Out
Out
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COMPETENCE
BY
JOUNGHAE BANG
REQUIREMENTS
IN
BUSINESS ADMINISTRATION
2005
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INFORMATION TO USERS
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UMI
UMI Microform 3188835
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OF
JOUNGHAE BANG
APPROVED:
Dissertation Committee:
Senior Professor
2005
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ABSTRACT
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
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
First, this study identified critical factors for successful CRM for a business
Because of its extensive reliance on CRM, the hotel industry was chosen as the
these factors and CRM performance were examined. Second, based on the research
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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
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.
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
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ACKNOWLEDGMENTS
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.
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
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
for all their support and friendship. I am also grateful to all my friends in Rhode Island
I cannot thank my family enough for their continued love, care, and
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
ACKNOWLEDGEMENTS................................................ ............................................iv
viii
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Page
CHAPTER 3 CONCEPTUAL FRAMEWORK AND HYPOTHESES................36
viii
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Page
CHAPTER 6 DISCUSSION, CONCLUSIONS AND IMPLICATIONS 119
ix
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LIST OF TABLES
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table Page
23. Age of Respondents................................................ .................................................. ........99
30. Additional Model - Test Results with CRM Fit................................................ ................. 113
31. Additional Model - Test Results Without CRM Fit.............................................. ....... 114
xi
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LIST OF FIGURES
xii
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CHAPTER 1
1.1 Background
retention costs (Kotler, 1997), can be held in check; while profits can be boosted by
1990). In terms of a business vision, it has become increasingly important for service
(Kandampully 1998). For these reasons, customer relational capability has started
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
technology can enhance the organizational abilities to identify and track individuals
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configuring, acquiring, fixing, or returning products (Ives and Mason 1990). Through
CRM and database technologies, companies can improve their customer relations
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,
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
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
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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
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,
(CMO, 2002). Caulfield (2001) indicated that since CRM projects usually involve a
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
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
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
businesses still formulate their marketing strategies based on the old ideas: marketing
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
Little rigorous academic research, however, exists on CRM. Even the definition
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,
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
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'
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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
category called “null” relationships. CRM Systems can manage null relationships as
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
• 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.
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This study draws from and blends multiple disciplinary perspectives. Knowledge
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
explain how CRM Systems could lead to increased customer retention and satisfaction.
Technologies that fit their intended tasks lead to salutary performance impacts
Klein, and March 2000). These notions are appropriate for the proposed study of CRM
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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,
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
the results along with practical and theoretical implications, limitations, and future
research directions.
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CHAPTER 2
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
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
and (4) more detailed reviews of existing literatures based on the components of the
framework.
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customer? What are customer relationships?” need to be addressed before getting into
issues. Many different answers exist to these questions, and these answers vary
There are four different types of 'customers': (1) paying clients, (2) employees,
settings, customers are referred to as “clients” (also “users”) but are simply called
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
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
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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.
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
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
customer value, and the correct means by which to motivate valuable customers to
practice or a strategy rather than as computer systems. Wright, Stone, and Abbot
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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 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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follows the Ang and Buttle (2002)'s definition which regards CRM as a strategy.
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.
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
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,
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
business philosophy and culture to support effective marketing, sales, and service
Successful CRM initiatives start with a business strategy and philosophy that aligns
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
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Several critical CRM issues are addressed in this framework. Winer stresses the
Value (LCV), “firing” or terminating customers that are not profitable (Zeithaml,
Rust, and Lemon, 2001), interacting with customers instead of talking “at” customers
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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high quality customer data and enabled by information technology. The CRM concept
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
integrated, and stored from all inbound touch points, including the web, call centers,
Operational CRM, Analytical CRM, and Collaborative CRM. Operational CRM is the
CRM with the financial and human resources functions of the enterprise resource
planning (ERP) applications. With such integration, end-to-end functionality from lead
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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.
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
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.
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
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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
servicing and delighting the customers are the ultimate end-goals as well as the
the primary requirement. And then every other activity can be configured to
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.
customer information, and therefore, the new struggle is to manage and use this
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and selling performance (Moe and Fader 2001). In this section, the issues related to
Multiple data formats and distributed nature of knowledge on the web make it a
(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
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
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
techniques can be the basis for advantageous customer relationships (Shaw et al.,
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knowledge that is compact and abstract; yet understandable and useful for further
of web data mining have emerged: web content mining, web structure mining, and
web usage mining (Jackson, 2002). According to Edelstein (2001), web content
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
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
driven analyzes using databases or data warehouses (Berry and Linoff, 2000). OLAP
entails generating an online report, analyzing the results, and submitting a more
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-
twenty-one
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methods have come to the fore. The strategic goal of database marketing is to use
continuing personalized relationships with them, leading to greater benefits for the
individuals and greater profits for the corporation (Kahan 1998). Database marketing
marketing - market segments with just one member each (Pitta 1998). It relies on a
relationship and allows customers to truly express the desires that the company can
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
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themselves should be able to stipulate how and when they wish to be approached
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
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
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
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
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Operational CRM technology can be seen as the systems that span the chain from
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
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
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
custom order when it comes along. Holweg and Pil (2001) introduced three
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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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).
