In Search of CRM Success: A Resource-based perspective SME Service Companies in Spain and the UK.

Transcription

1 In Search of CRM Success: A Resource-based perspective SME Service Companies in Spain and the UK. Dr Aurora Garrido Moreno. Assistant Professor, University of Malaga, Spain Facultad de Estudios Sociales y del Trabajo, Campus de Teatinos (Ampliación), Universidad de Málaga Málaga. agarridom@uma.es Prof Nigel Lockett. Professor of Enterprise, University of Leeds, UK Keywords: Customer Relationship Management, Service companies, Resource-based theory Objectives: The management of customer relationships has become a top priority for companies (Verhoef, et al., 2010), and they are using different social media tools to engage the customer in a collaborative conversation (Greenberg, 2010). However, there is still no widely accepted model to assist companies to successfully implement CRM and the objective of this paper is to develop and test such a model and provide insights into the use of emerging social media CRM technologies. Prior work: When analyzing the return on investments of these strategies contradictory results have been reported in the literature, because CRM results seem to vary, both within and across organisations (Bohling et al., 2006). The Resource-based View (RBV) has been one of the most relevant theoretical grounds used in the field of strategic management, and it has been widely apply to analyze the implementation of diverse types of strategies related to information systems, such as e- business value creation (Soto-Acosta and Meroño-Cerdán, 2008) and CRM (Keramati, Mehrabi and Mousakhani, 2008). Approach: This paper draws on recent empirical data to develop a success model based on the RBV, and tests it empirically in an international sample (Spain and the UK) of service companies (hotels), using a Structural Equation Methodology. Additionally, 10 semi-structured interviews were conducted in order to provide some insights into emerging social CRM technologies. Results: Results show that CRM success depends on an adequate combination of resources and capabilities acting jointly as a process. It was observed that technology acted as a basic resource, thus enabling the strategy, while knowledge management and organisational capabilities played the most important role. However, positive results are not guaranteed. In order to get benefits from CRM implementation, service companies managers need to lead implementation and adoption, while employees should be trained and motivated to engage in the CRM strategy. In addition, respondents to social media CRM interviews, identified advantages and challenges to adoption. Implications: This study provides several implications of interest to managers. Firstly, in an increasingly e-business focused environment, the management of customer relationships has become a top priority for companies in all sectors. Secondly, analysis confirms that investing in CRM technology on its own is not necessarily sufficient to guarantee CRM success. Thirdly, different technological resources should be integrated throughout the organisation in order to generate valuable knowledge management and organisational capabilities. Fourthly, CRM must be implemented as a cross-functional strategy, necessarily involving several departments. Additionally, in the semistructured interviews, most reported no major difficulties when using these tools. It required some degree of adaptation to change, but utilisation was relatively easy. The challenges appear to be more strategic in nature: Why are we doing it rather how do we do it. Value: This paper makes a contribution by analysing empirical data to develop a success model and provides some insights into emerging social CRM technologies.

2 Introduction Customer Relationship Management (CRM) is increasingly becoming an essential strategy for companies, allowing them to improve their profits through longer-term relationships with customers (Coltman, et al., 2011). In the current competitive environment, characterized by financial challenges and increasing competitiveness between firms, companies need to implement CRM strategies in order to develop and build more efficient and effective customer-focused strategies (Chang, et al., 2010). In this regard, it has been observed that CRM implementation could bring both tangible and intangible benefits to the companies (Chen and Chen, 2004). The tangible benefits include increased revenue and profitability and reduced costs, while the intangible include increased customer satisfaction, positive word-of-mouth and improved customer service (Chen and Chen, 2004). The management of customer relationships has become a top priority for companies (Verhoef, et al., 2010). In addition, CRM seems to be especially relevant in the service sector because: it can help deal with the intangibility of the service enabling better communication with customers and help customize the offer, thus increasing loyalty of more profitable customers (Dimitriadis and Stevens, 2008). Considering that service companies have a critical role in the economy (Suntornpithug, et al., 2010), is particularly relevant to analyze how CRM is being implemented in this sector and how it is creating value. From the late nineties there has been an explosion of interest in CRM, both in the literature and in the business world (Payne and Frow, 2005; Becker, et al., 2009). In the business world, the consultancy firm Gartner forecasts more than $12 billion for overall spending on CRM software in Moreover, this figure is expected to continue growing in coming years (Gartner, 2011). Similarly, in the last decade, academic research on CRM has increased dramatically with interest in the research community on addressing both its theoretical and practical implications (Kevork and Vrechopoulos, 2009). In recent years, much progress has been made in the area of CRM research, as indicated by the number of academic centres, conferences, research papers or courses devoted to this topic (Boulding, et al., 2005). In fact, several reviews of the literature on the subject have been published in an attempt to structure this new field of research (Romano and Fjermestad, 2003; Ngai, 2005, Kevork and Vrechopoulos, 2009). However, although there is general consensus on the current relevance of CRM, when analyzing the return on investments of those strategies contradictory results have been published. CRM results seem to vary, both within and across organisations (Bohling, et al., 2006). Diverse studies show high rates of failure in the implementation of CRM (Rigby, et al., 2002; Mendoza et al., 2007; Foss, et al., 2008). The main causes for this failure identified include: i) implementing CRM without creating a customer focused strategy beforehand, ii) not developing the necessary organisational and cultural changes and iii) putting too much emphasis on the technological aspects. Moreover, Verhoef, et al., (2010) asserted that CRM technology-driven initiative only succeed when are effectively integrated with routines and structure of the organisation. Consequently, is has been accepted that firms need to learn how to successfully combine their technological and organisational capabilities to achieve a success with CRM (Coltman, et al., 2011). There is still no overarching framework that details the process to follow and guide companies in their practical implementation (Mendoza et al., 2007). Regarding CRM implementation some questions remain unanswered. For example: What resources and capacities do firms need in order to develop a successful CRM strategy? (Zablah, et al., 2004; Coltman, et al., 2011) How to measure the dual value created with CRM? How to integrate technology, processes and people in order to be successful? (Boulding, et al., 2005). As Wheeler (2002) highlighted, there is a clear need for a theoretically rigorous and practically relevant framework for understanding information technology success and value creation. To fill this gap, this paper develops a conceptual model, grounded in the resourcebased view (RBV) of the firm, in order to analyse CRM success in service companies (SME hotels) by analyzing empirically which factors are more relevant and how they interact following a process approach. The paper first outlines the literature review relevant to service companies and proposes a research framework. Then, the main results of the empirical study are presented and discussed, and finally conclusions and managerial implications are proposed. Literature Review CRM concept CRM could be considered as an IT-dependent strategic initiative that requires a set of resources and capabilities to be successfully implemented and could enable sustained competitive advantage (Piccoli and Ives, 2005). The CRM concept has its roots in Relational Marketing, and implies the 1

