WERNER REINARTZ, MANFRED KRAFFT, and WAYNE D.

HOYER*

An understanding of how to manage relationships with customers

effectively has become an important topic for both academicians and
practitioners in recent years. However, the existing academic literature
and the practical applications of customer relationship management
(CRM) strategies do not provide a clear indication of what specifically
constitutes CRM processes. In this study, the authors (1) conceptualize a
construct of the CRM process and its dimensions, (2) operationalize and
validate the construct, and (3) empirically investigate the organizational
performance consequences of implementing CRM processes. Their
research questions are addressed in two cross-sectional studies across
four different industries and three countries. The first key outcome is a
theoretically sound CRM process measure that outlines three key
stages: initiation, maintenance, and termination. The second key result is
that the implementation of CRM processes has a moderately positive
association with both perceptual and objective company performance.

The Customer Relationship Management

Process: Its Measurement and Impact on
Performance

An understanding of how to manage customer relation- tionship management (CRM) strategy are hardly ques-
ships effectively has become an important topic for both tioned, the implementation challenges appear to be enor-
academicians and practitioners in recent years. Organiza- mous, as evidenced by commercial market research studies.
tions are realizing that customers have different economic These studies provide some convergent validity that approx-
value to the company, and they are subsequently adapting imately 70% of CRM projects result in either losses or no
their customer offerings and communications strategy bottom-line improvement in company performance (Gart-
accordingly. Thus, organizations are, in essence, moving ner Group 2003).
away from product- or brand-centric marketing toward a Previous studies have focused on components of CRM
customer-centric approach. strategy, such as the link between satisfaction and business
Nevertheless, some key problems need to be addressed. performance (Kamakura et al. 2002), the link between cus-
Although the conceptual underpinnings of a customer rela- tomer loyalty and profitability (Reinartz and Kumar 2000),
customer profitability heterogeneity (Niraj, Gupta, and
Narasimhan 2001), and customer loyalty programs (Verhoef
*Werner Reinartz is Associate Professor of Marketing, INSEAD (e-
mail: [email protected]). Manfred Krafft is Professor of Market-
2003). However, there is a severe lack of research that takes
ing and Director of the Institute of Marketing, Westphalian Wilhelms Uni- a broader, strategic focus across firms. There is no clear evi-
versity Münster (e-mail: [email protected]). Wayne D. Hoyer is dence regarding either the characteristics of successful
James L. Bayless/William S. Farish Fund Chair for Free Enterprise and CRM approaches or the reasons CRM may potentially fail.
Chair, Department of Marketing, McCombs School of Business, Univer- Furthermore, the existing academic literature and practical
sity of Texas at Austin (e-mail: [email protected]). The
authors gratefully acknowledge financial support from the Teradata Center applications of CRM do not provide a clear indication of
for Customer Relationship Management at Duke University. Additional what specifically constitutes the implementation of CRM
funding was provided by the INSEAD Research and Development Depart- processes. Some companies view CRM primarily as invest-
ment, the Center for Customer Insight (McCombs School of Business, ments in technology and software, whereas others treat
University of Texas at Austin), and the Center for Market-Oriented Man-
agement (WHU-Koblenz). The authors thank Rick Staelin and Wagner
CRM more expansively and are aggressive in developing
Kamakura from the Teradata Center at Duke University, Christoph van den sound and productive relationships with customers. In addi-
Bulte, Hubert Gatignon, Frenkel ter Hofstede, and participants of the 2003 tion, some companies have implemented CRM processes to
Marketing Science Conference for comments on a previous version of this a greater degree than others. Therefore, it is important to
article. They also thank Heiko Müller for valuable research assistance. identify the types of CRM activities that companies can

Journal of Marketing Research

293 Vol. XLI (August 2004), 293–305
294 JOURNAL OF MARKETING RESEARCH, AUGUST 2004

employ and to explore how these relate to company per- received preliminary support from Reichheld and Teal
formance and profitability. (1996). However, the observations have been tempered by
Given this situation, the key contribution of this article is empirical evidence (e.g., Niraj, Gupta, and Narasimhan
to conceptualize and operationalize a measure of the degree 2001; Reinartz and Kumar 2000) that stresses the impor-
to which CRM processes have been implemented. In partic- tance of moderating effects. Thus, it is probably not true
ular, we examine the functional and organizational compe- that more relationship building is always better; rather,
tencies that are necessary to conduct effective and profitable building the “right” type of relationship (which depends on
CRM activities. Developing such a measure or index of situational factors) is critical. In other words, facilitators
CRM processes will enable us to determine whether higher such as organizational design, adequate incentive schemes,
levels of CRM implementation are associated with and information technology resources, as well as industry,
improved economic performance. We further examine some company, or customer structures, may affect the perform-
conditions in which CRM processes are associated with ance of relationship marketing activities.
superior performance outcomes (i.e., moderators of this The second aspect of our conceptualization is that the
relationship). CRM process should acknowledge that relationships evolve
with distinct phases (Dwyer, Schurr, and Oh 1987). Thus,
THEORETICAL FOUNDATION OF THE CRM PROCESS relationships cannot be viewed as multiple independent
A challenge of defining CRM is that any definition is transactions; rather, the interdependency of the transactions
contingent on the level at which CRM is practiced in an creates its own dynamic over time. In other words, CRM
organization or, for that matter, what the researcher or man- processes are longitudinal phenomena. The process of rela-
ager believes about the correct level of CRM. There are tionship evolution can be subject to termination at any point
three different possible levels: (1) functional, (2) customer- through customer causes (ceasing of category consump-
facing, and (3) companywide. tion), competitive causes, or internally unintended (attrition
In this article, we focus on the CRM process on the through service problems) or internally intended (customer
customer-facing level. This perspective includes the build- firing) causes.
ing of a single view of the customer across all contact chan- The third aspect is that the recognition of relationship
nels and the distribution of customer intelligence to all evolution has implications for the organization: Firms
customer-facing functions. This view stresses the impor- should interact with customers and manage relationships
tance of coordinating information across time and contact differently at each stage (Srivastava, Shervani, and Fahey
channels to manage the entire customer relationship sys- 1998). For example, Jap and Ganesan (2000) find that the
tematically. For example, a bank customer who has both a effect of transaction-specific investments on relationship
loan product and a savings product might interact with the commitment in manufacturer–retailer relationships is posi-
bank through various channels and different types of inter- tive in the exploration and the decline phases. A goal of
actions (e.g., transaction, information request, complaint), CRM is to manage the various stages of the relationship
which may change over time. A CRM process on the systematically and proactively. For example, companies
customer-facing level would capture these interactions and, systematically attempt to mature relationships by cross-
on the basis of the generated intelligence, would result in selling and up-selling products with high purchase likeli-
coordinated and well-defined actions through different hood (Kamakura et al. 2002).
functions. The fourth aspect is the recognition that the distribution
A key question is, How should the CRM process be con- of relationship value to the firm is not homogeneous (Mulh-
ceptualized at the customer-facing level? The literature sug- ern 1999; Niraj, Gupta, and Narasimhan 2001). This is a
gests that companies should recognize four distinct factors: consequence of the increasing adoption of recent account-
(1) Building and managing ongoing customer relationships ing practices, especially activity-based costing. The key
delivers the essence of the marketing concept (Morgan and advantage of activity-based costing is that firms are able to
Hunt 1994; Webster 1992), (2) relationships evolve with make profitability statements along customer relationship
distinct phases (Dwyer, Schurr, and Oh 1987), (3) firms lines, not only along product lines. This enables firms to
interact with customers and manage relationships at each investigate resource allocations that are made against the
stage (Srivastava, Shervani, and Fahey 1998), and (4) the customer relationship profitability distribution. A common
distribution of relationship value to the firm is not homoge- finding is that best customers do not receive their fair share
neous (Mulhern 1999; Niraj, Gupta, and Narasimhan 2001). of attention and that some companies overspend on mar-
A key theoretical basis for CRM research is the relation- ginal customers. In a CRM paradigm, a key goal is to define
ship marketing literature. First, in this area it is theoretically different resource allocations for different tiers of cus-
held that the building and managing of ongoing customer tomers, where the customer’s tier membership depends on
relationships delivers the essence of the marketing concept the economic value of that customer or segment to the firm
(Morgan and Hunt 1994; Webster 1992). The new institu- (Zeithaml, Rust, and Lemon 2001).
tional economics approach uses economic theory to explain The continuous balance of CRM activities at each stage
the development and breakdown of customer–firm relation- (i.e., customer acquisition, retention, and relationship termi-
ships. For example, transaction cost theory (Rindfleisch and nation) should be guided by the attempt to maximize the
Heide 1997) focuses on minimizing the cost of structuring value of the set of concurrent customer relationships and
and managing relationships and maximizing the returns thus should be associated with better overall company per-
from them. Common to all theoretical approaches in the formance. Therefore, we define the CRM process at the
relationship marketing literature is that managing relation- customer-facing level as a systematic process to manage
ships is beneficial for the firm. This perspective has customer relationship initiation, maintenance, and termina-
Customer Relationship Management Process 295

