Knowledge Competence................................ ............................................ 54 3.2
Conceptual Framework - Customers' Perspective.................................................57 3.2.1 CRM
Performance - Satisfaction, Commitment, and Loyalty......59 3.2.2 CRM Fit, Process, and
Systems..... .................................................. .................62 3.2.3 Customer Orientation &
Customer Knowledge Competence...................... 65 3.2.4 Additional Study: Relational Benefit
Mediating M odel...................................67

CHAPTER 4 RESEARCH METHODOLOGY................................................ .......... 71

4.1 Hotel Industry................................................... .................................................. ...........71 4.2


Study 1 - Managers' Perspective.............................. ................................................72 4.2.1
Subjects and Data collection................................................ .................................. 72 4.2.2
Measurements.............. .................................................. ............................................ 75 4.2.3
Analysis .................................................. .................................................. ........... 81 4.3 Study
2 - Customers' Perspectives............................... ............................................83 4.3.1 Data
Collection. .................................................. .................................................. 83
4.3.2 Measurements.............................................. .................................................. ............. 84
4.3.3 Analysis................................................ .................................................. ................. 87

CHAPTER 5 ANALYSIS AND RESULTS.............................................. ...................90

5.1 Managers' Perspective................................................ ...................................................90 5.1


.1 Sample composition.............................................. ............................................90 5.1.2
Normality of residual, Multicollinearity, and Outlier.................................... 92 5.1.3 Hypotheses
Testing. .................................................. ............................................94 5.2 Customers'
Perspective.... .................................................. .......................................99 5.2.1 Sample
Composition..... .................................................. ...................................99 5.2.2 Hypotheses
testing......... .................................................. ................................... 101 5.2.3 Summary of
Hypotheses Testing......... .................................................. ......... 116

viii

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Page
CHAPTER 6 DISCUSSION, CONCLUSIONS AND IMPLICATIONS 119

6.1 Discussion of Findings................................................ ................................................ 120


6.1.1 Managers' perspective.............................................. ............................................120
6.1.2 Customers' perspective.............................................. ....................................... 124
'
6.1.3 Customers' Perspective vs. Managers Perspective....................................128
6.2 Limitations................................................ .................................................. ............. 129
6.3 Contributions and Implications................................................ ................................ 132
6.4 Future Research................................................. .................................................. .......135

APPENDICES................................................. .................................................. ............137

A. Factor Analysis for MO and MKC................................................ ................................137


B. Background Information of Managers' Data ................................................... ................138
C. Background Information of Customer data................................................ ...................139
D. Online survey-M anagers' perspective................................................... ....................... 141
E.Customer Survey................................................ .................................................. .......146

BIBLIOGRAPHY................................................. .................................................. ..... 150

ix

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LIST OF TABLES

Table Page 1. Recent Definitions of C RM ........................................... ...................................................12

2. Perspectives of Fit .............................................. .................................................. ............43

3. Relationship Cycle................................................ .................................................. ........ 45

4. CRM Systems Requirements and Categories................................................ ................. 48

5. Source of Measurements.............................................. .................................................. .........75

6. Definitions of Market Orientation and Market Knowledge Competence.................77

7. Reliability for MKC and M O................................................ ................................................77

8. Reliability for performance................................................ ................................................78

9. Reliability for CRM Process.............................................. ............................................80

10. Reliability for CRM Systems................................................ ............................................81

11. Reliability for CRM Process & CRM Systems................................................ ...................85

12. Reliability for Customer Knowledge Process & Customer Orientation...................86

13. Reliability for Performance................................................ ................................................86

14. Reliability for Relational Benefits................................................ ...................................87

15. Eight Analyzes.............................................. .................................................. ................. 89

16. Positions of Respondents................................................ ...................................................91

17. Revenue Levels of H otels................................................ .................................................. 91

18. Multicollinearity Check - VIF................................................ ............................................ 93

19. Cook's Distance.............................................. .................................................. .............93

20. Results of Regression Analyzes.............................................. ....................................... 95

21. Regression Analysis with CRM Process as Dependent Variable..............................97

22. Hypotheses Testing Results- Managers' model................................................ ...................98

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table Page
23. Age of Respondents................................................ .................................................. ........99

24. Income of Respondents................................................ .................................................. 100

25. Length of Membership................................................ .................................................. .100 _

26. Average Price per Night.............................................. .................................................. 101

27. Results of CFA............................................... .................................................. .............. 103

28. Correlations between Factors & AV E................................................ ............................104

29. Test Results - No Mediating Effect................................................ ................................107

30. Additional Model - Test Results with CRM Fit................................................ ................. 113

31. Additional Model - Test Results Without CRM Fit.............................................. ....... 114

32. Summary Results of Hypothesis Testing - Main Study.............................................. 117 _

33. Summary Results of Hypotheses Testing - Additional Study................................118

xi

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LIST OF FIGURES

Figure Page 1. A Framework of CRM ........................................... .................................................. ......18

2. Research Model - Managers' Perspective.............................................. ....................... 38

3. Revised Model - Customers' perspective................................................ ........................ 58

4. Additional Mediating Model - Relational Benefit.............................................. .......... 67

5. Normal PP plots of Regression Standardized Residuals................................................ 92

6. Managers' Model & Hypotheses................................................ ....................................... 94

7. Customers' Model & Hypotheses................................................ .................................... 106

8. Path Diagram (Non-member Data for Study 2 )................................................. ................ 109

9. Path Diagram (Member Data for Study 2 ).................................... .......................109

10. Relational Benefit Model & Hypotheses................................................ ....................... 112

xii

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CHAPTER 1

INTRODUCTION: CHALLENGES OF CRM

1.1 Background

Well-managed customer relationship management (CRM) systems have clear

economic payoffs. Customer acquisition costs, 5 to 7 times higher than customer

retention costs (Kotler, 1997), can be held in check; while profits can be boosted by

25% to 85% by reducing customer defections by a mere 5% (Reichheld and Sasser,

1990). In terms of a business vision, it has become increasingly important for service

organizations to conceptualize their service concepts as more than meeting short-term

financial goals. Contemporary services need to establish long-term 'relational value'

(Kandampully 1998). For these reasons, customer relational capability has started

receiving attention as a key corporate resource to gain competitive advantages (Day

and Van den Bulte, 2002).

CRM technologies offer significant possibilities for creating and sustaining ideal,

highly satisfying customer relationships (Goodhue, Wixom, and Watson 2002; Ives

and Mason 1990). With the help of new information technologies, managing customer

relationships is feasible even as people became more mobile, cities grow, and

companies become larger (Goodhue, Wixom, and Watson 2002). Information

technology can enhance the organizational abilities to identify and track individuals

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customers and to monitor service levels; as well as assist customers in specifying,

configuring, acquiring, fixing, or returning products (Ives and Mason 1990). Through

CRM and database technologies, companies can improve their customer relations

while enhancing their competitive positions (Ives and Mason 1990).

On the flip side, however, implementation of CRM is still far short of ideal

(Abbott, Stone, and Buttle 2001; Winer 2001). Despite several years of experience,

web-based companies were not able to fulfill many Christmas orders in 2000, and

failed to respond to email request in five days in 1998 (Tweney, 2000). Even in 2005,

customers continued to have difficulties returning defective products. Most customers

have had bad experiences such as poor customer service and unanswered emails

(Tweney 2000).

While these are problems on the customer side, the corporate side has its own

share of CRM difficulties. According to the Gartner Group, nearly 55% of CRM

projects during 2002-2006 were likely to fail (Caufield, 2001).

CRM Systems cost an average of $35,000 per call-center agent to deploy, with

setup and maintenance adding $28,000 and $40,000 per salesperson over a three-year

cycle (Caulfield 2001). Given such high costs of deployment and maintenance, the

drastic failure rates represent huge financial risks for most CRM Systems adopters. To

make matters worse, 20% of these CRM failures end up ensuring long-standing

customer relationships (Mello, 2002).

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1.2 Issues raised

What, then, are the problems that often derail CRM implementations? With

Regarding the causes of the CRM failure rates, a Gartner study indicated that up to 80

percent of enterprises did not understand how customer relationship management

creates value in their customer base (Kirkby, 2002). Because of this lack of

understanding, firms have failed to develop unifying CRM strategies to build up their

relationship assets.

In a similar vein, many consulting companies and experts point out that the

real challenges lie in the “softer” aspects of CRM such as coordinating employees,

understanding customers, and managing organizational environment rather than the

technical aspects. For example, CMO Consulting International pinpointed that

businesses usually do not understand the customer's perspective of relationships

(CMO, 2002). Caulfield (2001) indicated that since CRM projects usually involve a

variety of departments, the lack of explanation and agreements among the

organization members about the project - resulting in lack of high-level cooperation -

are among the reasons for failure. Dubois (2002) found that data quality issues account

for up to 70% of failure rates of data warehouses and contribute to a 55-70% failure

rate for CRM projects.

Such problems are pervasive in the CRM cycle, starting from defining a customer

and customer relationship to managing systems and data quality. Under ideal

conditions, CRM Systems should ensure that the processes of defining the customer

and the customer relationship, and the identification and integration of the business

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processes to support and serve the customer, are done right. CRM Systems should

ensure that it is the organization and its customers - and not the technology - that are

at the center of the CRM practice; and yet, expensive technology and databases cannot

be overlooked due to budgetary concerns.

Above all, the biggest challenge is the fact that businesses do not know

their customers. Davenport, Harris, and Kohli, (2001) noted that even companies that

have a huge data warehouse have few additional insights about their customers. That

is, the companies may store more data about their customers, but they do not know the

existing customers well, or how to attract new customers. Each customer has a

different value to a company, and CRM can help existing segment customers based on

their value to the company. Few companies, however, know how to use CRM systems

to learn about customers in insightful ways.

Furthermore, even though relationships are about mutual benefits, many

businesses still formulate their marketing strategies based on the old ideas: marketing

is something that businesses do to the customers, rather than a “relationship” between

parties in which both are equally engaged (Gamble, Stone, and Woodcock 1999). It is

well recognized that relational value is important (Kandampully 1998); yet, in reality,

there are not many translating this idea into viable practice (Gamble, Stone, and

Woodcock 1999).

To gain better insights about CRM practice, we need to scrutinize CRM practice

from multi-disciplinary perspectives and from multiple aspects. Insights from not only

technology and marketing disciplines but also from customer side and business side

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are required. Such integrated views of CRM will provide better theoretical background

to enhance the understanding of as well as improve the practice of CRM.

Little rigorous academic research, however, exists on CRM. Even the definition

of CRM is subject to multiple interpretations (Goodhue, Wixom, and Watson, 2002;

Winer, 2001; Wright, Stone, and Abbott, 2002).

Several studies in MIS area have examined the effect of information systems on

organizational performance, but there have not been convergent findings regarding the

positive effect of IT on performance. Many authors claim that IT spending has failed

to generate significant productivity gains and that the benefits of IT are not satisfying

(Franke 1987; Roach 1991; Strassman 1990; Weill 1992). In other studies, however,

IT spending has been linked to significant productivity improvements (Brynjolfsson

and Hitt 1993, 1995; Osterman, 1986).

Several studies on service quality, loyalty, and customer retention have also been

conducted in the relationship marketing area. Few studies, however, focus on the

linkage between the marketing concepts and IT. Even though CRM relies heavily on

information technology, the effects of technology have not been clearly found to

contribute to CRM goals. Additionally, it is not clear how technology can be managed

so as to improve customer relationships in CRM practice.

Ganesan (1994), for instance, examined the retailer (buyer)-vendor (seller)

relationship and tested the research model by analyzing buyer's data and seller's data.

I have found that the variables influencing the relationship are different for sellers and

buyers. Given this, it is meaningful to examine CRM practice from both customers'

and businesses' perspectives.

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The proposed research starts with a key question: How can a firm manage

customer relationships well using information technology while reducing the risk of

CRM failure? This study is one of the first attempts to provide a systematic

investigation of CRM from multi-disciplinary perspectives.

1.3 Research Objectives

Customer relationships and their management are undoubtedly important. Even

customers with whom “no relationship” is established can be viewed as members of a

category called “null” relationships. CRM Systems can manage null relationships as

well as any other category.

This study focuses on CRM as a continuous process to satisfy customers and

maintain good relationships (including null relationships) with customers rather than

as a short-term IT project.

The focus of the study is on a very basic issue: how to establish and maintain

good relationships (either relational or transactional) with customers by using CRM

technologies. To answer this question, the proposed study seeks to:

• Achieve a comprehensive understanding of CRM practice: what is CRM, how it


works, and how can it be made to work better

• Arrive at one integrated framework for CRM.

• Identify critical success factors for CRM implementation, how these factors work
and interrelate, and what would be the effects of these factors on customer
retention and satisfaction; and ultimately on the performance of the CRM-
implementing organization.

• Compare customers' perspective and businesses' perspective on CRM


practice.

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1.4 Theoretical Basis

This study draws from and blends multiple disciplinary perspectives. Knowledge

Discovery in Databases (KDD), the Task-Technology Fit (TTF) model from

Management Information Systems (MIS) and Computer Science, and Market

Orientation and Market Knowledge Competence from Marketing and Business

Strategy literatures are adopted and adapted for this study.

Market Orientation (MO) explains cultural norms of a firm toward a market.

Market Knowledge Competence (MKC) focuses on organizational processes to

generate market knowledge. Knowledge Discovery in Databases (KDD) focuses on

technological aspects of such knowledge (Li and Calantone 1998). In line with Slater

and Narver's (1994) notion that it is important to understand how features of the

organization's culture facilitate these processes, the cultural aspects (Market

Orientation) and systematic processes (Market Knowledge Competence) will be

examined together in the context of CRM.

The Task-Technology Fit (TTF) model from MIS provides a framework to

explain how CRM Systems could lead to increased customer retention and satisfaction.

Technologies that fit their intended tasks lead to salutary performance impacts

(Goodhue and Thompson 1995). Moreover, it is not technology in isolation that

affects performance - organizational characteristics also come into play (Goodhue,

Klein, and March 2000). These notions are appropriate for the proposed study of CRM

practice: even though technology is the enabler of CRM, it is factors beyond

technology that brings success to CRM practice (CMO, 2002).

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Of course, an unquestioned emphasis on customer relationship building needs to

be tempered with some caution. In their study, Reinartz, Krafft, and Hoyer (2004)

stressed that it may not be true that more relationship building is always better. Rather,

building right types of relationship is critical depending on situational factors based on

organizational design, IT resources, and industry, company, or customer structures.

1.5 Organization of the Dissertation

The remainder of the dissertation is organized as follows: Chapter 2 reviews the

literature on CRM and other related issues. The third chapter introduces two

conceptual frameworks that guide the research along with a set of propositions.

Chapter 4 details the research design and methodology. The results of the data analysis

are reported in Chapter 5. Chapter 6 concludes this dissertation with a discussion of

the results along with practical and theoretical implications, limitations, and future

research directions.

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CHAPTER 2

CRM: A MULTI-DISCILPINARY REVIEW

This chapter begins with a quick, preliminary review of the extant literatures on

CRM. Understanding what is CRM and what elements constitute CRM is essential for

further investigation of CRM. Since CRM relies heavily on computer systems while it

deals with customer relationships, CRM has been studied from not only management

and marketing angles but also from Management Information Systems (MIS)

perspective. The term CRM has connoted different things to researchers in various

disciplines (Goodhue, Wixom, and Watson, 2002; Winer, 2001; Wright, Stone, and

Abbott, 2002), and CRM is being implemented in different ways. Therefore, starting

With definitions of Customer and CRM, this chapter provides a single integrated

framework for CRM. Based on this framework, existing literatures pertaining to each

aspect in the framework are reviewed. This more detailed review leads to a clear

delineation of what has been studied and what has not received research attention; and

where the research gaps are.

The chapter comprises these sections: (1) definition of customer, and definition of

CRM for this study, (2) preliminary review of existing frameworks of CRM in

different disciplines, (3) development of a unitary, integrated framework for CRM;

and (4) more detailed reviews of existing literatures based on the components of the

framework.

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2.1 Customers in CRM

To answer the question, “What is customer relationship management?” we need

to first define the customer. Questions such as “What is a customer?” Who is a

customer? What are customer relationships?” need to be addressed before getting into

the details of Customer Relationship Management (CRM) technologies, processes, and

issues. Many different answers exist to these questions, and these answers vary

according to the disciplines and perspectives producing the answers.

There are four different types of 'customers': (1) paying clients, (2) employees,

(3) supplier/vendor, and (4) partner (Greenberg 2002). In business-to-business (B2B)

settings, customers are referred to as “clients” (also “users”) but are simply called

“customers” or “consumers” in business-to-consumer (B2C) settings. In the

Relationship Marketing field, not only external customers but also internal customers

are included in the customer definition. Internal customers refer to employees and

suppliers (Gamble, Stone, and Woodcock 1999). Some researchers have argued that

satisfying the needs of employees as internal customers improves the organizational

capability for satisfying the needs of external customers (Gronroos 2000). Schlesinger

and Zomisky (1991) studied employees' perceptions of their ability to deliver high-

quality service (employee capability) and found that such capability related strongly to

customers' perceptions of service quality. (Greenberg 2002) also emphasized the

importance of internal customers. He argued that employees are customers in terms of

the service provided and the fee to be charged.

10

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For the purposes of this chapter, however, the term customer is interpreted

narrowly. The definition of customer is limited to buyers of the products and services

of the firm. Having narrowed the focus of the term “customer” to the product/service

buyer, understanding what is CRM and what elements constitute CRM are the next

steps.

2.2 Definition of CRM

Since CRM has been interpreted and used in different ways by researchers in the

various disciplines (Goodhue, Wixom, and Watson, 2002; Winer, 2001; Wright, Stone,

and Abbott, 2002), it is useful to bring together these diverse views. Table 1 pulls

together most recent CRM definitions offered by researchers.

Goodhue, Wixom, and Watson (2002) defined CRM as any application or

initiative designed to help an organization interactions optimize with customers,

suppliers, or prospects via one or more touch points for the purpose of acquiring,

retaining, or cross-selling customers. Wright, Stone, and Abbott (2002) defined CRM

Systems that CRM Systems combine software and management practices to serve the

customer from order through delivery and after-sales service. Dyche (2002) defined

CRM as the infrastructure that enables the delineation as well as enhancement of

customer value, and the correct means by which to motivate valuable customers to

remain loyal - indeed, to buy again.

As shown in the table, most of recent definitions viewed CRM as business

practice or a strategy rather than as computer systems. Wright, Stone, and Abbot

eleven

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(2002) mentioned that to some companies CRM meant direct emails or database

marketing while for others it connoted OLAP (online analytical processing) and CICs

(customer interaction centers). In such definitions, they argued the notions of

'customer retention' and 'cross-selling' (and their application in practice) are often

weak.

Table 1
Recent Definitions of CRM
Authors Definition
Goodhue, Wixom, Any application or initiative designed to help an organization optimize
and Watson interactions with customers, suppliers, or prospects via one or more
(2002) touch points - such as a call center, salesperson, distributor, store,
branch office, web, or email - for the purpose of acquiring , retaining, or cross-selling
customers
Wright, Stone, and Combination of software and management practices to serve the
Abbott (2002) customer from order through delivery and after-sales service
Kleindl (2001)
Ang and Buttle A core business strategy that integrates internal processes and functions
(2002) and external business networks to create and deliver value to targeted
customers at a profit. It is grounded on high quality customer data
and enabled by information technology.
Dyche (2002) The infrastructure that enables the delineation of and increase in customer
value, and the correct means by which to motivate valuable customers
to remain loyal - indeed, to buy
Kellen (2002) again A business strategy aimed at gaining long-term competitive
advantage by optimally delivering customer value and extracting
business value
Kim, Suh, and simultaneously Managerial efforts to manage business interactions
Hwang (2003) with customers by combining business processes and technologies
that seek to understand a company's customers.
Kirkby (2002) A blueprint for turning an enterprise's customers into an asset by
building up their value.
Rembrandt (2002) A good CRM program enables customers to easily access the information
they need at any time and includes a 24-by-7 web-site, fast email tools
and the ability to discuss problems with a human being rather than an
electronic answering system.
Smith (2002) A business strategy combined with technology to effectively manage
the complete customer life cycle.
Sources: As cited in the first column

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This dissertation endorses the strategy-oriented, customer-centric view of CRM. Item

follows the Ang and Buttle (2002)'s definition which regards CRM as a strategy.

CRM can be defined as follows:

CRM is a core business strategy that integrates internal processes and functions
and external business networks to interact, create, and deliver value with
personalized treatment to targeted customers to improve customer satisfaction
and customer retention at a profit. It is grounded in high quality customer data and
enabled by information technology.

2.3 CRM Framework

Several frameworks have emerged to understand or explain CRM. Most of these

frameworks highlight either the information technology or the managerial aspects of

CRM practice including strategy and people who use the technology. The frameworks,

however, tend to focus on either the IT or the managerial aspect rather than including

both aspects. The following section reviews these diverse IT or managerial models,

and then goes on to propose a unitary integrated model. Existing frameworks from

both industry expertise and academic approaches are reviewed.

2.3.1 Industry Experts' Approach

Most CRM industry experts and academic researchers point out that CRM should

be viewed as an organizational strategy, and therefore its structure should start from

the organization's goals. For example, Onyx Software views the structure of CRM as a

pyramid, on the apex of which Business Objectives are placed, with Programs and

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Metrics, and individual Department Plans at levels below the apex; and at the bottom,

there is the foundation of Technology (reported in Greenberg 2002). CMO Group

views CRM as a strategy and proposes the Integrated CRM (ICRM) framework,

spanning the range from internal databases to the market place. ICRM analyzes the

data in a company's database based on the planned relationship structure and develops

CRM strategies under conditions of market competition (CMO 2002). Front Line

Solution Inc. views CRM as a business strategy to select and manage customers to

optimize long-term value. According to this view, CRM requires a customer-centric

business philosophy and culture to support effective marketing, sales, and service

processes (reported in Greenberg 2002).

In sum, from industry perspective, CRM is viewed as a disciplined business

strategy to create and sustain long-term and profitable customer relationships.

Successful CRM initiatives start with a business strategy and philosophy that aligns

company activities around customer needs. Thus, an organizational culture and an

atmosphere centering on customer are essential. CRM technology is a critical enabler

of the processes required to turn strategy into business results.

2.3.2 Academic Studies

2.3.2.1 Winer's model

Winer (2001) proposed a basic model for CRM. This model indicates what

managers should know about their customers and how to use information to develop a

complete CRM perspective.

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The model has seven components:

ÿ A database of customer activity


ÿ Analyzes of the database
ÿ Given the analyses, decisions about which customers to target
ÿ Tools for targeting the customers
ÿ How to build relationship with the targeted customers
ÿ Privacy Issues
ÿ Metrics for measuring the success of the CRM program

Several critical CRM issues are addressed in this framework. Winer stresses the

primary importance of a database containing important customer related data such as

transactions, customer contacts, descriptive information, and response to marketing

stimuli. Furthermore, the model also encompasses calculation of Lifetime Customer

Value (LCV), “firing” or terminating customers that are not profitable (Zeithaml,

Rust, and Lemon, 2001), interacting with customers instead of talking “at” customers

(Peppers and Rogers, 1993), delivering satisfaction, and privacy issues.

2.3.2.2 Ang and Buttle's Model

Ang and Buttle (2002) conceptualized CRM at three levels of abstraction:

strategic, operational and analytical. At a strategic level, CRM is seen as a core

business strategy which should be customer-centric or market-oriented. At yet

operational level, CRM is concerned with automation of the business process. At yet

analytical level, CRM is concentrated on mining customer data to derive insights and

to drive highly focused sales and marketing campaigns by using tools such as decision

trees, neural networks, and clustering. In Ang and Buttle's view, CRM is the core

business strategy that integrates internal processes and functions and external business

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networks to create and deliver value to targeted customers at a profit. It is grounded on

high quality customer data and enabled by information technology. The CRM concept

used in this dissertation is close to this view of CRM.

2.3.2.3 Goodhue, Wixom, and Watson's model - Technical Architecture

Goodhue, Wixom, and Watson (2002) viewed CRM's technical architecture from

two sides: analytical and operational. On the analytical side, a data warehouse

Typically maintains historical data that supports generic applications such as reporting,

queries, online analytical processing (OLAP), and data mining; as well as specific

applications such as campaign management, chum analysis, propensity scoring, and

customer profitability analysis. On the operational side, data must be captured,

integrated, and stored from all inbound touch points, including the web, call centers,

stores, and ATMs.

2.3.2.4 Greenberg's model - Types of CRM technology

Greenberg (2002) highlighted three components of CRM technologies:

Operational CRM, Analytical CRM, and Collaborative CRM. Operational CRM is the

“ERP-like” segment of CRM. He indicated the possibility of integrating operational

CRM with the financial and human resources functions of the enterprise resource

planning (ERP) applications. With such integration, end-to-end functionality from lead

management to order tracking can be implemented. Analytical CRM entails the

capture, storage, extraction, processing, interpretation, and reporting of customer data

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to the manager. The value of the application is in the ability to tailor and personalize

the response using the data. Collaborative CRM is the communication center that

provides the neural paths to the customer and his suppliers. It could be any CRM

function that provides a point of interaction between the customer and the channel

itself.

2.3.3 Integrated Framework of CRM

Based on these various CRM views, a unified integrated model is proposed. in

This model, CRM can be viewed at three different levels (shown in Figure 1). The

management level contains goals, strategy, plans and metrics. The second level

technological structure - contains analytical, operational, and collaborative technology.

