Does Customer Relationship Management pay off in times of economic crisis?
The latest financial crisis of 2008 hit many industries and firms hard
The latest financial crisis of 2008 hit many industries and firms hard across the globe and it can still be too early to say that it is over (Morgan 2009). Companies particularly suffer difficulties in financing, increased uncertainty in markets, and declining orders during economic crises and subsequent recessions (Deleersnyder et al. 2004). Besides, customer relationship management (CRM) is basically defined as a cross-functional process for achieving a continuous dialogue with customers across all their contact points to increase customer loyalty and retention (Day and Van den Bulte 2002).
A strong body of research exists to support a positive relationship between CRM deployment and company performance
A strong body of research exists to support a positive relationship between CRM deployment and company performance, at least under certain circumstances (Boulding et al. 2005). There have also been a few papers studying the appropriate marketing response during recessions (Grewal and Tansuhaj 2001; Srinivasan et al. 2005). However, despite the severe effects of recessions on firms’ performance and CRM’s potential to help, to the best of our knowledge, there is no research about how CRM can help companies suffering an economic downturn.
Our study carries significant potential
Our research objective is to understand if companies with CRM initiatives in use weather economic crises better in comparison with companies that do not. We expect that companies with solid CRM processes and technologies in place will better keep their existing customer base and relationships and suffer relatively less from the consequences of economic crisis. We also expect that a number of factors such as industry, competitive actions and experience with CRM should moderate the relationship.
We investigate these linkages in the context of the recent global financial crisis of 2008. Specifically, we will test the relationship between CRM processes (measure based on Reinartz et al. 2004) and company performance after the 2008 economic crisis (based on objective data). We will control for performance levels before the crisis. A selection of German companies whose objective performance data are available will build our sample.
Our study carries significant potential for both research and practice as it can shed light on the return of CRM investments during recessions, exactly when companies question the necessity of their marketing expenditures. Furthermore our study will guide practitioners about the contingent factors which impact the effectiveness of their CRM investments.
Contact:
Murat Serdaroglu
Altran GmbH & Co. KG
Frankfurt
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References
Boulding, W., R. Staelin, M. Ehret, and W.J. Johnston (2005), “A Customer Relationship Management Roadmap: What Is Known, Potential Pitfalls, and Where to Go,” Journal of Marketing, 69 (4), 155-66.
Day, G.S. and C.V. Bulte (2002), “Superiority in Customer Relationship Management: Consequences for Competitive Advantage and Performance,” Working Paper, Report No. 02-123, Marketing Science Institute, Cambridge.
Deleersnyder, B., M.G. Dekimpe, M. Sarvary, and P.M. Parker (2004), “Weathering Tight Economic Times: The Sales Evolution of Consumer Durables over the Business Cycle,” Quantitative Marketing and Economics, 2, 347–383.
Grewal, R. and P. Tansuhaj (2001), “Building Organizational Capabilities for Managing Economic Crisis: The Role of Market Orientation and Strategic Flexibility,” Journal of Marketing, 65 (April), 67-80.
Morgan, M. (2009), “Navigating the Economic Downturn,” Strategic Finance, April, 25-29
Reinartz, W., M. Krafft, and W.D. Hoyer (2004), “The Customer Relationship Management Process: Its Measurement and Impact on Performance,” Journal of Marketing Research, 41 (August), 293-305.
Srinivasan, R., A. Rangaswamy, G.L. Lilien (2005), “Turning adversity into advantage: Does proactive marketing during a recession pay off?” International Journal of Research in Marketing, 22, 109-125.