3 implementation of Relational Marketing using IT (Ryals and Payne, 2001:6). Taking into account that the main purpose of Relationship Marketing is to attract, maintain and enhance customer relationships (Berry, 1983), CRM focuses on realising this philosophy by using technological tools. So, innovations in technology that allows companies to communicate with customers more effectively and personalise their services have made CRM initiatives a reality (Boulding, et al., 2005). As a result, CRM combines the potential of relationship marketing strategies with IT to develop profitable, long-term relationships with customers (Payne and Frow, 2005). Although research of conceptualization of CRM has advanced considerably in recent years (Ngai, 2005), there is still no generally accepted definition (Zablah, et al., 2004). Following the Payne and Frow (2005) conceptualization, one of the more accepted in the field, CRM will be defined from a strategic perspective as a holistic approach to managing customer relationships in order to create customer and shareholder value. And as major building blocks of the CRM concept, it could be considered as: i) the management of the dual creation of value, ii) the intelligent use of data and technology, iii) the acquisition of customer knowledge and the diffusion of this knowledge, iv) the development of appropriate (long-term) relationships with specific customers, v) and the integration of processes across the many areas of the firm (Boulding, et al., 2005). So CRM could be considered as a cross-functional business strategy that integrates diverse functions in the company (marketing, sales, customer service, human resources and information technology) in order to maximize profitability of customer interactions (Chen and Popovich, 2003). CRM activities must be assumed from a strategic perspective, not just integrating marketing and IT, but involving the entire organisation (Bell et al., 2002). Two principal research streams related to CRM have emerged (Verhoef, et al., 2010). Firstly, addresses how to measure and assess the customer value created by CRM, considering its respective outcomes. Secondly, analyses how to embed the process of CRM effectively in the organisation, conceptualising the associated mechanisms and drivers. So, one is related to the measurement of value derived from CRM success, and the other tries to explain how to implement CRM successfully. Our study is located in this second area, trying to determine what factors determine the success of CRM in service companies. CRM is of strategic importance. Additionally, since 2008, the concept has been evolving towards Social Media CRM or CRM 2.0, trying to incorporate not only customer transactions but also customer interactions (Greenberg, 2010). Currently, the notion of the social customer, who interacts with the company using different social tools to personalise their experience (social networks, blogs, tagging) is emerging (Greenberg, 2010; Sigala, 2011). So, CRM research is moving towards a new frontier focusing on customer engagement as the new priority (Verhoef, et al., 2010). Customer engagement is reflected in a behaviour toward the brand, which goes beyond transaction, and includes co-creation, co-learning, customer-to-customer interactions (word of mouth) and blogging (Verhoef, et al., 2010, Sigala, 2011). Consequently, given this new environment and customer paradigm, CRM 2.0 includes the use of different social media tools in order to engage the customer in a collaborative conversation to provide mutually beneficial value (Greenberg, 2010). CRM could be useful for any company for detecting changes in customer needs, personalising their service, differentiating from competitors and then creating competitive advantage (Jain, 2005). In the following sections we analyze how companies could achieve these advantages, and what factors are determinant for CRM success. Analyzing CRM success in service companies CRM, when effectively implemented, could lead companies to build a sustainable competitive advantage resulting in greater profitability (Bohling et al., 2006). For this reason, CRM success has been a topic widely discussed in the literature (Nguyen, Sherif and Newby, 2007; King and Burgess, 2008). Following this line, numerous studies emerged analyzing the critical success factors (CSF) for CRM implementation (Chen and Chen, 2004; Chang, 2007; Mendoza et al. 2007; Salojärvi, Sainio and Tarkiainen, 2010). The main cited success factors are: top management support, cultural and organisational change, staff commitment, knowledge management and business-it alignment and integration. However, most of these studies just provide a list of CSF, without showing the interactions between then. So, there is a need for strong theoretical models that help managers to understand the underlying process and assist them to implement CRM successfully (King and Burgess, 2008). To fill this gap and deepen the knowledge of CRM, recently other lines of research have emerged that propose different models for CRM success. The following table (See Table 1) includes the main models proposed for analyzing CRM in the context of service companies. 2