The third level is the customer. Each level has to be coordinated.

First, as an organizational strategy (Ang and Buttle 2002; Day and Van den Bulte

2002; Smith 2001), CRM Systems should deal with various management levels.

Strategies should be established to achieve corporate-level goals. Specific plans

have to be crafted and the performance of these plans has to be tracked and evaluated

thoroughly. These goals, strategies, and plans should reflect the corporate philosophy

regarding customer orientation and instill a customer-responsive corporate culture.

Second, the technological structure needs to be worked out, including analytical

CRM Systems, operational CRM Systems, and collaborative CRM Systems.

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Goal > (Strategy Plan Metrics

Analytical CRM Systems oo

Operational CRM Systems

Figure 1. A Framework of CRM

Analytical CRM Systems help a firm to analyze the huge amount of customer

data so that the firm can find some patterns of customers' purchasing behavior

(Goodhue, Wixom, and Watson, 2002). Operational CRM Systems entail the

integration of all the front-end customer-facing functions of the business. For example,

since the sales process depends on the cooperation of multiple departments performing

different functions, the systems to support the business processes must be configurable

to meet the needs of each department (Earl, 2003; Greenberg, 2002). Collaborative

CRM Systems refer to CRM functions that provide points of interaction between the

customer and the channel - the so-called “touch points” (Greenberg, 2002).

Third and finally, the raison d'etre of any CRM Systems is the customer.

Customer service and related issues must be included in the design, implementation,

and operation of any CRM Systems. Davids (1999) emphasized that viewing CRM as

a sales or customer service solution is the southeast way to fail. The only way to benefit

the organization is to first benefit the organization's customers (Davids, 1999). CRM

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software needs to pay attention to not only users within the implementation

organization, but also to the end customer (Earl, 2003). While enhancing the

operational efficiency of the organization is an important goal of CRM technology,

servicing and delighting the customers are the ultimate end-goals as well as the

ultimate determinants of success.

Each level has to be coordinated for successful CRM implementation and

performance outcomes. It is important to note that placing customers in the center is

the primary requirement. And then every other activity can be configured to

understand and satisfy the customers.

2.4 Literature reviews based on CRM framework

This section provided more detailed reviews of CRM-related literatures,

organizing the discussion along the dimensions of the framework shown in Figure 1.

First, technology aspects of CRM are presented for collaborative, analytical, and

operational CRM Systems with studies of detailed tools. This is followed by review of

studies on managerial aspects. Lastly, but not the least, customer related studies are

presented.

2.4.1 Literature Review - Technology Aspects

Internet provides managers with an enormous quantity of previously-unavailable

customer information, and therefore, the new struggle is to manage and use this

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information accurately and efficiently to measure customer preferences, buying trends,

and selling performance (Moe and Fader 2001). In this section, the issues related to

the technical structure of CRM are reviewed.

2.4.1.1 Analytical CRM and Knowledge Discovery in Database

Multiple data formats and distributed nature of knowledge on the web make it a

challenge to collect, discover, organize and manage CRM-related customer data

(Shaw et al., 2001). For this reason, data analytics tools such as knowledge discovery

in databases (KDD), web data mining, and OLAP are receiving attention in

relationship marketing contexts (Mackinnon and Glick 1999; Fayyad, Piatetsky-

Shapiro, and Smyth, 1996).

First, knowledge discovery in databases (KDD) is defined as the iterative process

of data selection, sampling, pre-processing, cleaning, transformation, dimension

reduction, analysis, visualization, and evaluation (Mackinnon and Glick 1999). As a

component of KDD (Fayyad, Piatetsky-Shapiro, and Smyth, 1996), data mining can be

defined as the process of searching and analyzing data in order to find latent but

potentially valuable information (Berry and Linoff, 1997; Fayyad, Piatetsky-Shapiro,

and Smyth, 1996; Shaw et al., 2001). Data mining and KDD are designed to deal with

databases that are not only massive but also growing and changing (Mackinnon and

Glick, 1999). Systematic combining of data mining and knowledge management

techniques can be the basis for advantageous customer relationships (Shaw et al.,

2001). Research in KDD in general is intended to develop methods and techniques to

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process large volumes of unstructured data in order to recover valuable latent

knowledge that is compact and abstract; yet understandable and useful for further

applications (Bruha, Kralik, Berka 2000).

Second, especially in web-based relationship marketing, three distinct categories

of web data mining have emerged: web content mining, web structure mining, and

web usage mining (Jackson, 2002). According to Edelstein (2001), web content

mining describes the discovery of useful information from the web

content/data/documents, while web structure mining is a tool to discover the model

underlying the link structure of the website. Web usage mining tries to make sense of

the data generated by the web surfer's sessions or behaviors. Web usage mining is also

referred to as clickstream analysis. Marketers can examine a customer's navigation

patterns and guess about which actions to take (Dyche 2002). Valuable information

gleaned from clickstream data of many e-commerce sites can provide sharp

diagnostics and accurate forecasts, allowing e-commerce sites to profitably target and

reach key customers (Moe and Fader 2001).

Third, OLAP (On-Line Analytical Processing) refers to various types of query-

driven analyzes using databases or data warehouses (Berry and Linoff, 2000). OLAP

entails generating an online report, analyzing the results, and submitting a more

detailed query in order to understand the results (Dyche 2002).

Data mining techniques and KDD provide the tools to discover customer

preferences and to solve customer problems. Dholakia, Bang, Hamel, and Dholakia

(2004) reviewed and compared data mining tools and collaborative filtering as e-

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commerce strategic tools. With increasing availability of such tools, relationships

marketing relies heavily on technologies, especially analytical tools.

Within relationship marketing, database marketing and one-to-one marketing

methods have come to the fore. The strategic goal of database marketing is to use

collected information to identify customers and prospects as individuals and build

continuing personalized relationships with them, leading to greater benefits for the

individuals and greater profits for the corporation (Kahan 1998). Database marketing

identifies unique segments in the database reacting to specific stimuli such as

promotions (McKim 2002). One-to-One marketing represents the ultimate target

marketing - market segments with just one member each (Pitta 1998). It relies on a

two-way communication between a company and its customers to enhance a true

relationship and allows customers to truly express the desires that the company can

help fulfill (Dyche, 2002). A promising solution to implementing one-to-one

marketing is the application of data mining techniques aided by information

technology. Data mining allows organizations to find patterns within their internal

customer data. Customer containing information such as each customer's value to the

company, interaction mode, and products purchased can be analyzed using data

mining tools and the segments and sub-segments of customers can be identified (Bang

et al. 2004). Knowing such patterns, organizations can refine their targets and develop

their technology to achieve true one-to-one marketing (Pitta 1998).

As an extension of one-to-one marketing, the concept of permission marketing is

focused on seeking customers' agreement (permission) about desired marketing

methods. Customers not only needs to be communicated with as individuals, they

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themselves should be able to stipulate how and when they wish to be approached

(Newell 2003). One-to-one and permission marketing rely heavily on information

technology to track individual customers, understand their differences, and

acknowledge their interaction preferences (Dyche, 2002).

Data mining methods allow marketers to sift through growing volumes of data

and to understand their customers better. Shaw et al. (2001) introduced three major

areas of application of data mining for knowledge-based marketing - (1) customer

profiling, (2) deviation analysis, and (3) trend analysis. Also, Jackson (2002) noted

that data mining can be used as a vehicle to increase profits by reducing costs and/or

raising revenue. Therefore, CRM, especially analytical CRM systems can benefit

from data mining tools (Dholakia, Bang, Hamel, and Shin, 2004). In fact Knowledge

Discovery in Data bases or KDD (of which data mining is one part), CRM

technologies, and Relationship Marketing can be viewed as three key requirements for

sustainable e-marketing success (Dholakia, Bang, and Dholakia 2004).

While companies are eager to learn about their customers by using data mining

technologies, it is very difficult to choose the most effective algorithms for the diverse

range of problems and issues that marketers face (Kim, Kim, and Lee 2002). Data

mining studies have focused on analytical techniques while customer relationship

studies have focused on the interface to the customer and the strategies to manage

customer interactions (Shaw et al., 2001). In-depth research is needed for better

integration of analytical datamining techniques and relationship marketing strategies.

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2.4.1.2 Operational CRM and Integration

Operational CRM technology can be seen as the systems that span the chain from

order-taking to delivering the product to the customers. Two major technological

issues need to be addressed in operation CRM: business process reengineering (BPR)

and enterprise resource planning (ERP).

In managing and enhancing customer relationships, business processes

improvements are as important as data analysis. Dyche (2002) pointed out that every

successful CRM program entails a process improvement of some kind. All the CRM-

Related business processes should be designed around the customer's perspective with

the ultimate goal of improving the customer's experience.

It is important, though, to distinguish between operational CRM and ERP. The

focus of ERP is on process: it strives for integration of all office functions so that

interruptions and breaks in the processes are smoothed out and incompatibilities of

applications are eliminated or reduced. When the corporate system is seen to have two

distinct chains - the supply chain and the demand chain (Greenberg, 2002) - ERP

deals with the supply chain and CRM deals with the demand chain. The supply chain

covers the back office to external suppliers and distributors while the demand chain

you extend the front office to the customers and the channel. Operational CRM is geared

toward the front-office functions dealing with customers. ERP is a highly integrated

system of back-office functions that are customized and linked to all existing offices

business processes. Even though the organizational loci of CRM and ERP are

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different, the ideal of seamless integration between CRM and ERP is becoming closer

to reality due to the development of Internet architectures and web (Greenberg, 2002).

Several studies have been conducted in this area. For example, for the e-business

process, Wang, Hidvegi, Bailey Jr., and Whinston (2000) proposed a verification

method that determines and checks whether a system satisfies certain specifications

under all circumstances. They demonstrated that “model checking” could detect and

eliminate certain flaws (Wang et al. 2000). Sawy and Bowles (1997) noted that

customer support and service is becoming one of the most critical core business

processes. They attempted to provide insights for redesigning IT-enabled customer

support processes. In meeting the demanding requirements of the emerging electronic

economy for fast response, shared knowledge creating and inter-networked

technologies are the dynamic enablers of success (El Sawy and Bowles 1997).

Holweg and Pil (2001) argued that as companies rely more on forecasts, they lose

sight of real flesh-and-blood customer requirements, and it is difficult to handle a

custom order when it comes along. Holweg and Pil (2001) introduced three

dimensions of a successful build-to-order strategy: process flexibility, product

flexibility, and volume flexibility. They stressed that these three dimensions should be

optimized across the entire value chain, rather than in select parts, and companies and

their suppliers must first understand what customers want (Holweg and Pil 2001).

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2.4.1.3 Collaborative CRM

Collaborative CRM is the communication center (Greenberg, 2002). It can be any

CRM function that provides a point of interaction between the customer and the

channel.

Even before the Internet arrived, companies were under pressure to serve their

customers with multiple and varied channels (eg, toll-free call centers, catalogs).

Internet joined in as an additional channel to customers (Dholakia, Zhao and Dholakia

2005; Johnson 2002). The challenge for companies is to employ the Internet in ways

that enhance all their other channels (Dholakia, Zhao and Dholakia 2005). All the

channels need to be managed skillfully to avoid potential channel conflict, and to

allow channels to complement one another (Dholakia, Zhao and Dholakia 2005;

Johnson 2002).

In a similar vein, Butler (2000) noted that an online channel can suppress the

growth of other, traditional channels. Companies need to plan the online channel so as

to increase the corporate and brand visibility, accessibility, and sales to the growing

customer base on the Internet; as well as to enhance customer relationships via

traditional channels. They have a plan for analytics as they integrate the online

channel into CRM (Butler 2000).

Many articles and studies on collaborative CRM focus on the emergence of

websites. Topics studied include the effects of webpage and web portal designs on

customer interactions and sales. For example, Mandel and Johnson investigated the

effect of visual primes on the choices of expert and novice web users (Mandel and

Johnson 2002). They found that online atmospherics in electronic environments

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could have a significant influence on consumer choice. Not all studies are web-centric,

however. In a UK study, over 50 per cent of the respondents said that there would be

no changes to channels linked to the implementation of CRM (Abbott, Stone, Buttle

2001).

Yuan (2002) argued that agents, which are the catalysts for commerce on the web,

are mostly price-dominated and unreflective of the nature of supplier/consumer

differentiation, or the changing course of differentiation over time. To overcome those

problems, Yuan (2002) proposed a personalized and interactive comparison-shopping

engine. The author argued that these engines are able to leverage the interactive power

of the web for a more accurate understanding of consumer's preferences by combining

the agent-enabled customization of contents and the agent-enabled analysis of

interactions (Yuan 2002).

Joh and Lee (2002) pointed out that most of the e-marketplaces for B2B

Electronic commerce are seller-centric rather than buyer-centric. Each e-marketplace

organizes the directory of e-catalogs for the items it handles. For buyers, these external

directories are not efficient to integrate with their internal e-procurement systems. To

overcome this problem and inconvenience, they propose the logic programming

approach and a top-down algorithm (Joh and Lee 2002).

Kang and Han (2002) noted that many users are still unfamiliar with e-

marketplace systems. Users find it difficult to buy and sell products in cyber

marketplaces despite the rapid emergence of Internet-based electronic transactions.

These authors suggest a broker-based synchronous transaction algorithm that would

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guarantee a fairer and more efficient transactions for both sellers and buyers (Kang

and Han 2002).

Some of the studies focus on the design of the IT application through which

consumers interact with the businesses. Balasubramanian, Ma, and Yoo (1995)

proposed a systematic approach to designing such web applications (Balasubramanian,

Ma, and Yoo 1995). Isakowitz, Stohr and Balasubramanian (1995) noted that

hypermedia projects may involve people with very different skill sets, and the design

of hypermedia applications therefore entails capturing and organizing the structure of

a complex domain so as to make it clear and accessible to a varied user base. In their

study, they attempted to develop a methodology for structured hypermedia design

(Isakowitz, Stohr and Balasubramanian 1995).

Numerous technology-focused studies of analytical, operational, and collaborative

CRM Systems have been conducted, and specific techniques and tools have been

developed for each technical aspect of CRM. Studies of overall CRM Systems

effectiveness or challenge of managing CRM Systems are not as numerous. In the

MIS field, there are only a few studies on overall CRM information systems (eg

Gefen and Ridings 2002). Managerial and customer aspects of CRM usually attract

the attention of organizational or marketing researchers.

2.4.2 Literature Review - Managerial Aspects

The first part of this chapter reviewed CRM frameworks of academic researchers

such as Winer (2001) and Ang and Buttle (2002). Industry experts and consultants

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sometimes report on the process of CRM implementation and strategy (eg CMO

2002). Peppers and Rogers (2004) introduced a strategic framework of CRM with

three aspects: principles of managing customer relationships, implementation process,

and measuring and managing to build customer value. Croteau and Li (2003) studied

Critical success factors of CRM technological initiatives.

Among major CRM managerial issues are strategic orientations such as Customer

Relating Capability; and financial assessment of relationship with customers such as

Return on Relationship (investment) and Customer Lifetime Value.

Day (2003), for instance, highlighted the importance of customer relating

capability as a source of a sustainable strategic advantage against competitors. I have

argued that companies whose focus is on customer retention in terms of orientation,

configuration, and information show sustainable advantages in customer relationships.

He also mentioned that even though most companies think of information technology

first when they consider CRM capabilities, information technology is the least

important factor in distinguishing leaders from followers.

Large numbers of studies have been done on customer lifetime value (CLV)

calculation and return on investment (Shih and Liu 2003; Stahl, Matzler, and

Hinterhuber 2003; Todman and James 2004; Jortberg 2001; Liu and Shih 2005b;

Malthouse and Blattberg 2004; Mason 2003). Even though each customer is important

to a company, customers vary in their lifetime value to a firm. Differential plan

marketing initiatives targeted at each customer, a firm needs to estimate the lifetime

value of each customer (Kumar, Ramani, and Bohling 2004).

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Venkatesan and Kumar (2004) developed a framework to measure CLV and

evaluated the usefulness of CLV as a metric for customer selection and marketing

resource allocation. They sought to provide managers with a tool to assess the return

on marketing investment. They found that marketing communications and customer

returns influence CLV nonlinearly. They argued that customers should be selected on

the basis of CLV for higher profits in future periods. Pfeifer, Haskins, and Contoy

(2005) found inconsistencies in the use of customer lifetime value and customer

profitability. They proposed definitions for both to create and clarify differences

between these two terms. As an application of CLV, Liu and Shih (2005a) presented

recommender systems. Recommender systems have emerged in e-commerce

applications to support the recommendation of products. A WRFM (Weighted

Recency, Frequency, Monetary value based on CLV information) and CF (Preference-

based Collaborative Filtering) have been proposed as methods for coming up with

recommendations to customers. In their study, Liu and Shih (2005a) proposed two

hybrid methods that exploit the merits of the WRFM-based method and the

preference-based CF method to improve the quality of recommendations.

Rust, Lemon, and Zeithaml (2004) presented a framework to estimate return on

marketing. Making trade-offs on the basis of projected financial impact, managers can

make decisions on marketing strategy based on return on marketing. Gummesson

(1997) presented return on relationship which is a collective concept for current efforts

to pinpoint financial aspects of relationship marketing. Lastly, to evaluate the

effectiveness CRM, Kim, Suh, and Hwang (2003) proposed a framework using

balanced scorecard.

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CLV computations require different approaches depending on the business

application that a firm is looking at (Kumar, Ramani, and Bohling 2004). As well,

Shaw et al. (2001) challenged CLV calculations as a basis for strategy, and cautioned

that attaching a monetary value to customers does not necessarily mean that customers

They are properly valued as individuals, and that they are treated with respect.

In sum, while financial valuation of marketing strategy or customer relationship

effort including CLV calculation is essential, such metrics should be implemented

with some caution. Turning customers into mere monetary metrics could create

backlash effects.

2.4.3 Literature Review - Customer Aspects

In studies on customer aspects of CRM in the marketing discipline, the main

topics are Loyalty, Relational Benefit, Relationship Quality, and Service Quality.

Since firms are increasingly recognizing the value of building and maintaining

close relationships with their customers as a means of retaining existing customers

(Fomell and Wemerfelt, 1987; Reichheld and Sasser 1990), there have been many

studies conducted to measure relationship quality and relational benefit. Relational

benefit approach argues that building and maintaining relationship requires mutual

benefits (Hennig-Thrau, Gwinner, and Gremler 2002). For customers, the relational

benefits are the ones from the relationship itself rather than the benefits from core

service provided (Hennig-Thrau, Gwinner, and Gremler 2000).

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Relational benefits consist of three dimensions: confidence benefits, social

benefits, and special treatment benefits. Confidence benefit refers to the feelings of

reduced anxiety, trust and comfort in knowing what to expect in the service encounter

(Gwinner, Gremler, and Bitner 1998; Hennig-Thrau, Gwinner, and Gremler 2002).

Social benefit refers to the emotional part of the relationships such as personal

recognition of customers by employees and customers' familiarity with employees

rather than service performance. Special treatment benefit refers to individualized

additional services provided by a firm to customers in a relationship such as price

discounts, service upgrades, and faster handling of transactions (Hennig-Thrau,

Gwinner, and Gremler 2002).

Relationship quality is defined as “degree of appropriateness of a relationship to

fulfill the needs of the customer associated with the relationship” (Hennig-Thurau and

Klee 1997, p.751). Relationship quality is viewed as a high-order construct with

several dimensions (Crosby, Evan, and Cowles 1990; Dwyer and Oh 1987; Kumar,

Scheer, and Stettenkamp 1995). These dimensions have been characterized as

satisfaction and trust (Bejou, Wray, and Ingram 1996; Crosby, Evan, and Cowles

1990; Laglace, Dahlstrom, and Gassenheimer 1991; Wray et al 1994); conflict, trust,

commitment, willingness to invest and expectation of continuity (Kumar, Scheer, and

Stettenkamp 1995); and trust, satisfaction, commitment, and affective conflict (Roberts,

Varki, and Brodie 2003).

These studies have attempted to define relationship quality and benefit, to develop

measures for these constructs, and to distinguish them from and examine the

relationship with other constructs such as service quality. By doing so, it may be

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possible to develop superior marketing tools to retain customers as well as to obtain

sustainable competitive advantages from the relationships.

Another stream of studies is on Loyalty programs. In a retail setting, Sharp and

Sharp (1997) studied the effect of loyalty program on aggregated penetration, average

purchase frequency, and customer share, but could not find strong effects. From Wulf,

Odekerken-Schroder, and Iacobucci (2001) studied the effect of loyalty program on

customer share and also found no significant effects. On the other hand, Bolton,

Kannan, and Bramlett (2000) and Rust, Zeithaml, and Lemon (2000) studied loyalty in

credit card industry and airline industry respectively and both found positive effect on

retention and/or service usage. Verhoef (2003) studied the effects of loyalty program

and direct mailing on customer retention and customer share development and found

that loyalty program has significant effect on customer retention and share

development and that direct mailings influence customer share development. Whyte

(2004) noted that factors such as the conditions and circumstances are important

factors in the relationship between Frequent Flyer programs and customer

commitment and satisfaction, and the schemes are successful in creating repeat

purchase but the repeat purchase does not necessarily mean showing commitment or

satisfaction. Pullman and Gross (2004) studied the effect of service design elements on

loyalty behavior and found that a few design elements directly affect loyalty behavior

while most of design elements are mediated by eliciting emotional behavior that leads

to the loyalty behavior. In sum, most of customer-related studies are focused on

service quality and relationship quality. There are several studies examining

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customers' perceptions or behaviors on organizational programs and efforts such as

the loyalty programs, frequent flyers program, or membership programs.

2.4.4 Summary of Literature Reviews

This chapter has shown that there have been large numbers of studies conducted

on all three aspects of the CRM framework. Due to its complexity and broad coverage

of CRM, most of studies tend to focus on some small, but important, aspect of CRM.

What is mostly missing across all these reviews are attempts at developing a CRM

model with a multidisciplinary approach, so as to provide integrated technological and

Managerial insights to develop and maintain good relationships with customers.

As a core strategy, CRM relies heavily on information systems; and yet its

success is measured by soft aspects of relationship building, as shown in the

framework in Figure 1. There is not much research that does all of the following: (1)

develops and examines overall CRM practice, (2) examines both IT and customer

relationship thoroughly, and (3) examines both customer and business sides of

relationship in CRM.

CRM is not just a loyalty program or a sales automation system. TO

multidisciplinary research model needs to capture the technical, managerial, and

customer aspects of the overall CRM Process. In particular, CRM research requires an

interdisciplinary approach that connects MIS and marketing. Since CRM is about

relationship management, rather than about customer data management, it would be

meaningful to explore both sides of the relationship. In their study of customer

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relations, Reinartz, Krafft, and Hoyer (2004) stressed that it may not be true that more

relationship building is always better; rather, building right types of relationships is

critical depending on situational factors.

The first step in building the right type of relationship with customers is

understanding the customers. There have been numerous studies conducted on

understanding customers. Ganesan (1994) studied buyer-seller relationship to identify

determinants of long-term orientation in relationship. Data was collected from both

seller (vendor) and buyer (retailer), and the result was that the determinants of long-

term orientation of vendors are different from those of retailers. Not many studies,

however, have investigated CRM practice from customers' perspectives even though

Customers are at the center of CRM relationships.

Recently Reinartz, Krafft, and Hoyer (2004) developed a measurable construct of

CRM Process based on customer relationship cycle. This dissertation adopts and

adapts this CRM Process construct, and explores the effect of technology and CRM by

adapting MIS theory from customer perspectives. In the next chapter, a detailed

conceptual research model is presented that forms the basis of the empirical work in

this dissertation.

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CHAPTER 3

CONCEPTUAL FRAMEWORK AND HYPOTHESES

Building on the literature reviewed in Chapter 2, this chapter presents two

conceptual research models - one from managers' perspective and the other from

customers' perspective. Like Ganesan (1994)'s study, this study also explores the

organization-customer relationship, where the two sides often have differing

perspectives. The goal of CRM is to develop and maintain right types of relationships

with customers because some customers may want to have strong relationships with a

company while others may not want any relationship at all. Therefore, this study is

designed to examine not only what businesses do for better relationships, but also how

customers feel about an organization's CRM practice.

In this study, the two research models presented are basically exploring the same

thing - CRM practice, but one is a model from the service provider's perspective and

the other is a model from the service recipient's perspective. The service recipient or

the Customers' Model is a slightly modified version of the service provider or

organizational model.

The chapter has three main parts. First, a conceptual research model of managers'

perspective is presented. Second, a modified conceptual research model for customers'

perspective is presented. Lastly matched hypotheses from the two perspectives are

developed.

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3.1 Conceptual Framework - Managers' Perspective

As the reviews and the CRM framework of the previous chapter indicate, a

multidisciplinary CRM model should include all three dimensions - Managerial,

Technology, and Customer.

Figure 2 illustrates the proposed conceptual linking of CRM characteristics to

CRM Performance, from the perspective of the service provider or organizational

manager. As a managerial aspect, Market Orientation is included in the proposed

model to inject aspects of corporate culture that supports strong customer focus. It has

been recognized that the strategic thrust of CRM is “market-oriented” (Ang and Buttle

2002). Market orientation enables an organization to understand customer needs and

offer products and services that meet those needs, and is a means of developing a

competitive advantage (Jaworski and Kohli, 1993). The relationship between markets

orientation and performance has been examined and several studies have found

support for the fundamental market orientation-performance relationship (Narver,

Jacobson, and Slater, 1999; Narver and Slater, 1990; Nobel, Sinha, and Kumar, 2002;

Pelham, 2000; Pelham and Wilson 1996; Slater and Narver, 1994). Jaworski and Kohli

(1993) have argued, however, that technological turbulence - the rate of technological

change - will moderate the relationship between market orientation and business

performance. Since CRM practice relies heavily on technology, market orientation

It itself may not be enough to explain the effects and impacts of CRM practice.