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
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
traditional channels. They have a plan for analytics as they integrate the online
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
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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
2001).
Yuan (2002) argued that agents, which are the catalysts for commerce on the web,
engine. The author argued that these engines are able to leverage the interactive power
Joh and Lee (2002) pointed out that most of the e-marketplaces for B2B
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
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
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guarantee a fairer and more efficient transactions for both sellers and buyers (Kang
Some of the studies focus on the design of the IT application through which
consumers interact with the businesses. Balasubramanian, Ma, and Yoo (1995)
Ma, and Yoo 1995). Isakowitz, Stohr and Balasubramanian (1995) noted that
hypermedia projects may involve people with very different skill sets, and the design
a complex domain so as to make it clear and accessible to a varied user base. In their
CRM Systems have been conducted, and specific techniques and tools have been
developed for each technical aspect of CRM. Studies of overall CRM Systems
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 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
and measuring and managing to build customer value. Croteau and Li (2003) studied
Among major CRM managerial issues are strategic orientations such as Customer
He also mentioned that even though most companies think of information technology
first when they consider CRM capabilities, information technology is the least
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
marketing initiatives targeted at each customer, a firm needs to estimate the lifetime
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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
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
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
marketing. Making trade-offs on the basis of projected financial impact, managers can
(1997) presented return on relationship which is a collective concept for current efforts
effectiveness CRM, Kim, Suh, and Hwang (2003) proposed a framework using
balanced scorecard.
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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.
with some caution. Turning customers into mere monetary metrics could create
backlash effects.
topics are Loyalty, Relational Benefit, Relationship Quality, and Service Quality.
Since firms are increasingly recognizing the value of building and maintaining
(Fomell and Wemerfelt, 1987; Reichheld and Sasser 1990), there have been many
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
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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
fulfill the needs of the customer associated with the relationship” (Hennig-Thurau and
several dimensions (Crosby, Evan, and Cowles 1990; Dwyer and Oh 1987; Kumar,
satisfaction and trust (Bejou, Wray, and Ingram 1996; Crosby, Evan, and Cowles
1990; Laglace, Dahlstrom, and Gassenheimer 1991; Wray et al 1994); conflict, trust,
Stettenkamp 1995); and trust, satisfaction, commitment, and affective conflict (Roberts,
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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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,
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
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
service quality and relationship quality. There are several studies examining
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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
As a core strategy, CRM relies heavily on information systems; and yet its
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.
customer aspects of the overall CRM Process. In particular, CRM research requires an
interdisciplinary approach that connects MIS and marketing. Since CRM is about
3. 4
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relations, Reinartz, Krafft, and Hoyer (2004) stressed that it may not be true that more
The first step in building the right type of relationship with customers is
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
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 research models - one from managers' perspective and the other from
customers' perspective. Like Ganesan (1994)'s study, this study also explores the
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
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
organizational model.
The chapter has three main parts. First, a conceptual research model of managers'
perspective is presented. Lastly matched hypotheses from the two perspectives are
developed.
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As the reviews and the CRM framework of the previous chapter indicate, a
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
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
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
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
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
market
Orientation
Market Knowledge
Competence
CRM Systems
CRM Process
CRMFit
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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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
understanding customers.
In the next section, each factor that influences CRM Performance and exploratory
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dimensions: employing subjective vs. objective measures, and employing financial vs.
non-financial measures.
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
have been raised (Noble, Sinha, and Kumar 2002). Pelham and Wilson (1996) and
Jaworski and Kohli (1993) found significant relationships between market orientation
In this dissertation, CRM Performance refers to how well CRM practice executes
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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,
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
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
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sophisticated, and risky - are employed by many companies, but only some companies
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
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 (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
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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)
Tasks in the TTF model are broadly defined as the actions performed by
individuals in turning inputs into outputs (Goodhue and Thompson, 1995). CRM
company wide level. For example, Goodhue, Wixom, and Watson (2002) introduced
(Gamble, Stone, and Woodcock 1999). The stages of the relationship cycle are
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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
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
activities that have been identified as the main drivers of customer satisfaction, and
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
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
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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,
initiation, maintenance, and termination across all customer contact points in order to
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
improve the ability to recognize customers' value and allocate the resources
accordingly (Reinartz, Krafft, and Hoyer, 2004). Therefore it is expected that well
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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.).