tion across all customer contact points to maximize the neous customer segments. In contrast, CRM expands on
value of the relationship portfolio. this approach by supplementing traditional marketing tech-
Thus, our view of the CRM process entails the systematic niques with other relationship management activities (e.g.,
and proactive management of relationships as they move systems to regain lost customers, up-selling and cross-
from beginning (initiation) to end (termination), with exe- selling, referral management) at the clearly identified stages
cution across the various customer-facing contact channels. of the customer relationship (i.e., initiation, maintenance,
This necessitates both information generation through the and termination). Finally, CAM and CE focus on customer
analysis of customer and prospect needs and behavior and segments as assets, whereas our CRM process framework
action on this information, contingent on the customer’s centers on individual customer relationships. Thus, our
value and life-cycle stage. We attempt to capture the multi- CRM approach supplements the important principles that
dimensional components (life-cycle stage, customer evalua- emanate from these other frameworks. In addition, it is
tion, and interaction) in a multilevel model. important to note that the key concept of customer satisfac-
Similar to other multilevel models in the literature (Brady tion is a central foundation across all these approaches
and Cronin 2001), our model suggests that each of the pri- (Oliver 1999).
mary dimensions of the CRM process (relationship initia-
tion, maintenance, and termination) has distinct subdimen- A MODEL OF THE PERFORMANCE OUTCOMES OF
sions. Customer evaluation is the first subdimension of each CRM IMPLEMENTATION
primary dimension. The subsequent subdimensions are Adoption and implementation of the CRM process is
acquisition and recovery management for the initiation only the initial part of the story. It is also critical to establish
stage; retention, up-selling/cross-selling, and referral man- whether CRM is “a good thing” for the company. Given the
agement for the maintenance stage; and exit management dearth of sound empirical findings in the domain and that
for the termination stage. These nine subdimensions pro- evidence now suggests that CRM strategies may not per-
vide a structure for different CRM-related activities and form as well as many people had expected, an investigation
serve as the basis for a conceptual framework for the CRM of the CRM process–economic performance link should be
process construct. We consider the nine subdimensions of great interest to managers and academics. Thus, a second
formative (i.e., consisting of explanatory combinations of goal of this article is to conceptualize and test a model of
indicators that cover the distinct activities involved). how the three primary CRM dimensions are associated with
Our conceptualization is intended to measure how sys- organizational performance. Figure 1 presents an overview
tematic firms are in practicing the various activities of the of the theoretical model, which has two key components.
CRM process. We believe that it is important to capture the First, we investigate the main effect of the CRM process on
systematic aspects of the process, particularly if the process economic performance. Second, we examine moderating
is practiced on a large scale, such as in a business-to- effects, which may serve to establish some contingency
consumer environment. If firms formalize their CRM conditions.
efforts, they become more consistent in execution across First, in terms of performance outcomes, we relate the
contact channels, employees, and the portfolio of cus- three CRM dimensions to two types of performance meas-
tomers. It is important to note that we do not mean “formal- ures: perceptual and objective. Although most research in
ization” in terms of rigidity but in terms of conformance to marketing strategy assesses the impact of the focal con-
specification. For example, firms want to avoid the mistake
of not identifying a good customer and subsequently not
rewarding the customer accordingly (Type I error). Firms
also want to prevent wrongful classification of low-value Figure 1
customers as high-value customers and subsequent over- A MODEL OF THE PERFORMANCE OUTCOMES OF THE CRM
spending of resources (Type II error). The development of PROCESS
and reliance on a systematic approach that aids in the meas-
urement of customer value and in the interaction with these
heterogeneous customers decreases these errors.
It is important to compare our approach with other CRM Process
frameworks that address similar issues, including the serv- Relationship
Economic Performance
ice profit chain (Heskett et al. 1994), return on quality initiation
H1 Perceptual
(Rust, Zahorik, and Keiningham 1995), customer asset Relationship
maintenance
management (CAM; Berger et al. 2002), and customer
equity (CE; Blattberg, Getz, and Thomas 2001; Rust, Relationship Objective
termination
Lemon, and Zeithaml 2001). All four approaches are H2 H3
customer-centric, and customer knowledge (e.g., customer
databases, surveys) is critical to their implementation. How- Moderators
ever, whereas the service profit chain and return on quality
approaches address service quality issues, the CAM and CE CRM-compatible Control
organizational
approaches, as well as our measure of CRM processes, alignment
Industry
focus more on companies identifying profitable customers
and treating them adequately. The CAM and CE approaches CRM technology
deal more with the application of traditional marketing
techniques to manage customer assets in terms of homoge-
296 JOURNAL OF MARKETING RESEARCH, AUGUST 2004