Therefore not only Market Orientation, but also CRM Fit (as a technology-related

variable) and Market Knowledge Competence are included in the model. Figure 2

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outlines the overall proposed model of factors that drive CRM Performance and

success.

Information technology plays a critical role in the CRM practice. In fact, huge

investments in technology characterize the contemporary practice of CRM. To explain

how CRM Systems could lead to increased customer retention and satisfaction, one of

the valuable frameworks is the Task-Technology Fit (TTF) model from MIS. The TTF

model highlights the importance of task-technology fit in explaining how technology

leads to performance impacts (Goodhue and Thompson 1995).

market
Orientation

Market Knowledge
Competence

CRM Systems

CRM Process

CRMFit

Figure 2. Research Model - Managers' Perspective

These notions are appropriate for the proposed study of CRM practice since many

CRM experts have claimed that, even though technology is the enabler of CRM, it is

not just technology that brings success to the CRM practice (CMO, 2002). Sisodia and

Wolfe (2000) note that to conquer the biggest challenges marketing faces, “neither the

data in IT systems nor the computer is the solution,” and argue that relationship

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marketing requires more complex information systems than does product-driven or

transaction-driven marketing because of increased intimacy among providers, channel

clients, and consumers. In relationship marketing, information about consumers and

players in marketing channels is gathered on an individual basis and used to tailor

products, product distribution, and marketing messages.

Therefore, investigation of CRM practice requires the understanding of both

information technology and CRM Process. For this reason, not merely Technology,

but rather CRM Fit is proposed as a key factor in this model. The concept of CRM Fit

captures the idea that along with technology, organizational factors play crucial roles

in the success of CRM Systems.

Furthermore, CRM is not a single project but a continuing process. market

Knowledge Competence is treated as the process-focused knowledge-generating

capability of the organization. CRM relies heavily on technology, and a customer

knowledge management process with appropriate technology is critical for

understanding customers.

In the next section, each factor that influences CRM Performance and exploratory

research propositions flowing from that factor are discussed.

3.1.1 CRM Performance

To understand CRM, it is important to examine the link of CRM Systems to

performance outcomes. CRM Performance can be discussed along two distinct

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dimensions: employing subjective vs. objective measures, and employing financial vs.

non-financial measures.

First, any organization's performance can be categorized into financial company

performance and non-financial company performance (Homburg, Hoyer, and

Fassnacht 2002). Financial company performance measures are profitability measures

(eg ROI) while market-based performance - the non-financial company performance

- relates to the effectiveness of an organization's marketing activities measured in

terms of customer satisfaction, customer retention, and customer benefit (Menon,

Bharadwaj, and Howell, 1996; Morgan and Piercy 1996). Customer satisfaction occurs

as a result of a customer's interactions with the firm over time (Anderson, Fomell and

Lehmann 1994; Crosby, Evans and Cowles 1990), and most prior research has found

that satisfaction has a positive effect on customer loyalty (Bloemer and Ruyter, 1998;

Rust and Zahorik 1993; Szymanski and Henard, 2001). Gronholdt, Martensen and

Kristersen (2000), in particular, found the significant customer satisfaction-customer

loyalty relationship at the organizational level. Therefore, excellence in CRM is

expected to lead to higher customer satisfaction.

Second, issues of subjective and objective judgmental assessment of performance

have been raised (Noble, Sinha, and Kumar 2002). Pelham and Wilson (1996) and

Jaworski and Kohli (1993) found significant relationships between market orientation

and performance when using a subjective relative performance measure.

In this dissertation, CRM Performance refers to how well CRM practice executes

in terms of subjective (relative) non-financial assessment such as customer

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satisfaction, retention, and market share; as also subjective (relative) financial

assessment (eg sales growth, profitability, and stock price).

Relative performance measures were used for following three reasons: (1) relative

measures are easier to answer than the objective measures especially with the form of

7-point Likert scale, (2) objective measures may not be accessible to managers or be

proprietary, and therefore (3) participants may either skip the question or give up the

entire survey. Given the difficulty of data collection from industry respondents,

Relative performance measures are appropriate for this study.

In the following section, the factors expected to influence the CRM Performance

are discussed. First, CRM Fit between CRM Process and CRM Systems is discussed,

and then Market Orientation and Market Knowledge Competence are addressed.

3.1.2 CRMFit

In order to explain the effect of CRM information systems, TTF model from MIS

is adopted and adapted. Task-Technology Fit in the TTF model is defined as the

degree to which a technology assists an individual in performing his/her portfolio of

tasks (Goodhue and Thompson, 1995). Chan et al. (1997) found that for various

reasons some companies were more successful at developing appropriate systems than

others, even though it was generally expected that most companies would employ the

kinds of systems that supported their strategy. Chan et al (1997) briefly indicated

resource constraints or internal company turbulence as possible reasons for such

differences. In a similar vein, CRM Systems - which typically happen to be expensive,

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sophisticated, and risky - are employed by many companies, but only some companies

are successful at developing and employing highly appropriate systems to support

their strategy and goal. Therefore we expect that greater “fit” between CRM Process

and CRM Systems to lead to better performance than CRM Systems alone. This is

because highly featured and expensive CRM systems are by themselves are not

guarantee that they would be used effectively to generate profits or desirable outcomes.

The concept of “fit” has been used differently by different researchers (Joyce,

Slocum Jr., and Glimowet 1982), and six unique perspectives on fit in the strategy

literature have been identified and summarized well by Venkatraman (1989). The six

perspectives are fit as moderation, as mediation, as matching, as gestalts, as profile

deviation, and as covariation. Brief summaries of the six perspectives are provided in

Table 2.

CRM Fit can be viewed as the “fit as moderation” in this model. The fit as

moderation refers to the impact that a predictor variable (CRM Process) has on a

variable criterion (CRM Performance), which is dependent on the level of a third

variable (CRM Systems), termed the moderator (Venkatraman, 1989). One of the

limitations, however, of the fit as moderation is that it cannot separate the existence of

CRM Fit from the CRM Systems and CRM Process (Venkatraman, 1989).

Therefore, in this study, both CRM Process and CRM Systems are measured to

arrive at CRM Fit: the alignment between systems and processes, and how well the

information systems employing match the CRM Process.

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Table 2
Perspectives of Fit
Fit Description Example
Fit as A match between two theoretically The match between strategy
matching related variables is defined, without and structure enhances administrative
reference to a criterion variable efficiency
Fit as A pattern of covariation or internal The degree of internal consistency (fit)
covariation consistency among a set of underlying in resource allocations has a significant
theoretically related variables is defined, effect on performance
without reference to a criterion variable
Fit as Gestalts are defined in terms of the The nature of internal congruence (fit)
gestalts degree of internal coherence among a among a set of strategic variables
set of theoretical attributes, involving differs across high and low performing
many variables, but not specified firms
with reference to a criterion variable
Fit as The impact that a predictor variable has The interactive effects of strategy and
moderation on a criterion variable is dependent managerial characteristics
on the level of a third variable, termed have implications for performance
the moderator
Fit as A significant intervening mechanism Market share is a key intervening
mediation exists between a predictor and variable between strategy and
responses performance
Fit as A profile of theoretically related The degree of adherence to a specified
profile variables is specified and related to profile has a significant effect on
deviation a criterion variable performance
Source: Adapted from Yen catraman (1989)

3.1.2.1 CRM Process

Tasks in the TTF model are broadly defined as the actions performed by

individuals in turning inputs into outputs (Goodhue and Thompson, 1995). CRM

Process, however, can be defined differently at different levels such as functional, or

company wide level. For example, Goodhue, Wixom, and Watson (2002) introduced

three different levels of CRM technology structure based on the functionality -

Analytical, Collaborative, and Operational CRM.

This study, however, categorizes CRM Process based on relationship cycle

(Gamble, Stone, and Woodcock 1999). The stages of the relationship cycle are

Welcome/qualification program, Getting to know, Customer development, Problem

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management, and Win-back. Each stage in the cycle is summarized and described in

Table 3.

The cycle helps to capture customer-focused activities and relationship aspect that

are essential to CRM practice regardless of technologies.

Also, Bitner et al. (2000) argue that this kind of customer-oriented insight is

necessary in examining the CRM practice since it can help capture the opportunities

for customization, flexibility, service recovery, and spontaneous customer delight -

activities that have been identified as the main drivers of customer satisfaction, and

that can be delivered to the customers by the infusion of technology.

Reinartz, Krafft, and Hoyer (2004) took the customer-facing level to define CRM

Process in their study. They conceptualized CRM Process based on four distinct

factors: “(1) building and managing ongoing customer relationships delivers the

essence of the marketing concept (Webster 1992; Morgan and Hunt 1994), (2)

relationships evolve with distinct phases (Dwyer, Schurr and Oh 1987), (3) firms

interact with customers and manage relationships at each stage (Srivastava, Shervani

and Fahey 1998), and (4) the distribution of relationship value to the firm is not

homogenous (Mulhem 1999; Niraj, Gupta and Narasimhan 2001)”.

Dyche, (2002) argued that every successful CRM program entails a process

improvement and these CRM-related processes are all customer centric. Since

Reinartz, Krafft, and Hoyer (2004) developed CRM Process measure based on three

key phases - the initiation, maintenance and termination phases of a customer

relationship - their definition of CRM Process is appropriate for this study.

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Table 3
Relationship Cycle
stage Description Opportunity challenge
Welcome / Beginning of the relationship building Gains customer information It creates first professional
Qualification Understand what the customer might image in the customer's mind
program Providing initial benefit to customers be inclined to buy
What they can afford
How they want to be managed
Getting to Learning Promote higher value products/services Gradual customer education
Know for the same category of purchase or on the benefits of products
try and increase the frequency or Incentives
volume of purchases. (Up-selling)
customer Account management: Loyalty program and cross-selling Data driven contact activities:
Development Database and contact strategy (Difficult to the products, where short DB analysis aimed to identify
duration, intermittent or infrequent potential problems or
purchase patterns are inherent in the opportunities and route
product/services) information to the right
contact channel for action.
problem Complaint management Record the data of present and planned All complaints have to be
Manage- Good customers don't complain contacts, trace dates (when follow-up recorded.
ment without cause. Individual complaints action is needed), and feedback code Problem management has to
vary in severity. The severity depends that identifies future required actions. be designed to ensure that all
on whether it is justifiable, whether it activities or contacts remain
is the result of a previously on an action list until they
unresolved complaint, who actually have been solved.
makes it and the frequency with
which it is made.
winback Reactivating inactive customers Identifying customers who are Data on inactive customers
becoming inactive before they lapse. can be tested or revalidated
Reactivating customers who lapse through telemarketing.
some time ago.
Source: Adapted and summarized from Gamble, Stone, and Woodcock (1999)
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Following Reinartz, Krafft, and Hoyer (2004), for the purpose of this dissertation,

CRM Process is defined as “a systematic process to manage customer relationship

initiation, maintenance, and termination across all customer contact points in order to

maximize the value of the relationship portfolio.”

While the Fit between CRM Process and CRM Systems is expected to influence

CRM Performance, CRM Process is also expected to have positive effect on CRM

Performance. Even without computer systems, well-designed CRM Process will

improve the ability to recognize customers' value and allocate the resources

accordingly (Reinartz, Krafft, and Hoyer, 2004). Therefore it is expected that well

designed CRM Process will be positively associated with non-financial performance

(relative market-based performance such as market share, customer satisfaction) as

well as financial performance (relative financial performance such as sales growth,

stock price, and profitability).

HI: CRM Non-financial Performance is positively related to well designed CRM


Process.
HI a: CRM Non-financial Performance is positively related to well designed
Measurement Stage Process.
H lb: CRM Non-financial Performance is positively related to well designed
Initiation Stage Process.
H lc: CRM Non-financial Performance is positively related to well designed
Maintenance Stage Process.
H id: CRM Non-financial Performance is positively related to well designed
Termination Stage Process.
H2: CRM Financial Performance is positively related to well designed CRM
Process.
H2a: CRM Financial Performance is positively related to well designed
Measurement Stage Process.
H2b: CRM Financial Performance is positively related to well designed
Initiation Stage Process.
H2c: CRM Financial Performance is positively related to well designed
Maintenance Stage Process.
H2d: CRM Financial Performance is positively related to well designed
Termination Stage Process.

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3.1.2.2 CRM Systems

In the TTF model, technologies are viewed as tools for carrying out

organizational tasks (Goodhue and Thompson 1995). The tools can be computers

systems (hardware, software, and data) and user support services (training, help lines,

etc.).

CRM Systems as enablers of CRM have received much attention. Goodhue,

Wixom, and Watson (2002) identified the technical architecture of CRM as multiple

applications: performing analytical, operational, and collaborative functions. In the

CRM technical structure, on the analytical side, a data warehouse typically maintains

historical data that supports generic applications such as reporting, queries, online

analytical processing (OLAP), and data mining; as well as specific applications such

as campaign management, chum analysis, propensity scoring, and customer

profitability. On the operational and collaborative sides, data must be captured from

the inbound touch points, including the web, call centers, stores, and ATMs; as well as

outbound touch points such as email, direct mail, telemarketing, and mobile devices.

The unique requirements of CRM Systems have also been addressed by Dyche

(2002). She provides the possible requirements for CRM Systems for firms attempting

to choose such systems.

• Integration and connection requirements: The ability of the tool to


integrate into the company's unique technology infrastructure from a
hardware, software, and networking perspective.
• Processing and Performance requirements'. The ability to support and control
required operations
• Security requirements'. The ability to limit user access
• Reporting requirements'. The versatility to provide company and user
requested information.

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Usability requirements: Enabling end users to easily and intuitively accomplish
required tasks.
• Function - enabling features: The way in which the tool provides certain required functionality

• Performance requirements'. Laying out acceptable turnaround time for


CRM activities or reporting response time
• Availability requirements'. The acceptable level of system availability

These requirements can be grouped into four basic categories: Integration and

Connection, Functionality, Security, and Usability. Based on these four categories of

basic CRM technology requirements, CRM Systems can be investigated

comprehensively. The categories and the CRM technology requirements are

summarized in Table 4.

Table 4
CRM Systems Requirements and Categories

Category CRM Technology Description


Requirement
Integration and Integration and connection The ability of the tool to integrate into the
connection requirements company's unique technology infrastructure
requirement from a hardware, software, and networking
perspective.
Functionality Processing and The ability to support and control required
requirement Performance requirements operations
Function — enabling The way in which the tool provides certain
features required functionality
Reporting requirements The versatility to provide company and
user-requested information
Performance requirements Laying out acceptable turnaround time for CRM
activities or reporting response time
Availability requirements The acceptable level of system availability
Security Security requirements The ability to limit user access
requirement
Usability Usability requirements Enabling end users to easily and intuitively
requirement accomplish required tasks
Source: Author's research and Dyche (2002).

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Croteau and Li (2003) studied technology readiness of the organization as one of

the critical success factors of CRM. Technological readiness refers to “the level of

sophistication of information technology (IT) usage and IT management in an

organization” (Croteau and Li 2003; Iacovou, Benbasat, and Dexter 1995).

Sophisticated technology-ready organizations are (1) less likely to feel intimidated by

technology, (2) possess a superior corporate view of data as an integral part of overall

information management, (3) have access to the required technological resources

(Iacovou, Benbasat, and Dexter 1995).

Even though many studies have been conducted on CRM technologies, this

dissertation adopts and adapts the concept and method from a study by Chan et al.

(1997). Chan et al. (1997) developed a concept of strategic information systems

alignment - the fit between business strategic orientation and information systems

strategic orientation. Because this study also investigates “fit” between CRM Process

and CRM Systems - a and CRM Systems are more than technologies in TTF model -

Chan et al.'s approach is followed.

To measure the alignment or fit between business strategy and information

systems strategy, Chan et al. (1997) also measured business strategic orientation

(STROBE) and information systems strategic orientation (STROEPIS) as antecedents

of the alignment. They identified dimensions and specific items for STROBE, and

then developed matched items for STROEPIS, explicitly to parallel STROBE. That is,

a parallel STROEPIS item for each STROBE item was created to determine whether

the information systems supported that particular aspect of business strategic

orientation.

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In a similar vein, in this study, CRM Systems are referred to as information

systems that support CRM Process. CRM Systems are developed and matched to each

individual dimension of CRM Process - initiation, maintenance, and termination -to

determine the degree to which CRM Systems support CRM Process well.

3.1.3 Relationships among CRM Systems and Process, Fit, and Performance

TTF model posits that performance is dependent on the fit between three

constructs: technology characteristics, task requirements, and individual abilities. Item

emphasizes that it is not the technology in isolation that affects performance -

organizational characteristics also come into play (Goodhue, Klein, and March 2000).

Dyche (2002) highlights the importance of the fact that understanding the

requirements for CRM and making the business case for a comprehensive new

program both need to occur before choosing any CRM systems in order for the

technology to match the requirements.

In fact, there have been similar findings reported in CRM research. Even though

technology itself is well recognized as an important player in the CRM practice, the

direct effect of technology on CRM Performance has been found not significant

(Croteau and Li 2003; IDC, 2000). Croteau and Li (2003) found that the relationship

between technological readiness and CRM impact was not significant. Rather, the

indirect effect of technological readiness was found significant through the knowledge

management capabilities. IDC (2000) found that a large proportion of CRM

technology deployments do not perform up to expectations. Furthermore, TTF model

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studies showed that the fit has significant relationship with individual performance

(Goodhue, Klein, and March 2000). Therefore, CRM Fit, rather than technology itself,

is expected to affect CRM Performance.

Therefore the following relationships are expected:

H3: CRM Systems has a moderating effect on the relationship between CRM
Process and CRM Non-financial Performance
H3a: Measurement CRM Systems has a moderating effect on the relationship
between Measurement CRM Process and CRM Non-financial Performance
H3b: Initiation CRM Systems has a moderating effect on the relationship
between initiation CRM Process and CRM Non-financial Performance
H3c: Maintenance CRM Systems has a moderating effect on the relationship between
initiation CRM Process and CRM Non-financial Performance
H3d: Termination CRM Systems has a moderating effect on the relationship between
initiation CRM Process and CRM Non-financial Performance

H4: CRM Systems has a moderating effect on the relationship between CRM
Process and CRM Financial Performance
H4a: Measurement CRM Systems has a moderating effect on the relationship
between Measurement CRM Process and CRM Financial Performance
H4b: Initiation CRM Systems has a moderating effect on the relationship initiation
between CRM Process and CRM Financial Performance
H4c: Maintenance CRM Systems has a moderating effect on the relationship
between initiation CRM Process and CRM Financial Performance
H4d: Termination CRM Systems has a moderating effect on the relationship
between initiation CRM Process and CRM Financial Performance

3.1.4 Market Orientation

Market Orientation is included in the proposed model to inject aspects of

corporate culture that supports strong customer focus. The concept of market

orientation has been observed for long and extended by many researchers from Narver

and Slater (1990) to Nobel, Sinha, and Kumar (2002). Narver and Slater (1990)

viewed market orientation as consisting of three behavioral components (customer

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orientation, competitor orientation, and interfunctional coordination) and two decisions

criteria (a long-term focus and a profit focus). According to Narver and Slater (1990),

customer orientation is defined as “the sufficient understanding of one's target buyers

to be able to create superior value for them continuously” (Narver and Slater 1990,

p.21). Competitor orientation refers to the situation when “a seller understands the

short-term strengths and weaknesses and long-term capabilities and strategies of both

the key current and the key potential competitors” (Narver and Slater 1990, p.22).

Finally interfunctional coordination is viewed as “the coordinated utilization of

company resources in creating superior value for target customers” (Narver and Slater

1990, p.22).

Jaworski and Kohli (1993) also investigated the effect of market orientation.

They used the definition of Kohli and Jaworski (1990), which viewed a market

orientation as composed of three sets of activities: (1) organization-wide generation of

market intelligence pertaining to current and future customer needs, (2) dissemination

of the intelligence across departments, and (3) organization-wide responsiveness to it.

In their study, they found a strong relationship between market orientation and overall

business performance across the environmental contexts (Jaworski and Kohli 1993).

In this study, market orientation is treated as a cultural norm rather than process.

Li and Calantone (1998) argued that the measures of market orientation contain both

cultural and behavioral approaches, and these two aspects need to be distinguished.

Slater and Narver (1994) pointed out as an important research area understanding how

Features of the organization's culture and climate facilitate market oriented processes,

as well as determine whether they lead to superior learning outcomes. They argued

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that market orientation, as an organizational culture, provides strong norms for sharing

of information; However, it may not encourage a sufficient willingness to take risks.

Lytle, Horn and Mokwa (1998) studied organizational service orientation as a

dimension of an organization's overall climate. They defined an organizational

service-orientation as “an organization-wide embracement of a basic set of relatively

enduring organizational policies, practices and procedures intended to support and

reward service-giving behaviors that create and deliver service excellence” (p. 459).

They explained that it can be viewed as an organizational tendency or a natural

organizational preference for service excellence.

In this dissertation also, Market Orientation is viewed as a climate and as

consisting of customer orientation, competitor orientation, and interfunctional

coordination. In this study, customer orientation refers to the organizational preference

for understanding of one's target buyers to be able to create superior value for them

continuously. Competitor Orientation refers to organizational preference for

understanding the short-term strengths and weaknesses and long-term capabilities and

strategies of both the key current and the key potential competitors. Finally

interfunctional coordination is viewed as organizational preference for the coordinated

utilization of company resources in creating superior value for target customers.

Many researchers have studied the effect of market orientation on performance

and profitability. Quite a few studies have found support for the fundamental market

orientation and performance relationship (Pelham 2000; Narver, Jacobson, and Slater

1999) while several issues have been raised about the positive effect of market

orientation on performance. Some of the issues are about the fact that market

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orientation is not the only strategic orientation and there may be other critical factors

and strategic orientations that affect business performance (Noble, Sinha, and Kumar

2002).

It is generally recognized that successful organizations need to have a customer-

oriented business culture (Athanassopoulos, 2000; Deshpande, Farley and Webster,

1993). Based on the weight of prior research, market orientation is expected to

positively influence CRM Performance in the context of CRM practice.

Also, a strongly customer-oriented organization is expected to design its process

better, from the customer perspective, since the organizational culture forces its

members to understand customers. Along these lines, a strongly customer-oriented

organization will also set up clear goals and tasks for CRM. Therefore, the following

relationships are likely to prevail:

H5a: CRM Non-financial Performance is positively related to Market Orientation


H5b: CRM Financial Performance is positively related to Market Orientation
H5c: CRM Process is positively related to Market Orientation

3.1.5 Market Knowledge Competence

Market Knowledge Competence is defined as the processes that generate and

integrate market knowledge (Li and Calantone 1998). Market Knowledge Competence

is a close conceptual relative of Market Orientation. In this study, however, Market

Knowledge Competence is treated and measured distinctly from Market Orientation in

that Market Orientation is viewed as atmosphere and cultural norm while Market

Knowledge Competence is viewed as current activities and systematic process. Slater

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and Narver (1994) argued that market orientation, as an organizational culture,

provides strong norms for sharing of information; however, it may not encourage a

sufficient willingness to take risks. Hamel and Prahalad (1994) also argued that market

orientation, in a narrow sense, could limit a company's focus to only the currently

expressed needs of customers. Especially in the highly technology dependent

environments, market knowledge competence is critical.

Market knowledge competence is composed of three processes: (1) a customer

knowledge competence (2) competitor knowledge process, and (3) the Marketing-

Research and Development (R&D) interface.

According to Li and Calantone (1998), a customer knowledge process refers to

the set of behavioral activities that generates knowledge relevant to customers'

current and potential needs for new products or services. A competitor's knowledge

process involves the set of behavioral activities that generates knowledge about

competitors' products and strategies. The Marketing-R&D interface refers to the

process in which marketing and R&D functions communicate and cooperate with each

other.

They viewed a customer knowledge process as consisting of three sequential

aspects: customer information acquisition, interpretation, and integration. customer

data can be collected through various ways, and such data needs to be interpreted and

examined. The analyzed information can then be integrated into a new product design

by matching product attributes with needs (Li and Calantone 1998).

In this study, market knowledge competence is therefore examined as a

systematic process of the organization since CRM is not a single project but a

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continuing process of improving the customer-facing interfaces of the organization. Item

It is argued that the success of knowledge organizations depends largely on how

effectively and efficiently they can perform the knowledge processes. They are the

ongoing processes of gathering information and knowledge, integrating that into

existing organizational knowledge, sharing and leveraging it, and applying it to create

value for customers (Dawson 2000). Dawson (2000) noted that effective real-time

development and implementation of strategy relies heavily on the organization's

knowledge capabilities. Also it has been argued that a customer knowledge process

enhances new product advantage or services because it enables a firm to detect and

explore innovation opportunities in the market as well as to reduce potential risks of

mis-fitting buyer needs (Day and Wensley, 1988; Li and Calantone, 1998). Cooper

(1992) observed that the process would be able to determine product performance

requirements, and therefore, it either confirms or refutes whether proposed product or

service features are indeed increasing benefits and value to customers.