4 Table 1: Empirical CRM studies analyzing CRM success in services companies Authors Sample Methodology Included success factors Main findings Chen and Ching (2004) Chang et.al (2005) Sin et.al (2005) Eid (2007) Shum et.al (2008) Keramatia et.al (2008) Suntornpithu get.al (2010) Lo et.al (2010) Coltman et.al (2011) 155 financial services companies in Taiwan 136 service companies in Taiwan 215 financial service companies in Hong Kong 159 banks in UK that were experienced using CRM 13 banks in New Zealand 72 Internet service providers in Iran 348 SMEs from various types of services in US 17 hotels in Hong Kong 50 companies from diverse services industries Source: The authors Quantitative: Structural Equation Modelling Quantitative: Structural Equation Modelling Quantitative: Structural Equation Modelling Quantitative: Structural Equation Modelling Qualitative: in-depth interviews with bank managers Quantitative: Multiple regression Quantitative: Univariate statistics and Structural Equation Modelling Qualitative: 45 Semistructured indepth interviews Quantitative: Structural Equation Modelling - IT intensity - Absorptive capacity - Market orientation - Customer service - CRM technology - Organisational support - Environmental pressure - Key customer focus - CRM organisation - Knowledge Management - Technology-based CRM - CRM enablers: strategic, tactical and operational factors. - CRM effectiveness: relationship quality, transactional quality and cost reduction - Organisational culture - Facilitative leadership - Cross-functional integration - Training - Communication - Technology - Organisational CRM resources - Human CRM resources - Technological CRM resources - Top management commitment toward CRM - Employee empowerment - Customer intelligence - Leadership and culture - People (employee involvement) - Information technology - Processes - Human knowledge - IT infrastructure - Business infrastructure Market orientation and customer service mediates the impact of absorptive capacity and IT intensity in CRM results. The organisational support factor showed to have the most relevant impact in CRM performance. The environmental pressure was not significantly related with performance. This study developed a scale to measure the four dimensions of CRM. The scale was found valid and reliable, so the four factors were determinants of CRM performance. It was observed that CRM critical success factors should be implemented holistically to achieve the full potential of the strategy. It was highlighted the role of organisational issues and customer orientation. It was found a correlation between employees commitment to the CRM initiative and positive outcomes reflected in better performance. For succeed in CRM is fundamental to cultivate a change-ready environment in the organisation. CRM success was analyzed using the Theory of Resources and Capacities. Results showed how the human part of CRM resources played the most important role for enabling the related processes Results showed that firms with a high degree of top management commitment with CRM were more likely to put more emphasis on employee empowerment and generate better CRM performance. CRM success did not depend on technology but on other factors as adequate leadership, customer oriented culture, employee and management commitment. It was observed that CRM technology when combined with appropriate resources and other capabilities in an organizing context, creates a higherorder capability that contributes to firm performance It can be concluded that most of the studies conducted in the services sector were focused on financial companies. In fact, the financial sector is considered one of the most advanced in the use of CRM systems (Ryals and Payne, 2001). However, it follows that more research is needed in other service sectors that have economical relevance, and where the concept has been less well studied. Such as the tourism sector, the health sector or the education sector. Regarding the methodology used, most of the studies followed a quantitative methodology, being structural equation modelling the most cited statistical method. Focusing on the CSF for CRM the most cited, in the context of service companies, were the information technology resources, customer intelligence and knowledge 3

5 management and also the organisational factors. Between the organisational factors, variables were top management commitment, organisational culture, leadership or cross-functional integration. In order to create business value from CRM investments, the human part of CRM resources seems to play the most relevant role to effectively create process capabilities which lead to value creation (Keramatia, et al., 2008). Based on these results, in the next section a conceptual framework analysing CRM success in service companies is proposed. Conceptual Framework As it was previously noted, the conceptual framework proposed to explain CRM success is based on the RBV of the firm. The RBV has been widely used in the field of management strategy related to understanding the sources of sustained competitive advantage (Porter and Millar, 1985). Following this approach, the company is considered as a set of heterogeneous resources and capacities (Penrose, 1959) that are the main determinants of their strategy. The theoretical basis of this approach can mainly be found in the following works: Penrose (1959), Wernerfelt (1984), Barney (1991), Mahoney and Pandian (1992). This theory highlights two key concepts: resources and capabilities. Resources refer to tangible and intangible assets that give increasing returns, and they include assets, infrastructures and skills. It is interesting to note that the resources themselves do not generate competitive advantage, this depends on how they will be used, combined and managed. And while resources serve as the basic units of analysis, firms create competitive advantage by assembling resources that work together to create organisational capabilities (Soto-Acosta and Meroño-Cerdán, 2008). Consequently, capabilities could be defined as the capacity of a group of resources to perform some task or activity (Grant, 1991), and they are recognised as the source of sustainable competitive advantage because are harder to buy or copy. Consequently, resources can be combined and integrated into unique configurations that enable distinctive abilities within a firm (Teece et al. 1997). According to the RBV of the firm, to develop a competitive advantage, firms need to formulate and implement a strategy that exploits the unique characteristics of their set of resources and capabilities (Grant, 2004). RBV recognises that competitive advantage comes from owning valuable, rare, inimitable, and non-substitutable resources (Barney, 1991). Figure 1: Conceptual framework for CRM success Source: The authors The RBV is one of the most relevant theoretical grounds used in the field of Strategic Management, and is has been widely apply to analyze the implementation of diverse types of strategies related to 4