Wixom, and Watson (2002) identified the technical architecture of CRM as multiple
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
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
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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
These requirements can be grouped into four basic categories: Integration and
summarized in Table 4.
Table 4
CRM Systems Requirements and Categories
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the critical success factors of CRM. Technological readiness refers to “the level of
technology, (2) possess a superior corporate view of data as an integral part of overall
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.
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 -
systems strategy, Chan et al. (1997) also measured business strategic orientation
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
orientation.
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systems that support CRM Process. CRM Systems are developed and matched to each
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
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
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
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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,
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
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)
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criteria (a long-term focus and a profit focus). According to Narver and Slater (1990),
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).
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
market intelligence pertaining to current and future customer needs, (2) dissemination
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
reward service-giving behaviors that create and deliver service excellence” (p. 459).
for understanding of one's target buyers to be able to create superior value for them
understanding the short-term strengths and weaknesses and long-term capabilities and
strategies of both the key current and the key potential competitors. Finally
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).
better, from the customer perspective, since the organizational culture forces its
organization will also set up clear goals and tasks for CRM. Therefore, the following
integrate market knowledge (Li and Calantone 1998). Market Knowledge Competence
that Market Orientation is viewed as atmosphere and cultural norm while Market
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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
knowledge competence (2) competitor knowledge process, and (3) the Marketing-
current and potential needs for new products or services. A competitor's knowledge
process involves the set of behavioral activities that generates knowledge about
process in which marketing and R&D functions communicate and cooperate with each
other.
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
systematic process of the organization since CRM is not a single project but a
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effectively and efficiently they can perform the knowledge processes. They are the
existing organizational knowledge, sharing and leveraging it, and applying it to create
value for customers (Dawson 2000). Dawson (2000) noted that effective real-time
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
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
essential. Rust and Lemon (2001) noted that the Internet allows the interchange of
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
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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
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
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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.
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
Loyalty
customer customer
orientation* knowledee*
dimensions. The three dimensions for Market Orientation are Customer Orientation,
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and R&D Interface. In the customer model, among these dimensions, only Customer
Orientation and Customer Knowledge Process are included for Market Orientation and
customer retention at a profit (Ang and Buttle, 2002). Since the basic goal of CRM is
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
consumption pleasurable when consumption fulfills their needs, desires, and goals.
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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
(Roberts, Varki, and Brodie, 2003; Hennig-Thrau, Gwinner, and Gremler 2002).
indicator of service relationships since relationships are built upon the foundation of
viewed from affective and cognitive aspects and measured as importance of the
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
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
1997), it is related to the fulfillment of social needs and this repeated fulfillment 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
and future intentions to buy. As such, it is expected that for people who already have
would influence commitment for those who do not have membership status.
Therefore, it is expected:
From managers' perspective, CRM Process was identified to have three stages -
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
manage customer relationship initiation and maintenance across all customer contact
points in order to maximize the value of the relationship portfolio (Reinartz, Krafft,
The termination stage, however, should be examined separately from this CRM
control for enhancing profit rather than a business operation for mutually beneficial
model for additional understanding. Therefore, CRM Process here contains three
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
individual customer preferences have been seen as a key component of CRM (Freeland
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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
limited.
Therefore we expect:
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
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
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
examined by customers at the contact points even though they are managerial issues.
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about customers.
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
have positive effect on Commitment. However, due to the privacy issues, the effect is
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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
B: special treat
CRM Systems Satisfaction
B: confidence
Commitment
B: social my
CRM Process
Loyalty
C. orientation
C. knowledge
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Gremler, and Bitner, 1998). According to Gwinner, Gremler, and Bitner (1998)'s
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
benefits “take the form of relational consumers receiving price breaks, faster service,
desire personalized and close relationships with service providers., Customers value
the benefits of maintaining the relationship (Zeithaml, Berry, and Parasuraman, 1996).
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
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Also, since relational benefits refer to benefits that customers likely receive as a
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
Also, the benefits have been found to be significantly related to Satisfaction and
and Gremler (2002) found that: Confidence Benefits were significantly related to
and Social Benefits also significantly influenced Commitment and customer Loyalty.