Especially in the Internet era, the systematic process of knowledge generation is

essential. Rust and Lemon (2001) noted that the Internet allows the interchange of

information. Ideally, with Internet it is possible to create an “interactive information

service”, with consumer wants and needs flowing in one direction, and highly

customized information flowing in the other direction. They noted that if the Internet

is used only as catalog or as new advertising medium, then the organization does not

take full advantage of the Internet. Therefore, the customer knowledge process is

expected to improve new product design as well as management of existing

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product/service. In line with this notion, in this dissertation Market Knowledge

Competence is expected to be positively associated with CRM success.

If an organization has well-established market knowledge generation process, the

organization will be able to establish clear goals and tasks of CRM. Similarly,

Sophisticated CRM Systems will enhance the Market Knowledge Competence since

the CRM Systems are focused on helping customers and at the same time, the data

from the customers can be managed well through CRM Systems. Therefore, the

following relationships are likely to be found:

H6a: CRM Non-financial performance is positively related to Market Knowledge


Competence
H6b: CRM financial performance is positively related to Market Knowledge
Competence
H6c: CRM process is positively related to Market Knowledge Competence

3.2 Conceptual Framework - Customers' Perspective

In order to examine the CRM practice from customers' perspective, the research

model proposed for managers' perspective should be modified somewhat. This section

presents the modified research model for customers' perspective and matched

hypotheses. Figure 3 below shows the modified model, from customers' perspective.

This model has same structure as business' model in that it has (1) CRM Fit

including CRM Process and CRM Systems, (2) CRM Performance in terms of

customers' perceived level of Satisfaction, Commitment, and Loyalty, and (3)

Customer Orientation and Customer Knowledge Competence.

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The differences, however, are stages included in CRM Process, performance

variables, and the paths between the variables. In this customer model, CRM Fit, CRM

Process and CRM Systems remain the same as in managers' model except for the fact that

Termination stage of CRM Process is separated from CRM Process in this model.

Termination stage does not represent business's effort to enhance mutual benefit.

Rather termination of relationship is managerial aspect of CRM to enhance profit.

Therefore this termination stage should be included in managers' model for CRM

while it is not something that customers would seek voluntarily unless they very

unhappy with the relationship.

CRM Fit: Initiation,


T erm in ati-
Maintenance
on

CRM Systems Satisfaction

Loyalty

CRM Process Commitment

customer customer
orientation* knowledee*

Figure 3. Revised Model - Customers' perspective


*
Among the three dimensions of Market Orientation and Market Knowledge Competence, only one dimension per each was used.

Both Market Orientation and Market Knowledge Competence consist of three

dimensions. The three dimensions for Market Orientation are Customer Orientation,

Competitor Orientation, and Interfunctional Coordination; and for Market Knowledge

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Competence these are Customer Knowledge Process, Competitor Knowledge Process,

and R&D Interface. In the customer model, among these dimensions, only Customer

Orientation and Customer Knowledge Process are included for Market Orientation and

Market Knowledge Competence respectively because customers would not know

about Competitor Orientation or Internal Business Operations.

CRM Performance, the managerial construct, is replaced with customer-oriented

constructs of Satisfaction, Commitment, and Loyalty. CRM is a core business

strategy to deliver value to targeted customers to improve customer satisfaction and

customer retention at a profit (Ang and Buttle, 2002). Since the basic goal of CRM is

to improve customer satisfaction and retention, Loyalty, Satisfaction, and

Commitment are included as customers' aspects of CRM Performance.

3.2.1 CRM Performance - Satisfaction, Commitment, and Loyalty

In CRM Performance - in the customers' model - Satisfaction, Loyalty and

Commitment are included to correspond to managers' model variables like market-

based performance (such as customer satisfaction), market share as well as financial

performance. Satisfaction and Commitment are viewed as not only the result of

interaction with the businesses over time (Anderson, Fomell and Lehmann 1994;

Crosby, Evans and Cowles 1990) but also as core variables in relationship quality

(Hennig-Thrau, Gwinner, and Gremler 2002).

Oliver (1997) defined satisfaction as pleasurable fulfillment. Consumers find

consumption pleasurable when consumption fulfills their needs, desires, and goals.

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While this perspective on satisfaction appears to be transaction-specific, recent

research has focused more on satisfaction as relationship-specific (Shankar, Smith,

and Rangaswamy 2000). Storbacka, Strandvik, and Gronroos(1994) defined

satisfaction as “customers' cognitive and affective evaluation based on their personal

experience across all service episodes within the relationships” (p.25). Satisfaction is

viewed as the cumulative effect of a set of discrete transactions over a period of time

(Bitner and Hubbert 1994; Oliver 1997). Frequent or cumulative satisfaction is

required to induce loyalty (Oliver 1999).

As another core variable of relationship quality, commitment has been recognized

(Roberts, Varki, and Brodie, 2003; Hennig-Thrau, Gwinner, and Gremler 2002).

Commitment is defined as “an enduring desire to maintain a valued relationship”

(Moorman, Zaltman, and Deshpande 1992, p.316). Commitment is found to be an

indicator of service relationships since relationships are built upon the foundation of

mutual commitment (Berry and Parasuraman 1991). In this study, Commitment is

viewed from affective and cognitive aspects and measured as importance of the

relationship and degree to which the person is committed to the relationship.

The importance of loyal customers to the business has been well recognized

because loyal customers usually spend more, buy more frequently, have greater

motivation to search for information about the brand or the store that the customers are

loyal to, are more resistant to counter persuasion, are more likely to be involved in

positive word-of-mouth, and are more tolerant of businesses' temporary failures (Dick

and Basu 1994). Even though loyalty continues to be defined in some circles as repeat

purchasing frequency, more and more researchers are defining loyalty as a construct

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consisting of both behavioral and cognitive components (Dick and Basu 1994; Oliver

1999; Lim and Razzaque 1997). The attitudinal component includes consumers'

preference attitude, and purchase intention (Dick and Basu 1994) or the commitment

to rebuy or repatronize a preferred product/service consistently in the future (Oliver

1999). In this study, Loyalty is measured as degree of perceived strength of

relationship and recommendation behavior.

3.2.1.1 Relationships between Loyalty, Commitment and Satisfaction

Most prior research has reported that satisfaction has a positive effect on customer

loyalty (Bloemer and Ruyter, 1998; Rust and Zahorik 1993; Szymanski and Henard,

2001). The relationships between satisfaction and store loyalty (Bloemer and Ruyter,

1998), and customer satisfaction and store loyalty via repurchase intentions (Baker-

Prewitt and Sivadas 2000) are found to be significant. Gronholdt, Martensen and

Kristersen (2000); in particular, there are significant customer satisfaction-customer

loyalty relationships at the organizational level.

Also, a high level of satisfaction leads the customers to create commitment-

inducing emotional bonds via repeated positive reinforcement (Hennig-Thurau,

Gwinner, and Gremler 2002). Since satisfaction is pleasurable fulfillment (Oliver

1997), it is related to the fulfillment of social needs and this repeated fulfillment is

likely to increase emotional bonds (Hennig-Thurau and Klee 1997). Commitment is

also found to influence loyalty positively (Pritchard, Havitz, and Howard 1999).

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One study, however, found different effects of satisfaction and commitment based

on customers' relational level (Garbarino and Johnson 1999). hi this study, infrequent

Individual theater ticket buyers are viewed as low relational customers while

consistent subscribers are seen as high relational customers. Overall satisfaction was

found to lead to commitment for low relational customers. For high relational

customers, commitment - rather than satisfaction - is the mediator between attitudes

and future intentions to buy. As such, it is expected that for people who already have

membership accounts such as frequent flyer (mileage) programs or frequent user

reward programs, commitment would lead to satisfaction level while satisfaction

would influence commitment for those who do not have membership status.

Therefore, it is expected:

He la: Loyalty is positively related to Customer Satisfaction.


Hclbmembei-: Commitment is positively related to Satisfaction
He 1 bnonmember• Satisfaction is positively related to Commitment
Hclc: Loyalty is positively related to Commitment

3.2.2 CRM Fit, Process, and Systems

3.2.2.1. CRM Process and CRM Performance

From managers' perspective, CRM Process was identified to have three stages -

initiation (gain, regain the relationship with customers), maintenance of the

relationship, and termination of the relationship (Reinartz, Krafft, and Hoyer, 2004).

From the customers' aspect, the process can be applied similarly. For example, in the

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initiation stage, a business attempts to attract prospects with different offers while

customers receive the offers from the business. Likewise, a business attempts to up-

sell and cross-sell their product or service during the maintenance stage while

customers will have the customized individualized offers related to their previous

purchase of service. Therefore, CRM Process is still viewed as a systematic process to

manage customer relationship initiation and maintenance across all customer contact

points in order to maximize the value of the relationship portfolio (Reinartz, Krafft,

and Hoyer 2004).

The termination stage, however, should be examined separately from this CRM

Process from the customers' perspective. Termination represents organizational

control for enhancing profit rather than a business operation for mutually beneficial

relationship. Therefore, termination stage is included as a separate variable in the

model for additional understanding. Therefore, CRM Process here contains three

stages which are gain and regain in initiation, and maintenance.

As in the managers' model, well-designed CRM Process will improve the ability

to recognize customers' value (Reinartz, Krafft, and Hoyer, 2004). It is expected that

well-designed Regain Stage Process will lead to customers' Satisfaction and

Commitment by offering individualized attractive deals to customers. Similarly, well-

designed maintenance stage is also expected to influence Satisfaction and

Commitment by providing individualized special services. Customizing offers to

individual customer preferences have been seen as a key component of CRM (Freeland

2003; lemon, White, and Winer 2002; Winer 2001).

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The Gain stage is geared toward potential customers or prospects. Most potential

customers become customers for the firm through general attraction instead of

individualized special offers. Therefore the effect of gaining stage is expected to be

limited.

Therefore we expect:

Hc2a: Commitment is positively related to well designed Gain Stage Process.


Hc2b: Satisfaction is positively related to well designed Gain Stage Process.

Hc2c: Commitment is positively related to well designed Regain Stage Process.


Hc2d: Satisfaction is positively related to well designed Regain Stage Process.

Hc2e: Commitment is positively related to well designed Maintain Stage Process.


Hc2f: Satisfaction is positively related to well designed Maintain Stage Process.

In addition, Terminate Stage is expected to have a negative effect on commitment

and satisfaction. Even though customers know that they are not profitable customers

for the business, it is plausible that customers would want to be treated like a king if

they are buyers no matter how often they buy. The Terminate Stage is about reduction

of services or increasing service fees to terminate the relationship. Therefore,

Hc2g: Commitment is negatively related to well designed Terminate Stage Process.


Hc2h: Satisfaction is negatively related to well designed Terminate Stage Process.

3.2.2.2. CRM Systems, Fit and CRM Performance

CRM Systems usage for CRM Process was mostly an internal management issue.

For communication and interaction between the businesses and customers, the Internet

you have been used. For customers, the technology exposed in contact points would be

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the Internet including emails and web pages. Therefore, for initiation and maintenance

stages in customers' perspective, CRM Systems are viewed in a limited way - a tool

to interact with customers. The degree to which the Internet (website and emailing)

supports the communication and interaction needed during the stages will be examined

as CRM Systems. As a tool of CRM Process, CRM Systems can enhance the effect of

CRM Process by providing better ways of interaction and communication with

customers.

Therefore it is expected:

Hc3: CRM Systems have a moderating effect on the relationship between CRM process
and CRM Performance.

Hc3a: CRM Systems in gain stage has a moderating effect on the relationship
between gain stage process and commitment
Hc3b: CRM Systems in gain stage has a moderating effect on the relationship
between gain stage process and satisfaction

Hc3c: CRM Systems in regain stage has a moderating effect on the relationship between
regain stage process and commitment
Hc3d: CRM Systems in regain stage has a moderating effect on the relationship
between gain stage process and satisfaction

Hc3e: CRM Systems in maintain stage has a moderating effect on the relationship between
maintain stage process and commitment
Hc3f: CRM Systems in maintain stage has a moderating effect on the relationship between
maintain stage process and satisfaction

3.2.3 Customer Orientation & Customer Knowledge Competence

Market Knowledge Competence and Market Orientation have three dimensions.

Among these, Customer Knowledge Competence and Customer Orientation can be

examined by customers at the contact points even though they are managerial issues.

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Therefore, the modified customer model included Customer Orientation as an

atmosphere or organizational culture that customers perceive, and Customer

Knowledge Competence that customers evaluate.

In this model, Customer Orientation is viewed as customers' perception of the

firm's atmosphere and culture to understand customers' needs while Customer

Knowledge Competence is viewed as customers' perception of firm's knowledge

about customers.

In the manager's model, Customer Orientation and Customer Knowledge

Competence are expected to influence CRM Process and CRM Performance positively.

Customer Orientation, because culturally salespeople tend to practice and show the

marketing concept by helping their customers, will satisfy the customers' needs (Saxe

and Weitz 1982; Siguaw, Brown, and Widing 1994). As such, if customers perceive

that employees try to understand and help the customers, it is expected to lead to

customer Satisfaction and Commitment. Also, it is also possible that customers would

be more committed if customers perceive that the firm tries to learn about them to

improve the service. It is postulated that Customer Knowledge Competence would

have positive effect on Commitment. However, due to the privacy issues, the effect is

not expected to be strong.

Hc4a: Satisfaction is positively related to Customer Orientation


Hc4b: Commitment is positively related to Customer Orientation

Hc5: Commitment is positively related to Customer Knowledge Process

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3.2.4 Additional Study: Relational Benefit Mediating Model

In this section, the relational-benefit mediating model is introduced. The two

popular approaches in relationship marketing are relational benefit approach and

relationship quality approach (Hennig-Thurau, Gwinner, and Gremler 2002). Gamble,

Stone, and Woodcock (1999) noted in their definition of CRM that building

relationships with customers is based on mutual benefit. The relational benefits are

those perceived by customers. Therefore, it is expected that via CRM practice, a firm

will create relational benefits for customers to build and strengthen the relationship.

Therefore, Relational Benefits are included as mediating variables in this rival model

to explain the relationship between CRM Process and Performance in customers'

perspective. Figure 4 shows this mediating model.

CRM Fit: Initiation, Relational Benefits T erm in ate


Maintenance

B: special treat
CRM Systems Satisfaction

B: confidence
Commitment

B: social my
CRM Process

Loyalty
C. orientation

C. knowledge

Figure 4. Additional Mediating Model - Relational Benefit

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Relational benefits are referred to “benefits that customers likely receive as a

result of having cultivated a long-term relationship with a service provider including

confidence benefits, social benefits, and special treatment benefits” (Gwinner,

Gremler, and Bitner, 1998). According to Gwinner, Gremler, and Bitner (1998)'s

study, confidence benefits refer to customers' “perceptions of reduced anxiety and

comfort in knowing what to expect in the service encounter”, social benefits “pertain

to the emotional part of the relationship and are characterized by personal recognition

of customers by employees, the customer's own familiarity with employees, and the

creation of friendships between customers and employees”, and special treatment

benefits “take the form of relational consumers receiving price breaks, faster service,

or individualized additional services” (p. 104).

Parasuraman, Berry, and Zeithaml (1991) mentioned that customers commonly

desire personalized and close relationships with service providers., Customers value

the benefits of maintaining the relationship (Zeithaml, Berry, and Parasuraman, 1996).

CRM Process is a firm's effort to manage the initiation and maintenance of

relationship, but - if customers do not find any relational benefit from the firm's effort

- then the customers would not be satisfied or committed to the relationship. Foreman

(2002) even argued that customers are no longer loyal and that customers are never

satisfied. According to the study, it is not a customer but a company that wants a

relationship. All the customers want are information, reward for the patronage, and

control of the selling process.

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Also, since relational benefits refer to benefits that customers likely receive as a

result of having cultivated a long-term relationship with a service provider (Gwinner,

Gremler, and Bitner, 1998), a mediating effect of relational benefit is expected.

Therefore, initiation stage and maintain stage of CRM Process are expected to

create relational benefit. On the other hand, termination stage is not expected to be

related to the benefits. Rather it is expected to have negative relationship with

Commitment and Satisfaction, because it deals with a firm's evaluation of customers

and “firing” of non-profitable customers.

Also, the benefits have been found to be significantly related to Satisfaction and

Commitment (Hennig-Thurau, Gwinner, and Gremler 2002). Hennig-Thurau, Gwinner,

and Gremler (2002) found that: Confidence Benefits were significantly related to

Satisfaction, Special Treatment Benefits were significantly related to Commitment,

and Social Benefits also significantly influenced Commitment and customer Loyalty.

Therefore we expect:

Hadditionaila: Social Benefit is positively related to well designed Gain Stage


process
Hadditionailb: Special Treatment Benefit is positively related to well designed Gain
Stage Process
Hadditionailc: Confidence Benefit is positively related to well designed Gain Stage
process

H ad d itio na i2 a : Social Benefit is positively related to well designed Regain Stage


process
H additionai 2 b : Special Treatment Benefit is positively related to well designed
Regain Stage Process
H ad d itio na i2 c : Confidence Benefit is positively related to well designed Regain
Stage Process

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H ad d itio na i3 a : Social Benefit is positively related to well designed Maintain Stage


process
H ad d itio na i3 b : Special Treatment Benefit is positively related to well designed
Maintain Stage Process
H ad d itio na i3 c : Confidence Benefit is positively related to well designed Maintain
Stage Process

H ad d itio na i4 a : CRM systems in Gain Stage has a moderating effect on


the relationship between Gain Stage Process and Social Benefit
H ad d itio na i4 a : CRM systems in Gain Stage has a moderating effect on the
relationship between Gain Stage Process and Special Treatment Benefit
H ad d itio na i4 a : CRM systems in Gain Stage has a moderating effect on
the relationship between Gain Stage Process and Confidence Benefit

H ad d itio na i5 a : CRM systems in Regain Stage has a moderating effect on


the relationship between Regain Stage Process and Social Benefit
H ad d itio na i5 b : CRM systems in Regain Stage has a moderating effect on the
relationship between Regain Stage Process and Special Treatment Benefit
H ad d itio na i5 c : CRM systems in Regain Stage has a moderating effect on the
relationship between Regain Stage Process and Confidence Benefit

H ad d itio na i6 a : CRM systems in Maintain Stage has a moderating effect on the


relationship between Maintain Stage Process and Social Benefit
H ad d itio na i6 b : CRM systems in Maintain Stage has a moderating effect on the
relationship between Maintain Stage Process and Special Treatment
Benefit
H ad d itio na i6 c : CRM systems in Maintain Stage has a moderating effect on the
relationship between Maintain Stage Process and Confidence Benefit

H ad d itio na i7 a : Commitment is positively related to Social Benefit


H ad d itio na i7 b : Commitment is positively related to Special Treatment Benefit
H ad d itio na i7 c : Commitment is positively related to Confidence Benefit

H ad d itio na i8 a : Satisfaction is positively related to Social Benefit


H ad d itio na i8 b : Satisfaction is positively related to Special Treatment Benefit
H ad d itio na i8 c : Satisfaction is positively related to Confidence Benefit

In the remaining chapters of the dissertation, empirical research efforts

undertaken to test the CRM models from managers' and customers' perspectives are

described, analyzes of data are presented, and discussions and implications are offered.

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CHAPTER 4

RESEARCH METHODOLOGY

In this chapter, two studies are presented to test the two conceptual models:

managers' perspectives and customers' perspectives of CRM. In the section on

customers' model, an additional relational-benefit mediating model is included.

These models are tested in the context of the hotel industry. Study 1 examines the

research model from the managers' perspectives using responses from hotel managers.

Study 2 examines the modified model based on customers' perspectives of CRM with

hotel customer data. Details are addressed in following sections.

The structure of this chapter is as follows: first, section 4.1 addresses the hotel

industry that this thesis is focused on; second, in section 4.2, Study 1 is introduced and

study 2 follows in section 4.3. Each study addresses the measures, data collection, and

analysis to test the research models proposed in chapter 3.

4.1 Hotel Industry

Even though the proposed models can be applied across industries, this study is

focused on one hotel industry to control possible covariates in model testing. Also,

hotel industry is one of the industries that is better suited for CRM than others (Lin

and Su 2003). Bose (2002) made reference to a recent issue of Harvard Management

Update (2000), which identifies companies that are most likely to benefit from CRM.

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Those companies appear to be information-intensive. Most likely to benefit from

CRM are those who “accumulate lots of data on each customer's buying patterns in

the course of their business” (Bose 2002, p.95). Crosby, Evans, and Cowles (1990)

argued that for some services, effective “relationship selling” is critical, and explained

that this is the case when (1) the service is complex, customized, and delivered over a

continuous stream of transactions, (2) many buyers are relatively unsophisticated

about the service, (3) the environment is dynamic and uncertain in ways that affect

future needs (demand) and offerings (supply). Given such criteria, the hotel industry

can be seen as one of the industries that can take advantage of CRM. Therefore this

study focuses on the hotel industry.

4.2 Study 1 - Managers' Perspective

Study 1 was conducted to test the proposed research model of managers'

perspective in a hotel industry. Measures were adapted and adopted from existing

literature, and reliabilities of those items were examined.

4.2.1 Subjects and Data collection

The unit of analysis in this study is the Strategic Business Units (SBU). By its

definition (Aaker, 1988), each SBU has a defined business strategy and a manager

with sales and profit responsibility. Therefore, each unit has separate strategies for

managing the customers. Since this study is targeting the hotel industry, hotel

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managers were asked to participate in the online survey. Each separate hotel is

considered one SBU because each specific operation and implementation of CRM can

vary under different situational factors. Of course, it is recognized that strategy of a

hotel chain may influence the operation of individual hotels under the chain. The name

of hotel chain to which each hotel belongs was asked to assess the possible effect of

the hotel chain. Respondents were marketing/sales managers, general managers, or

director of Marketing/Sales of hotels because the survey questions require certain level

of knowledge of CRM practice.

The data collected sought one response per hotel. Kumar, Stem, and Anderson

(1993) introduced one hybrid approach to deal with multiple informants. They

suggested assessment of informant competence and using multiple informant reports.

Considerable disagreement between the reports of the multiple informants was

observed. Kumar, Stem, and Anderson (1993) suggested that in the disagreement,

those items could be pooled when there is acceptable agreement and consensus should

be required only when differences were substantial. Given this, responses from each

hotel were asked at the beginning of the data collection, but because of low response

rate, single key informant had to be asked on in this study in order to increase the sample

size (Hibbard, Kumar, and Stem, 2001).

The methods for recruitment were (1) obtaining a list of managers from Rhode

Island Hotel Association, (2) to make a phone call to prompt the responses, and (3) to

send an email with the URL of online survey. Also, various national or international

associations established by tourism and hospitality industries (eg, American Hotel

and Lodging Association) were contacted to put the invitation for online survey in

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their online newsletters and share it with the association members. To enhance the

completion rate of the web-based survey, pre-contacts via telephone and email ware

attempted. Follow-up reminders based on email.

Data collection for the pretest was conducted from June - October 2004 using

MBA student respondents at the University of Rhode Island. The MBA students were

asked to take the survey and to provide some comments on them. Fifteen responses

were collected, and the questions in the survey were revised based on their comments.

With the revised survey items, data were collected from hotel managers from

November 2004 to June 2005. Nearly 700 email invitations were sent to individual

managers and hotels, and also the requests to hotel associations were sent. Among

them, 394 were viewed, 266 started the survey, but only 78 completed the survey. Este

yielded 29.32% rate of complete/started, and 19.8% rate of complete/viewed.

To clean the data, descriptive and frequency analyzes were conducted despite

the fact that the data were collected via online survey which means there is no coding

mistake. Many missing answers were found in half of the responses, which lead to a

usable data set of 34 fully completed responses.

Lastly, skewness and kurtosis were checked. Skewness value for all variables

were within -1.704 and +1.905 except for one item of market orientation (-2.571).

Kurtosis values ranged from -1.647 to 2.343 for the most point. There were three

items with the values of 3.407, 3.297, and 8.989. Generally it is suggested that

skewness is extreme if absolute value of skewness is more than 3.0 while kurtosis is

considered extreme if it is from 8.0 to 20.0 (Chou and Bentler 1995; West, Finch, and

Curran 1995). According to West, Finch, and Curran (1995), greater than 10 absolute

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value of kurtosis is viewed as problematic and great absolute value of kurtosis than

20.0 is viewed as serious. Given these recommendations, no further treatment was

applied to the data.

4.2.2 Measurements

Most questions in the structured survey employed a Likert scale ranging from 1 to

7 with an additional “not applicable” option. Measures were adopted and adapted

from existing literature. Table 5 shows the literature used for measurement items. Ace

shown in following sections, reliabilities of all the measures were over 0.7, the

recommended minimum for exploratory studies (Nunnally 1978).

Table 5
Source of Measurements

Construct Studies - Source of Measures Theoretical Basis


CRMFit Chan et al. (1997) - Moderating variable TTF Model
between CRM Systems and Tasks Alignment
CRM Process Reinartz et al. (2004)
CRM Systems Chanetal. (1997)
Market Orientation Narver and Slater (1990) Market Orientation
Lytle, Horn and Mokwa (1998) Service Orientation
Homburg, Hoyer, and Fassnacht (2002)
Market Knowledge Li and Calantone (1998) Market Knowledge
Competence Competence
Performance Homburg, Hoyer, and Fassnacht, (2002) Relative Non-fmancial
Homburg, Hoyer, and Fassnacht, (2002) Performance
Jaworski and Kohli, (1993) Finance Performance

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4.2.2.1 Market Orientation and Market Knowledge Competence

Market Knowledge Competence (MKC) was measured with the items from Li

and Calantone's study (1998). Customer knowledge process was measured by eight

items on seven-point semantic differential scale. The coefficient Alpha reported for

Customer Knowledge Process in the original study was .94. Marketing/R&D Interface

was measured using an eight-item scale (a=.95), while Competitor Knowledge

Process was measured using a five-item scale (ce=.95).