struct on perceived performance (e.g., Bharadwaj, Varadara- ine two moderators that have been identified as having
jan, and Fahy 1993; Kohli and Jaworski 1990), we also strong theoretical and/or managerial relevance and impact:
assess the association with a measure of objective economic CRM-compatible organizational alignment and CRM
performance (Varadarajan and Jayachandran 1999). technology.
Second, regarding the contingencies of the CRM
process–economic performance link, we examine several CRM-Compatible Organizational Alignment
important moderating variables that are of interest to man- Day (1992) argues that the various corporate functional
agers and that may either enhance or weaken the focal link units have become more marketing oriented because mar-
(Bharadwaj, Varadarajan, and Fahy 1993; Holmström keting is becoming more important. Likewise, the view that
1979). Supply-side characteristics include a CRM- the marketing function is distinct and nonoverlapping with
compatible organizational alignment (i.e., training proce- other corporate functions has become mostly obsolete
dures, employee incentives, and organizational structure) (Webster 1992). Therefore, as firms become able to align
and CRM technology (e.g., investments in CRM technol- their organizations and structures more effectively with
ogy, one-to-one communication capabilities). Finally, the their market goals, it is expected that they would be more
specification of our model controls for the types of indus- successful in that market because they can adapt more read-
tries investigated. ily to the needs of customers. To address these needs, there
is an imperative to bring customer knowledge and orienta-
HYPOTHESIS DEVELOPMENT
tion deeper into the organization (Day and Montgomery
Effects on Economic Performance 1999; Kohli and Jaworski 1990).
As we mentioned previously, our CRM process construct A critical determinant of an organization’s ability to
captures the degree of formalization of how to manage cus- influence CRM-compatible activities and processes is the
tomer relationship initiation, maintenance, and termination. development of appropriate compensation schemes and
If companies are able to understand more effectively the organizational structures. For example, agency theory
value of the customer to the firm, they will perform better argues that the design of incentive-compatible contracts
on these three primary dimensions. Companies will then be with employees that realign company goals and the employ-
better able to manage individual customer relationships and ees’ utility is necessary to maximize company profit (Holm-
to determine more effectively the contribution of these rela- ström 1979). Consistent with this argument, contingency
tionships to the profitability of the unit and/or the firm. theory hypothesizes that company profit will be maximized
A high degree of CRM process implementation means if appropriate organizational structures are depicted (Black
that firms are able to adjust their interactions according to and Boal 1994; Miller 1996). The more that these aspects
the life-cycle stages of their customers and that they may be support specific CRM-compatible behavior, the stronger the
able to influence the stages actively (e.g., by maturing or CRM process–economic performance link should be. In
extending relationships; Zeithaml, Rust, and Lemon 2001). others words, if companies stress to employees that CRM
The goal of these activities is to align the resources spent on activities are important, structure their organizations to
customers with the revenues or profits derived from the facilitate these activities, and reward employees for engag-
same customers (Mulhern 1999). Firms will spend a dispro- ing in CRM-related activities, the companies are more likely
portionate amount of resources on highly profitable cus- to stress these activities in their interactions with customers.
tomers or ones that are worth the resource allocation H2: The greater the level of CRM-compatible organizational
because they are “high potentials.” Furthermore, firms will alignment, the stronger is the positive link between eco-
economize on unprofitable or marginally profitable cus- nomic performance and relationship (a) initiation, (b) main-
tomers, who then either may leave the relationship or may tenance, and (c) termination.
build up their relationship with the focal firm. Therefore,
we expect a significant and positive association between the CRM Technology
degree of a business unit’s customer management practices
with regard to relationship initiation, maintenance, and ter- Another critical moderator of the CRM process–
mination and the business unit’s economic performance. economic performance link may be the degree to which a
firm uses supporting information technology. In this con-
H1: Higher economic performance is associated with greater text, CRM technology is the information technology that is
implementation of CRM processes at the stage of relation-
ship (a) initiation, (b) maintenance, and (c) termination.
deployed for the specific purpose of better initiating, main-
taining, and/or terminating customer relationships. The
It should be noted that though all three subsections of the potential for information technology to constitute a sustain-
hypothesis are in the same direction, the possibility exists able competitive advantage has been amply discussed
that the magnitude of the effect across the three stages (Bharadwaj, Varadarajan, and Fahy 1993). The key point is
varies. Therefore, there is a question of whether the effec- that CRM technology plays a critical role in the context of
tiveness of the different stages can differentially contribute leveraging CRM-related activities and thus contributes to
to economic performance. Unfortunately, prior research improved organizational performance in the market; indeed,
does not provide guidance to enable the development of CRM technology is often (incorrectly) equated with CRM.
specific hypotheses. However, we perform an exploratory Therefore, we would expect that, ceteris paribus, CRM
analysis to address this important issue. technology functions as a facilitator of CRM activities and
As we mentioned previously, there are several factors that contribute to better performance in the market.
may moderate the relationship between the implementation Nevertheless, this strong conceptual support should be
of the CRM process and economic performance. We exam- tempered in light of evidence from practitioner and com-
Customer Relationship Management Process 297