Therefore we expect:
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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:
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
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
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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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
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
perspective in a hotel industry. Measures were adapted and adopted from existing
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
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
director of Marketing/Sales of hotels because the survey questions require certain level
The data collected sought one response per hotel. Kumar, Stem, and Anderson
(1993) introduced one hybrid approach to deal with multiple informants. They
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
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
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
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
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
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
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
Table 5
Source of Measurements
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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
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
(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
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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.
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
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
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.
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
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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
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
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
1ST (2,3) INFORMATION SYSTEMS used bv the business unit help us: .8205
* deleted item
4.2.3 Analysis
Due to the small sample size of Study 1, only limited statistical analysis has been
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To examine the effect of CRM Fit (moderating effect), CRM Process and CRM
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
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
items measures were created by averaging the scores and collapsed into single item
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section presents data collection, measurements and analysis for the customer study.
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
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
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
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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
Gain stage items can be directed into “direct effort” to gain customer and
potential customers for customized offers while indirect efforts can be viewed as the
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
Two regain stage items were found and the reliability alpha was .8168. Items and
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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.
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
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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
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
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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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.
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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
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
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
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between the attitudes and future intentions. Therefore the models were tested with
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
Table 15
Eight Analyzes
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CHAPTER 5
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.
managers' positions in their organizations and the revenue levels of hotels they
and outlier checks follow. After reviewing the normality of residual, multicollinearity,
and outliers from the data, hypotheses test results are presented and discussed.
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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They were invited to participate in the study. Table 16 shows the distribution. As requested,
They were general managers. Also, about fifteen percent were Chief Operating Officers
Table 16
Positions of Respondents
Frequency 4 Percent Cumulative Percent
Valid Chairman/CEO/Owner eleven .8 eleven .8
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
2 5.9
3. 4 1 0 0 .0
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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
UJ 0.00.
UJ 0 .0 0
00 .25 .fifty .75 1.1
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As mentioned in the previous chapter, the variables including CRM Process and
the variance inflation factors (VIFs). According to Belsley, Kuh, and Welsch (1980), a
all five variables show VIF of less than 6, indicating no significant multicollinearity.
Table 18
Multicollinearity Check - VIF
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
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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
1 ________
CRM Process H3,4
ÿHI,2
*
Measurement, Initiation (gain & regain), Maintain, Terminatioprocess
< .05, and CRM Systems is significant at t = -2.758, p < .05. CRM Process is
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Table 20
Results of Regression Analyzes
R2 .304 .298
Incremental R2 .007 .0 0 2
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
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
(5.27)=3.642, p< .05. CRM Process was marginally, positively related to the
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
positively related to CRM Process as well as performance. Therefore the third multiple
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.
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
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The separated regression analyzes partially reveal this hierarchical structure among 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
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
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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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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.
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%,
Table 23
Age of Respondents
Total 220 1 0 0 .0 1 0 0 .0
As shown in Table 24, income levels of respondents were also distributed evenly
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
Table 24
Income of Respondents
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
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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
$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
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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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
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
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
“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
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,
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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
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
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
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
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Performance
lHcl„T Loyalty
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
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
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
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
When all constituent variables (gain, regain, maintenance stage) were excluded
and the CRM Fit variables were entered (using member data, with CRM Fit model),
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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
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
Satisfaction.
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NMnfcr
F.G. FMj Y-Ht
R.G.
V ' Nfltafit
CO
CO
C.K. C.K.
GM GM
R.G. IVtnixr
F.G. pM\ M nhr sj /
NHt
Y-Ht IVftnefit
NBrefit
C.K. C.K.
GM
CO CO
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.
Satisfaction across the membership. It was expected that for members, Commitment
would lead to Satisfaction while Satisfaction would lead to Commitment for non-
have significant positive association with Satisfaction in both member and non-
member data while Market Orientation was not found significant in Managers' Model.
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.
members' data while Satisfaction was found to mediate in non-members ' data. With
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).
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-
Commitment across the models with CRM Fit and without CRM Fit (The path was not
mediating variables in all four models. Figure 10 shows the relational benefits
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
Loyalty
HA 1,2,3
customer customer
orientation knowledge
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
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
II
either
either
approximation (RMSEA) 0.15 0.19
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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
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
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
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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
Similar to the findings in the main study, in the additional study, positive paths
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
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
Process across the models with CRM Fit and without CRM Fit (It was not significant
in members' data).
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Based on the test results in main study, the hypotheses formulated in Chapter 4
As shown in this Table, there are some similarities as well as some differences in
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
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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
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Table 33
p < .05
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CHAPTER 6
The primary goal of this research was to examine CRM practice from multiple
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
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
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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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.