Market Orientation (MO) was measured by using items based on the studies of

Narver and Slater (1990), Homburg, Hoyer, and Fassnacht (2002), and Lytle, Horn,

and Mokwa (1998). Some items of Narver and Slater's (1990), however, were

excluded since some of their measures contain strong process-oriented aspects. The

Items included in the study were modified to assess market orientation as a climate.

Starting with the definition of MO and MKC, the measures for both variables

were investigated. Table 6 shows the definition of market orientation and market

knowledge competence.

To distinguish the effect of cultural norm from process, measures for the Market

Knowledge Competence were compared in exploratory factor analysis. In all 18 items

(9 for market orientation and 9 for market knowledge competence) were examined and

Because of reliability and factor loadings, eight items were retained. All the items for

the three dimensions of market orientation and market knowledge competence were

included in totality without distinguishing the dimensions because the number of

variables in the analysis had to be collapsed due to small sample size.

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Table 6
Definitions of Market Orientation and Market Knowledge Competence
Variable Dimension Definition
market customer Employee's perception of organizational preference for the
Orientation Orientation sufficient understanding of one's target buyers to be able
to create superior value for them
Competitor continuously Employee's perception of organizational
Orientation preference for understanding the short-term strengths and
weaknesses and long-term capabilities and strategies of
both the key current and the key
Interfimctional potential competitors Employee's perception of
Cooperation organizational preference for the coordinated utilization
of company resources in creating
market customer superior value for target customers The set of behavioral
Knowledge Knowledge activities that generates knowledge pertaining to customers'
Competence process current and potential needs for new products or services.
Competitor The set of behavioral activities that generates knowledge
Knowledge about competitors' products and strategies
process
R&D - The process in which marketing and R&D functions
marketing communicate and cooperate with each other
process

The 8 items loaded on each of two variables, 4 items per each (factor loadings are

reported in the Appendix). Table 7 shows the items and alpha scores.

Table 7
Reliability for MKC and MO

Variable Items
Alpha
market We systematically process and analyze customer information .7912
Knowledge Customer information is fully integrated in our services
Competence We systematically analyze information about competitors
Marketing and R&D fully cooperate in evaluating and refining new
products and services
market Managers give personal input and leadership into understanding .8749
Orientation customer needs
Management constantly communicates the importance of responding
rapidly to competitors' actions
Management provides excellent incentives and rewards at all levels
for responding well to inter-functional customer calls
Management provides excellent incentives and rewards at all levels
for information shared across functions, not just productivity

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The reliability of the items was checked with Cronbach alpha. ForMarket

Knowledge Competence Cronbach alpha was .7912, and for market orientation it

was .8749.

4.2.2.2 Performance Measurement

Performance was measured with the items from the studies of Li and Calantone

(1998), Homburg, Hoyer, and Fassnacht (2002), and Jaworski and Kohli (1993). In the

Homburg, Hoyer, and Fassnacht (2002)'s study, performance items were scored on a

five-point Likert scale with anchors l “much worse” and 5=“much better” than

competitors («= 0.87). In this study, the measures include subjective non-financial

(market-based) measures and subjective financial performance measures. Table 8

indicates the result of reliability.

Table 8
Reliability for performance
Variables Items Alpha
RELATIVE TO COMPETITORS, over the last three business years, how it does
your business unit perform concerning the following statements?
Relative non- Achieving customer satisfaction .8257
financial Attaining desired market share
performance Attaining desired growth
Market Share
Relative non- Sales growth .7946
market based Profitability
performance Stock Price

Perceptions of market-based (non-financial) and financial performances were

assessed using this sentence: “RELATIVE TO COMPETITORS, over the last three

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business years, how does your business unit perform concerning the following

statements?” The reliability was .8257 for non-fmancial performance and .7946 for

financial performance.

4.2.2.3 CRM Fit Measures - CRM Process and CRM Systems

CRM Process measures were adopted and adapted from Reinartz et al. (2003).

Measure stage, Gain stage, Maintain stage, and Termination stage were included in

CRM Process, and measures for CRM Systems were matched to CRM Process

following Chan et al's study (1997), categorized as four different stages: Measurement,

Gain, Maintenance, and Termination. Fit measures were calculated by multiplying the

two variables and the product was used as moderating variable in the model test.

The reliabilities of the measurement items were tested and several items (one

from retain stage and one item per each stage information systems measure) were

excluded to increase the reliability. As a result, the reliabilities were .7447 for

measurement process, .7078 for gain process, .7870 for maintenance process,

and .7102 for terminate process. The reliabilities of items for CRM Systems were also

all over .7. Table 9 and 10 shows the reliabilities for CRM Process and CRM Systems.

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Table 9
Reliability for CRM Process
Variable Items Alpha
Measurement We have a formal system for identifying potential customers .7447
We have a systematic process for assessing the value of past
customers with whom we no longer have a relationship
We have a formal system for identifying non-profitable or lower value
customers
Gain We have a formal system in place that differentiates targeting of .7078
our communications based on the prospects value
We systematically present different offers to prospects based on
their value
We have a systematic process for re-establishing a relationship
with valued inactive customers
We have developed a system for interacting with inactive customers

Retain We systematically attempt to customize products/services based on .7870


(2,3,4) the value of the customer
We have formalized procedures for cross-selling to valuable customers
We have formalized procedures for up-selling to valuable customers

* We maintain an interactive two-way communication with our


customers
Terminate We have a formal policy or procedure for actively discontinuing .7102
relationships with low value or problem customers (eg canceling
customer accounts)
We try to passively discontinue relationships with low value or problem
customers (eg raising basic service fees)
We offer disincentives to low-value customers for terminating their
relationships (eg offering poorer service).
* deleted item

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Table 10
Reliability for CRM Systems
Variable Items Alpha
ISM (2.3) INFORMATION SYSTEMS used bv the business unit help us: .7153
Identifying potential customers.
assess the value of past customers with whom we no longer have a
relationship.
identify non-profitable or lower value customers

* identifying potential customers

ISG (1,2,4) INFORMATION SYSTEMS used bv the business unit help us: .8732
differentiate targeting of our communications based on the prospects
value
systematically present different offers to prospects based on their value
interact with inactive customers

* re-establish a relationship with valuable inactive customers

ISRET(2,3,4) INFORMATION SYSTEMS used bv the business unit help us: .8236
customize products/services based on the value of the customer
in cross-selling to valuable customers
in up-selling to valuable customers

* maintain an interactive two-way communication with our customers

1ST (2,3) INFORMATION SYSTEMS used bv the business unit help us: .8205

Actively discontinue relationships with low value or problem customers


(eg canceling customer accounts)
passively discontinue relationships with low value or problem
customers (eg raising basic service fees)
offer disincentives to low-value customers, inducing them to terminate
their relationships (eg offering poorer service).

* deleted item

4.2.3 Analysis

Due to the small sample size of Study 1, only limited statistical analysis has been

conducted. By using SPSS, several multiple regression analyzes were conducted to

examine the direct effects of independent variables on dependent variables, instead of

Structural Equation Modeling.

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To examine the effect of CRM Fit (moderating effect), CRM Process and CRM

Systems were multiplied. The continuous independent variables and dependent

variables were mean-centered to reduce multicollinearity between the main and

interaction terms (Aiken and West 1991). Alternative suggests that standardization be

applied to all the variables if standardized solution is desired (Tabachnick and Fidell,

2003). By using z-scores of all variables including dependent variables, the current

standardized coefficients could be given as “unstandardized” regression coefficients in

the solution (Friedrich 1982).

Therefore, in this study, all variables were standardized and applied to multiple

regressions. The interaction variable was entered in the regression model after the

main effects were taken into account (Mohr, Fisher and Nevin, 1996). Also, Hair et al.

(1998) suggested that any moderating effect can be detected by first estimating the

original (unmoderated) equation and then estimating the moderated relationship if the

multicollinearity concerns. Following Hair et al. 's study, this study first estimates the

relationship without fit, and then estimates the relationship with the fit and examines

the change in the R , and also whether it is significant or not. Furthermore, to full

model with moderating variables was also examined since z-scores of variables were

used.

Therefore, two separate regression analyzes were conducted with each of the two

dependent variables (non-financial performance and financial performance). Multiple

items measures were created by averaging the scores and collapsed into single item

measures, and then standardized to deal with multicollinearity.

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4.3 Study 2 - Customers' Perspectives

Study 2 addresses customers' perspective on CRM practice in hotel industry. Este

section presents data collection, measurements and analysis for the customer study.

4.3.1 Data Collection

Like Study 1, data were collected using web-enabled surveys. Subjects for this

study 2 are hotel customers - business travelers and personal travelers. Since the

analysis was done using Structure Equation Modeling, at least 200 to 300 cases were

needed (Hair et al. 1998).

People who had stayed at a hotel within a year were invited to participate in the

survey. The questions were not about a specific hotel, but about a hotel chain which

responder had used most often within a year. This is because it is less likely that

people on the move would stay at the same exact hotel all the times, even when they

They are very satisfied and loyal. Rather, it would be much more likely that they would find

a hotel under the same hotel chain.

The online survey was viewed by 447 people. Among them, 361 started the

survey. Only 239, however, completed the survey. Completion/view rate was 53.47%,

while completion/start rate was 66.2%. To clean the data, descriptive and frequency

analysis were conducted and it was found that 220 responses were usable. Kurtosis

and skewness for these data were all under 2.0 (from -1.1 to +1.3 for skewness, and

from -1.19 to +1.5 for kurtosis).

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4.3.2 Measurements

The measures for process and systems were taken from the managers' study. Ace

In the managers' study, the measures were 7-point Likert scale items (strongly agree -

strongly disagree) with not applicable option. Since respondents were customers,

slight adjustment was made to the items. Those measurement items which

customers cannot evaluate were excluded.

4.3.2.1. CRM Process and CRM Systems

Gain stage items can be directed into “direct effort” to gain customer and

“indirect effort” to gain customers. Direct efforts can be direct mailing/emailing to

potential customers for customized offers while indirect efforts can be viewed as the

attempt to attract general potential customers without targeting specific individual

such as overall website or general discount deals. Because most of people were not

receiving any specific deal from a hotel as a prospect, the item for indirect effort of

gain stage was included and the items for direct effect in gain stage were deleted. Only

one item for gain stage (CRM Process) and hence one item for gain stage systems

(CRM Systems) was included.

Two regain stage items were found and the reliability alpha was .8168. Items and

reliabilities are shown in Table 11.

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Table 11
Reliability for CRM Process & CRM Systems
Variables Items Alpha
Gain For my first stay at this hotel chain, the hotel made an offer which
They seemed to be tailored for me and attracted me to the hotel.

IS gain I receive promotional offers easily from this hotel chain via Internet.
Regain I receive special offers from this hotel chain if I don't use the hotel for a .8168
while
This hotel chain offers me promotion offers a while after my first stay
there.
IS regain The hotel uses the Internet to contact me after I stop using this hotel .9449
chain for a while.
I receive email promotional messages from this hotel chain if I stop
using it for a while.
Maintain I feel comfortable discussing my needs with this hotel chain. .8580
It is easy to get a response from this hotel chain.
This hotel chain tries to customize the service for me.
This hotel chain offers other related products or services which I may
need.
This hotel chain continuously offers me more attractive deal.
It is easy for me to come back to this hotel chain because of the
information I have already provided.
IS maintain I can use the Internet to keep myself updated about this hotel chain .8180
It is easy to use the Internet to inform this hotel chain of my preferences
finish I feel this hotel chain would provide me with poor services if I did not .8332
use the hotel for long.
I feel that this hotel chain would raise basic service fees if I did not use
the hotel for long.

4.3.2.2. Customer Orientation and Customer Knowledge Process

Among the items for Market Orientation and Market Knowledge Competence,

only customer orientation and customer knowledge process items were adopted

because customers wouldn't know about internal Information systems usage of CRM.

The items retained are shown in Table 12. The reliability coefficients were .8753 for

Customer Knowledge Process and .9251 for Customer Orientation.

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Table 12
Reliability for Customer Knowledge Process & Customer Orientation
Variables Items Alpha
C.K. I think this hotel chain uses many different ways to read about me .8753
I think this hotel chain has a lot of information about me.
I think this hotel chain uses the information about me to improve the
services
CO I think all the employees in this hotel chain are motivated to help .9251
customers well.
I think employees of this hotel chain try to understand what the
customers need well

4.3.2.3. CRM Performance

The measures for Loyalty, Satisfaction, and Commitment were adopted and

adapted from Hennig-Thurau, Gwinner, and Gremler (2002), Gwinner, Gremler and

Bitner (1998), Oliver (1980), and Morgan and Hunt (1994). Loyalty measures include

cognitive aspects and behavioral aspects such as word of mouth. Reliabilities for

satisfaction, commitment and loyalty were .9172, .9461, and .7339 respectively. table

13 shows the reliabilities.

Table 13
Reliability for Performance
Variables Items Alpha
Satisfaction Overall, I am satisfied with this hotel chain. .9172
I think I did the right thing when I decided to use this hotel chain.
Loyalty I have a very strong relationship with this service provider .7339
I often recommend this service provider to others
Commitment My relationship to this hotel chain.. .9461
Is something that I am very committed to
It's very important to me

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4.3.2.4. Relational benefits

Lastly, the items for relational benefit on additional sub-study as part of the

customer study were adopted from Hennig-Thurau, Gwinner, and Gremler (2002).

Relational benefits consist of social benefit, special treatment benefit, and confidence

benefit. The reliabilities were .9632 for Social Benefit, .9201 for Special Treatment

Benefit, and .9471 for Confidence Benefit. Table 14 shows the reliabilities and the

items used.

Table 14
Reliability for Relational Benefits
Variables Items Alpha
Social benefits I am recognized by certain employees .9632
I am familiar with the employee(s) that perform(s) the service
special I get faster service than most customers .9201
treatment They do services for me that they don't do for most customers
benefit I get discounts or special deals that most customers don't get
Confidence This company's employees are perfectly honest and truthful .9471
benefit This company's employees can be trusted completely.
This company's employees have high integrity

4.3.3 Analysis

Using LISREL 8.3, data analysis with Structural Equation Modeling (SEM) was

employed to test the proposed models. SEM is often used as a confirmatory analysis

tool, but it is also used for theory development (Raykov and Marcoulides, 2000; Hair

et. to the. 1998). While various paths linking the variables have been suggested through

the literature review, the field studied in this dissertation is largely unexplored.

Therefore, all the proposed models including relational benefit-mediating models

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were investigated. The analyzes were conducted in two ways - confirmatory factor

analysis for measurement model and path analyzes for structural model. confirmation

Factor Analysis was conducted to examine the structure of revised measurements. The

Issues were addressed in path analyses, discussed next.

First, since the main goal of this study is to provide integrated insight about CRM

with customers' perspective and managers' perspective, the basic issue to deal with is

to examine the effect of CRM Process and CRM Fit (moderating variable), as in the

managers' study. Due to the small sample size, Ping (1995)'s method or Joreskog and

Yang (1996)'s method to estimate the moderating effect in Structural Equation

Modeling were not available for this study. Therefore, determination of the existence

of moderating effect was done by first estimating the original (unmoderated) model

(without-fit model) and then estimating the moderated relationship model (with-fit

model).

Second, this study was conducted with customers of hotel chains. Among those

customers, some are already members of the hotel chain while others are not. The

members, of course, would already have been in maintenance stage in CRM process

while non-members would not be in this stage. The analysis sought to determine if

membership could make differences in the effect of each stage in CRM Process, as

well as the paths between satisfaction, commitment and loyalty. Garbarino and

Johnson (1999) argued that for high relational customers, commitment rather than

Satisfaction is the mediators between attitudes and future intentions to buy while for

low relational customers overall satisfaction is the primary mediating construct

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between the attitudes and future intentions. Therefore the models were tested with

two separate data - members' data and nonmembers' data.

Third, the additional model with relational benefit as mediating variable between

CRM process and relationship quality (commitment and satisfaction) was analyzed.

The model with the benefits as mediating variables and the model without the benefits

were analyzed and compared. In sum, a total of 8 different sets of paths analyzes were

conducted to examine the models. Table 15 summarizes the eight analyses.

Table 15
Eight Analyzes

Member data Non member data


With Fit Without Fit With Fit Without Fit
BenefitNo Analysis 1 Analysis 2 Analysis 3 Analysis 4
Benefit Yes Analysis 5 Analysis 6 Analysis 7 Analysis 8

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CHAPTER 5

ANALYSIS AND RESULTS

Chapters 3 and 4 described the research models and the studies designed to test

them. This chapter presents the data analyzes that were conducted to test the

hypotheses and a discussion of the results. It first begins with the managers' model

including sample composition and analyses. Customers' study is discussed next with

eight different analyses. A summary of the results from the studies concludes the

chapter.

5.1 Managers' Perspective

In this section, sample composition is discussed first to indicate the surveyed

managers' positions in their organizations and the revenue levels of hotels they

represent Next, assumptions of normality of residual, multicollinearity are discussed;

and outlier checks follow. After reviewing the normality of residual, multicollinearity,

and outliers from the data, hypotheses test results are presented and discussed.

5.1.1 Sample composition

Thirty-four responses were collected from hotel managers. Due to this small

sample size, a series of multiple regression analyzes have been conducted instead of

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structural equation modeling. Respondents who held “manager” or higher positions

They were invited to participate in the study. Table 16 shows the distribution. As requested,

more than 70% of respondents were sales/marketing executives (managers) or general

managers. Forty-one percent were Sales/Marketing Executives and thirty-two percent

They were general managers. Also, about fifteen percent were Chief Operating Officers

while twelve percent were Owner or CEO.

Table 16
Positions of Respondents
Frequency 4 Percent Cumulative Percent
Valid Chairman/CEO/Owner eleven .8 eleven .8

Chief Operating Officer 5 14.7 26.5


Sales/Marketing Executive 14 41.2 67.6
Gerente general eleven 32.4 1 0 0 .0

Total 3. 4 1 0 0 .0

Revenues for the hotels ranged from under $499,999 to over $1 billion. Table 17

indicates the distribution. Most were evenly distributed from $2.5 million to $50

million.

Table 17
Revenue Levels of Hotels

Frequency Percent Valid Cumulative


Percent Percent
Valid Under $499,999 4 eleven .8 12.5 12.5
$500,000 - $999,999 $1 2 5.9 6.3 18.8
million - $2,499 million $2.5 2 5.9 6.3 25.0
million - $4,999 million $5 million 6 17.6 18.8 43.8
- $9,999 million $10 million - 5 14.7 15.6 59.4
$19,999 million $20 million - 5 14.7 15.6 75.0
$49,999 million $50 million - $99,999 4 1 1 .8 12.5 87.5
million $100 million - $499,999 1 2.9 3.1 90.6
million Over $1 billion System Missing 1 2.9 3.1 93.8
Total 2 5.9 6.3 1 0 0 .0

2 5.9
3. 4 1 0 0 .0

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5.1.2 Normality of residual, Multicollinearity, and Outlier

Three multiple regression analyzes were conducted. One is with non-financial

performance as a dependent variable and the other is with financial performance as a

dependent variable. The third multiple regression analysis examined the relationship

between market orientation and market knowledge competence, and CRM Process.

Initially, the plan was to test each stage such as measurement, initiate, maintain,

and terminate stage for its effect on performance. Because of small sample size,

however, only overall effects of CRM Process and the fit between CRM Process and

systems were investigated.

To examine the normality, normal PP plots of standardized residuals from the

regression were tested with non-financial performance and financial performance as

dependent variables, respectively. Figure 5 shows patterns of residuals that

approximate the diagonal line, indicating normality of residuals.

DV: Z(finance) DV: Z(non-financial)

UJ 0.00.
UJ 0 .0 0
00 .25 .fifty .75 1.1

Observed Cum Prob O bserved Cum Prob

Figure 5. Normal PP plots of Regression Standardized Residuals

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As mentioned in the previous chapter, the variables including CRM Process and

CRM Systems, Market orientation, Market Knowledge Competence, and

performances were all standardized to avoid multicollinearity and to interpret the

standardized beta coefficients. In the analyses, multicollinearity was diagnosed using

the variance inflation factors (VIFs). According to Belsley, Kuh, and Welsch (1980), a

VEF of less than 10 indicates no significant multicollinearity. As shown in Table 18,

all five variables show VIF of less than 6, indicating no significant multicollinearity.

Table 18
Multicollinearity Check - VIF

Variables (z-score) VIFs


process 5,216
ES 5,586
Fit 1,085
M.O. 1,388
MKC 2,232

Furthermore, to detect any outlier or influencer, Cook's Distance was calculated.

If values of Cook's D of the observation is more than 1, it indicates that the

observation is influential and should be studied further (Anderson, Sweeney, and

Williams 2005). As shown in Table 19, the largest Cook's D was 0.173 for non-

financial performance and 0.181 for financial performance, indicating not significant

influential observations.

Table 19
Cook's Distance

Minimum Maximum mean

Financial performance .0 0 0 .181 .023


Non-financial performance .0 0 0 .173 .034

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5.1.3 Hypotheses Testing

As shown in Figure 6, managers model was examined. In these analyses, first

CRM Process and CRM Systems were entered, and then CRM Fit was entered. Each

time R2 and its change were examined. In order to see the effect of the moderating

variable, CRM Fit, change in R2 was reviewed. Lastly market orientation and market

knowledge competence were entered. The results of the analyzes are shown in Table

twenty.

market CRM
Orientation
Performance
H5.
•Non-financial
H5C Market Knowledge •Financial
Competence H6,a,b
performance

H6C CRM Fit CRM Systems

1 ________
CRM Process H3,4
ÿHI,2

*
Measurement, Initiation (gain & regain), Maintain, Terminatioprocess

Figure 6. Managers' Model & Hypotheses

First, the model with non-financial performance as a dependent variable was

significant at F(5,27)=3.707,/?< .05. CRM Process and CRM Systems are

significantly related to CRM performance. CRM Process is significant at t = 2.826, p

< .05, and CRM Systems is significant at t = -2.758, p < .05. CRM Process is

significantly positively related to Non-financial Performance. Well-designed CRM

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Process leads to higher non-financial performance such as obtaining desirable market

share and customer satisfaction.

Table 20
Results of Regression Analyzes

Dependent variable Non-financial Performance Financial Performance


model B (ff) t BGS) t
1 (Constant) -.008908 -.060 0.006608 .043
process *** 3,562 .925*** 2,881
1121
ES -.893*** -2,817 -.492 -1,520

R2 .304 .298

2 (Constant) -0.07088 -.372 0.03729 .191


process 1,150*** - 3,559 910*** 2,751
ES 919*** -2,832 -.479 -1,440
Fit 0.07297 .537 -0.03613 -.260

Incremental R2 .007 .0 0 2

F change .288 .067


Significance of F change .595 .797

Full Model
3 (Constant) -0.09090 -.492 0.02353 .125
process 9 4 5*** 2,826 .673* 1973
ES -.963** -2,758 -.474 -1,333
Fit .106 .788 -0.01043 -.076
MKC .305 1,388 .264 1,182
M.O. .160 .915 .216 1,215

F (5, 27) 3.707** 3,642**


Significance .011 .0 1 2
R2 .407 .403
Adj R2 .297 .292

Regression coefficients are standardized regression coefficients


**
*p < .10 p < .05 ***p < oi

CRM Systems, however, is found to be negatively related to Non-financial

Performance. Higher level of CRM Systems implemented to support CRM Process

leads to lower Non-financial Performance. CRM Fit was not significant when

investigating the R change. When CRM Fit enters, the R only increases 0.7%, which

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is not significant. R2 for the full model is 40.7%, which is large enough for reasonable

power level (over 80%) given the small sample size. However, adjusted R2 for the full

model indicates that proportion of variance accounted for is 29.7%.

Second, the model with financial performance is also significant at F

(5.27)=3.642, p< .05. CRM Process was marginally, positively related to the

performance at t - 1.973 ip = .059) in the full model. Well-designed CRM Process

influences performance positively. CRM Systems, however, again is not significant.

Change in R2 is just .002, and therefore CRM Fit is not significant. The adjusted R2

for the full model indicates that 29.2% of variance was accounted for by the regression

model.

Third, for both models, Market Orientation and Market Knowledge Competence

were all not significantly related to the both types of Performance. Previously it was

hypothesized that market orientation and market knowledge competence would be

positively related to CRM Process as well as performance. Therefore the third multiple

regression analysis was conducted to examine the relationship between market

orientation, market knowledge competence and CRM Process. The regression model

was significant at F (2,31)=11.805, p< .01. The results are shown in Table 21.

As expected, Market Knowledge Competence is significantly positively related to

CRM Process at t - 4.263, p < .01 while Market Orientation was not significant. R

was 43% indicating 43% of variance in CRM Process is explained by the regression. If

the business has established systematic processes both to learn more about customers

and competitors, and to coordinate marketing-R&D interface, it will lead to better-

designed CRM Process. Therefore, it implies that Market Knowledge Competence is

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positively related to CRM Process, which in turn is positively related to Performance.

The separated regression analyzes partially reveal this hierarchical structure among the

three variables, but thorough analysis should be conducted to examine the

relationships.

