MOVING TOWARD E-BUSINESS: CUSTOMER RELATIONSHIP MANAGEMENT ALIGNMENT IN MALAYSIAN SMALL BUSINESSNorshidah Mohamed (Presenter)International Business School, Universiti Teknologi Malaysia http://www.ibs.utm.my

Murni Mahmud, Abdul Rahman Ahlan, Umar AditiawarmanInternational Islamic University Malaysia

Ramlah Hussein, Nor Shahriza Abdul KarimPrince Sultan University, Kingdom of Saudi Arabia

International Conference on Ebusiness and EgovernmentIzmir, Turkey 27-28 April 2013

2

OUTLINE• Introduction

• Literature review

• Research methodology

• Findings

• Conclusion

3

INTRODUCTION• Customer Relationship Management (CRM)

• Relates to sales & marketing strategy

• The process of acquiring, retaining and growing profitable customers on service attributes that customers would value and create loyalty to the organisation (Brown, 2000).

4

RESEARCH AIM

Develop a research model on CRM alignment and investigate the impact of CRM alignment on

performance.

LITERATURE REVIEW

6

CRM ?

– process (Day and Van den Bulte, 2002)

– strategy (Parvatiyar and Sheth, 2001)

– capability (Peppers, Rogers and Dorf, 1999)

– technological tool (Shoemaker, 2001)

– Other organizations simply view CRM as a help desk or call center.

What is CRM alignment?

7

CRM ALIGNMENT ?

Conceptualize CRM alignment as:

• Business – IT strategic alignment

• CRM process – IT alignment

8

BUSINESS-IT ALIGNMENT• The latest annual survey on IT industry in 2010

shows that business and information technology (IT) alignment (BIA) is still among the top five of top management concerns

9

BUSINESS-IT ALIGNMENT .. cont’

Alignment is sometimes used differently in the BIA literature. Terms include:

• Fit (Venkatraman, 1989; Chan, 1992; Henderson and Venkatraman, 1993)

• Harmony (Luftman, 1993)

• Bridge (Ciborra, 1997)

• Fusion (Smaczny, 2001)

10

BUSINESS-IT ALIGNMENT .. cont’

• Integration (Weill and Broadbent, 1988)

• Linkage (Henderson and Venkatraman, 1993)

11

CRM PROCESS-IT ALIGNMENT

• Refers to processes on customer-facing level (Reinartz et al. 2004)

• Involves coordination of information – thus IT-enabled

• Key aspects in relationship management e.g. initiation, maintenance & termination.

12

BENEFITS OF CRM?• Boulding et al. (2005) argued that the

benefits of CRM applications are perceived differently across industries.

13

BENEFITS OF CRM – SOME SUGGESTIONS

Richards and Jones (2008) suggested CRM:

• improves pricing

• increases customer satisfaction and loyalty through better customer service

• enhances product development and differentiation through customization/personalization

• enhances ability to create long-term relationships and customer segmentations

• improves customer acquisition and retention

• motivates employees to foster customer relationship

• reduces administrative and operational cost

• enhances decision-making process

• improves knowledge sharing among the selling companies

14

BALANCED SCORECARD• Based on four perspectives : financial,

customer, internal business process and learning and growth (Kaplan and Norton 1992; 1996)

• Examples of studies using BSC for CRM include Kim et al. (2003) and Kim & Kim (2008)

15

HYPOTHESESH1: CRM performance is positively related to organizational performance

H2a: CRM process-information technology (IT) alignment is positively related to CRM performance

H2b: CRM process-IT alignment is positively related to organizational performance

H3a: Business-IT strategic alignment is positively related to CRM performance

16

HYPOTHESES

H3b: Business-IT strategic alignment is positively related to organizational performance

H4: Business-IT strategic alignment is positively related to CRM process-IT alignment

17

RESEARCH MODEL

RESEARCH METHODOLOGY

19

CONTEXT OF STUDY• Malaysian small and medium enterprises (SME)• Malaysia’s SME has fewer than 50 employees with turnover of below RM25 million• In 2009, SME in Malaysia account for about 99% of total business establishments (552,849) and contribute to 31.2% of the nation’s Gross Domestic Product (GDP).