6 information systems, such as e-business value creation (Soto-Acosta and Meroño-Cerdán, 2008) or CRM (Keramatia, et al., 2008). Based on the RBV foundations, we differentiate between CRM resources and capabilities to study their separate influences on CRM performance. Considering that a resource is a specific asset (tangible or intangible) that a firm owns, when analyzing CRM implementation, technology is going to be considered as the main resource. Technological resources are easy to duplicate, and, hence, IT resources per se do not provide competitive advantages (Santhanam and Hartono, 2003). However, CRM technology will enable the development of the complex capabilities required to achieve the success when developing the strategy. Considering that capabilities are rooted in processes and business routines, in the present study knowledge management and organisational capabilities will be considered as the key capabilities related to CRM success. The proposed framework and the considered relations are reflected in Figure 1. In the next subsections, the variables are described and the research hypotheses presented. CRM technology as main CRM resource CRM technological systems should be seen as a key component in implementing this type of strategy (Hansotia, 2002; Mendoza et al., 2007). As Sin et al. (2005) note, CRM software systems enable firms to offer a customized service with higher quality but at lower cost, so many customer-centric activities would be impossible without the right technology. Consequently, technology is a fundamental resource to implement CRM successfully. (Chalmeta, 2006) argues that CRM technological systems offer numerous benefits to firms, since they provide a single view of the customers, manage the relationships with customers in an integrated way regardless of the communication channel used, and help the firm improve the efficiency and effectiveness of the processes involved in customer relationships. CRM technology plays a critical role enabling the strategy and it includes the computer hardware and the related software for managing relational interactions (Shang and Lin, 2010). A CRM technological system covers the following elements: information systems, software, sales force automation (SFA), data warehouse and data mining, help desk, internet and call centers (Mendoza et al., 2007). It could be asserted that most of the customer-centric activities that CRM implies, should be impossible without the appropriate technology (Sin, et al., 2005). Therefore, the role of technology should not be neither over nor underestimated (Zablah, et al., 2004), since the success of CRM applications will depend on their successful integration with the existing people and processes across the enterprise (Chen and Popovich, 2003). In this sense, it must be pointed out that IT resources are necessary, but not a sufficient condition, for competitive advantages, because it is the way in which firms leverage their investment to create unique capabilities what impact on firm performance (Clemons and Row, 1991). Similarly to previous works (Keramati, et al., 2009; Coltman, et al., 2011) CRM technology and infrastructure will be considered as a basic resource that will impact CRM process and capabilities. Based on it, it is expected that CRM technology will enable the creation of knowledge management and organisational capabilities that impact CRM success. Thus, the following hypotheses are proposed: Hypothesis 1: There is a positive relationship between CRM technology and knowledge management capabilities. Hypothesis 2: There is a positive relationship between CRM technology and organisational capabilities. Organisational capabilities as antecedents of CRM success Traditionally, CRM was assumed as a combination of people, process and technology for managing customer relationship and gain customer retention (Chen and Popovich, 2003). However, when implementing the strategy, companies usually have given an excessive prominence to technology, believing that the more, the better, and this has led to notorious failures in the implementation of CRM (Rigby, et al., 2002). Considering that CRM is a strategy that involves the whole organisation, more attention need to be paid to the human-driven CRM processes (Shang and Lin, 2010). Based on it, it will be described the main organisational variables that have been mentioned as determinants of CRM success in the literature. First at all, the role played by top management is crucial. Taking into account that CRM implementation implies a fundamental change in the business philosophy, strong support from top management is needed, in order to succeed in this change (Mendoza et al., 2007; Suntornpithug, et al., 2010). So, assuming the holistic nature of a CRM project, effective leadership seems vital during all the implementation process (Shum, et al., 2008). Managers must exert an appropriate leadership and show commitment to promote the change toward a customer-centric mindset in all the members of the organisation (Suntornpithug, et al., 2010; Shang and Ling, 2010). Managing change within an 5

7 organisation is not an easy task. Thus, managers need to lead the day-to-day change process, and act as references, to avoid employees resistance to change (Shum, et al., 2008). For all the above and assuming CRM as a people-driven process, its implementation requires a big deal of top management commitment, customer-oriented organisational culture and management system support (Shang and Lin, 2010). On second term, considering that employees are the responsible for executing day-to-day processes and are actually interacting with customers, CRM success will depend largely on the human factor of the organisation (Dimitriadis and Stevens, 2008). Surprisingly, despite this importance, little attention has been paid to the role of employees in the effective implementation of CRM (Boulding, et al., 2005). To succeed in CRM implementation, companies need a customer-focused culture, and to make it happen, employees need to be convinced and motivated, because are the ones who will finally use CRM (Suntornpithug, et al., 2010). Moreover, especially in service companies, the human-touch is critical in all the process of customer interaction and, hence, has a great impact on customer satisfaction (Zablah, et al., 2004). There are two factors that seem particularly relevant to enable employee commitment and empowerment: the training and the reward systems of the company (Shum, et al., 2008; Shang and Ling, 2010). Related to the employee relevance, cross-functional integration and redesign of business processes have been also cited as relevant enablers of CRM implementation (Shum, et al., 2008). An effective CRM implementation requires coordination of channels, technologies, customers, and employees (Boulding, et al., 2005), so all departments need to work together to accomplish the CRM objectives. Consequently, the different business processes need to be redesigned around the customer. As a result of the above, the organisational variables are considered as a key capability related to CRM success, and the third hypothesis of our study is proposed as follows: Hypothesis 3: There is a positive relationship between organisational capabilities and CRM success. Knowledge management capabilities as antecedents of CRM success Later developments in the RBV have suggested that organisational knowledge is the fundamental capability (Grant, 1996) because it can provide the underpinnings for dynamic capabilities and prosperity in turbulent, competitive environments. In this sense, a knowledge management capability is the ability of an organisation to capture, manage and deliver real time authenticated customer, products and services information to improve customer response and provide faster decision-making based on reliable information (Alavi and Leidner, 2001). It is interesting to point out that a CRM strategy is based on a great deal of knowledge about customers (Gebert et al., 2003), which allows customization and customer value creation. When analyzing the empirical studies in the services sector, it was noted that knowledge acquisition and transfer, and customer intelligence were all of them cited as a relevant factor for the success of CRM. The knowledge management process help companies to systematically acquire disseminate and use information from customer in order to understand their preferences and needs and better serve them (Plakoyiannaki et al., 2008). Firms with a better knowledge base about their customers were more able to generate better performance for their CRM initiatives (Suntornpithug, et al., 2010). From a resource-based perspective (Penrose, 1959; Wernerfelt, 1984), customer knowledge will be a valuable and rare asset for businesses, which will allow them to respond quickly to customer needs and adapt to changing markets (Shi and Yip, 2007). Whereas the search for competitive advantage becomes the key factor of current strategic management, it should be noted that to collect information about customers in the context of a relationship, and offer those customers a superior value proposition based on this knowledge, will be a key advantage, providing the company a distinctive capacity, hard to imitate. Based on in, to manage CRM effectively, companies must develop capabilities related to customer knowledge management processes because they can become a source of competitive advantage (Shi and Yip, 2007). Considering at this point that the knowledge management process is largely dependent upon the technological and human resources of the company (Zablah, et al., 2004), the fourth hypothesis is proposed: Hypothesis 4: There is a positive relationship between knowledge management capabilities and CRM success. 6

