CRM Functionality

CRM functionality refers to the CRM applications introduced into the firm. CRM applications and systems encompass a wide range of products and services from a variety of suppliers (Computerworld, 2004).

Other than the Raman and Pashupati (2004) paper few other studies have focused on CRM functionality and the potential effect on outcomes. Due to the wide variety of CRM applications and functionality available, a CRM technology continuum is conceptually appropriate in order to determine where a firm “sits” relative to other firms. At the extremes of this continuum are “contact manager” applications (e.g., Microsoft “Outlook”) at one end, and CRM enterprise suites, highly sophisticated client/server applications, offering 360 degree views of the customer (e.g., MySAP, Siebel, PeopleSoft) at the other (Buttle, 2004; Greenberg, 2002; Turban, McLean et al., 2003; Zikmund et al., 2003).

3.2.3.2. CRM Technology Acceptance

User acceptance relates to the habitual use of the technology, as part of the job function to achieve results (F. D. Davis et al., 1989). The desired results in the case of CRM technology can be described as collecting customer information, accessing, and using that customer information on a regular basis to complete the job requirements (J. W. Kim et al., 2004). User acceptance can also be influenced by a number of factors including perceived ease of use, attitude toward the system, and usefulness (F. D. Davis et al., 1989; Frambach, 1993). As Speier and Venkatesh (2002) demonstrated user acceptance is necessary for CRM technology to be successfully adopted within the firm. Perceived use and usefulness of CRM technology within an organisation reflects the user’s utilisation of the CRM applications and technology. Due to the nature of the CTA construct, the higher the level of CRM technology acceptance within the firm the more likely perceived and measurable benefits will accrue to both users and customers.

3.2.3.3. CRM System Integration

The implementation of an enterprise wide CRM system is not generally a “turnkey” solution, due to idiosyncratic business processes, procedures and customer interfaces (Gefen & Ridings, 2002). However purchasing and implementing stand-alone CRM software such as ACT! requires little integration on a PC or in a small business

environment and is relatively simple. Organisations implementing CRM technology may incorporate any combination of operational, analytical and/or collaborative CRM, in any number of variations (e.g., ACT!, 2004; Epiphany, 2004; Microsoft, 2004; Oracle, 2004; PeopleSoft, 2003; SAP, 2004; SAS, 2004; Siebel, 2004).

A number of researchers have indicated the importance of system integration as a critical success factor of CRM technology implementation (Bull, 2003; Goodhue et al., 2002; M. Meyer & Kolbe, 2005; Plakoyiannaki & Tzokas, 2002). There are two aspects of systems integration that are pertinent to CRM technology adoption: first, integration into existing legacy systems and organisational applications; and second, integration across other functional customer touchpoints (Buttle, 2004; Payne & Frow, 2006). The ability to link the CRM system to finance, operations, distribution, and human resources provides additional value to users, and potentially to customers: customer queries and complaints can be handled more professionally with credible, accurate and timely information.

Similarly, integrating call centres, e-mail and websites through CRM technology provides the opportunity for seamless and transparent customer touchpoints. The extent of CRM integration within the firm should manifest itself in the customer’s perceived relationship strength and performance and leads to the following two hypotheses:

H4: The greater the level of CRM technology adoption within a firm the greater the overall relationship strength with customers.

H5: The greater the level of CRM technology adoption within a firm the greater the relationship performance.

3.2.4. Relationship Strength (RS)

Although there are no strict definitions of relationship strength (RS) in the literature, RS has been considered a higher-order construct by most relationship researchers in both the business-to-consumer and business-to-business environments (Lages et al., 2005). For example, a number of studies have defined RS as consisting of a variety of dimensions including trust, commitment, communication quality, information sharing, conflict, long-term relationship orientation, satisfaction, opportunism and customer orientation (Crosby et al., 1990; Dorsch et al., 1998; Lages et al., 2005; Lang & Colgate, 2003; Storbacka et al., 1994; Wong & Sohal, 2002). Trust and commitment are central to most evaluations of relationships and can not be easily discarded (K. Roberts et al.,

2003). Similarly communication is generally considered a key antecedent or driver of relationships and relationship quality (Duncan & Moriarty, 1998; Lages et al., 2005; Morgan & Hunt, 1994). More importantly, CRM technology provides the potential for extensive, frequent and bidirectional communication beyond traditional

communications media (i.e., telephony and postal service). Hence the communication aspect is considered an important aspect of RS within the CRM context. The other factors noted above have been shown to be dimensions of RS in specific circumstances. For example, information sharing in UK export industry (Lages et al., 2005) or conflict in consumer services (K. Roberts et al., 2003). Relationship strength in this study encompasses the dimensions of trust, commitment and communications quality expressed by the customer, and reflecting the influence of MO and CTA within the supplier firm. In addition it is proposed, based on prior research, that relationship strength is positively related to relationship performance (Lages et al., 2005).

3.2.4.1. Trust

It is not uncommon to define trust narrowly based on the theory being tested and the paradigm being used (McKnight & Chervany, 1996). Trust has been defined, used and studied extensively in the area of relationship initiation, development and maintenance (Berry, 1995; Morgan & Hunt, 1994). Elements of trust are considered to play a significant role in the initiation, development and maintenance of relationships and are central to the concept of RS (K. Roberts et al., 2003). Trust is just as important in the online environment, affecting customer’s perceptions and willingness to participate and establish relationships with suppliers online (Gefen et al., 2003; E. Kim & Tadisina, 2003; Pennington, Wilcox, & Grover, 2004; Rosenbaum & Huang, 2002). Since CRM technology incorporates aspects of the online environment, the RS trust factor may be affected by CRM technology adoption.

