Customer relationship management and firm performance: The mediation role of business strategy.

1. D I V E R G E N T

2. Customer relationship
management and firm
performance:
The mediating role of
business strategy

3. Original Empirical Research
Conducted by M. Reimann, Oliver Schilke & Jacquelyn S. Thomas
Published in the Academy of Marketing Science Journal in 2009
Questions CRM’s direct and unconditional performance effect

4. 70% CRM projects
losses
nobottom-line
improvementsGrowing
skepticism
11studies to measure links
between performance and CRM
6 Positive
2 Negative
3 insignificant
Questionable
and
Inconclusive

5. Indirect performance effect
of CRM
Conditional effect
of CRM
possibility of important intervening
variables
 the relevance
of business
strategy
 highly
commoditized
industries
specific environmental circumstances

6. Concept of CRM
Customer care
PR
Analysis
Customer Loyalty
Acquisition
Documentation
Communication
Database
CRM

7. Three stages
Initiation
Maintenance
Termination

8. Theoretical Background
Industrial Economics Theory
Sources--->Positions--> Performance
Framework
Conceptual Framework

9. Above average rate of return
• Differentiation
• Cost-leadership
• One/Parallel?
• One– Vulnerable
• Parallel– Positive impact

10. • Capabilities are ‘Discrete Practices’
• Coordinated deployment of assets
• Key source of positional advantage
• Potential to be the source of advantage
CRM

13. H0: Indirect performance effects of CRM
→ positions→ performance framework
The sources
Performance
framework
Positions Proposed Model
The Effect

14. • H1: Differentiation mediates the relationship between CRM and
performance
• H2: Cost leadership mediates the relationship between CRM and
performance.

15. • H3: The relationship between CRM and differentiation is stronger if
industry commoditization is high than if industry commoditization is
low.
• H4: The relationship between CRM and cost leadership is stronger if
industry commoditization is high than if industry commoditization is
low.

16. Methodology

17. Data Collection Methods
In-depth
Interview
Survey
Question
naire
Data

18. Questionnaire Characteristics
Questionnaire
First section
CRM, Performance
Differentiation, High
Industry
Commoditization,
Cost Leadership
Second section
Gender, Position in
the Company
Length of Company
Affiliation, Knowledge
of Company Strategy

19. Differentiation
Communication Price Distribution Brand

20. Cost Leadership
Low manufacturing
Costs
Low Distribution
Costs

21. Performance
Profitability
Satisfaction
Effectiveness

22. Industry Commoditization
Switching
Costs
Price
Sensitivity
Homogeneity
Stability

23. Results
 Measurement assessment
 Structural model
 Comparison of low and high
industries

24. Measurement assessment
First-order
construct
Examined the squared factor loadings.
Analyzed the Composite reliability (CR) and
average variance extracted (AVE)
Examined the Cronbach’s alpha
Established the Content validity
Assessed discriminant validity
Evaluated indicator collinearity and external
validity
The second-
order construct
Adopted PLS analysis

25. Measurement assessment (Continued)
• In the first order construct, the path coefficients were positive (.42,
.52, .08) and significant (p<.01).
• In the PLS analysis, all four differentiation dimensions had positive
(.28, .23, .24, .42) and significant (p<.01) paths on the second-order
factor of differentiation.

26. Structural model
• The relationship between CRM and the two business strategies including
differentiation and cost leadership was confirmed in this study.
• The results also provide strong support for the effects of differentiation
(β=.41; p<.01) and cost leadership (β=.52; p<.01) on performance.
• The R2 value of the performance variable (68%) indicated that the model
highlights important factors associated with the success of firms.

27. Structural model (Continued)
• Found that the indirect associations are significant (while the direct
association is insignificant
• Differentiation and cost leadership fully mediated the link between
CRM and performance, supporting H1 and H2
• Applied covariance based multiple group structural equation
modeling, conducting separate analyses for the low commodity and
high commodity markets to test hypothesis H3 and H4

28. Comparison of low and high industries
• For H3: The impact of CRM on differentiation was significantly greater
in high commodity industries (β=.81, p<.01) than in low commodity
industries (β=.70, p<.01)
• For H4: The impact of CRM on cost leadership remained virtually
unchanged (resulting in no support for H4)

29. Comparison of low and high industries
(Continued)
Paths Differentiation to
performance
Positive and significant
(p<.01) in both subsamples
Cost leadership to
performance

30. Comparison of low and high industries
(Continued)
For the indirect
effect
CRM→
differentiation→performance t-value=1.40
CRM→ cost leadership→
performance
t-value=1.02
*t-value based on the Smith-Satterthwaite test
Both indirect
effects are not
statistically
different (p>.05)

31. Two important questions on taking
CRM approach
1. What is the role of CRM for business strategy and firm
performance?
Sources → Positions→ Performance
2. Does industry commoditization affect
the impact of CRM?

32. Does industry commoditization affect
the impact of CRM?

33. CRM in practice
The research suggests three specific managerial
recommendations
Focusing CRM efforts on the fundamental business
strategies.
Increased collaboration between CRM teams and other
strategy.
Re-examine.

35. Limitations
• Not exhaustive of possible constructs for the
chosen factors
• Confined to manufacturing industries
• Empirical design