8 Measuring CRM success The concept of dual value creation is the core of a CRM strategy (Boulding, et al., 2005). So, the objective of CRM is to create value both for customers and for the company. Based on it, when measuring CRM success, it must be included two business performance outcomes: the creation of value for shareholders and the creation of value (i.e., utility) for customers (Zeithaml, et al., 2006). How to properly measure CRM performance is a fundamental topic, because it needs to be clearly defined and measured in order to provide useful insights for managers to make the right strategic decision (Suntornpithug, et al., 2010). However, it has been observed that the metrics used by companies to measure their CRM performance are not well developed (Payne and Frow, 2005). In this study, similarly to previous studies (Li, 2001; Chen and Ching, 2004; Sin, et al., 2005), CRM results will be measured using a bidimensional scale, which reflects both customer value and shareholder value. In order to understand how CRM creates value for the customer, different measures have been proposed in the literature: customer satisfaction (Sin, et al., 2005; Bang, 2005; Saini, Grewal and Johnson, 2010; Shum, et al., 2008; Suntornpithug, et al., 2010); customer retention (Wu, 2002; Saini, Grewal and Johnson, 2010 Suntornpithug, et al., 2010); customer loyalty (Chang, et al., 2005; Shum, et al., 2008); service personalization (Chen and Ching, 2004; Doherty and Lockett, 2008); improved customer service (Shum, et al., 2008; Doherty and Lockett, 2008). On the other hand, in the current context, for companies is fundamental to understand also how their customer management efforts are reflected in financial results (Hogan et al. 2002). For this purpose, different measures have been used to reflect business value create with CRM: profitability (Li, 2001, Wu, 2002; Sin, et al., 2005; Bang, 2005; Saini, Grewal and Johnson, 2010; Suntornpithug, et al., 2010; Coltman, et al., 2011); sales increase (Wu, 2002; Bang, 2005; Shum, et al., 2008), cost reduction (Wu, 2002, Chen and Ching, 2004; Shum, et al., 2008; Coltman, et al., 2011), market share increase (Wu, 2002; Bang, 2005). In the empirical study, all the mentioned items will be included in order to measure CRM success. Methodology Sample and data collection In order to empirically test the research framework in an international context, an empirical study was conducted with data from Spain and UK services companies. Specifically, in the service sector, the hospitality sector was chosen as the specific target. The reasons for focusing on it, was that hospitality is one of the most important activities inside the tourism sector, which has become increasingly important nowadays, as a source of economic and social development (World Tourism Organisation, 2008). In addition, the hospitality sector, where customer service is a fundamental point and there exist multiple customer touch points, seems to be ideally positioned to take advantage of CRM philosophy (Piccoli et al., 2003). Moreover, most of CRM-related research in hotels only analyzed specific practices like loyalty programs (Lo, et al., 2010), but there is still a lack of a widely accepted framework for CRM implementation in the sector (Sigala, 2005). Based on the literature review, an questionnaire designed for hotel managers. To get the information, it was followed the key-informant methodology, choosing the hotel managers as informants, as in previous studies (Li, 2001; Wu, 2002; Bang, 2005). The target population of the study consists of hotels from 3-5 stars located both in Spain and in UK. Regarding UK, using a hotel database provided by a specialized company, 5300 mails were sent and 102 responses were obtained. Is Spain, the company data were obtained by a database from Turespaña (Ministry of Tourism), and mails were sent and 210 responses received. Total sample was 312 hotels from both countries. Additionally, 10 semi-structured interviews were conducted (5 in each country), in order to provide some additional insights into using the emerging social CRM technologies. In order to verify that the sample obtained is indeed representative of the population, the nonresponse bias was analyzed. The extrapolation method was used for this, which assumes that the subjects that respond at the end of the data collection process are representative of the nonrespondents (Amstrong and Overton, 1977). Thus, the data obtained between the hotels responding at the beginning and those responding at the end were compared. A Mann-Whitney U test to test the difference of means in all the questionnaire variables was carried out. No significant differences were 7