Table 21
Regression Analysis with CRM Process as Dependent Variable
Unstandardized Standardized
Coefficients Coefficients
model b Std. Error Beta t Next.
1 (Constant) 1,171 .788 1,486 .147
MKC ,566 .133 .633 4,263 < .0 0 1

M.O. 0.04901 .135 .054 .364 .718

F(2,31) 11,805
Significance p < .0 0 1
R2 .432
Adj R2 .396

Overall, even though the hypotheses proposed were not fully examined, several

hypotheses were partially tested and found significant. Based even on this small

sample study, the relationship between CRM Process and performance (HI & 2), and

the relationship between market knowledge competence and CRM Process (H6c) are

accepted. A summary of managers' model test is shown in Table 22.

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Table 22
Hypotheses Testing Results- Managers' model

Hypothesis Result
HI: CRM Non-financial performance is positively related to well designed CRM (+) Sig.
Process.
HI a: CRM Non-financial performance is positively related to well designed
Measurement Stage Process Not
Hlb: CRM Non-financial performance is positively related to well designed tested
Initiation Stage Process
Hlc: CRM Non-financial performance is positively related to well designed
Maintenance Stage Process
Hid: CRM Non-financial performance is positively related to well designed
Termination Stage Process.
H2: CRM financial performance is positively related to well designed CRM Process (+) Sig.
H2a: CRM financial performance is positively related to well designed
Measurement Stage Process Not
H2b: CRM financial performance is positively related to well designed tested
Initiation Stage Process
H2c: CRM financial performance is positively related to well designed
Maintenance Stage Process.
H2d: CRM financial performance is positively related to well designed
Termination Stage Process.
H3: CRM Systems has a moderating effect on the relationship between CRM Process Not next.
and CRM Non-financial Performance
H3a: Measurement CRM Systems has a moderating effect on the relationship
between Measurement CRM Process and CRM Non-financial Performance Not
H3b: Initiation CRM Systems has a moderating effect on the relationship between tested
initiation CRM Process and CRM Non-financial Performance
H3c: Maintenance CRM Systems has a moderating effect on the relationship
between initiation CRM Process and CRM Non-financial Performance
H3d: Termination CRM Systems has a moderating effect on the relationship
between initiation CRM Process and CRM Non-financial Performance
H4: CRM Systems has a moderating effect on the relationship between CRM Process and Not next.
CRM Financial Performance
H4a: Measurement CRM Systems has a moderating effect on the relationship
between Measurement CRM Process and CRM Financial Performance Not
H4b: Initiation CRM Systems has a moderating effect on the relationship initiation tested
between CRM Process and CRM Financial Performance
H4c: Maintenance CRM Systems has a moderating effect on the relationship
between initiation CRM Process and CRM Financial Performance
H4d: Termination CRM Systems has a moderating effect on the relationship
between initiation CRM Process and CRM Financial Performance

H5a: CRM Non-financial performance is positively related to Market orientation Not next.
H5b: CRM financial performance is positively related to Market orientation Not next.
H5c: CRM Process is positively related to Market orientation *Not next
H6 a: CRM Non-financial performance is positively related to Market Knowledge Not next.
Competence
H6 b: CRM financial performance is positively related to Market Knowledge Not next.
Competence
H6 c: CRM process is positively related to Market Knowledge *(+) Sig.
Competence * indicates “partially tested”

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5.2 Customers' Perspective

This section presents the analysis results of customers' perspective research

model and the additional mediating model with relational benefit. As in managers'

model, the sample composition is addressed and this is followed by the eight analyses.

The results from eight analyzes are compared and discussed.

5.2.1 Sample Composition

Two hundred twenty distinct and usable data points were obtained via online

survey of hotel customers. As shown in Table 23, the ages of respondents were fairly

evenly distributed across 20's, 30's, 40's and 50's. Female respondents were 35.5%,

while 63.6% of respondents were male.

Table 23
Age of Respondents

Age Frequency Percent Valid Percent Cumulative Percent


Valid 18-24 27 12.3 12.3 12.3
25-34 68 30.9 30.9 43.2
35-44 63 28.6 28.6 71.8
45-59 53 24.1 24.1 95.9
60 and more 9 4.1 4.1 1 0 0 .0

Total 220 1 0 0 .0 1 0 0 .0

As shown in Table 24, income levels of respondents were also distributed evenly

across the range of under-$25,000 to over-$150,000. As customers of hotels,

Respondents were asked questions such as frequency of hotel stay within a year,

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membership, and purpose of trip. Of the respondents, 42% were traveling most often

for personal leisure while 57.7% responded as business travelers.

Table 24
Income of Respondents

Income ($) Frequency Percent Valid Cumulative


Percent Percent
Valid <25,000 35 15.9 16.9 16.9
25,000-49,999 3. 4 15.5 16.4 33.3
50,000-74,999 30 13.6 14.5 47.8
75,000-99,999 36 16.4 17.4 65.2
100,000-124,999 32 14.5 15.5 80.7
125,000-149,999 > 14 6.4 6 .8 87.4
150,000 26 eleven .8 1 2 .6 1 0 0 .0

Total 207 94.1 1 0 0 .0

Missing system 13 5.9


Total 220 1 0 0 .0

Furthermore, 46.8% of respondents answered that they had membership accounts.

Among these, 44% had maintained the membership more than 4 years, and 17.9%

indicated their membership had been 1-2 years long. Details are shown in Table 25.

Table 25
Length of Membership
Frequency Percent Valid Cumulative
Percent Percent
Valid < 1 month 1 .5 .9 .9
1 - 6 months 4 1 .8 3.8 4.7
6 - 1 2 months 6 2.7 5.7 10.4
1 - 2 years 19 8 .6 17.9 28.3
2-3years 17 7.7 16.0 44.3
3-4 years 12 5.5 11.3 55.7
> 4 years 47 21.4 44.3 1 0 0 .0

Total 106 48.2 1 0 0 .0

Missing system 114 51.8


Total 220 1 0 0 .0

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Half of the respondents answered that they stayed at a hotel 2 to 5 times within a

year, and 13.4 % of respondents stayed 6-9 times. Stays of “22 and more”, “10-14

times”, and “one or fewer” times were reported by 10.1% of respondents each.

Average price per night spent for a hotel stay showed that a lot of people (43%)

spent $100-150 per night. Price range of “$150-200” was reported by 26%. Therefore

most of respondents spent $50 to $200 per night. Details are shown in Table 26.

Table 26
Average Price per Night
Price Range Frequency Percent Valid Percent Cumulative Percent
Valid less than $50 4 1 .8 1 .8 1 .8

$50-99 39 17.7 17.7 19.5


$100-149 94 42.7 42.7 62.3
$150-199 57 25.9 25.9 8 8 .2

$200-249 15 6 .8 6 .8 95.0
$250-299 1 .5 .5 95.5
$300-349 5 23 23 97.7
$350-399 2 .9 .9 98.6
$400 and more 3 1.4 1.4 1 0 0 .0

Total 220 1 0 0 .0 1 0 0 .0

5.2.2 Hypotheses testing

Confirmatory Factor Analysis (CFA) and Path Analyzes were conducted to

examine the proposed models using LISREL 8.3. The measurement items were first

chosen by their reliability check, and those revised items were investigated with CFA.

Eight path analyzes were conducted to test the models including the additional

mediating model. Sample covariance matrix was used as an input matrix for all the

analyses. In order to examine the moderating effect of CRM Systems, model with

CRM Fit variable was compared to model without CRM Fit. As well, members' and

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non-members' responses were compared. Lastly, the mediating effect of relational

benefit was examined by comparing the model fits between model with mediating

variable and without the mediating variable. This section presents following:

1. Results of CFA

2. Main studies: without mediating variable - relational benefit


• Analysis 1 (Member, with fit) and Analysis2 (Member, without fit)
• Analysis3 (Non-member, with fit) and Analysis4(Non-member, without
fit)

3. Additional studies: with mediating variable - relational benefit


• Analysis5(Member, with fit) and Analysis6(Member, without fit)
• Analysis7(Non-member, with fit) and Analysis8(Non-member, without
fit)

5.2.2.1 CFA results

CFA was conducted to examine the measurement model. Most of variables in

customers' perspective model have only two revised items to measure. Cronbach's

alpha would not test the inter-item reliability for a two-item scale properly, because

Cronbach's alpha is designed to test the reliability by comparing every combination of

each item with all other items in the scale as a group (Verhoef 2003). Therefore CFA

was employed to examine the measurement model and the loadings for the two-item

scale were constrained equal because the correlation of two items can be viewed as

just one, not necessarily two separate parameters. Based on the results, construct

reliabilities and validity were examined. Tables 27 and 28 show the results.

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Table 27
Results of CFA

Items K(ty YE Items YE C.R.


CR*
• *

“C” c
(t)
Customer knowledge 1 0.82 .67 .8 6 Bconfidencel 0.96 (19.02) .91 .96
Customer knowledge2 0.77(15.19) .59 B_confidence2 0.90(17.21) .81
Customer knowledge3 0.85(15.19) .73 Bconfidence3 0.95 (18.96) .91
Customer orientation 1 0.92(19.23) .84 .92 B special treat 1 0.94 (19.60) .89 .94
Customer orientation2 0.93 (19.23) .87 B_special treat2 0.94 (19.60) .8 8

ReGainl 0.76(15.10) .57 .74 B so cia ll 0.95 (19.94) .90 .95


ReGain2 0.78(15.10) .61 B_social2 0.96 (19.94) .93

ISregainl 0.93 (19.23) .87 .92 Loyalty 1 0.84(16.01) .71 .77


IS_regain2 0.92(19.23) .84 Loyalty2 0.74(16.01) .55
maintain 1 0.79(15.94) .63 .78 Commitment 1 0.97 (20.04) .94 .96
maintain2 0.81 (15.94) .65 Commitment2 0.95 (20.04) .89
ISmaintainl 0.78 (15.95) .61 .78 Satisfactionl 0.99 (20.34) .97 .97
IS_maintain2 0.82 (15.95) .67 Satisfaction 0.95 (20.34) .90

Finish 1 0.78 (16.04) .61 .78


Terminate2 0.82 (16.04) .6 8

X2 = 638.69 (df= 284) (p < 0.001)


GFI = .84
CFI = .94
Tucker-Lewis Index (non-normed fit index) = .92
Standardized Root Mean square Residual = .056 RMSEA
= .068

* Loadings are standardized values.


** SMC refers to Squared Multiple Correlation.
***CR refers to Composite Reliability

First, construct reliability was examined using composite reliability and average

variance extracted (AVE). As shown in Table 27, composite reliabilities for all

variables were .70, which exceeds .60, the cutoff recommended by Bagozzi and Yi

(1988). Also, in Table 28, AVEs for all variables were over .50 (Fomell and Larcker,

1981). These two results indicate good construct reliability.

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Table 28
Correlations between Factors & AYE

regain Irega main Bsoci Bspetre Bconfi ends cknow corien satis loyal commit maint

regain 0.59

Irega 0.97 0.86


Imain 0.34 0.27 0.64
Bsoci 0.33 0.38 0.27 0.91

Bspetre 0.32 0.33 0.25 0.83 0.88


Bconfi 0.24 0.17 0.33 0.43 0.37 0.88
ends 0.09 0.12 -0.39 0.03 0.06 -0.27 0.64
cknow 0.51 0.46 0.44 0.47 0.57 0.37 0.05 0.66
Corien 0.16 0.09 0.56 0.35 0.40 0.70 -0.38 0.50 0.86
satis 0.20 0.14 0.53 0.18 0.19 0.59 -0.51 0.39 0.74 0.94
loyal 0.54 0.51 0.48 0.64 0.70 0.53 -0.09 0.80 0.58 0.48 0.63
commit 0.37 0.32 0.28 0.56 0.67 0.42 -0.01 0.54 0.46 0.35 0.86 0.92
maint 0.56 0.46 0.56 0.57 0.55 0.47 -0.19 0.59 0.58 0.55 0.74 0.61 0.64

* Diagonal: AVE (Average Variance Extracted)


* Off-diagonal: correlations

Second, convergent validity and discriminant validity were examined. The results

in Table 27 indicate good convergent and discriminant validities. For overall fit, GFI

indicates a moderately good fit (.84), but CFI and Tucker-Lewis Index (TLI) are .94

and .92, respectively. Since GFI is considerably influenced by variations in sample

size and non-normality of the measures, it is recommended that CFI and TLI be

examined as alternative measures of fit as they are more robust (Burton et al. 1998).

CFI and TLI in this instance are higher than 0.9, the advocated fit level (Roberts,

Varki, and Brodie 2003), and indicate a good fit. X2 was 638.69 with 284 degrees of

freedom. Loadings were all significant atp < .05, and their Squared Multiple

Correlations (SMC) exceed 0.50, the cutoff recommended by Bagozzi and Yi (1988).

Also, AVEs were compared with correlation coefficients between the factors for

further rigorous examination of the discriminant validity (Fomell and Larcker, 1981).

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As shown in Table 28, most of AVEs exceeded the squared correlation coefficients

except for IREGAIN. The correlation between Regain stage CRM systems (indicated

as Iregain) and Regain Stage Process was high and the squared correlation exceeded

BIRD. Regain stage CRM systems was measured as Internet website and email usage

to attract the existing customers. It is understandable that the measures for Regain

Stage Process were close to those for Regain CRM Systems due to the common usage

of Internet in CRM practice. Also, the method used to measure CRM Fit required the

Matched measures for CRM process and CRM systems. Given this methodological

restriction and the results of good overall fits of the measurement model, these

measures were retained.

5.2.2.2. Main studies: analyzes 1 through 4 (without relational benefit)

Among the participants, 103 were members of hotel reward and frequent user

programs. With the data from such customers, who maintain a membership account

with a certain hotel chain, the first two analyzes were conducted to examine the model

with CRM Fit and without CRM Fit. The same two analyzes were also conducted with

the data from customers who did not have a membership account (sub-sample size was

117). Figure 7 shows the research model and the hypotheses.

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CRM Fit: Gain,


Regain,
Maintenance c Ends ^\Hc2 i«
tjon

Performance

CRM Systems H^ 3 * Satisfaction


JI t lI

lHcl„T Loyalty

CRM Process Commitment


Hc2 if
H c l.

Hc4„ Jiik HjS-


customer customer
orientation knowledge

Figure 7. Customers' Model & Hypotheses

First of all, as shown in Table 29, the overall fit for all four models was good.

Among the four, the best model is the one without CRM Fit using member data (chi-

square (45 degree of freedom) = 32.44,/? =.92, root mean squared error of

approximation (RMSEA) = .00 p= 1.0, goodness-of-fit index (GFI) = .96, comparative

fit index (CFI) = 1.00). A value of CFI of at least .90 had suggested as indicative of

the model fitting the data well (Bentler 1990) and a value of RMSEA of .05 or less

had suggested to indicate a close fit of the model to the data, and a value of RMSEA

between .05 and .08 to be a fair fit (Browne and Cudeck 1993; Hair et al. 1998).

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Table 29
Test Results No Mediating Effect

Member Non member


Parameters Fit Not fit Fit Not fit
coeff. t coeff. t coeffi. t coeffi. t
CRM Process
gain -> commitment 0.05 0.63 0.04 0.54
regain -> commitment 0.10 0.79 -0.13 -0.95
maintain -> commitment 0.58* 3.44 0.25+ 1.86

gain -> satisfaction -0.08 -1.72 0.00 0.06


regain -> satisfaction 0.06 0.81 -0.11 -1.27
maintain -> satisfaction 0.12 1.19 0.33* 3.94

terminate -> commitment 0.23* 2.24 0.20* 1.90 0.16+ 1.65 0.12 1.28
terminate -> satisfaction -.16* 2.69 -0.14* -2.34 -0.11+ -1.68 -0.11+ -1.75

CRMFit
gain-IS->commitment 0.01 0.90 -0.01 -1.34
regain-IS->commitment 0.01 0.84 0.03+ 1.90
maintain-IS->commitment 0.05* 2.59 0.01 0.54

gain-IS->satisfaction 0.00 -0.32 0.00 0.65


regain-IS->satisfaction 0.00 0.54 0.00 -0.23
maintain-IS->satisfaction 0.00 -0.16 0.02* 2.33

CO -> commitment 0.46* 3.43 0.36* 2.66 0.06 0.38 0.12 0.83
CO -> satisfaction 0.41* 5.00 0.39* 4.81 0.62* 7.82 0.56* 7.22
CK -> commitment 0.00 0.02 -0.02 -0.12 0.33* 3.46 0.37* 3.77
CK -> satisfaction 0.06 0.79 0.03 0.34 0.00 0.02 0.03 0.54

commitment -> satisfaction 0.08 1.29 0.05 0.92


satisfaction -> commitment 0.20 1.42 0.18 1.22
commitment -> loyalty 0.66* 11.85 0.66* 11.67 0.51* 6.38 0.51* 6.29
satisfaction -> loyalty 0.29* 3.29 0.29* 3.24 0.24* 2.45 0.24* 2.42

Goodness of Fit Stats.


(df) (21) (45) (21) (45)
^-square 32.08 p=.058 32.44 p=.92 40.66 p=.0062 62.10 p=.046
Goodness of fit index (GFI) 0.94 0.96 0.94 0.94
Comparative fit index (CFI) 0.97 1.00 0.94 0.97
Root mean square error of
approximation (RMSEA) 0.057 p=.39 0.00 p=1.0 0.076 p=0.17 0.025 p=.77

* Significant, + Significant (w eak) atp < .O5 (one-tailec

When all constituent variables (gain, regain, maintenance stage) were excluded

and the CRM Fit variables were entered (using member data, with CRM Fit model),

GFI decreased to .94 and RMSEA increased to .057.

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In terms of non-member data, the result about CRM Fit (moderating variable) is

similar. Overall fit of nonmember data, no fit model was good (chi-square (45 degree

of freedom) = 62.10, p = .046, RMSEA = 0.025 p = .ll, GFI = .94, and CFI = .97).

However, when the constituent variables (gain, regain, maintenance stage) were

excluded, and fits (moderating variables) were included, CFI decreased to .94 and

RMSEA increased into 0.076, which is 0.05 more than previous value, .025, even

although GFI remained the same and RMSEA remains within the acceptable level (.05

to .08).

Therefore no matter which data is used, the model without CRM Fit explains

better than the model with CRM Fit does. It is however noticeable that the model with

CRM Fit indicates good fit with the member data (chi-square (21 degree of freedom) =

32.08,/? = 0.058, RMSEA = 0.057 p=.39, GFI = .94, and CFI = .97) even though

RMSEA is a little bit higher than .05.

Secondly, as shown in Figure 8 and 9, significant paths were identified. desde

CRM process, only Maintain Stage was significantly associated with CRM

Performance, either Commitment or Satisfaction. Across all four models, it was found

that there are positive paths from Commitment to Loyalty, Satisfaction to Loyalty, and

Customer Orientation to Satisfaction, and a negative path from Terminate stage to

Satisfaction.

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NMnfcr
F.G. FMj Y-Ht
R.G.
V ' Nfltafit

CO
CO
C.K. C.K.
GM GM

OMqarc =4166(P=.OOffi), (H = dhl, RV®A=Q07&

Figure 8. Path Diagram (Non-member Data for Study 2)

R.G. IVtnixr
F.G. pM\ M nhr sj /
NHt
Y-Ht IVftnefit
NBrefit

C.K. C.K.
GM

CO CO

Oi-sqiwe=3144 (p=.92>, (IT =.% HVWA=aOO Gi«quare=3Z08(p=.()68))a iI=51>HVSA=ft0S7

Figure 9. Path Diagram (Member Data for Study 2)

G: Gain, RG: Regain, M: Maintain, T: Terminate, CK: Customer Knowledge Process, CO:
Customer Orientation, Com: Commitment, Sat: Satisfaction, Loy: Loyalty, FG: CRM Fit in Gain stage,
F-RG: CRM Fit in Regain Stage, FM: CRM Fit in Maintain Stage

* Line: significant path, * Dotted line: weak but significant path atp < .05 (one tailed test)

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Commitment and Satisfaction are both well-known core variables for relationships

quality, and these results again added one more example in support of such theory.

Unexpectedly, there was no significant relationship between Commitment and

Satisfaction across the membership. It was expected that for members, Commitment

would lead to Satisfaction while Satisfaction would lead to Commitment for non-

members (Garbarino and Johnson 1999).

Customers' perception of Customer Orientation of a hotel chain was found to

have significant positive association with Satisfaction in both member and non-

member data while Market Orientation was not found significant in Managers' Model.

The negative relationship between Terminate stage and Satisfaction showed no

difference between members and non-members. The path, however, was weaker in

non-member data. As such, Terminate Stage was found to have a positive relationship

with Commitment for members (t=2.24 model with CRM Fit, f=1.90 model without

CRM Fit) and weaker but significant for non-member in the model with CRM Fit

(t=1.65).

On the other hand, different paths were found between non-member data and

member data.

Commitment was found to mediate CRM Process and CRM Performance in

members' data while Satisfaction was found to mediate in non-members ' data. With

members' data, Commitment was significantly positively related to CRM Fit in

Maintenance Stage (Satisfaction was not significantly related to CRM Fit) in the

model with CRM Fit. Also, Commitment was significantly positively related to

Maintain Stage in the model without CRM Fit (Satisfaction was not significant). On

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the other hand, with non-members' data, Satisfaction was positively related to CRM

Fit in Maintenance Stage (Commitment was not significant) in the model with CRM

Fit. Also, Satisfaction was positively related to Maintain Stage in the model without

CRM (t=3.94). The path from Maintain Stage to Commitment was significant but

weak (t = 1.86).

As well, it is found that in members' data, Customer Orientation has a significant

positive effect on Commitment across the models with CRM Fit and without CRM Fit

(The path was not significant in non-members' data). On the other hand, in non-

members' data, Customer Knowledge Process has a significant positive effect on

Commitment across the models with CRM Fit and without CRM Fit (The path was not

significant in members' data).

5.2.2.3 Additional studies: analyzes 5 through 8 (with relational benefits)

In the same settings as main studies, relational benefits were included as

mediating variables in all four models. Figure 10 shows the relational benefits

mediating model and the hypotheses.

As shown in Tables 30 and 31, the overall fit of all four models was not good and

worse than those models without relational benefits. Among the four, the best model

without CRM Fit was the one using member data (chi-square (72 degree of freedom) =

150.12, p = 00, RMSEA = .090 ^=0.0095, GFI = .86, CFI = .89), just as the model

without CRM Fit with member data was the best in main studies in previous section.

However, the fit measures such as GFI and CFI are less than .90. Acceptable level for

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RMSEA is a maximum of .08 (Hair et al 1998) and RMSEA for the best model among

the four was even greater than .08. Therefore relational benefits do not seem to play an

important mediating role in this model.

CRM Fit: Gain, End fron


Regain, ,
Maintenance
Performance
Satisfaction
CRM Systems

Loyalty

CRM Process Commitment

HA 1,2,3

customer customer
orientation knowledge

Figure 10. Relational Benefit Model & Hypotheses

Also, to examine the moderating effect, CRM Fit, the goodness-of-fit statistics

were investigated. With member data, when all constituent variables (gain, regain,

maintenance stage) were excluded and the CRM Fit variables were entered, GFI

decreased to .82 and RMSEA increased to .15 relative to the best model (using

member data, without CRM Fit). With non-member data, the results about the

moderating effect were similar. Overall fit of the model without CRM Fit using

nonmember data was not good (chi-square (72 degree of freedom) = 286.63,p =.00,

RMSEA = 0.15 p=.00, GFI = .77, and CFI = .73). When the constituent variables

(gain, regain, maintenance stage) were excluded, and CRM Fits (moderating variables)

were included, CFI even decreased further to .66 and RMSEA increased to 0.19.

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Table 30
Additional Model - Test Results with CRM Fit

Fit
Parameters Member Non member
coeff. t coeff. t
CRMFit
gain-IS->social 0.00 0.19 0.00 -0.16
regain-IS->social 0.04* 2.32 0.06* 3.34
maintain-IS->social 0.08* 4.23 0.01 0.62

gain-IS->special treat 0.00 -0.01 -0.02 -1.48


gain-IS->special treat 0.02 1.62 0.02 0.98
maintain-IS->special treat 0.10* 6.06 0.01 0.41

gain-IS->confidence 0.00 -0.15 0.00 0.50


regain-IS->confidence 0.01 0.69 0.02* 2.10
maintain-IS->confidence 0.06* 5.07 0.01 1.07

terminate -> commitment 0.13 1.32 0.10 1.12


terminate -> satisfaction -0.14* -2.52 -0.15* -2.37

CO -> commitment 0.40* 3.48 -0.02 -0.11


CO -> satisfaction 0.28* 4.00 0.66* 9.05
CK -> commitment -0.01 -0.06 0.27* 3.16
CK -> satisfaction 0.11 1.52 0.05 0.85

Benefit
social -> commitment 0.02 0.35 0.13* 1.78
special treat -> commitment 0.40* 5.20 0.23* 2.85
confidence -> commitment 0.08 0.73 0.01 0.10

social -> satisfaction -0.02 -0.42 0.02 0.37


special treat -> satisfaction -0.11* -2.16 -0.11* -1.93
confidence -> satisfaction 0.26* 3.77 0.27* 3.00

commitment -> satisfaction 0.12* 2.01


satisfaction -> commitment 0.24* 1.70
commitment -> loyalty 0.66* 11.55 0.54* 6.48
satisfaction -> loyalty 0.31* 3.30 0.18* 1.93

Goodness of Fit Stats.