CRM Process was defined and developed in a measurable way. It consists of four
Process is the effort to build and develop good relationships with customers and, by
Performance. Significant positive relationships were found between CRM Process and
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
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
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, 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
using the overall measure of CRM Fit might cause non-significant relationships
because the relationship between CRM Fit in Maintain Stage and CRM Performance
Limitation of sample size, and therefore, of the analysis tools precluded the
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
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
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
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
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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constituted one category, and the other category had the customers without such
memberships. Since membership was expected to influence the results, the data
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
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
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
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
relationship quality, and it was found that there are strong positive relationships with
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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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.
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
culture or atmosphere.
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
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
customers.
First of all, all models fit better member data than non-member data as expected
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.
with relational benefits as mediating factors did not fit the data well. The relational
CRM Process has been focused on Maintain Stage and relational benefits are
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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
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
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
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
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enhance customers' Commitment just as CRM Process does for managers as part of
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
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.
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
relationships. Also, possible CRM practice differences across hotels with respect to
informant per hotel has the potential for biasing the responses and results obtained
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
acknowledged that path parameters that were not significant might well turn out to be
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.
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
definitions of Loyalty and Commitment are needed. Loyalty has been defined in many
studies from multiple aspects such as cognitive, affective, and behavioral, and
Loyalty. In this study, exploratory Factor Analysis and CFA indicated good fit in
measurement model, but further refined measurement items for Loyalty and
data, however, service quality might also be an important factor in determining the
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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.
Despite the limitations, the research presented in this dissertation has theoretical
for CRM systems do not always generate desirable outcomes. The research also
The conceptual discussion and the two studies provided a comprehensive CRM
framework and tested a model of critical factors for CRM success. The result
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and TTF model from Management Information Systems literature were integrated in
this study.
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
The best benefits of this study to the managers would be closer matching of
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
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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
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.
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
Orientation were found to have different roles for different groups of people. For non-
customer friendly corporate culture while non-members are likely to seek evidence of
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
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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
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.
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
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
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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
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
possible differences in the paths between relational benefits and relationship quality
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
insightful for managers in that, using the results of such studies, they can employ this
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APPENDICES
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
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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
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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
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6.Income
7. Gender
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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IN V IT AT IO N
Hello:
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.
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
Title: Understanding CRM: Exploring the implications of CRM Fit, Market Orientation and Market Knowledge Competence
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.
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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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
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Online Sirveys Powered
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
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We systematically attempt to customize products/services based on c
the value of die customer
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We try to passively discontinue relationships with low value or
problem customers (eg raising basic service fees)
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-
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143
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To what extent do you agree or disagree with the foRowing statements using the 7-point scale below:
Strongly Not
OKagra* /pfleait
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144
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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?
BACKGROUND REFORMATION
We respect your privacy. Your respons on ses are confidential and no Individual Information will be reported.
| - Select » 3 |
Revenue
1 - Select - you !
BACKGROUND MFORMATION
We respect our privacy. Your responses are confidential and no Individual Information will be reported
|-S e le c t- 3 Yo
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- *| |
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.
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145
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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
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.
Title: Understanding CRM: Exploring the implications of CRM Fit, Market Orientation and Market knowledge Competence
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.
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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| - SelBct -
j~ Select --V]
[-- Select - 3
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 ~
r Business Trip
r Other |
Please indicate the degree to which you agree with the following statements based on this hotel chain.
Strongly NtutrU
ApM uisagra* yp jcacN
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
40%
Q uest
fWeMhf
Instantly
Or*» Suveys Powered By QoesttonPro Survey Software
147
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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 (
Itiseasytogetaresponsefrommywaftote/cftaw c c c c c
' ' r -r r .
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mih M c/alntfet u cuifcmas the aarne (mon ;
7ft«hote/cfteMOfrersotherrelatedproductsorserviceswhichl c c c c c
may need
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toonghr
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preferences
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r r '
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They do services for me that they donl do for most customers CCCCCCCC
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Strongly
148
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Please indicate the degree to which you agree wkh the fotowbig
statements based on your experience with the hotel chain that you
Strongly Not
OitigrN AppfcaMa
Strongly Not
Ditagraa AppfeaMa
* .
Mum a vary ttong nuioniiup Mm h it • « « provMM,
I am very likely to switch to another service provider in the near future C
Dn.rnandthl9SkMctprmUnlaift.il£t , _\>V
We respect our privacy. Your responses_are conlldenliaLand no individual Information will be reported.
| - S elect- f ]
|-S e le c t- V]
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j - Select - ~3
income
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Gender
f"Female f“ Male
2l
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