9 found in the analyzed variables between the two groups of respondents. Thus the conclusion is that non-response bias does not affect the data in this study. Measure development Based on the described literature review, it was built the measurement scale for the variables included in the proposed conceptual framework. First, it was developed an initial list that included more than 100 items. The repeated items were eliminated, and the most used previously for measuring the constructs were selected. After this refinement process, the final scale for measuring the four variables and CRM results consists of 30 items (see Table 2). A 7-point Likert scale (1 = totally disagree, 7 = totally agree) was used to measure the variables of the model. The questionnaire was further refined after a pretest conducted with 4 researchers in the topic (2 from UK and 2 from Spain). Table 2: Measurement scale items for model variables ORGANISATIONAL CAPABILITIES Li (2001), Sin et.al (2005), Keramati et.al (2009), Suntornpithug et.al (2010), Chang et.al (2010) Top management commitment/leadership My hotel has established clear business objectives with respect to customer acquisition and retention, and has communicated these objectives to all employees. Our top executives have clearly indicated their commitment to high levels of customer service. The senior management in my hotel considers CRM to be a top priority. The senior management in my hotel is strongly involved in the implementation of its CRM strategy. Senior managers motivate and encourage employees to live the CRM vision. Employee commitment and organisational structure Training programs are designed to help employees to develop the skills needed to manage customer relationships effectively. Employee performance is measured and rewarded on the basis of their ability to effectively satisfy customer needs. Our employees are well trained in the use of CRM technologies. Employees at all levels are committed to using CRM to achieve high levels of customer satisfaction. Organisational structure is designed to facilitate a customer-centric approach. The different departments work together to achieve CRM objectives. We have reorganized areas of responsibility in order to ensure that our employees can respond to customer requirements on a personal level. KNOWLEDGE MANAGEMENT CAPABILITIES Beijerse (1999), Li, (2001), Chen and Ching (2004), Sin et al (2005), Lin and Lee (2005) My hotel provides channels to enable ongoing two-way communication with key customers. My hotel has established processes to acquire knowledge about customers. My hotel fully understands the needs of its key customers thanks to its knowledge about customers. My hotel encourages employees to share knowledge. My hotel s organisational culture encourages the acquisition of knowledge and its sharing amongst employees. My hotel has designed processes to facilitate knowledge transmission between the different functional areas. CRM TECHNOLOGY Li (2001), Chen and Ching (2004), Sin, Tse and Yim (2005), Chang et al (2005) My hotel has the appropriate portfolio of CRM technologies to effectively serve its customers. My hotel has the appropriate hardware infrastructure to serve its customers. My hotel s information systems are integrated across all the different functional areas. CRM SUCCESS Li (2001), Wu (2002), Chen and Ching (2004), Sin et al (2005), Bang (2005), Keramati et al (2009), Chang et al (2010), Reimann et al (2010), Suntornpithug et al (2010) Financial results Sales income. Improved profitability, because of increased sales. Improved profitability, because of reduced costs. Increased market share Marketing results Improved customer satisfaction. Increased customer retention. Improved customer loyalty. Improved levels of customer service. Enabled the personalisation of products and services Source: The Authors 8

10 Measurement validity In order to evaluate the measurement scale, three basic aspects of the scale were analyzed (Hair et al., 2004): its conceptual definition, validity, reliability, and dimensionality. To ensure content validity, as commented before, a pretest of the questionnaire was developed by four experts in the topic. Regarding construct validity, the measurement scale used constructs that had been identified and used in previous studies and theories. To ensure the convergent and discriminant validity, the correlation matrix between variables of the questionnaire was examined, verifying that indeed the correlations between variables of the same construct were shown to be higher than correlations between different constructs. With regard to external validity, the sampling technique used (random sampling) allows that the results are generalizable to the population. The reliability of the scale was tested using the Cronbach alpha coefficient. This coefficient evaluates the consistency of the entire scale, and is the most commonly used measure (Hair et al., 2004). The Cronbach alpha was close to 0.9 for all the variables, which confirms the scale reliability. On the other hand, unidimensional measurement is a crucial condition in theory testing and development, because it reflects that each set of indicators has only one underlying trait or construct in common (Anderson and Gerbing, 1988). In this study, unidimensionality was tested performing a principal components exploratory factor analysis. It was observed that knowledge management capabilities and CRM technologies were both unidimensional (all the items grouped in an only factor), while organisational capabilities and CRM results were bisimensional, as it was proposed in the original measurement scale. This dimensionality was then considered in the empirical testing of the model. Empirical Results Univariate and bivariate analysis Regarding the size of the hotels that composed the total sample (312), most of them were small hotels: 82.7% had less than 50 employees, and 17.3 were medium and big hotels. It was observed that only 40% of them were implementing CRM (125 hotels). The level of implementation was higher in Spanish hotels (44.3%) than in the UK ones (26.5%). In addition, most of the analyzed hotels (40%) had been using CRM between 1 and 2 years, and 33.3% of them for more than 4 years, so they have some experience with CRM implementation. It was also empirically analyzed whether there were some features of the hotels (size, category of the hotel, integration in chains) that might be associated with a higher degree of CRM implementation. To test these relationships some association measures were used, concretely the Phi and Cramer V coefficients. The results showed that the size of the hotel was significantly related with the level of CRM implementation (Phi and Cramer V coefficients: 0.333, p = 0.000). So it was observed that the bigger the size, the most they implemented CRM. The category of the hotel, measured by number of stars, was also related with higuer level of CRM implementation (Phi and Cramer V coefficients: 0.241, p = 0.000). And finally, the results indicated that the hotels that were integrated in a chain or were part of a group of independent hotels, were more likely to implement CRM than independent hotels (Phi and Cramer V coefficients: 0.349, p = 0.000). Structural Model testing A confirmatory factor analysis was carried out in order to refine the measurement scale. To further improve the fitness of the scale, the items that did not have substantial loadings on the factors originally assigned, and those who had the largest standardized residuals were eliminated. The analysis resulted in a refined scale consisting of 21 items, with showed higher levels of validity and reliability than the initial scale, so it was used to estimate the proposed model. In order to test the described hypotheses, a structural equation methodology was followed. This methodology, which has been largely used when analyzing CRM success, enables to evaluate the suitability of the theoretical model under analysis with respect to the empirical data, and to examine the significance of specific hypotheses. As the collected data were not normal (the normalized Mardia coefficient of multivariate kurtosis equals > 1.96), the statistics package EQS 6.1 was used to estimate the SEM model. This software can be used to estimate robust goodness-of-fit indicators as well as the robust chi-square statistic (Satorra-Bentler scaled statistic), which corrects the chi square when the variables are nonnormal (Satorra and Bentler, 1994; Satorra and Bentler, 2001). 9