mercial market research reports that investments in CRM- responsible for CRM operations. Whenever possible, we
related technology may be associated with lower economic asked potential respondents to provide their e-mail address
performance. Day (2000) echoes this view by suggesting and to fill out an electronic version of the questionnaire. In
that though the cost aspects of CRM investment are evident, 72% of the cases, we received digital responses rather than
the revenue enhancing aspects are much less obvious. Fur- traditional mail responses. To increase the response rate, we
thermore, there is anecdotal evidence that a large proportion conducted follow-up telephone calls three weeks after the
of CRM technology deployments do not perform to expec- initial mailing. This resulted in an effective response rate of
tations (Gartner Group 2003). 21.1%. We consider this rate satisfactory, given that average
If this is so, there are likely to be multiple reasons, such top management survey-response rates are in the range of
as lack of defining objectives or lack of appropriate training 15% to 20% (Menon et al. 1999). Altogether, we obtained
procedures, for this disappointing result (Reinartz and 214 responses, of which 211 were usable.
Chugh 2002). However, this does not necessarily mean that In more than 75% of cases, senior executives such as
the technology is at fault per se. It is also important to point marketing or sales executives filled out the questionnaires.
out that investments in technology represent a direct short- The executives were knowledgeable key informants about
term financial investment that may have a negative effect on information pertaining to CRM design; they direct entities
the bottom line in the short run. The payoffs for these that, in most cases, are responsible for CRM activities. The
investments are more likely to be realized over a longer unit of analysis was the strategic business unit (SBU).
period. To strengthen the insight and veracity of our analysis, we
Taken together, it is clear that there are conflicting argu- also collected objective performance measures for the exist-
ments about the direction of the effect of CRM technology ing set of firms. This is particularly important for empirical
on firm or economic performance. However, because there survey research in which a reliance on subjective perform-
seems to be more evidence on the positive side, we still ance measures may be a limitation (Jaworski and Kohli
hypothesize a positive moderating effect for CRM technol- 1996). Our goal was to assess the degree to which the sub-
ogy. Thus: jective and the objective performance measures converge in
H3: The greater the level of CRM technology, the stronger is the
order to lend greater credibility to our survey results (Han,
positive link between economic performance and relation- Kim, and Srivastava 1998). Because our sample consists of
ship (a) initiation, (b) maintenance, and (c) termination. public and nonpublic firms from different industries, we
could not rely on absolute performance measures; rather,
Control Variable we needed measures of relative performance. As in previous
studies, we assessed performance in terms of profitability
To control for the possibility of variance across different (Han, Kim, and Srivastava 1998; McKee, Varadarajan, and
industries, we entered the type of industry as a control. This Pride 1989). We obtained the information on profitability
enables us to account for mean differences of economic per- from company reports for public companies and from sec-
formance across industries. ondary sources for nonpublic companies. We chose the
return on assets (ROA) performance measure, which is con-
METHODOLOGY sistent with previous studies (Han, Kim, and Srivastava
To test our framework, we collected data from both pri- 1998). In total, we were able to collect the objective per-
mary and secondary sources. First, a cross-sectional survey formance measures for 98 companies (81 public, 17 non-
was conducted in the fall of 2001 in three countries: Aus- public). The ROA measure that entered our analysis was the
tria, Germany, and Switzerland. We limited our investiga- average ROA of the years 2001 and 2002. It is more appro-
tion to consumer markets because business-to-business rela- priate for us to use the average because it is more realistic to
tionships are characterized by small numbers of customers expect a longer-term impact of the CRM process rather than
and a strong reliance on salespeople as major means of a short-term spike.
communication between firms and clients. In our initial A possible concern in single-informant studies is that an
empirical work on CRM, we wanted to target a more informant may not necessarily possess a totally accurate or
diverse environment of multiple customer contact points, unbiased view of the entire organization. Relatedly, the reli-
which is characteristic of consumer markets. Using litera- ability of the subjective performance indicators used in the
ture reviews and pretest interviews, we selected industries study could be questioned (i.e., they could be artificially
on the basis of characteristics such as a large customer base, related to the other indicators measured). Therefore, to
intensive use of various channels, professionalism in CRM cross-validate the analysis and to counter a possible
activities, and market pressure to differentiate from compe- common-method bias, we collected a second set of primary
tition. On the basis of these characteristics, we identified the data from a different set of respondents in the same firm
following industries as adequate targets: financial services, sample (hereafter, Sample 2). The objective was to assess
hospitality, online retailing, and power utilities. the robustness of the Sample 1 findings with a separate
A pretest of the questionnaire was given to a small sam- sample of respondents (Deshpandé, Farley, and Webster
ple of marketing managers and CRM experts. Another 1993). The sampling frame was the 211 companies that
pretest of the questionnaire was administered to assess the responded in the first round of data collection. We collected
validity of the scales. We obtained the data from a large- the second set of data as soon as possible after we con-
scale mail survey. The final questionnaire was sent to a cluded Sample 1 to minimize any temporal biases. In Sam-
sample of 1015 companies, which we derived from industry ple 2, we obtained 95 valid responses (45% response rate)
associations’ member lists. A personalized mailing was sent from the same group of target respondents (senior execu-
to the executives identified in premailing telephone calls as tives, sales managers, marketing managers). Because a sub-
298 JOURNAL OF MARKETING RESEARCH, AUGUST 2004

