Customer relationship management (CRM) technology has attracted significant attention from researchers and practitioners as a facilitator of organizational performance. Even though companies have made tremendous investments in CRM technology, empirical research offers inconsistent support that CRM technology enhances organizational performance. Given this equivocal effect and the increasing need for the generalization of CRM implementation research outside western context, the authors, using data from Korean companies, address the process concerning how CRM technology translates into business outcomes. The results highlight that marketing capability mediates the association between CRM technology use and performance. Moreover, a customer-centric organizational culture and management system facilitate CRM technology use. This study serves not only to clarify the mechanism between CRM technology use and organizational performance, but also to generalize the CRM results in the Korean context.
In today's competitive business environment, the success of firm increasingly hinges on the ability to operate customer relationship management (CRM) that enables the development and implementation of more efficient and effective customer-focused strategies. Based on this belief, many companies have made enormous investment in CRM technology as a means to actualize CRM efficiently. Despite conceptual underpinnings of CRM technology and substantial financial implications, empirical research examining the CRM technology- performance link has met with equivocal results. Recent studies demonstrate that only 30% of the organizations introducing CRM technology achieved improvements in their organizational performance (Bull, 2003 and Corner and Hinton, 2002). These conflicting findings hint at the potential influences of unexplored mediating or moderating factors and the need of further research on the mechanism by which CRM technology leads to improved business performance.
Such inconsistent results of CRM technology implementation are not limited to western countries which most of previous CRM research originated from. Even though Korean companies have poured tremendous resources to CRM initiatives since 2000, they also cut down investment in CRM technology drastically due to disappointing returns (Knowledge Research Group, 2004). As a result, Korean companies are increasingly eager to corroborate the returns from investment in CRM. In the eastern culture like Korea that promotes holistic thinking focusing on the relationships between a focal object and overall context (Monga and John, 2007), CRM operates as a two-edged sword. Because eastern culture with holistic thinking tends to value existing relationship with firms or contact point persons as a standard of selecting products in comparison to western culture with analytic thinking focusing on attributes of products, CRM in eastern cultures can be more effective to improve organizational performance if executed appropriately or can be more miserable if implemented horribly than that of western culture with the similar level of CRM implementation. Considering the possibility of more powerful influence of CRM on organizational performance in eastern culture, CRM research in eastern culture is expected to show the process by which CRM technology translates into organizational outcomes more definitely and to generalize successful CRM implementation to cross-cultural setting neglected by prior CRM studies. In particular, Korea is supposed to be a reasonable context in that it possesses unique feature of holistic thinking more vividly and experienced recently increasing need to clarify the reason of conflicting results in CRM implementation more sincerely than any other eastern countries. This is not to say, however, that significant questions relating to how CRM technology leads to firm's outcome and generalizability have not emerged.
Thus, the objectives of this paper are to suggest an integrative framework describing how CRM technology use translates into organizational performance and to make a generalization of the mechanisms involved in the successful CRM implementation. Specifically, we discussed some antecedents and outcomes of CRM technology use and situate our findings in the Korean domain. In our proposed model, we suggest that marketing capability operates as a key mediating variable. We reason that while firms may possess CRM technology, the enhancements to performance resulting from increased CRM technology use are conditioned on the extent to which CRM technology improves firm's marketing capability by providing sales and service support, data integration, and analysis effectively. In addition, we believe that customer-centric organizational culture and management system will facilitate CRM technology use on the basis of recent emphasis on the integration of organizational variables with CRM solutions to enhance the outcome of CRM technology implementation (e.g., Jayachandran et al., 2005 and Payne and Frow, 2005). Understanding of determinants and outcomes of CRM technology use helps clarify what firms should do to improve CRM performance.
The remainder of this paper proceeds as follows. First, we discuss our focal constructs of interest and the relationships among them on the basis of a theoretical model stressing the importance of marketing capability to CRM technology vis-a-vis business performance. Second, we detail the research method utilized in our study and analyze the model's overall fit and our hypotheses via a structural equation model. Finally, the paper concludes with a discussion of the findings as well as managerial and theoretical implications.
In conclusion, it is hoped that this research contributes to both academics and business practitioners by improving our understanding of successful CRM implementation. By examining the holistic process by which CRM technology leads to organizational performance, this study specifically helps management to know what it should do in order to actualize CRM performance. It is evident that marketing capability plays a pivotal role in translating CRM technology into business outcomes. Additionally, in order to utilize CRM technology effectively, management should set up a customer-centric organizational culture and management system. Despite the progress and insights achieved, however, there remains a strong need for future research to build upon these findings and further expand our understanding of this important research topic. It is believed that such research will offer meaningful implications for research and practice alike.