II

X2-square (df) 155.31(42) 232.01 (42) p=.00


Goodness of fit index (GFI) 0.82 0.77
Comparative fit index (CFI) 0.81 0.66
Root mean square error of
II

II

either
either
approximation (RMSEA) 0.15 0.19

* significant at p < .05 (one-tailed test)

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Table 31
Additional Model - Test Results Without CRM Fit

Not fit
Parameters Member Non member
coeffi. t coeffi. t
CRM Process
gain -> social 0.14 1.43 0.03 0.34
regain -> social 0.20 1.34 -0.03 -0.22
maintain -> social 0.87* 5.19 0.15 0.98

gain -> special treat 0.04 0.46 0.00 0.01


regain -> special treat -0.03 -0.22 -0.10 -0.74
maintain -> special treat 1.00* 6.86 0.16 1.13

gain -> confidence -0.04 -0.66 0.03 0.73


regain -> confidence 0.10 1.02 0.11 1.38
maintain -> confidence 0.49* 4.72 0.20* 2.38

terminate -> commitment 0.13 1.29 0.10 1.11


terminate -> satisfaction -0.14* -2.47 -0.15* -2.34

CO -> commitment 0.40* 3.34 -0.02 -0.11


CO -> satisfaction 0.28* 3.85 0.66* 8.91
CK -> commitment -0.01 -0.06 0.27* 3.13
CK -> satisfaction 0.11 1.50 0.05 0.84

Benefit
social -> commitment 0.02 0.34 0.13* 1.76
special treat -> commitment 0.40* 4.91 0.23* 2.80
confidence -> commitment 0.08 0.70 0.01 0.10

social -> satisfaction -0.02 -0.41 0.02 0.37


special treat -> satisfaction -0.11* -2.05 -0.11* -1.90
confidence -> satisfaction 0.26* 3.64 0.27* 2.95

commitment -> satisfaction 0.12* 1.98


satisfaction -> commitment 0.24* 1.67
commitment -> loyalty 0.66* 11.49 0.54* 6.38
satisfaction -> loyalty 0.31* 3.26 0.18* 1.91

Goodness of Fit Stats.


II

either
X2-square (df) 150.12 (72) p=.00 286.63 (72)
Goodness of fit index (GFI) 0.86 0.77
Comparative fit index (CFI) 0.89 0.73
Root mean square error of
II

either
approximation (RMSEA) 0.090 p=0.0095 0.15

* significant at p < .05 (one-tailed test)

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Therefore no matter which data were used, the model without CRM Fit explains

better than the model with CRM Fit just as in the main studies in the previous section.

Overall the membership data showed better fit than non-member data across the main

studies and additional studies. Also, the model without mediating variables (relational

benefit) explains better than the model with the mediating variables (relational benefit).

Lastly, even though the overall model fits were not good, the specific paths were

investigated to examine whether there are similar patterns found in the relational

benefit studies as in main studies (without relational benefit studies) in comparing the

members' data and non-members' data.

Similar to the findings in the main study, in the additional study, positive paths

from Commitment to Loyalty, Satisfaction to Loyalty, and Customer Orientation to

Satisfaction, and a negative path from Terminate Stage to Satisfaction were found in

all four models. The path from Satisfaction to Loyalty, however, was weaker in non-

members' data than members' data. The path from Customer Orientation to

Satisfaction was significant across the both member and non-members similar to the

one in the main study.

Just as in the main study, it was found that in members' data, Commitment was

positively related to Customer Orientation across the models with CRM Fit and

without CRM Fit(It was not significant in non-members' data). On the other hand, in

non-members' data, Commitment was positively related to Customer Knowledge

Process across the models with CRM Fit and without CRM Fit (It was not significant

in members' data).

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5.2.3 Summary of Hypotheses Testing

Based on the test results in main study, the hypotheses formulated in Chapter 4

were examined. The results are summarized in Table 32.

As shown in this Table, there are some similarities as well as some differences in

members' data and non-members' data.

In the additional relational benefit study, because of lack of fit, only the analysis

result with member data was used to examine the hypotheses. The results are

summarized in Table 33.

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Table 32
Summary Results of Hypothesis Testing - Main Study
Member | Non-Member
Customer perspective Hypotheses Fit Not fit Fit Not fit

I have the: Customer satisfaction -> loyalty support Support Support Support
H clbnome: Customer satisfaction ->commitment ns ns
I have 1 bmem Customer commitment ^satisfaction ns ns
Hclc: Customer commitment ->loyalty support support support support

Hc2a: Gain stage -> Commitment ns ns


Hc2b: Gain stage -> Satisfaction ns ns

Hc2c: Regain stage -> Commitment ns ns


Hc2d: Regain stage -> Satisfaction ns ns

Hc2e: Maintain stage -> Commitment support support


Hc2f: Maintain stage -> Satisfaction ns support

Hc2g: Terminate stage -> Commitment (-) (+) (+) (+) ns


Hc2h: Finish stage -> Satisfaction (-) support support support support

Hc3: Moderating effect of CRM Systems on


the relationship between CRM Process
and CRM Performance.

Hc3a: Gain stage moderating effect on ns ns


commitment
Hc3b: Gain stage moderating effect on ns ns
satisfaction

Hc3c: Regain stage moderating effect on ns support


commitment
Hc3d: Regain stage moderating effect on ns ns
satisfaction

Hc3e: Maintenance stage moderating effect on support ns


commitment
Hc3f: Maintenance stage moderating effect on ns support
satisfaction

Hc4a: Customer orientation -> satisfaction Support Support Support Support


Hc4b: Customer orientation -> commitment support Support ns ns

Hc5: Customer knowledge process -> ns ns support support


commitment
Support: supported, ns: not significant at p < .05

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Table 33

Summary Results of Hypotheses Testing - Additional Study

Hypotheses Member, no fit Member, fit


CRM Process to Benefit
11 additional 1 a gain -> social ns
ff additional 1 b gain -> special treat ns
^additional 1C gain -> confidence ns

addilional^d regain -> social ns


ft additional^b regain -> special treat ns
Haddilional^C regain -> confidence ns

Radditional^U maintain -> social supported


ffadditional^b maintain -> special treat supported
ft additional^C maintain -> confidence supported

CRM Fit to Benefit


ft additional^^ moderating gain -> social ns
Hadditional^b moderating gain -> special treat ns
Radditional^C moderating gain -> confidence ns

11 additionally moderating regain -> social supported


f ^additionapb moderating regain -> special treat ns
ft additional-^ ^ moderating regain -> confidence ns

I bidditionalbd moderating maintain -> social supported


biadditionalbb moderating maintain -> special treat supported
Radditionalbc moderating maintain -> confidence supported

Benefit to relational quality


tf additionally social -> commitment ns ns
11 additional"^
special treat -> commitment supported supported
Radditional^ C confidence -> commitment ns ns

^additionally social -> satisfaction ns ns


ft additional ^b
special treat -> satisfaction (+) (-) (-)
Radditional^C confidence -> satisfaction supported supported

p < .05

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CHAPTER 6

DISCUSSION, CONCLUSIONS AND IMPLICATIONS

The primary goal of this research was to examine CRM practice from multiple

aspects. Starting with multidisciplinary literature reviews, a single integrated

framework for CRM has been drawn to provide a blueprint for better CRM practice.

Based on the framework, critical success factors for the businesses and their

relationships were identified. Meanwhile, the factors for the businesses were used to

develop “reflected variables” from customers' perspective. To examine the

relationships of the variables, hotel industry was chosen as the research context. Data

were collected from managers in each hotel and customers of hotels. This investigation

was designed to provide and explain the important factors for CRM Performance for

managers, customers' perceptions about CRM effort of the businesses, and the factors

to lead customers to be satisfied and committed to the relationship.

Following the discussions of the findings of this research, the chapter addresses

some of the limitations. The contributions and implications of this research are discussed

with next. The chapter concludes with discussion toward on directions for future

research.

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6.1 Discussion of Findings

6.1.1 Managers' perspective

Even though the sample size was small, multiple regression analysis remained an

option to examine the research model. It was, however, obvious that the investigation

was restricted to examining the overall relationships: the small sample precluded the

testing of sub-hypotheses.

6.1.1.1 CRM Process, Systems, and Fit

CRM Process was defined and developed in a measurable way. It consists of four

main stages: Measurement, Initiating, Maintaining, and Terminating. This CRM

Process is the effort to build and develop good relationships with customers and, by

definition, CRM Process was expected to be positively associated with CRM

Performance. Significant positive relationships were found between CRM Process and

Non-financial Performance and between CRM Process and Financial Performance.

These results indicate that a well designed CRM process can lead to increases in

customer satisfaction and market share as well as in sales growth and profitability,

even without expensive CRM systems. This result is consistent with reported CRM

success cases (Duffy, 2002). In one of these reported cases, a company decided not to

use technology because they had to meet their customers face-to-face to provide

services. This company's policy was to keep talking to customers in person, for better

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understanding and superior services. Even though there is no doubt about the growing

importance of IT, well designed and customer-centric CRM “process” is the basic

cornerstone for CRM success.

The CRM Systems variable was expected to have moderating effect on the

relationship between CRM Process and CRM Performance, while not direct

relationship of this variable with CRM Performance was proposed. It was noticed,

however, that the CRM Systems variable was significantly negatively related to Non-

fmancial Performance. The possible explanation of this result could be that the CRM

Systems variable used in this analysis was an overall measure. Even though CRM

Process was defined to have four stages - measuring, initiating, maintaining, and

terminating - CRM practice may have been focused most intensely on the maintenance

stage. It is possible that, in the responding firms, any other stage in CRM Process was

either not yet realized or developed fully. Also, CRM Systems are likely to be large,

multifunctional systems; and therefore require certain gestation period for users to

become familiar with the systems. The lag time between implementation of systems

and learning and utilizing the systems may cause this negative relationship between

CRM Systems and Performance.

Also, CRM Fit was not found to be significantly related to CRM Performance in

this study. It was proposed that when CRM Process was designed well to satisfy

customers and CRM Systems employed supported the CRM Process, the impact on

CRM Performance would be stronger than in the case when only CRM Process was

well designed but without the support of CRM Systems. The reasons for non-

significant results could be the negative relationship between CRM Systems and CRM

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Performance. Because the CRM Systems were negatively related to CRM

Performance, effect of CRM Fit may also be confounded. Another reason could be the

small sample size. Due to the small sample size, the relationship between CRM

Systems and Performance may not have emerged as significant and this might lead to

non-significant relationship between CRM Fit and CRM Performance. Additionally,

using the overall measure of CRM Fit might cause non-significant relationships

because the relationship between CRM Fit in Maintain Stage and CRM Performance

may be confounded by CRM Fits in other stages. Therefore, further investigation of

these relationships would be desirable.

6.1.1.2 Market Orientation and Market Knowledge Competence

Limitation of sample size, and therefore, of the analysis tools precluded the

examination of the structure of paths related to Market Orientation and Market

Knowledge Competence in the model. Both Market Orientation and Market

Knowledge Competence were expected to have not only a positive relationship with

CRM Performance, but also a positive relationship with CRM Process. However, their

direct relationships with CRM Performance were and found not significant. Given the

fact that Market Orientation and Market Knowledge Competence have been found to

have significant positive relationship with organizational performance in many

different studies, this non-significant result stands out. The possible reasons are: (1)

small sample size, (2) the moderating effect of technological aspects of CRM

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(Jaworski and Kohli 1993), and/or (3) overall (rather than component) measures used

for Market Orientation and Market Knowledge Competence.

The relationships between Market Orientation and CRM Process and between

Market Knowledge Competence and CRM Process were separated and additionally

examined. Due to the small sample size, the paths could not be included in model

testing.

In this test, Market Orientation was found not significant, while Market

Knowledge Competence was found significant in the relationship with CRM Process.

This indicates that systematic organizational processes to collect customer data and to

use such information, rather than organizational culture, is important in terms of

improving the effectiveness of CRM Process.

Since Market Orientation was defined as organizational culture or atmosphere, it

is possible that a mediating/moderating variable between Market Orientation and

CRM Process or between Market Orientation and CRM Performance is needed to

realize the effect of Market Orientation. For example, Market Knowledge Competence

may be necessary to mediate the path from Market Orientation to CRM Process. Also,

According to Service Profit Chain theory, internal service quality that satisfies

employees' needs will influence the employees capability, productivity, satisfaction,

and loyalty (Hallowell, 2000); and satisfied employees will in return strive to satisfy

customers. Therefore top managements may have to try to instill not only a culture of

Market Orientation but also ensure employees' satisfaction in order to improve CRM

Performance.

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6.1.2 Customers' perspective

For the study of customers' perspectives, two different types of customers

were identified. Customers with the memberships of hotel reward programs

constituted one category, and the other category had the customers without such

memberships. Since membership was expected to influence the results, the data

analysis was conducted separately for each dataset.

6.1.2.1 CRM Process, CRM Systems, and CRM Fit

CRM Process was viewed as overall concept of gain, regain, and maintain stages.

In the managers' model CRM Process also contains the idea of measurement stage in

which the businesses evaluate customers to identify the profitable customers that the

firms should target. Customers, however, would not know how they were evaluated

and valued by the businesses. All the customer-side “reflected variables” were

developed based on the contact points of customers. In this study, how the effort of

businesses in each stage would affect customers' satisfaction, commitment, and

Loyalty level was the main issue. As expected, maintain stage was found to have

significant impact, but not other stages. Again, most of CRM practice is likely

concentrated on the “maintain stage”; and larger and more varied samples may be

needed to assess other stages

The terminate stage was found to have a negative effect on satisfaction level. Este

indicates that customers would want to be treated as valuable customers even though

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firms may regard them as not valuable customers. The idea of termination decreases

the satisfaction level. This result was consistent across the member data and non-

member data. Therefore, it is important to assess the value of customers and identify

who is profitable and who is not. Subtle and sophisticated tactics may be needed at

the termination stage, tactics that are not obvious to customers, to enhance CRM

Performance.

CRM Fit was not shown to have strong relationship with CRM Performance. Item

could be partially because the measures of CRM Systems in this study are limited to

the Internet contact methods such as email and website. This study assumed that the

time and place that customers would be able to judge any part of the corporate CRM

computer systems would be during Internet-based encounters and transactions.

Alternatively, it could also be possible that the businesses have not been successful in

utilizing available technologies. If the businesses attempt to use tools like the

Internet more intensively, this could create opportunities for businesses to develop

better customer relationships.

6.1.2.2 Commitment, Satisfaction, and Loyalty

Commitment and Satisfaction had been identified as core variables for

relationship quality, and it was found that there are strong positive relationships with

Loyalty. Therefore CRM Process should be designed to enhance Commitment and

Satisfaction levels. Based on the results of analyses, the Maintain Stage was the

almost the only stage that showed significant relationships with CRM Performance.

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This implies that there could be opportunities to enhance CRM Performance by

utilizing CRM stages beyond just the Maintain Stage. interesting enough, however,

it was found that the Maintain Stage has a positive relationship with Commitment for

members' data while the Maintain Stage has a positive relationship with Satisfaction

for non-members' data. CRM Fit models are also in accordance with these results. The

CRM Fit in Maintain stage has a positive relationship with Commitment for members'

data while it has a positive relationship with Satisfaction for non-members' data. Este

indicates that CRM efforts should be designed differently to target members and non-

members. For non-members increasing satisfaction should be the main goal. On the

other hand, for members, increasing commitment level should be the primary goal.

6.1.2.3 Customer Orientation and Customer Knowledge Process

In the managers' model, Market Knowledge Process was found to have

significant a relationship with CRM Process while Market Orientation did not have

any significant relationship. On the other hand, in the customers' model, Customer

Orientation was found to have a significant relationship with Satisfaction across the

member and non-member data. Customer Orientation was found to be important for

all types of customers, but it is likely that sometimes managers may overlook

potentially strong contribution of Customer Orientation as an aspect of corporate

culture or atmosphere.

Furthermore, customer orientation was found to have a positive relationship with

Commitment for members while the factor that increased Commitment for non-

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members was Customer Knowledge Competence. This means that if hotel members

perceive a hotel as seriously attempting to understand customers, and all the

Employees are encouraged to help customers by understanding customer requirements,

then the members are most likely to increase their commitment level; though not the

satisfaction level. On the other hand, non-members will increase satisfaction level if

they perceived that hotels have a systematic process to collect customer data so as to

understand customers and employees make serious attempts to understand the

customers.

6.1.2.4 Goodness of Fit of Model - Mediating model and Moderating model

This study conducted separate path analyzes to investigate different models

including mediating model (Relational Benefits as mediator) and moderating model

(CRM Fit as moderator).

First of all, all models fit better member data than non-member data as expected

since CRM process is found to focus on Maintain Stage.

Second, regarding moderating effect, the models without CRM Fit fit the data

slightly better than the models with CRM Fit. Based on simple comparison of

goodness-of-fit indices, the model without CRM Fit fit best the member data.

Third, regarding mediating effect, based on goodness-of-fit indices, the models

with relational benefits as mediating factors did not fit the data well. The relational

benefits-mediating model fits non-member data poorly. A likely explanation is that

CRM Process has been focused on Maintain Stage and relational benefits are

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generated by staying in a relationship for a while. Therefore, mostly members may

have chances to receive relational benefits, and therefore the model with mediating

variable fits better the member data than non-member data. Overall, the relational

benefits-mediating model, however, fits even the member data poorly..

In sum, simple goodness-of-fit indices indicate that the model without CRM Fit

without Relational Benefits fit well the member data while the model with CRM Fit

with Relational Benefits explains nonmember data poorly.

6.1.3 Customers' Perspective vs. Managers' Perspective

This study was designed to examine the different perspectives of customers and

managers on CRM practice. Due to the small sample size, however, a direct

comparison of these two perspectives was not possible. In this section, the differences

and similarities between the customers' models and managers' model are reviewed

briefly.

The managers' model found positive relationship between CRM Process and

CRM Performance, and also a positive relationship between Market Knowledge

Competence and CRM Process. In managers' study, those effects found to be

significant were all based on overall (rather than component) measurements.

Nevertheless, this still indicates that CRM Process is important for CRM Performance

and the results of the customers' model are also in accordance with this, in that the

Maintain Stage of CRM Process was found to have a positive relationship with

Commitment and Satisfaction.

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Customer Knowledge Process for customers-especially not members- would help

enhance customers' Commitment just as CRM Process does for managers as part of

Market Knowledge Competence. Therefore improvements in Customer Knowledge

Process would satisfy customers as well as lead to a better CRM Process.

6.2 Limitations

Even though the research has shown interesting results in terms of CRM Process

and its impact on customers, there are some limitations. The biggest limitations of this

study are in terms of the sample sizes.

First, as already noted earlier, the managers' study was limited by the low

response rate leading to a small sample size. Given the fact that the managers' model

includes five independent variables including CRM Fit, the rule of thumb to calculate

the sample size suggests that at least 90 data points be obtained (N = 50+8*m, where

m is the number of independent variables) (Green 1991). The usable data points were

34, considerably less than 90. Despite this limitation, however, there were some

significant results and the R2 was large enough to achieve a reasonable level of power

(over 80%).

Due to this small sample size, CRM Process could only be investigated as an

overall measure, and it was not possible to examine the component stages in detail.

The full path structure could not be investigated.

While the small sample size does not necessarily detract much from the findings

that were statistically significant, the smallness of the sample does mean that the

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results that were not statistically significant cannot be dismissed easily. Therefore it is

possible that CRM Systems, CRM Fit, and Market Orientations are significantly

related to CRM Performance - a large sample study is required to assess these

relationships. Also, possible CRM practice differences across hotels with respect to

hotel size and brand were not captured.

In terms of data collection method, reliance on responses from a single key

informant per hotel has the potential for biasing the responses and results obtained

from the managers' study.

Second, while significantly larger than managers' dataset, the customers' data set

was also not big enough to use full structural equation modeling. Therefore, in this

study, only path analyzes were conducted. If all the measurement items could be

included in the model and Ping (1995)'s method or Joreskog and Yang (1996)'s

methods to estimate the moderating effect be employed, then the results might become

more insightful by investigating measurement structure and moderating effect together

in a comprehensive structural model.

Also, as mentioned in the discussion about the managers' sample, it must be

acknowledged that path parameters that were not significant might well turn out to be

so if a larger sample size had been available.

Another issue concerns the comparison of models between sub-groups (eg,

members vs. non-members). It was concluded that these models appear to be different

in the sub-groups primarily because path parameters that are significant in one model

are not significant in the other. While it is legitimate to point out such results and draw

conclusions from them, the strength of these conclusions is limited because not direct

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test of the difference between the parameter estimates is available due to the small

sample size of the study. Under ideal conditions, a multiple group SEM model could

be conducted that tests the “invariance” of the model across groups. Such a model

would provide a direct test of the equality of parameters across groups and provide

much stronger evidence as to whether the models are the same or not across groups.

Lacking such an approach, the conclusions drawn must be tempered somewhat.

Regarding the Relationship Marketing approach, Trust - one of the core

relationship quality measures - was not included in the model. The Confidence

Benefit contained the trust concept, but the model fit was not good. ThereforeTrust

may not be the critical variable in this particular study. In full and comprehensive

investigations of relationship quality and relational benefits, however, Trust would

have to be treated explicitly in the models. Furthermore, clear distinction in the

definitions of Loyalty and Commitment are needed. Loyalty has been defined in many

studies from multiple aspects such as cognitive, affective, and behavioral, and

Commitment may not be clearly distinguished from affective or cognitive aspect of

Loyalty. In this study, exploratory Factor Analysis and CFA indicated good fit in

measurement model, but further refined measurement items for Loyalty and

Commitment would improve the model fit.

CRM conceptually is about relationships and mutual benefits. For non-members'

data, however, service quality might also be an important factor in determining the

satisfaction and loyalty levels.

In terms of data collection, instead of random sampling method, the hierarchical

Convenience-sampling data collection method was used to expedite the survey.

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Despite this convenience approach to sampling, the data showed no significance

skewness or kurtosis and the composition of respondents showed almost even

distributions in terms of gender, age, income level, and hotel usage.

Lastly, customers' perspectives and managers' perspectives are not comparable

primarily because of different analytical methods that had to be employed in light of

sample sizes, and because of the context of this study - hotel industry - and the

associated limitations of data collection. Customer data were collected from people

who have experienced any hotel stay within a year, and the aggregated data were used

to examine the models. Also hotels involved in the managers' sample were not

necessarily the same hotels referred in the customers' sample. Therefore, directly

Matched data sets from both managers and customers for a specific hotel chain were

not available.

6.3 Contributions and Implications

Despite the limitations, the research presented in this dissertation has theoretical

and practical implications with regard to understanding why huge investments in IT

for CRM systems do not always generate desirable outcomes. The research also

showed how customers and managers perceive CRM differently.

The conceptual discussion and the two studies provided a comprehensive CRM

framework and tested a model of critical factors for CRM success. The result

conceptual framework provides a stronger theoretical basis for understanding the

technology aspects of customer and market-focused research in the Marketing

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discipline. As a conceptual contribution, relationship quality from Marketing literature

and TTF model from Management Information Systems literature were integrated in

this study.

The study theoretically sheds light on the importance of customer-centric

management as well as information technology in CRM practice. The findings showed

that CRM Process was significantly associated with CRM Performance. CRM Process

was developed based on relationship cycle, and with an embedded focus on customers.

To investigate CRM practice, it was important to adapt the definition of CRM Process.

Based on responses from the customers and from the managers, it was clearly found

that customer-centric CRM Process was critical for CRM success. Results from the

managers' study indicated that well designed CRM Process influenced CRM

Performance, and results from the customers' study indicated that the Maintain Stage

(CRM Process) influenced their Commitment positively. Even though in the business

world, a lot of attention has been devoted to information systems for better CRM

Performance, the customer centric aspects of well-designed CRM Process should

receive greater managerial attention.

The best benefits of this study to the managers would be closer matching of

CRM technology and CRM Process, leading to increasing levels of customer

satisfaction and customer retention. Even though CRM Fit could not be thoroughly

investigated, the concept of CRM Fit would help managers understand the importance

of well designed IS implementation strategy. The focus on CRM Fit highlights the

fact that CRM Systems should be implemented to provide best support for CRM

Process. In addition to well-designed CRM Process, supportive CRM systems would

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boost CRM Performance. The relationship between CRM Systems and CRM

Performance was found not significant and even significantly negative. These results

indicate that implementation of Information Systems has to be planned thoroughly

before major IT projects are executed. Based on the concept of CRM Fit, scrutiny of

CRM Process should precede the investments in and implementation of CRM Systems.

In addition, the analyzes of Market Orientation and Market Knowledge

Competence highlighted the importance of cultural orientation toward customers.

The distinction between cultural norm and the organizational process for customer

Knowledge were examined empirically in the context of CRM. Even though Market

Orientation as a cultural norm was not found to be significantly associated with either

CRM Process or CRM Performance in the managers' data, responses from customers

indicated that Customer Orientation was an important factor for Satisfaction across

members as well as non-members. Customer Knowledge Process and Customer

Orientation were found to have different roles for different groups of people. For non-

members, Customer Knowledge Process was found to influence Commitment while

for members Customer Orientation was positively associated with Commitment. TO

practical implication is that members are likely to respond well to a perceived

customer friendly corporate culture while non-members are likely to seek evidence of

corporate attempts to acquire honest customer knowledge.

Furthermore, the comparisons between the member model and the non-member

model provided insights about how differently these two groups perceive the same

practice and what are the important variables to satisfy these two different categories

of customers. When members and non-members categories exist in an organization's

134

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customer base, then managers should adjust their strategies and tactics according to

what appeals to each category. Also in this study, the effects of each stage in CRM

Process were investigated from the customers' perspective. Terminate Stage has been

recognized as an important managerial issue: a way of pruning unprofitable customers.