11 First, the proposed conceptual model for CRM success was estimated with the subsample of 125 who affirmed to be using CRM. To evaluate the fit of the structural model, the significance of the model parameters was analyzed using robust statistics. In this first estimation, although the whole model showed a moderated fit, it was observed that knowledge management capabilities were not related with CRM success in a significant way (0.05 level), and that organisational capabilities were the only variable impacting CRM success directly. Moreover, the statistical software also advised to eliminate this direct relationship between knowledge management capabilities and CRM success, to improve the overall fit of the model. In order to test if this knowledge capabilities exerted and indirect effect on CRM success, mediated by the organisational ones, the model was re-specified (including a new relationship between knowledge management and organisational capabilities) and estimated again. It was observed that this modification led to some improvement in the measures of overall fit of the model. In this case, all the parameters were statistically significant and the goodness of fit indicators reached higher values. Table 3 summarizes the measures used and the overall fit of the final model. Table 3: Goodness-of-fit indicators of the model Indicator Value Recommended value Satorra-Bentler chi-square P= p 0.05 RMSEA RMSEA confidence interval (0.034, 0.069) narrow IFI CFI Normed chi-square > 1; < 2 AIC Small values Table 4: Standardized and unstandardised regression coefficients Unstandardised coefficients Standardized Path coefficients Robust Coefficient standard error t-value F1 F F1 F F2 F F3 F F3 F F3 F F6 F F6 F Although the chi square remaining non-significant (p<0.05), considering the limitations of this measure we turned to other indicators to analyze the model s goodness of fit. As the table shows, the other indicators were all at acceptable levels. With regard to the fit of the measurement model, the significance of the loads in the model and the measures of reliability and variance extracted of the constructs were examined. All of them exceed the recommended values comfortably, so the fit of the measurement model was satisfactory. Finally, evaluating the fit of the structural model, it was observed observed that, in this final model, all the coefficients estimated in these equations were significant (See Table 4). Figure 2 shows the estimations of the standardized regression coefficients. As it was commented before, all the t-values (critical ratios) exceed the reference value of 1.96 for a significance level of 0.05, which means that all the estimated coefficients were statistically significant (robust statistics 10

12 were used in these calculations). Moreover, the coefficient of determination of CRM success rose to 0.763, which means that 76.3% of the variability of them was explained by the model. Figure 2: Final estimated model for CRM success Source: The authors Discussion The study seeks to analyse CRM success in service companies, proposing a conceptual model to assist companies in effective CRM implementation. It was observed that the most cited success factors for CRM were the organisational variables, knowledge management and CRM technology. In order to build the model, the RBV of the firm was selected as theoretical base to ground the conceptual model, and according to this approach, the mentioned variables were classified in CRM resources (CRM technology) and capabilities (knowledge management and organisational variables). The proposed model was tested on an international sample of hotels (service companies) from both Spain and UK. Significantly, the results showed that the organisational capabilities were the only variable that directly impacted on CRM success. Consequently, factors like top management commitment, employee commitment or organisational structure were found to have a direct impact on the results of the CRM strategy and could be considered antecedents of CRM success. This finding is not surprising, because several authors (Ryals and Knox, 2001; Mendoza et al., 2007; Nguyen, Sherif, and Newby, 2007; Shum, et al., 2008) identified the organisational variables as the key capability. This result is also consistent with the findings of Suntornpithug, et al., (2010) who observed that small firms in the service sector with top management formally committed to the CRM were more likely to witness improved customer satisfaction, competitive position and profitability when implementing the strategy. Therefore, hypothesis 4 was accepted. With regard to knowledge management capabilities, it was observed that they did not exert a direct impact on CRM success. They only had an indirect influence on it, mediated by the organisational capabilities. Therefore, hypothesis 3 was only partially confirmed. This could be explained because it unlike data or information, knowledge is embedded in people (Davenport and Prusak, 1998). Consequently, to fully develop their knowledge management capabilities, firms need to have a skilful blend of people, business processes and IT. Similar to Zablah, Bellenger and Johnston (2004) it was found that the knowledge management process is highly dependent upon the human resources of a firm and other organisational variables. Finally, the empirical results showed that CRM technology was effectively a relevant resource, which was positively related to the knowledge management and organisational capabilities of the firm, hence supporting hypotheses 1 and 2. This finding confirms Chen and Ching (2004) conclusions, that considered IT investments as a fundamental building block of CRM success, because they it allows knowledge and information sharing within the organisation and facilitating the development of CRM 11