20

CONTEXT OF STUDY .. cont’• SME have provided 56% to total employment

and 19% exports of the country (SME annual report). • Total survey questionnaires distributed: 300

21

SURVEY INSTRUMENT SOURCES

Constructs Source of constructs anditems used in the research

Business-IT alignmentCRM process-IT alignmentCRM performance

Kearns and Sabherwal (2007);Viaene et al. (2007)Reinartz et al. (2004); Chen and Ching (2004)Kim et al. (2003); Chen and Ching (2004)

22

SURVEY INSTRUMENT ITEMS

Business-IT alignment

1. Our strategic IT plan is well-aligned with the organisation’s mission, goals, objectives and strategies.

2. Our strategic IT plan contains quantified goals and objectives.

3. Business and IT management processes are strongly integrated.

4. We prioritise major IT investments by the expected impact on business performance.

CRM-IT alignment

5. IT in our organisation supports us in tracking of prospects. (initiate)

6. IT helps us to identify different offers for prospects based on prospects’ economic value. (acquire)

7. In our organisation, IT supports us in identifying customers lost to competitors. (regain)

8. IT helps us determine which of our customers are of the highest value. (maintain)

9. IT supports two-way communication with our customers. (retain)

10. IT helps us in tracking customers and the incentives for them if they intensify their business with us. (cross-sell / up-sell)

11. IT helps us in tracking current customers and the incentives for them when they acquire new potential customers. (referral)

12. IT supports us in tracking non-profitable, low value or problem customers. (terminate)

23

SURVEY INSTRUMENT ITEMS .. cont’

CRM Performance

In our organisation, IT has helped us improve in:

1. Customer satisfaction. (customer)

2. Customer loyalty. (customer)

3. Customer retention. (customer)

4. Increased return on investment (ROI) on IT-enabled CRM processes. (financial)

5. Tremendous reduction in customer transaction cost. (internal business process)

6. CRM process innovation and product / service innovation. (learning & growth)

Organisational performance

In our organisation, IT has

7. Return on investments (ROI).

8. Profitability

9. Competitiveness

10.Sales revenue

FINDINGS

25

PROFILE OF SMEIndustry Frequency Percentage

Automotive 8 3.5Manufacturing 7 3.1Direct selling 39 17.3Travel and hospitality 6 2.7Professional services (legal, accounting etc.) 71 31.4Information and communication technology 12 5.3Others (retail etc.) 80 35.4Missing 3 1.3Total used for analysis 226 100

26

PROFILE OF SME .. cont’• The minimum number of employees was one,

maximum was 150, and average was 15.

• Minimum duration in business, was fewer than one year, maximum was 33 years and average was four years.

27

RELIABILITY ANALYSIS

Constructs No. of items

Cronbach’s Alpha

Business-IT alignment 4 0.687 CRM process-IT alignment 8 0.798

CRM performance 6 0.639Organizational performance 4 0.682

28

CORRELATION ANALYSIS  Organizati

onal performan

ce

CRM performan

ce

CRM process

-IT alignment

Business

-IT alignme

ntOrganizational performance

1      

CRM performance 0.713** 1    

CRM process-IT alignment

0.653** 0.618** 1  

Business-IT alignment 0.658** 0.628** 0.695** 1**Correlation is significant at the 0.01 level (2-tailed)

29

SUMMARY

CRM PROCESS–ISALIGNMENT

BUSINESS–IS STRATEGIC

ALIGNNMENT

CRM PERFORMANCE

CRM ALIGNMENT

IMPACT OF CRM ALIGNMENT

H4:0.695**

H3a: 0.628**

H2a:

0.618**

ORGANIZATIONAL PERFORMANCE

H1: 0.713**

H2b: 0.653**

H3b:0.658**

CONCLUSION

31

CONCLUSION• The research explores and proposes a model to

aid researchers and practitioners alike in gaining insights into CRM alignment and its impact on performance.

• The research has proposed a research instrument and model for CRM alignment.

• The instrument has shown reliability while the model demonstrated relationships in the Malaysian SME context.

32

CONCLUSION• For researchers, the results provide a

starting point for future research opportunities.

• For practitioners, the research provides an insight into the components of CRM alignment and impact of CRM alignment. Future research areas include examining antecedents of CRM alignment and confirming the research model.

33

ACKNOWLEDGEMENTThe research is supported by the

Fundamental Research Grant Scheme Ministry of Higher Education Malaysia

(504/RES/G/14/3/2/2 FRGS).