Accordingly, a lot of studies have focused on customer lifetime value calculation. The

customers' data showed, however, that customers - even marginal and unprofitable

ones - did not seem to like the idea of the Terminate Stage. A clear implication is that

the Terminate Stage tactics have to be handled with extreme care and finesse.

6.4 Future Research

Based on the research presented here, several issues for future research have

become evident. Future research is needed not just to overcome some of the

limitations but also to extend the work presented here.

First, CRM has received a lot of managerial attention and many academic studies

have been done on various aspects of CRM. Not many studies, however, have

examined both the customer and the business perspectives. Due to the small sample

size of managers' data, however, customers' model and managers' model could not be

compared fully. Addressing this issue in larger scale studies would help managers to

understand the differences between managers' and customers' view of CRM and to

bridge the gaps between the differing perceptions of managers and customers.

Second, in a similar vein, large sample size allowed the investigation of CRM

Process and CRM Fit in detail. It would be helpful to examine the relationship

135

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between CRM Process and CRM Systems as well as the moderating effect of CRM

Systems.

Third, investigation of the CRM practice of a specific, branded hotel chain (or

other such service organization) and that chain's own customers' perceptions of CRM

practice would help understand the CRM process more thoroughly by comparing

directly the perceptions of managers and customers.

Fourth, the modification index of path analyzes results suggested the paths from

relationship quality to relational benefit as a way to improve the model fit. The paths

were not investigated because literature review had pointed towards other paths from

relational benefit to relationship quality. It would be interesting, however, to examine

possible differences in the paths between relational benefits and relationship quality

for non-member and member categories of customers.

Fifth, this study does not include service quality measures in the models. Since

service quality, relationship quality, and relational benefits are closely related to each

other, it would be interesting to investigate the three concepts jointly in the context of

CRM.

Sixth, the Internet has emerged as a major new medium for customers to interact

with firms and as a new tool for information search, information delivery, and

shopping. This study did not have the opportunity to thoroughly investigate the role of

Internet in CRM settings. Studies of the impact of Internet on CRM would be

insightful for managers in that, using the results of such studies, they can employ this

new medium more effectively for enhancing customer retention.

136

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APPENDICES

A. Factor Analysis for MO and MKC

It varies Factor
Items
ble 1 2
MKC We systematically process and analyze customer 0.04961 .875
information
Customer information is fully integrated in our services .142 .875
We systematically analyze information about competitors .472 .620
Marketing and R&D fully cooperate in evaluating and 0.09060 .706
refining new products and services
MO Managers give personal input and leadership into .872 .124
understanding customer needs
Management constantly communicates the importance of .841 .256
responding rapidly to competitors' actions
Management provides excellent incentives and rewards at .940 0.04010
all levels for responding well to inter-functional customer
calls
Management provides excellent incentives and rewards at .852 .138
all levels for information shared across functions, not just
productivity
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser

137

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'
B. Background Information of Managers Data

1. Position of Respondent__________________________________
Frequency Percent Valid Percent Cumulative
Percent
Valid Chairman/CEO/Owner 4 11.8 11.8 11.8
Chief Operating Officer 5 14.7 14.7 26.5
Sales/Marketing Executive 14 41.2 41.2 67.6
Gerente general eleven 32.4 32.4 100.0
Total 3. 4 100.0 100.0

2.Revenue

Frequency Percent Valid Percent Cumulative


Percent
Valid Under $499,999 4 11.8 12.5 12.5
$500,000 - $999,999 2 5.9 6.3 18.8
$1 million - $2,499 million 2 5.9 6.3 25.0
$2.5 million - $4,999 million $5 6 17.6 18.8 43.8
million - $9,999 million $10 5 14.7 15.6 59.4
million - $19,999 million $20 5 14.7 15.6 75.0
million - $49,999 million $50 4 11.8 12.5 87.5
million - $99,999 million $100 1 2.9 3.1 90.6
million - $499,999 million Over $1 1 2.9 3.1 93.8
billion Total 2 5.9 6.3 100.0
32 94.1 100.0
Missing System 2 5.9
Total 3. 4 100.0

138

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C. Background Information of Customer data

1. Last year, how often stay at hotels______________________________


Frequency Percent Valid Percent Cumulative
Percent
Valid 1 or fewer 22 10.0 10.1 10.1
2-5 110 50.0 50.7 60.8
6-9 29 13.2 13.4 74.2
10-13 22 10.0 10.1 84.3
14-17 10 4.5 4.6 88.9
18-21 2 .9 .9 89.9
22 and more 22 10.0 10.1 100.0

Total 217 98.6 100.0

Missing system 3 1.4


Total 220 100.0

2. Average price per night


Frequency Percent Valid Percent Cumulative
Percent
Valid less than $50 4 1.8 1.8 1.8

$50-99 39 17.7 17.7 19.5


$100-149 94 42.7 42.7 62.3
$150-199 57 25.9 25.9 88.2

$200-249 15 6.8 6.8 95.0


$250-299 1 .5 .5 95.5
$300-349 5 23 23 97.7
$350-399 2 .9 .9 98.6
$400 and more 3 1.4 1.4 100.0

Total 220 100.0 100.0

3.Purpose
Frequency Percent Valid Percent Cumulative
Percent
Valid Family Leisure 93 42.3 42.3 42.3
127 57.7 57.7 100.0
Business Trip
Total 220 100.0 100.0

4. Membership
Frequency Percent Valid Percent Cumulative
Valid (Not) 1 117 53.2 53.2 53.2
(Yes) 2 103 46.8 46.8 100.0

Total 220 100.0 100.0

139

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5. how long in the membership


Frequency Percent Valid Percent Cumulative
Percent
Valid < 1 month 1 .5 .9 .9
1-6 months 4 1.8 3.8 4.7
6-12months 6 2.7 5.7 10.4
1-2 years 19 8.6 17.9 28.3
2-3years 17 7.7 16.0 44.3
3-4 years 12 5.5 11.3 55.7
> 4 years 47 21.4 44.3 100.0
Total 106 48.2 100.0
Missing system 114 51.8
Total 220 100.0

6.Income

Frequency Percent Valid Percent Cumulative


Percent
Valid <25,000 35 15.9 16.9 16.9
25,000-49,999 3. 4 15.5 16.4 33.3
50,000-74,999 30 13.6 14.5 47.8
75,000-99,999 36 16.4 17.4 65.2
100,000-124,999 32 14.5 15.5 80.7
125,000-149,999 > 14 6.4 6.8 87.4
150,000 26 11.8 12.6 100.0
Total 207 94.1 100.0

Missing system 5.9


Total 13 220 100.0

7. Gender

Frequency Percent Valid Percent Cumulative Percent


Valid Female 78 35.5 35.8 35.8
male 140 63.6 64.2 100.0
Total 218 99.1 100.0
Missing system 2 .9
Total 220 100.0

8. age
Frequency Percent Valid Percent Cumulative Percent
Valid 18-24 27 12.3 12.3 12.3
25-34 68 30.9 30.9 43.2
35-44 63 28.6 28.6 71.8
45-59 53 24.1 24.1 95.9
60 and more 9 4.1 4.1 100.0
Total 220 100.0 100.0

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D. Online survey - Managers' perspective

IN V IT AT IO N

Hello:

He is a doctoral student at the University of Rhode Island.

This Is a survey about Customer Relationship Management (CRM). Because of your experience, your respons on ses are vital for my research

Please spend a very small part of your busy day to answer those questions.

Your identity will be kept completely confidential.

A summary of the survey results will be available to you so indicate at the end of the survey.

Please note that the participation is voluntary, if you have any questions or comments, please feel free to contact Jounghae Bang (Ms. Kris)
(lounohaefiimaH url.edut or my research supervisor Dr. Nik Dholakla fnlkgmri aduv

Jounghae Bang
Ph D Candidate. Marketing
University of Rhode Island

IN FORMEDCONSENTFORM

The University of Rhode Island


College of Business Administration
7 UppH Road, BaUentine Hall
University of Rhode Island
Kinston, Rl 02881

INFORMED CONSENT FORM

The University of Rhode Island


College of Business Administration
7 Lippit Road, Ballentine Hell
University of Rhode Island
Kinston, Rl 02881

Title: Understanding CRM: Exploring the implications of CRM Fit, Market Orientation and Market Knowledge Competence

PRINT OUT AND KEEP THIS FORM FOR YOURSELF

You have been asked to take part In the research project described below. If you have any questions, please feel free to contact Jounghae Sang
(Kris) by phone at (401) 674-7563 or her research supervisor Nik Dholakla by phone at (401) 874 - 4172, the people mainly responsible for this study.

This purpose of this research Is to Identify critical success factors of CRM practice. Your participation In this exercise Is voluntary, and Involves
answehng this questionnaire designed to assess the CRM system fit market orientation and market knowledge com petence of your
organization. Your identify as a participant in this study will be kept confidential. The survey questionnaire Is on the Web. Completing the
questionnaire should take you approximately 20 minutes.

YOU MUST BE AT LEAST 1B YEARS OLD to be In this research project

If you decide to take part In this study, your participation will Involve filling out a questionnaire pertaining to CRM systems, market orientation,
market knowledge with respect to your organization.

There are no risks and the possible discomforts of the study are minimal. You will not receive any disadvantage from answering the questions and
from the result of this research.

Although there may be no direct benefits of the study, your answers will help expand our knowledge of CRM and its succe ss factors. If you want the
result you can give us your contact Information and the request Upon the request, the result will be sent

Your part In this study Is confidential. That means that your answers to all questions are private. Scientific reports will be based on group data and will
not Identify you or any individual as being In this project A unique identification number will help us track your response for the encouragement
of the participation and the potential follow up study.

The decision to participate in this research protect is up to you. You do not have to participate and you can reftjse to answer any question.

. Partirinatinn In thlc etnilv i« nnt.evnerteri In he harmflil nr InlnHniis In vnn Hnwevar If thlc eluriwraiaeea.vnii aov inlurv vnu write nr rail

141

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ÿfit • Min mo ll Inlrrn«l i'xrilfir<*t provided by Ai t Mvdw

Although mare mav bs no direct benefits of the study. vour answers will help expand our knowledge of CRM and Its su cce ss factors. If you want
the result, you can give us your contact Information and the request. Upon the request, the resultwfll be sent

Your part In this etudv is confidential. That means that your answers to all questions are private. Scientific reports will be based on group data
and will not identity you or any Individual as being In this project A unique identification number will help us track your response fbrthe
encouragement of the participation and the potential follow up study.

The decision to participate in this research gold is up to you. You do not have to participate and you can refuse to answer any question

Participation In this study Is not expected to be harmful or Injurious to you. However, If this study c au ses you any Injury, you should write or call
Jounghae Gang (Kris) or her research supervisor Nik Dholakla at the University of Rhode island at (401) 874-2337.

If you have more questions or concerns about this study, you may contact

University of Rhode Island's Vice Provost for Graduate Studies, Research and Outreach, 70 Lower College Road, Suite 2, URI, Kingston, Rl,
(401) 874-4328.

You are at least 18 years old You have read the consent form and your questions have been answered to your satisfaction. Your filling out the
survey implies your consent to participate in this study.

Thank you.
Jounghae Bang (Kris)
Doctoral Candidate

APPROVED-URI
institutional Reveiw Board
on 1 2/11/03

r.Continue
u or clcfc here It you have any questions regarding this survey.

What ucsti
ProfeMh
Instant!)
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3 Customer Relationship Management - Microsoft Internet Txploier pi ovtded liy Art Media

To the extent do you agree or agree with the following statements using the 7-point scale below:

Strongly Strongly
Apaa OtsjgrM

We have a format system for Identifying potential customers F rÿ

We have a systematic process for assessing the value of past F


r
customers with whom we do not have a relationship

Wh have a formal system tor identifying non-profitable or lower value C



customers

We have a format system In plate OiitaNbranUatea to

We systematically present different offers to prospects based on r


their value
We have a systematic process lior re-establishing and refaVonehip r
'
with valued inactive customers

We have developed a system for interacting with inactive customers r

Strongly
Disagm

rr , r/' .r rr . ÿ
We systematically attempt to customize products/services based on c
the value of die customer
Wa hava ttnmalrai) procedures tor crata-aelllng Id valuable

We have formalized procedures for up-selling to valuable customers C

lydjacgobriulng:

m
We try to passively discontinue relationships with low value or
problem customers (eg raising basic service fees)

Any comments on previous questions

142

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r R i-latm nshipM .itK ujtM nvnl M um sn ft ItiU rncl. F xp lu ritr jirovid*?il by Art. Me.di-

to

INFORMATION SYSTEMS ussd by the bu«inesi unit help ui:

StroogTy Mot
Oifagm ApptokiM

IP enM gp«snt|«leu»tomtrs, r r .r
assess the value of past customers with whom we no longer have a C RC
relationship
Identify AOfrprdntabia or kNMrvaiue customers c

^FORMATION SYSTEMS used by the business unit help us:

Strongly Nautid 9strongly Net


Agroo Otsap*« «ppkahi
differentiate targeting orourcommunicatione bawd on the gg J g PJ lie n r
prospects value mm
lr r r r r

SKIS! yes
Interact with inactive customers r r

INFORMATION SYSTEMS used by the business unK help us:

9tm>0y Not
Ohagnt

maintain an Interactive two-way communication with our cuilom irt CC


JflL *
customize products/services based on the value of the customer CC c

in cross-selling to valuable customers DC ,

in up-selling to valuable customers c

'3 Costumer Relationship Moiwqemeitt - Microsoft Internet txplorer provided try Art Media

MRXtMA RON SYSTEMS used by the business unN help us:

Suongfy MM
OngiM

rnaibbi5 ub ^ta* .h ^wa,« !rW ubitasoh«tth?urcurto™re; / r > rs , r 'V - f r

customize products/services based on the value of the c c c c CCC c


- '
customer Intrers-MiiinswvpiirtWtHiaimtii t r \ r ,- 'r V - r - r
in up-selling to valuable customers rrrrrrrr

NFORMATfON SYSTEMS used by the business ur* he*) us:

&n>ft0y 9strongly MM
Qugre* /ppfeabk
ad}ve^d^contfnueiwMlm«hi|N|Mth)Mf)ahiaor^roblam < r>\r
customers (eg canceling customer accounts)
r s#
passively discontinue relationships with low value or problem r r
customers (eg raising basic sensitivity fees)

Any comments on previous questions?

ÿa

d
Corttlnuejjj
U °r clckhere if you have any questions regarding this survey.

c 3
46%

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To what extent do you agree or disagree with the foRowing statements using the 7-point scale below:

W.Wrtm.kMllyproMM and Customer InftrmMor.. : A 'v O CM i ,<rS t SCSL iU C


information Is fully integrated In our services CCOCCCCC-

w « totorrr « on . M « A cgr Ww«r. . ry, . r r r r r and r


Information aboutcompe tito rs' p ro ducts and se rv ic es is fully
In teg ra ted asabenchma rk In ourbus in ess

araj ..r.»c.7 -toM..r.nB«..n.™.B,.....1. c crrr r


toothy tfeutnl
Sgr**
Markabng win RftD communicate ragulaiy , r rr ÿ r cf£
Marketing and R&D fufty cooperate In establishing new product and rrcrc
service development goals and priorities

? r? ^r . wcoM,r“ inMiu“',a,"3"“',on,w r>. r .r • ^ r-

To what extent do you agree or agree with the foRowing


statem ents?

Management copetanRy cpmrnunfcateethf Importance of


mmm W iM l tn milnmin zl

r kelH[i«inslii|i MrtiirKjeinent - Min Internet I Kplorer provider! by Ait. Half H-lJlxl


“ to

To what extent do you agree or disagree with the foRowing


statements?

Strongly Not
OKagra* /pfleait

Manauemanl constantly communicates tha importance l"> r r C'Ci


of commltmam to cuanmaq , '\
Management constantly communicates the importance of r r r r r c
understanding customer needs
Managers g in personal Inpul and leadership Into understanding r r r r
customer needs *U
HI
NtuM

Management constantly communicates the importance of * and

responding rapidly to competitors1 actions P8BSBISffiBB r >


Management shows that they care about sharing competitors r c r r
Information
Management shows that they care about responding rapidly to H RS! F. ' r
Spmpftitori'ictlonB

Stronpy NcitrM Strongly Not


D ngu Apg»o* u
ManagersghepeftonallnputandteaderehlpintocreelfngftinctionRl r ."fClC
InlagratanlnatialaiK
Management provides excellent Incentives and rewards at all levels C for c c c
responding well to Interfunctlonal customer calls
M amgniwntprm M incata M lnnn M aandmnidaalalllmli . ' <*

Any comments on previous questions?

zl

RELATIVE TO COMPETITORS, over the last three business years, how


does your business perform concerning the foRowing
statements? zl

144

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RELATIVE TO COMPETITORS, over the last three years, how


do es your bu sin ess unit perform concerning the fodowing
statem ents?

Achieving customer satisfaction


Attaining desired market share

Malnlng desired growth

RELATIVE TO COMPETITORS, over the last three bu sin ess years, how
do es your bu sin ess unit perform concerning the foiowtng
statem ents?

Mwh Mjoh Not


S«ttir Won* A oloW t

bales growth r r SSSS i r


Profitability r r r < r
Manat Sharo
S lili SS fi SBH i rr iS ESHS r
Stock Price r r r r r

BACKGROUND REFORMATION
We respect your privacy. Your respons on ses are confidential and no Individual Information will be reported.

Which country is your business unit located in?

| - Select » 3 |

Your position (Job title)


I - Select - rl[""

Revenue

1 - Select - you !

'3|fustoniei R e la tio n sh ip M anagement • M ic ro so ft I n te rnetfxp lo rerp ro v id ed by rtit M ed io

BACKGROUND MFORMATION

We respect our privacy. Your responses are confidential and no Individual Information will be reported

Which country is your business unit located in?

|-S e le c t- 3 Yo

Vour position (Job title)

j - Select -

| - Select - *|

Since there are often multiple respondents from an organization, we need to know the name of your organization. This is for statistical purposes
only. This information will not be used to identify you. Please choose from the following:
(If you cannot find your hotel name in the list, please select' other* and provide us your hotel name in the box.)

IS e le c t- *| |

Thank you so much for your help!! We really appreciate it

If you want to receive the aggregated result, please provide us with your
contact information below.

3
Continue |
Please cut lomcfraeittmai.url.edu or click here If you have any questions regarding this survey.

Yo
j..-'-' - -— I
100%

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E.Customer Survey
H iriisfonn 'i S urveyf RMM il io mi II I nternet E xplorerprovideiltry A rt M edia

INVITATION

Thank you for participating In this survey

This is about Customer Relationship Management and a purely academic study. Because of your experience, your response is essential. We
highly appreciate it.

The survey is anonymous, and your identity will not be asked. You will find short answer questions and 7 polnt-scale questions. Your answers
should be based on your previous experiences of hotel stays.

Again, thank you very muchl

INFORMED CONSENT FORM

The University of Rhode I stand


College of Business Administration
7 LippH Road, Ballentine Hall
University of Rhode Island
Kinston, Rl 02881

Title: Understanding CRM: Exploring the implications of CRM Fit, Market Orientation and Market knowledge Competence

PRINT OUT AND KEEP THIS FORM FOR YOURSELF


Dear Sir or Madam:

You have been asked to take part in the research project described below, if you have any questions, please feel free to contact Jounghae
Bang (Kris) by phone at (401) 874-7563 or her research supervisor Nik Dholakla by phone at (401) 674 - 4172. the people mainly responsible
forthls study.
^
riistonipr S u rv ey • fk M - M icro so ft lo t pi netfxp lo ie ip io v id e rl by A rt M ed ia

will be kept confidential. The survey questionnaire is on the Web. Completing the questionnaire should take you approximately less than 10
minutes.

YOU MUST BE AT LEAST 1B YEARS OLD to be in this research project.

If you decide to take part in this study, your participation will involve filling out a questionnaire pertaining to how you feel about your experiences at
a hotel.

The possible risks or discomforts of the study are minimal. You will not receive any disadvantage from answering the questions and from the result
of this research.

Although there may be no direct benefits of the study, our answers will help expand our knowledge of CRM and Its success factors. If you want
the result, you can give us your contact Information and the request Upon the request, the result will be sent

Your part in this study is anonymous. That means that your answers to these questions are private. Scientific reports will be based on group
data and will not identify you or any individual as being In this project

The decision to participate In this research orlect Is uo to vou. You do not have to participate and you can refuse to answer any question.

Participation in this study is not expected to be harmful or injurious to you. However, if this study causes you any injury, you should write or call
Jounghae Bang (Kris) or her research supervisor Nik Dholalda at the University of Rhode Island at (401) 874-4172.

If you have any more questions or concerns about this study, you may contact

University of Rhode Island's Vice Provost for Graduate Studies, Research and Outreach, 70 Lower College Road, Suite 2. URI, Kingston, Rl,
(401) 874-4328.

You are at least 18 years old. You have read the consent form and your questions have been answered to your satisfaction. Your filling out the
survey implies your consent to participate in this study.

Thank you,
Jounghae Bang (Kris)
Doctoral Candidate

APPROVED-URI
Institutional Review Board
on 4/11/05

Cowinut |
U or cicfc here if you have any questions regarding this survey.
zl

146

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How often do you travel a year?

| - SelBct -

Last year, how often did you stay at hotels?

j~ Select --V]

Average price per night of your hotel stays last year

[-- Select - 3

Select the hotel chain which you stay most often at

Please answer the foRowing questions based on the hotel chain you chose above.

During last year, how many times have you stayed at this hotel chain?
f - Select ~

For what did you mostly use the hotel chain?


^
Family Leisure

r Business Trip

r Other |

• J rus to mpr S u rv ey - CRM - M icrosoft In fer net Fn p lo rer p ro v id edby A rt M edia

Please indicate the degree to which you agree with the following statements based on this hotel chain.
Strongly NtutrU
ApM uisagra* yp jcacN

I trunk the hotel values its rslsDonahlpwthme


lamavaluablecustomerforthishotelchaln c c c

Do you belong to the membership account of this hotel chain?


f"" Yes

fNo _

* My continue
if V««, pt K
No. p lease slick the continue button and move on to the next page.

How long have you been with the membership program of this hotel chain?

[-^Select - >|

Please indfcatethe degree to which you agree with the foRowing statements based on your experience with thehotelchain that you

fcwigfy Hturtf Strongly Net


Ksagrat tpfikabk
It Is Important for me to manage mt nwrpershlp wW) Bile hotel ÿ' . r r
/! ;ÿ ri
I have high reward scores stored in my membership account rrrr rerr

vmammi ÿ tO ggO gg^


I am aware of the details of rewards available from my membership Yor rrr r r r r
Continue

40%

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147

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^ C us to mer S u rv ey - LKM - M iu o so lt I n te rnet tx p lo re ip ro v id edl»y A rt M edtd I _aaj yes

Please Indfcate the degree to wNch you agree wKh the foHovring statements based on your experience w*fi 1he hotel cftafi that you
chose
9strongly NnM Scwiflilly No
AgrM DlndrH noh

l etiose fttoAow cam) stay tint time because I feund an aflrscfra \ CCCCCC
deal ftrmy ftp 1 -* either'
Formyfirslstayattow/jofe/c/wjn.thehotelmadeanofferwhlch c c c c DC
seemed to be tailored for me and attracted me to the hotel.
it is easy to And (ftu Metcwr/ t information when 1a earth » ra CCTCCC
hotel via internet . *» • . >
I receive promotional offers easily from tfMaftote/chawvialnternet. DC c c (

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first »*ay
stay cr r ~ r r r
there

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i stop c r c
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may need
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information I have already provided.

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preferences
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Pom

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This company's employees can be trusted completely.

rancompany?employee!havemghMagrty C' r 'C . r

Strongly

I feel ms toie/chain would provide me tftfi pi


use the hotel for long , „
ifeelthatflwhote/ctowwoJdralsebaslcseiYlcefees.fldldnot use c c c c c. c c c
the hotel for long.

Any comments on previous questions

148

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Machine Translated by Google

3 Customer Survey - ( RM - Microsoft Internet Lnplu»et provided by Art Media ygyy

Please indicate the degree to which you agree wkh the fotowbig
statements based on your experience with the hotel chain that you

Strongly Not
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Strongly Not
Disagrot Appfcabia
I think aH the employees in ^ io te fc /w in are motivated to help F F DC
customers will
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customers need well
I think mu Mot chain ca m about « ch customer c r;r

Strongly Not
Ditagraa AppfeaMa

i am always dinghtedwm tfueMs/cbeAfs ssiylcs


Overall, I am satisfied with this hotel chain.

* .
Mum a vary ttong nuioniiup Mm h it • « « provMM,
I am very likely to switch to another service provider in the near future C

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My relationship to this hotel chain...


Strongly Not
*
Orsagna fiffk M

It something that l am veiy committed to go


It's very important to me c
DEMOGRAPHY MFOflMATION

We respect our privacy. Your responses_are conlldenliaLand no individual Information will be reported.

Which of the following categories best describes your age?

| - S elect- f ]

What Is the highest level of education you have completed?

|-S e le c t- V]

Which of the following best describes your ethnicity?

I - Select •• 3

Where are you located?

j - Select - ~3
income

- Select - H

Gender

f"Female f“ Male

THANK YOU SO MUCH FOR YOUR PARTICIPATION! WE DEEPLY APPRECIATE IT!

2l

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