stantial percentage of participants in our study were small Indicator collinearity. Because formative measurement
and medium-sized enterprises, it was extremely difficult to models are based on linear equation systems, substantial
identify a second knowledgeable informant in such compa- collinearity among indicators would affect the stability of
nies. Many respondents from Sample 1 were also reluctant indicator coefficients. In our example, none of the 42 indi-
to name second informants because they did not appreciate cators revealed serious multicollinearity problems.
the cross-validation procedure. To assess potential differ- External validity. The very nature of formative measure-
ences in sample respondents, we compared Sample 1 and ment renders traditional assessments of convergent validity
Sample 2 respondents on several descriptive variables; how- and individual item reliability irrelevant (Hulland 1999, p.
ever, no differences between the groups were found. 201). However, this does not enable researchers to link sets
of items to constructs arbitrarily. Aside from strong theoreti-
Item Measurement and Index Construction cal foundations, researchers must ensure that all indicators
As mentioned previously, the key goal of our study was that form a construct are included. To test for external valid-
to develop a comprehensive operationalization of the three ity, we follow the suggestions of Diamantopoulos and Win-
primary dimensions of CRM process implementation (i.e., klhofer (2001) to estimate a multiple indicators and multiple
relationship initiation, maintenance, and termination). To causes model with our aggregate indexes INITIATE, MAIN-
achieve this goal, scales and measurement items for the TAIN, and TERMINATE, as well as their respective subdi-
study were developed as follows: All our constructs reflect mensions and formative indicators. We used four variables
a composite of individual indicators across different, unique that capture the commitment of top management to imple-
sources and are therefore operationalized effectively in a ment CRM as reflective indicators of the implementation of
formative rather than reflective way (Bagozzi 1994). There- CRM processes.1 The loadings of all four items were highly
fore, we followed the guidelines for constructing indexes significant, with loadings of .861, .839, .729, and .802.
based on formative indicators, as proposed by Diaman- As we described previously, the CRM process is concep-
topoulos and Winklhofer (2001). They identify four issues tualized as a second-order factor measurement model that
that are critical to successful construction of indexes with can be approximated with various procedures. One of the
formative indicators: (1) content specification, (2) indicator easiest procedures to implement is the hierarchical compo-
specification, (3) indicator collinearity, and (4) external nent model suggested by Wold (1980). In essence, a second-
validity. Our focal independent variables are the three pri- order factor is directly measured by observed variables for
mary dimensions of the CRM process. To exemplify how all the first-order factors. Partial least squares (PLS) is
we proceeded to construct valid indexes with formative appropriate for estimating our measurement model because
indicators, we refer to these key constructs. it provides a means for directly estimating component scores
Content specification. We developed a new formative, (i.e., the three dimensions of relationship initiation, mainte-
multi-item scale of CRM processes at the customer-facing nance, and termination). Because the latent variable scores
level that captures the three lifetime stages of customer rela- are determinate, PLS can be used to model formative indica-
tionships. More precisely, on the construct level, the domain tors, as is the case here. The determinate nature of the PLS
of CRM process implementation was defined as covering approach avoids parameter identification problems that can
the activities of acquisition management and regain man- occur under covariance-based analysis (Bollen 1989).
agement at the initiation stage; retention management, Nomological validity. Given that the formation of imple-
up-sell/cross-sell management, and referral management at mentation of CRM processes as a new formative construct
the maintenance stage; and termination management at the is a key objective of our study, we included 11 additional
final stage of the customer relationship. On the construct items in our survey. The items were measured on seven-
level, we also captured activities of customer evaluation at point semantic scale formats (“With regard to your SBU, to
each of the three stages, which led to nine subdimensions of what extent do each of the following activities represent a
CRM process implementation. The subdimensions repre- strength or weakness for you?”), where 1 = “major weak-
sent latent constructs that reflect the presence or absence of ness,” 4 = “neither strength nor weakness,” and 7 = “major
CRM activities. We also established higher-level indexes strength.” To check the nomological validity of our nine
that express the total degree of CRM activities at the three subdimensions and the three higher-level indexes, we esti-
stages of customer life cycles. Thus, in our content mated the bivariate correlations between the subdimensions
specification, we sought to capture major facets of evalua- or indexes and the respective independent weakness/
tion and management activities along customer–company strength indicators.
relationships. Our formative index for acquisition management activi-
Indicator specification. Critical for the design of valid ties shows correlations of .36 and .34 with the independent
indexes with formative indicators is the choice of items, strength/weakness items “acquiring high value customers”
because the indicators must capture the entire scope of the and “implementing systematic customer acquisition,” and
latent construct as described previously. On the basis of an
extensive review of relevant articles in marketing journals, 1Two items were stated as “strongly disagree–strongly agree” seven-
the business press, and exploratory interviews with man- point Likert scale formats (“CRM is a central aspect of our business strat-
agers who are responsible for CRM systems, we identified egy” and “CRM has become a top management issue in our SBU”),
42 items that were evaluated by participants of pretest inter- whereas the other two items were measured on seven-point semantic scale
views as capturing all major subprocesses in the implemen- formats (“With regard to your SBU, to what extent do each of the follow-
ing activities represent a strength or weakness for you?” “The institutional-
tation of CRM at the customer-facing level. These indica- ization of a CRM philosophy” and “Getting top management commitment
tors are listed in the Appendix. All items were measured on to CRM”), where 1 = “major weakness,” 4 = “neither strength nor weak-
a seven-point Likert scale. ness,” and 7 = “major strength.”
Customer Relationship Management Process 299

our regain management index reveals a correlation of .35 where

with the statement “regaining high value customers” as a
strength of the SBU. The measurement at the maintaining •Economic performance (perceptual) = formative, multi-item
stage index is significantly correlated with the item “under- measure (adapted from the work of Desphandé, Farley, and
standing and determining the value of a customer” (ρ = Webster [1993] and Kohli and Jaworski [1990]) with four
.55). Similar strong associations are observable between our indicators,
•Economic performance (objective) = net income in year x/total
retention management index, retaining high value cus-
assets in year x (ROA),
tomers (.38) and building long-term relationships with our
•Relationship initiation, relationship maintenance, relationship
valued customers (.32). Our management of up-selling/ termination, CRM-compatible organizational alignment, and
cross-selling index reveals even stronger correlations with CRM technology = formative multi-item measures,
the items “implementing procedures for up-selling” (.50) •Industry 2 = financial services,
and “implementing procedures for cross-selling” (.51). Cor- •Industry 3 = power utilities, and
relations of .36 (“management of word-of-mouth”) and .47 •Industry 4 = hospitality.
(“managing customer referrals”) emphasize that the cus-
tomer referral management index measures the degree of All multi-item measures are given in the Appendix. Table 1
activities related to customer referrals. Because the lists the summary statistics for the measurement scales.
weakness/strength statement “discontinuing relationships On the basis of our previous discussion, we estimate
with low-value customers” is also significantly correlated to three different models:
activities to demarket customers index (.44), we conclude
that all our indexes represent valid measures of the respec- Model 1: Economic performance (perceptual)Sample 1
tive constructs. = f(covariates)Sample 1,
For the regression analysis, we constructed the relation- Model 2: Economic performance (objective)
ship initiation, maintenance, and termination indexes by = f(covariates)Sample 1, and
weighted multiplication of the individual indicators with the
standardized PLS weights, similar to the American cus- Model 3: Economic performance (perceptual)Sample 2
tomer satisfaction index (Fornell and Johnson 1996).2 = f(covariates)Sample 1.
Given our data structure, this configuration maximizes the
Model Specification and Estimation
degrees of freedom for each estimation and simultaneously
The complete model specification is given in Equation 1. addresses the issue of common-method bias. We mean-
Variables are grouped into main effects (βs), interaction centered the variables for the analysis.
effects (γs), and control variables (δs). The control variables
in our system of equations are dummy variables for industry RESULTS
effects.
The results of the estimation are summarized in Table 2.
(1) Economic performance = α The effective sample size for the estimation with perceptual
+ β1 relationship initiation performance (Model 1) is 211 observations; for objective
+ β2 relationship maintenance
+ β3 relationship termination performance (Model 2), the effective sample size is 98
+ β4 CRM-compatible organiza- observations. Both estimations fit the data well; the R2 is
tional alignment .24 for perceptual performance and .49 for objective per-
+ β5 CRM technology formance. Thus, our model helps highlight some factors
+ γ1 (CRM-compatible organiza- that are associated with more successful CRM process
tional alignment × relationship implementations.
initiation)
+ γ2 (CRM-compatible organiza-
We report one-tailed significance levels. This is appropri-
tional alignment × relationship ate because we exclusively test directional hypotheses.
maintenance) Because the hypothesized effects are equal for both per-
+ γ3 (CRM-compatible organiza- formance measures (perceptual and objective), we discuss
tional alignment × relationship the results together.
termination)
+ γ4 (CRM technology × relation- Relationship Stages and Economic Performance
ship initiation)
+ γ5 (CRM technology × relation- We hypothesized that the degree of CRM process imple-
ship maintenance) mentation is positively associated with economic perform-
+ γ6 (CRM technology × relation- ance (H1) at the three stages of initiation, maintenance, and
ship termination) termination. For our perceptual performance measure, sup-
+ δ1 Industry 2 port is strongest for maintenance (β2 = .71, p < .01). For ini-
+ δ2 Industry 3
+ δ3 Industry 4
tiation, support is marginal (β1 = .47, p < .05), and it is not
+ ε1, significant for termination. In the case of objective perform-
ance, all three coefficients are marginally significant (β1 =
9.04, p < .1; β2 = 8.16, p < .05; β3 = 6.97, p < .05). Thus, it
2Details of the measurement model, particularly a description of the data
seems that the more firms engage in implementing CRM
structure, correlations, and PLS coefficients, are available from the authors processes, especially at the initiation and maintenance
on request. stage, the better they perform.
 Table 1

