The impact of customer relationship management (CRM) implementation on firm performance is an issue of considerable debate. This study examines the impact of CRM implementation on two metrics of firm performance—operational (cost) efficiency and the ability of firms to generate profits (profit efficiency)—using a large sample of U.S. commercial banks. The results show that CRM implementation is associated with a decline in cost efficiency but an increase in profit efficiency. Thus, the results support the contention that CRM implementation succeeds through dual value creation—that is, firms create value for themselves by creating value for their customers—rather than through improving cost efficiency. Overall, the results imply that the focus on efficiency gains from CRM implementation might be misguided because, regardless of its impact of efficiency, CRM implementation enhances a firm’s profit potential. Both CRM vendors and CRM users should be wary of implementing CRM merely as a tool to enhance efficiency. Instead, CRM should be viewed as a means of enhanced customer knowledge that enables firms to provide customers with products that meet needs more precisely, thus increasing customer value. In other words, CRM implementation is not an “efficiency play” but rather an “effectiveness play” for firms because it allows them to serve customers with greater effectiveness, albeit at a higher cost. The authors also find that as a firm-level factor, CRM commitment reduces the negative effect of CRM implementation on cost efficiency. The study also finds that two adoption-related factors, time of adoption and time since adoption, influence the relationship between CRM implementation and cost and profit efficiencies. Early adopters benefit less from CRM implementation than later adopters. However, time since adoption improves the performance of firms that implement CRM. Overall, the success of CRM implementation in enhancing firm profitability should highlight the role of chief marketing officers (CMOs) in driving firms to pursue CRM. Given that CRM implementation entails high risks, the CMO could play a key role in helping the management team cope with the complexity and uncertainty associated with the process. In the absence of such stewardship, firms might cut back on CRM spending because of the inability of the marketing function to clearly demonstrate the impact of marketing investments on firm performance. The results of this study will help CMOs reduce negative perceptions of CRM implementation and limit suboptimal decision making that will lead to poor firm performance.
Alexander Krasnikov is Assistant Professor of Marketing in the School of Business at George Washington University. Previously, he was a visiting research fellow with the Center for Research in Technology and Innovation in Kellogg School of Management at Northwestern University. His research interests are in investigating the performance outcomes of marketing capabilities and market-based assets, with specific emphasis on customer-centric capabilities and customer relationship management. His research has been published in Journal of Marketing. He has a PhD in Marketing from the University of South Carolina, an MBA from the University of North Carolina, Charlotte, and an MD from Rostov-na-Donu State Medical University (Russia). He has worked in sales and marketing positions with two global pharmaceutical companies in Russia.
Satish Jayachandran is Moore Research Fellow and Associate Professor of Marketing in the Moore School of Business at the University of South Carolina. His research interests are in the area of marketing strategy—specifically, the responsiveness of organizations to changes in the market environment. Currently, Satish is investigating research issues related to customer relationship management and how the structure of marketing channels influences brand performance. His research has been published in Journal of Marketing, Journal of Marketing Research, and Journal of the Academy of Marketing Science. With his coauthors, Satish was a recipient of the Harold H. Maynard award for 2001 from Journal of Marketing for the article that made the most significant contribution to marketing theory and thought. Satish was nominated as a young scholar by the Marketing Science Institute in 2003 based on research productivity and managerial interest in research.
V. Kumar is Richard and Susan Lenny Distinguished Chair Professor of Marketing and executive director of the Center for Excellence in Brand and Customer Management in the J. Mack Robinson College of Business at Georgia State University. He has been recognized with more than 20 teaching and research excellence awards, including two lifetime achievement awards, the Marketing Science Institute/Paul H. Root Award (twice), the Don Lehmann Award (twice), and the Sheth Foundation Award. He has published more than 125 articles in many scholarly journals, as well as book chapters and books. His books include Managing Customers for Profit, Customer Lifetime Value: The Path to Profitability, Customer Relationship Management, Marketing Research, and International Marketing Research. He was recently listed as one of the top five ranked scholars in marketing worldwide. He has consulted for numerous global Fortune 500 firms and spends his “free” time visiting business leaders to identify challenging problems to solve.
Journal of Marketing, Volume 73, Number 6, November 2009
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