The trust typology proposed by Sako (1992) incorporating contractual trust, competence trust and goodwill trust, is used to define trust in this study.

3.2.4.2. Commitment

Commitment is considered necessary for relationship continuation, an antecedent to customer retention, and to positively affect relationships (Helfert et al., 2002; Morgan & Hunt, 1994; Verhoef, 2003). However not all studies have demonstrated that

commitment include forming a psychological attachment or affective commitment, deploying superior resources compared to the competition, and working together to provide customer preferred solutions (Garbarino & Johnson, 1999; Lewin & Johnston, 1997). From this perspective the affective and calculative classifications of commitment provide a useful typology to study relationship commitment (Gounaris, 2005).

CRM technology adoption may be considered as committing resources toward the relationship in the form of a transaction specific investment (TSI) (J. W. Kim et al., 2004). Some TSIs has been demonstrated to improve relationships between retailers and suppliers by indicating commitment to customers (Ganesan, 1994). However the nature and perceived benefit of the TSI may dictate whether there is any improvement in relationship quality (J. W. Kim et al., 2004). The adoption of CRM technology by a supplier may be viewed as an instrumental component, or affirmative action,

demonstrating customer commitment – that is, by collecting and utilising customer data to develop value congruence. Offering leading edge technology, like CRM, in order to provide superior customer solutions exhibits greater resource deployment. In addition CRM technology implementation may be interpreted as attempting to form affective bonds, through acknowledging the values and goals of customers (Gundlach et al., 1995).

3.2.4.3. Communications Quality

Some researchers consider communication as the basis for relationships or even as the foundation of a marketing model (Duncan & Moriarty, 1998; Lewin & Johnston, 1997). Effective quality communication aids relationship initiation and building, and is brought about through timeliness, frequency, accuracy, completeness and credibility (Mohr & Sohi, 1995; Mohr & Spekman, 1994). Timeliness of the information has been shown to be important in relationship building in that the more timely the information the greater the trust (Moorman et al., 1993). Mohr and Sohi (1995) also demonstrated that frequency (and feedback) were viewed as positive attributes of quality

communication, while formal and informal sharing of meaningful and timely

information has been shown to significantly contribute to relationship commitment and trust (J. C. Anderson & Narus, 1990; N. Sharma & Patterson, 1999).

CRM technology is considered by many as possessing the potential to develop improved bilateral communication (interactions) with customers, and implement one-to-

one marketing techniques to a broad customer base (Dibb, 2001; Gummesson, 2004; Ling & Yen, 2001; Winer, 2001; Yu, 2001). Therefore the adoption of CRM technology by a firm has the potential to improve the communications quality between the firm and the customer within a relationship.

As Sharma and Patterson (1999, p. 163) state “regular communications can help develop a sense of closeness and ease in the relationship, and be instrumental in

building emotional and social bonds, thus making the relationship more resistant to the occasional problems that inevitably develop from time to time.”

This study views communication quality as a construct based on attributes such as communication frequency, openness, formality, and bidirectionality.

3.2.5. Relationship Performance (RP)

Financial business performance will not be addressed directly in this study for two reasons. First, Lages, Lages and Lages (2005) have already demonstrated that

relationship strength has a positive effect on business performance. Second, traditional marketing metrics (i.e., market share) and business performance measures (i.e., sales growth) may not be appropriate to evaluate relationships and CRM (Payne & Frow, 2005). For example, an increase in market share (objective measure) may develop from new marketing and sales initiatives, not necessarily from the adoption of CRM

technology. Similarly “objective” profitability measures would not demonstrate whether profitability was improved by enhanced business relationships or merely from the acquisition of a new major customer. As Parvatiyar and Sheth (2000, p. 24) indicate “if the purpose of a particular relationship marketing effort is to enhance distribution efficiencies by reducing overall distribution cost, measuring the program’s impact on revenue growth and share of customer’s business may not be appropriate”. Although a balanced scorecard approach has been used to measure RM performance, other

measures such as relationship satisfaction and loyalty have also been successfully utilised (Parvatiyar & Sheth, 2000; Reichheld & Sasser, 1990). Therefore relationship measures were favoured over more “objective” market- or financial-based measures (Bharadwaj et al., 1993).

Compared to relationship strength, relationship performance considers the overall relationship behaviour and reflects the ongoing quality of the relationship and

et al., 2004). That is, one may trust the other party to behave in a certain manner, be committed to purchase from them due to price, and even communicate frequently, but yet not be a satisfied or loyal customer. Improvement in RP is considered a driver of CRM technology implementation in business, yet there are few CRM specific quantitative studies that investigate this linkage (Firth, 2001; J. W. Kim et al., 2004; Reinartz et al., 2004; Zeithaml et al., 2001). Relationship performance captures outcomes of the relationship through measures of customer satisfaction (Farrell & Oczkowski, 2002; Guo, 2002; Stefanou et al., 2003; Verhoef, 2003; Webster, 2000), customer retention (Croteau & Li, 2003; Jutla et al., 2001; J. W. Kim et al., 2004) and customer loyalty (Matear, Osborne, Garrett, & Gray, 2002; Sanzo et al., 2003; Webb, Webster, & Krepapa, 2000). Relationship performance is measured separately as a consequence of relationship strength (Hausman, 2001), and leads to the following hypothesis:

H6: The greater the level of relationship strength the greater the relationship performance.