300
SUMMARY STATISTICS FOR THE MEASUREMENT SCALES

Sample 1 Sample 2
Number Standard Standard
Variable of Items Frequency Mean Deviation Minimum Maximum Mean Deviation Minimum Maximum
Performance (perceptual) 4 — 18.4 4.4 6.0 27.0 19.0 4.0 8.0 26.0
Performance (objective) 1 — .009 .06 –.19 .269 — — — —
Relationship initiation 15 — 5.1 1.8 1.5 9.9 4.9 1.6 1.6 8.4
Relationship maintenance 20 — 7.1 1.8 2.4 11.2 6.7 1.6 3.2 10.5
Relationship termination 4 — 4.1 2.0 1.3 9.3 3.6 1.6 1.0 6.9
CRM-compatible organizational alignment 4 — 13.7 4.1 4.0 21.0 12.6 3.9 4.0 20.0
CRM technology 4 — 16.4 5.3 4.0 28.0 15.6 6.2 4.0 28.0
Industry 1 (online retailers) 1 64 — — — — — — — —
Industry 2 (financial services) 1 78 — — — — — — — —
Industry 3 (power utilities) 1 28 — — — — — — — —
Industry 4 (hospitality) 1 41 — — — — — — — —

Table 2
RESULTS OF MODELS 1–3

JOURNAL OF MARKETING RESEARCH, AUGUST 2004

Performance (Perceptual): Performance (Objective): Performance (Perceptual):
Model 1 Model 2 Model 3
Dependent Variable Description Coefficient Estimate Standard Error Estimatea Standard Error Estimate Standard Error
Intercept α 18.4***0 .55 N.S. 17.3*** .74
Main Effects Relationship initiation β1 .47*** .26 9.04** 5.59 .93*** .39
Relationship maintenance β2 .71*** .23 8.16** 4.80 .60** .33
Relationship termination β3 N.S. 6.97** 3.44 N.S.
CRM-compatible organizational alignment β4 N.S. N.S. N.S.
CRM technology β5 –.16*** .07 N.S. –.17* .11
Interactions CRM organizational alignment × relationship initiation γ1 .17*** .08 2.45** 1.77 N.S.
CRM organizational alignment × relationship maintenance γ2 N.S. N.S. N.S.
CRM organizational alignment × relationship termination γ3 .18*** .05 N.S. N.S.
CRM technology × relationship initiation γ4 –.11*** .06 N.S. N.S.
CRM technology × relationship maintenance γ5 N.S. N.S. N.S.
CRM technology × relationship termination γ6 .09*** .04 N.S. N.S.
Control Variables Industry 2 (financial services) δ1 N.S. N.S. 1.79 .92
Industry 3 (power utilities) δ2 N.S. N.S. N.S.
Industry 4 (hospitality) δ3 1.53*** .80 33.92** 20.72 3.23*** 1.11
N 211.00*** 98** 101.
R2 00.24*** .49** .29
*p ≤ .1.
**p ≤ .05.
***p ≤ .01.
aDependent variable has been rescaled (×103).
Notes: We report one-tailed significance levels. N.S. = not significant.
Customer Relationship Management Process 301