13 practices. However, it was noted that simply investing in IT does not automatically leads to success, so CRM technology could be considered as a necessary, but not a sufficient condition for achieving CRM objectives. These findings validate much of the existing literature, where scholars have concluded that in order to be successful, organisations must combine IT with another capabilities (Piccoli and Ives 2005; Coltman, et al., 2011). Consequently, the results emphasize the importance of paying attention to the human dimension of CRM rather than focusing exclusively on the technological tools (Shang and Lin, 2010). Similarly to Keramati, Mojir and Mehrabi (2009) it was found that there is a chain from CRM resources to CRM process capabilities and moving through it seems necessary to have a successful CRM program. With the evident increasing utilisation of emerging Social Media CRM technologies the semi-structured interviews provided some insight into advantages and challenges of adoption, Table 5. Most of the interviewees reported no major difficulties encountered when using these tools. It required some degree of adaptation to change, but the fact of having a young staff in reception and marketing help to face this problem, so the utilisation was relatively easy. The challenges appear to be more strategic in nature: Why are we doing it rather how do we do it. Table 5. Advantages and challenges to the adoption of Social Media CRM technologies ADVANTAGES Interviewees emphasized the following advantages: Improved image; Customer proximity: Repeat custom; Gaining valuable information to improve the product; Keep innovating. Generally, they considered that Social Media CRM was a must have channel to market: "Considering that one of our brand attributes is customer relations, if we were not able to develop a channel as social media we would have a problem" Repeat business at the moment it is pretty high. I do the Google analytics, how many people visit our website and how many of those have been before and how many are brand new, it is probably about 70% "The information obtained in these channels is rich and interesting, and generates a dynamic of innovation based on customers' views that is really important" We have a Facebook page. I would say it is a little bit more usable [than Twitter] for trying to sell something Also, using Social Media CRM gives them an image of modernity and closeness to customers (community) that helped them to connect with a young target audience: "It gives us a modern touch and gives us more image than results" We use it to post news. It is more of a community-based thing Social media is a growing area. It certainly is a growing area We use Twitter nearly every day However, the use of Social Media CRM does not have a direct measurable impact on performance or profitability: "Direct profitability is difficult to get from this channel. For me, the true ROI is richness in terms of feedback that can give you the customer, which is what will allow you to develop the product and implement various strategies that will have a real ROI. But to seek a direct ROI on a customer's view, it seems a bit risky "In the end it is about generating impact, but the tool will require more time than the sale finally gives you" CHALLENGES The main challenges of using Social Media CRM were the initial lack of knowledge, facing a completely new channel that they do not know and also the lack of training available: "There is no training about the topic, no one has explained to us what to do, how and what the objectives are. At first you know you have to be in these channels, but you re not quite sure why "These things are so new that initiation is by trial and error" "Social Media is very viral, everything runs very quickly and there may come a time when you lose all control" Our clientele is mainly older people and obviously Facebook is a younger generation. Another challenge was the absence of a clear strategy or specific goals when starting to use Social Media CRM: I think you have to define first the strategy: what you want to do with social networking, what is your intention: branding, customer service, use it as a sales channel When I look at the competition s sites, I think it makes our site look really bad I think it is a disadvantage. Customers saying, why haven t you got any staff for our function The problem is that the role of Community Manager has been created as a concept, as the person exclusively in charge of social networks, but without there being aligned with business objectives Longer term, I would question it [Facebook] because with social media the minute you have an offer - one person shares it with another. But we don t Twitter [tweet] offers because we found that puts the client off Conclusions 12

14 The primary purpose of the study was to explain how CRM creates value through the RBV of service companies, and what were the main resources and capabilities involved. The results of the study conclude that a process approach can be used to explain the success of CRM. Moreover, it offers empirical support to the proposed model, showing that technology acts as a basic resource, exerting a direct impact on the knowledge management and organisational capabilities, with the latter being the key antecedent of CRM value creation. Consequently, this study provides valuable insights into underlying mechanisms of the CRM implementation-performance relationship. Specifically, this research offers the following contributions: i) it shows that organisational capabilities are the main driver of CRM success; ii) it confirms that CRM technology is a basic resource or enabler of the strategy, playing a major role in determining the creation of the necessary capabilities to succeed; iii) it demonstrates that knowledge management acts as an intermediate capability, impacting CRM success through the organisational capabilities. Results of the empirical test of the model confirmed the fundamental role of the organisational factors (aspects to do with the leadership and commitment of the top management, functional integration and employee commitment) in the implementation of CRM. Although we consider CRM as an IT-enabled business strategy, the analysis of the service firms show that simply introducing CRM technologies does not generate advantages for the firm or translate into positive impacts on marketing and financial results. IT investments are only a resource that must be used and combined for building valuable capabilities. In order for CRM initiatives to be successful and provide a source of competitive advantage, firms need to develop knowledge management and organisational capabilities, rooted in processes and business routines. So successful CRM strategies requires not only significant investments in technology, but also in process redesign and people (Özgener and Iraz, 2006). These results are coherent with the essence of the RBV of the firm, which gives a special role to internal and organisational aspects as determinants of the firm s success. Thus according to the RBV approach, the efficiency and success of firms will be a function of their abilities, skills and competences in developing a management of the resources that facilitates the creation of sustainable competitive advantage (Barney, 1991; Grant, 1991). In this study, the results show that only when CRM technology and knowledge management capabilities are integrated into and internalised by the whole organisation, will the firm achieve a change at the organisational level, creating a capability in CRM that is difficult to imitate and hence a source of sustainable competitive advantage. This study provides several implications of possible interest to managers. Firstly, in an increasingly e- business focused environment, the management of customer relationships has become a top priority for companies (Verhoef, et al., 2010). However, the results of this paper confirm that investing CRM technology on its own is not necessarily sufficient to guarantee CRM success. The different technological resources should be integrated throughout the organisation in order to generate valuable knowledge management and organisational capabilities. Consequently, in order to be successful CRM is much more of a cross-functional strategy, necessarily involving several departments. Additionally, as in other systems/technologies implementation, the positive results are not guaranteed. In order to get benefits from CRM implementation, service companies managers need to lead implementation and adoption, while employees should be trained and motivated to engage in the CRM strategy. In service companies contact with customers is especially intensive, so it is critical that employees have the necessary training to manage customer relationships effectively. Additionally, employees should be committed and motivated to improve service quality and, as a consequence, customer satisfaction and retention. As Chang, Park and Chaiy (2010) also highlighted, the effect of CRM technology in organisational outcomes requires a considerable organisational change. Consequently, the big investment is not in technology, but in knowledge sharing capabilities and in the training and motivation of employees, along with the change management that should follow CRM. There are a number of limitations of the present research, as well as areas for future research, that are worth considering. Regarding the limitations, firstly, the use of cross-sectional data prevents us from examining the evolution in time of the phenomenon under analysis. Secondly, although the data was collected in two countries, the final sample size is rather small. In order to solve, partially, this problem a random sampling technique was used in order to get statistically significant data from the population. Thirdly, the use of managerial perceptions (from the managing directors or marketing directors of companies) to evaluate the different model variables and the results of CRM could also be considered a limitation. Thus, only managers of service companies were asked to complete the questionnaire, but no information about employees and/or customer perceptions about CRM implementation were used. As has been mentioned in previous sections, using managers' perceptions 13

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