Dimensions of CRM Effectiveness and its Effect on Relationship Quality

Dimensions of CRM Effectiveness and its Effect on Relationship Quality

C. J. Padmavathy (National Institute of Technology, Tiruchirappalli, India) and V. Sivakumar (National Institute of Technology, Tiruchirappalli, India)
DOI: 10.4018/jcrmm.2012010101
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Abstract

Despite numerous studies in customer relationship management (CRM), research into CRM effectiveness is limited. The purpose of this study is to first identify the dimensions of customer relationship management effectiveness (CRME) and then investigate the effect of CRME dimensions on customer satisfaction, customer trust and customer commitment. Based on a sample of 458 Indian retail bank customers, the study has identified four dimensions of CRME, namely, reliability, process focus, customer focus and technology focus. It is found that CRME dimensions positively influence customer satisfaction; customer satisfaction positively affects customer trust and customer trust has positive effect on customer commitment. The study findings imply bank mangers that orchestration of all the four dimensions will increase the effectiveness of CRM practices and foster in enduring relationship with customers.
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Introduction

Banks contribute a crucial role in any economy of a country. Banking industry is known to be highly human intensive and customer interactive industry where customer relationship management (CRM) is realized and applicable more (Winer, 2001) and CRM is a growing trend in banks today (Jarrar & Neely, 2002). Global banking environment has been altered due to regulatory, structural and technological factors (Angur, Nataraajan, & Jahera, 1999). Furthermore, increased awareness, sophistication, demand of the customers (Arnett & Badrinarayanan, 2005) and little difference in product offerings (Beerli, Martin, & Quintana, 2004; Heffernan, O'Neill, Travaglione, & Droulers, 2008) have coupled to produce intense competition among banks.

Indian banking sector is of no exception to this changing backdrop as it is facing turbulent time, prolific challenges and unbendable competition due to the arrival of private and foreign banks, existence of deregulation, and alienation of government ownership. To overcome these challenges, Indian banks have shifted towards managing relationships with customers (Sureshchandar, Rajendran, & Anantharaman, 2003) and many Indian banks have started investing heavily in CRM technology (Khare, 2010). Because, effective customer relationship management would bring them increased customer satisfaction (Sin, Tse, & Yim, 2005), customer loyalty (Ngai, 2005), customer trust (Crosby & Johnson, 2001), customer retention (Eid, 2007), and increased cross selling opportunities (Chen & Popovich, 2003).

Review of literature suggests that, first, limited research has been published regarding CRME (Boulding, Staelin, Ehret, & Johnston, 2005; Mithas, Krishnan, & Fornell 2005). Second, while number of studies have found positive effect of CRM on firm performance (e.g., Sin, Tse, & Yim, 2005; Stein & Smith, 2009), scholars like Richards and Jones (2008) and Chen, Yen, Li, and Ching (2009) are skeptical about the effectiveness of relationship efforts on customer share development. This is possibly due to lack of appropriate metrics to evaluate effectiveness of CRM efforts (Jain, Jain, & Dhar, 2007; Sigala, 2005). Third, empirical research on CRM has covered employee perception, leaving to consider customer perception (Sin, Tse, & Yim, 2005). Fourth, regarding CRME dimensions, Chen, Yen, Li, & Ching (2009) have found three dimensions of CRME through rigorous empirical research in the context of Taiwanese manufacturing and service firms, whereas Jain, Jain, and Dhar (2007) have found eight dimensions of CRME by exploratory factor analysis in Indian service industries context. Finally, Jham and Khan (2008) observe that CRM performance has been widely studied in western contexts and ignored in eastern countries such as India. This article therefore attempts to fill this void by empirically indentifying the dimensions of CRME in Indian retail banking context from customer’s perspective and investigates the impact of CRME dimensions on relationship quality. Specifically, the study examines the effect of CRME dimensions on customer outcomes such as customer satisfaction, customer trust and customer commitment.

Rest of the paper is divided into following sections. First, CRM definition is presented. Second, literature on CRME is discussed. Third, conceptual framework and hypothesis are presented. Fourth, research methodology and empirical results are described. Finally, discussion of results, and conclusion and implications are provided.

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