Moderating Effects of CRM-Compatible Organizational data with Sample 2 data. Specifically, we estimated the
Alignment association of our Sample 1 covariates with the Sample 2
We hypothesized that a CRM-compatible organizational perceptual performance measure (Model 3). The results of
alignment has a positive, moderating effect on the CRM this cross-validation are shown in Table 2.
processes–economic performance link at each stage of Similar to Model 1, the estimated specification fits the
CRM (H2). For the perceptual performance measure, H2 data reasonably well, with an R2 of .29. The key finding is
was marginally supported for the initiation stage (γ1 = .17, that all three effects for H1 were replicated. In other words,
p < .05) and fully supported for the termination stage (γ3 = the relationship to economic performance is positive at both
.18, p < .01). H2 was not supported at the maintenance the initiation stage (β1 = .93, p < .01) and the maintenance
stage, but the association at least was in the hypothesized stage (β2 = .60, p < .05). As in Model 1, the effect at the ter-
direction (positive). For objective performance, the moder- mination stage was negative but not significant. For H2, the
ating effect was marginally significant for initiation (γ1 = signs of all three coefficients are consistent with our find-
2.45, p < .05), but not for the other two stages. ings for Model 1. However, they are not significant even at
the initiation and termination stage. For H3, we found all
Moderating Effects of CRM Technology three coefficients to be consistent with our results for Model
We hypothesized that CRM technology has a positive, 1. Again, the coefficients are not significant even at the ini-
moderating effect on the CRM processes–economic per- tiation and termination stages. However, we have a margin-
formance link at each stage of the relationship (H3). For ally significant, negative main effect for CRM technology
perceptual performance, H3 was supported only in the case (β5 = –.17, p < .1). That the effect size for H2 and H3 is sim-
of termination (γ6 = .09, p < .05). Notably, for the initiation ilar to that of Model 1 could be an indication that the non-
stage, the moderating effect was negative (γ4 = –.11, p < significant findings of Model 3 are a function of the smaller
.05). At the maintenance stage, the moderating effect was in sample size. This occurred because of a difficulty in acquir-
the expected positive direction, but it was not significant. In ing second informants in many of the companies.
terms of objective measures, all three interaction effects
were not significant. The findings are somewhat contrary to DISCUSSION
our expectations. Thus, the sophistication of the CRM tech- The goal of the current study was threefold: (1) to con-
nology used is not necessarily linked to a company’s ability ceptualize and operationalize the process of CRM imple-
to improve economic performance through CRM processes. mentation, (2) to determine whether the implementation of
CRM processes is positively linked to performance, and (3)
Industry to identify some key moderators of the relationship between
Our control variables capture effects due to industry CRM processes and performance. The results of this empir-
membership. The hospitality industry had marginally higher ical effort from two studies produced several notable
average performance compared with the base case, both for findings.
perceptual performance (δ3 = 1.53, p < .05) and for objec- First, the data provide support for our conceptualization
tive performance (δ3 = 33.92, p < .1). The remaining indus- for the CRM construct. We grouped the key activities of a
try dummies were not significant for either perceptual or formalized CRM process in terms of three primary dimen-
objective performance. Thus, our findings appear to be rela- sions: relationship initiation, maintenance, and termination.
tively consistent across industries.3 We then developed items to assess the extent to which the
dimensions are implemented. This is an important contribu-
Common-Method Bias tion for several key reasons. On the one hand, this repre-
When dependent and independent variable data are col- sents a first step toward development of what constitutes a
lected from a single informant, common-method bias can standard for defining the nature of CRM processes. As we
be a problem. Based on the work of Podsakoff and Organ mentioned previously, there have been different ways of
(1986), we used Harman’s one-factor test to examine the conceptualizing CRM processes in the academic literature
extent of this bias. The results of the principal components and in practice. A good metric for this construct is needed
factor analysis revealed that there are ten factors with eigen- to establish a common ground so that the results of CRM
values greater than 1.0, which accounts for 76% of the total processes can be compared across companies and research
variance. Common-method variance does not appear to be a studies. This index can also be employed as a guide for fur-
problem because several factors were identified, the first ther research. On the other hand, our conceptualization
factor did not account for the majority of the variance (only highlights the importance of separating the three dimen-
24%), and there is no general factor in the unrotated struc- sions of CRM processes, because performance may vary at
ture (Podsakoff and Organ 1986). each stage. Mere examination of CRM processes at a gen-
To address any other concerns about common-method eral level does not capture the detailed nature of relation-
variance, we cross-validated the estimation of Sample 1 ship management. A key goal of further research could be
to examine factors that influence performance at each stage
3We also tested for differences in the effects of interest (initiation, main- in more detail.
tenance, and termination) for the various industries for Model 1. None of Second, our findings indicate that the implementation of
the interactions was significant. We also explored the possibility of mean CRM processes is associated with better company perform-
differences between the different countries. Taking Switzerland as a base ance in two of the three stages. The strongest effect is for
case, we found a significant, positive effect for the cross-validation (Model
3) for Austria and Germany. For the other two equations (Models 1 and 2),
relationship maintenance, followed by relationship initia-
the country effects were not significant. When we included the country tion. The effects for relationship termination were either
effects, none of the other parameter signs or significances changed. low or not significant (even in the negative direction for
302 JOURNAL OF MARKETING RESEARCH, AUGUST 2004

perceptual performance). Thus, CRM appears to produce outline of the different CRM activities that occur at each of
some of the payoff that companies expect when they invest the three main stages. Thus, a company could use our
in CRM activities. However, some types of activities may approach to identify key activities that must be imple-
increase performance and others may not. In the case of ter- mented to be successful, and an evaluation of the activities
mination, a possible explanation for the negative results is can provide a means for comparing their level of implemen-
that companies are subject to Type II errors. That is, it is tation with that of competitors and other industries.
possible that companies are reluctant to terminate relation- Second, our results indicate that the CRM process–
ships with customers who are not profitable. It is also possi- performance link is not as strong as we expected. This sug-
ble that companies are not as effective in implementing gests that there is considerable room for improvement in the
CRM processes at this stage. implementation of CRM processes. In particular, our find-
Additional notable results are provided by the moderator ings strongly suggest that mere implementation of CRM
variables. First, there was a significant interaction between technology will not lead to the desired effect; it may even
a CRM-compatible organizational alignment and both rela- have a negative effect. Therefore, managers need to evaluate
tionship termination and initiation. Thus, implementation of the contributions of technology differently at the three
CRM processes is more likely to improve performance stages of CRM processes.
when the company develops an incentive and organizational Third, managers also need to pay greater attention to
scheme to support CRM-compatible behavior. It might be other aspects of CRM process implementation. Our data
argued that CRM processes are already more developed at show that the alignment of organizational aspects is a criti-
the maintenance stage, which leaves the greatest room for cal element in the CRM implementation effort. For exam-
improvement at the initiation and termination stages. This ple, a customer focus needs to be brought deeper into the
rationale is supported by data in Table 1, which indicate that functional areas of the company; it cannot be isolated
companies most often implement maintenance processes. among marketing managers. The installation of technology
If a proper organizational structure and incentives are not or CRM software is not enough to ensure that a program
in place, it may be difficult for CRM processes to produce will be profitable. Employees must be rewarded for engag-
the desired effects. Thus, it is not enough for a company ing in CRM activities and customer-oriented behaviors.
simply to implement CRM processes. It must organize itself Fourth, it is often argued that CRM works better in some
and install a reward structure to support these processes. industries than in others. However, in our data, we do not
This also suggests that organization variables need to play a find support for this contention, at least for the four indus-
key role in further research efforts that attempt to under- tries under investigation. Therefore, our findings suggest
stand the performance impact of CRM. that many of the key issues and problems are relevant
Another notable finding is that our data are partially con- across various industries.
sistent with existing evidence that a large proportion of CRM
technology deployments do not perform to expectations. We Limitations and Further Research
found one moderately positive effect and one moderately Although our study produced interesting and meaningful
negative effect, and all other moderating CRM technology findings, there are some limitations that need to be dis-
effects were not significant. This is an important finding cussed. First, a key objective of our study was to conceptu-
because it attests to the difficulty of making CRM technology alize and operationalize a measure of the three stages of
investments pay off. However, it could also be argued that CRM processes. In particular, we conducted an extensive
technological investments offer positive returns only after ini- search through the business press and academic literature
tial implementation difficulties are overcome. Because CRM and supplemented this with interviews of CRM experts to
information technology investments are relatively recent, identify relevant CRM processes. Thus, we attempted to
there could be a potentially reversed effect in the future. capture as many current, relevant CRM activities as possi-
Nevertheless, our results emphasize the key point that ble. However, because new CRM processes evolve over
successful implementation of a CRM program requires time, it could be argued that our sets of processes at each
more than just technology, and if firms focus on only this stage will need to be “enriched” or updated as new activities
aspect, their efforts are likely to be disappointing, at least in become common practice.
the short run. In particular, the successful implementation Second, it should be noted that we are studying a
of CRM requires a strong people-related component. This dynamic phenomenon from a cross-sectional perspective.
may partially explain the negative relationship for CRM Because capturing this process over time is often difficult,
technology at the initiation stage. Perhaps in establishing a we took a “snapshot” of the situation at a single point in
relationship with a company, potential customers would time. Nevertheless, it is possible that some of the effects are
rather have contact with people than with technology-driven more longitudinal in nature. For example, it is possible that
systems. However, at the termination stage, it may be cost the negative effects of technology change over time as
efficient to manage low-value relationships with technolog- employees and customers become more accustomed to the
ical support systems. Because our findings suggest that the systems. It might be that in the long run, a more positive
effectiveness of CRM technology varies across the three relationship between the two variables could be expected.
stages, further work in this area needs to explore processes Therefore, a future longitudinal study might also provide
at each of these stages in more detail. worthwhile insights.
Third, it would be worthwhile to investigate how various
Managerial Implications industry- and firm-specific characteristics drive the degree
The results of our study have several important implica- to which the three CRM dimensions are developed across
tions for managers. First, our research provides a systematic firms. Finally, we examine CRM processes at the customer-
Customer Relationship Management Process 303

facing level only. It would be interesting to determine how •We continuously track customer information in order to assess
our findings compare with observations from the company- customer value. (3.808)
wide or functional levels. The critical issues are different at •We actively attempt to determine the costs of retaining cus-
these other levels. For a complete picture of CRM, all three tomers. (1.826)
•We track the status of the relationship during the entire cus-
levels must be examined.
tomer life cycle (relationship maturity). (1.760)
APPENDIX: DESCRIPTION OF MEASURES Activities to Retain Customers (RETAIN)
The scales for CRM initiation, maintenance, and termina- With regard to your SBU, to what extent do you agree to
tion are new and were considered formative constructs, the following statements?
rated on a seven-point Likert scale, anchored by 1 =
“strongly disagree” and 7 = “strongly agree.” The variance •We maintain an interactive two-way communication with our
customers. (1.453)
inflation factors of each item with regard to the other items •We actively stress customer loyalty or retention programs.
of the respective construct are in parentheses. (1.379)
•We integrate customer information across customer contact
CRM Initiation (INITIATE) points (e.g., mail, telephone, Web, fax, face-to-face). (1.581)
Measurement at Initiating Stage (IMEASURE) •We are structured to optimally respond to groups of customers
With regard to your SBU, to what extent do you agree to with different values. (1.660)
the following statements? •We systematically attempt to customize products/services
based on the value of the customer. (1.870)
•We have a formal system for identifying potential customers. •We systematically attempt to manage the expectations of high
(4.253) value customers. (1.580)
•We have a formal system for identifying which of the potential •We attempt to build long-term relationships with our high-
customers are more valuable. (4.663) value customers. (1.282)
•We use data from external sources for identifying potential
high value customers. (1.590) Activities to Manage Up-Selling and Cross-Selling
•We have a formal system in place that facilitates the continu- (CROSS_UP)
ous evaluation of prospects. (2.615) With regard to your SBU, to what extent do you agree to
•We have a system in place to determine the cost of the following statements?
reestablishing a relationship with a lost customer. (1.993)
•We have a systematic process for assessing the value of past •We have formalized procedures for cross-selling to valuable
customers with whom we no longer have a relationship. (2.021) customers. (2.488)
•We have a system for determining the costs of reestablishing a •We have formalized procedures for up-selling to valuable cus-
relationship with inactive customers. (1.953) tomers. (2.902)
•We try to systematically extend our “share of customer” with
Activities to Acquire Customers (ACQUISIT) high-value customers. (1.978)
With regard to your SBU, to what extent do you agree to •We have systematic approaches to mature relationships with
the following statements? high-value customers in order to be able to cross-sell or up-sell
earlier. (2.289)
•We made attempts to attract prospects in order to coordinate •We provide individualized incentives for valuable customers if
messages across media channels. (1.397) they intensify their business with us. (1.415)
•We have a formal system in place that differentiates targeting
of our communications based on the prospect’s value. (1.733) Activities to Manage Customer Referrals (REFERRAL)
•We systematically present different offers to prospects based With regard to your SBU, to what extent do you agree to
on the prospects’ economic value. (1.710) the following statements?
•We differentiate our acquisition investments based on cus-
tomer value. (1.580) •We systematically track referrals. (1.992)
•We try to actively manage the customer referral process.
Activities to Regain Customers (REGAIN) (2.487)
With regard to your SBU, to what extent do you agree to •We provide current customers with incentives for acquiring
the following statements? new potential customers. (2.440)
•We offer different incentives for referral generation based on
•We have a systematic process/approach to reestablish relation- the value of acquired customers. (2.103)
ships with valuable customers who have been lost to competi-
tors. (1.786) CRM Termination (TERMINATE)
•We have a system in place to be able to interact with lost cus-
tomers. (1.881)
Measurement at Termination Stage (TMEASURE)
•We have a systematic process for reestablishing a relationship With regard to your SBU, to what extent do you agree to
with valued inactive customers. (1.663) the following statement?
•We develop a system for interacting with inactive customers.
•We have a formal system for identifying nonprofitable or
(1.796)
lower-value customers.
CRM Maintenance (MAINTAIN) Activities to Demarket Customers Actively (EXIT)
Measurement at Maintaining Stage (MMEASURE) With regard to your SBU, to what extent do you agree to
With regard to your SBU, to what extent do you agree to the following statements?
the following statements?
•We have a formal policy or procedure for actively discontinu-
•We have a formal system for determining which of our current ing relationships with low-value or problem customers (e.g.,
customers are of the highest value. (3.144) canceling customer accounts). (1.237)
304 JOURNAL OF MARKETING RESEARCH, AUGUST 2004

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