Long-Term Relationships and Profitability: The Benefits of Customer Relationship Management (CRM).

to CRM (hereafter, relational information processes) could help shed light on the role of CRM technology in firms.

The Need for Relational Information Processes Relationship marketing is based on the generation of a foundation of shared interest, in which firms and customers are committed to each other.Firms strive to use interactions with customers to generate commitment, a lasting desire in customers to maintain a valued relationship, and trust, a readiness to rely on the exchange partner. Trust is considered especially critical for relational exchanges because it is a crucial determinant of commitment. An important antecedent of trust is communication (Morgan and Hunt p.

20-38). Communication in the CRM context involves the sharing of information between a firm and its customers (De Wulf, Odeken-Schroder, and Iacobucci p. 33-51).To establish and maintain relationships, it is also imperative that organizations use the information to shape appropriate responses to customer needs.

In effect, information plays a key role in building and maintaining customer relationships. Relationship marketing follows different precepts from those of transactional marketing in the firm--customer interaction. Compared with transactional marketing, relationship marketing requires a much greater degree of firm--customer information sharing and differs in terms of the type of learning involved (Selnes and Sallis p. 80-96) and in how customer information is used.Therefore, although general marketing information processes have been discussed in prior research (e.

g. , Menon and Varadarajan p. 53-72; Moorman 318-36), customer information processes for relationship marketing require specific attention (see also Zahay and Griffin 169-203). As we previously noted, we conceptualize these as relational information processes. These information processes systematize the capture and use of customer information so that a firm's effort to

build relationships is not rendered ineffective by poor communication, information loss and overload, and inappropriate information use.

Dimensions of Relational Information Processes Our approach to understanding relational information processes involved a review of extant academic and business literature on CRM. In addition, we interviewed 15 managers (in eight companies that employ customer relationship managers and seven CRM technology vendors) and conducted a preliminary survey on a CRM-focused Web site to glean insights into relational information processes.On the basis of the literature review, interviews, and the preliminary Web-based survey, we suggest that the relational information processes construct consists of five dimensions: information reciprocity, information capture, information integration, information access, and information use. Information reciprocity ensures effective communication, information capture and integration prevent information loss, information access limits information overload, and information use routines ensure that customer information is used consistently with the needs of CRM.

We describe these processes next. Information reciprocity. Reciprocity occurs when actions taken by one exchange partner are matched by the other; it is a key defining characteristic of CRM (De Wulf, Odeken-Schroder, and Iacobucci 33-51). Therefore, emphasizing processes for such interactive firm--customer information exchange is important for a firm to execute its relationship marketing strategy effectively (Day 54-75). Information reciprocity refers to the processes that enable customers to interact and share information with the firm and that enable the firm to respond to customers.Information reciprocity is an integral part of relational information processes because trust and commitment, the pillars of a strong relationship, are unlikely to develop in the absence of collaborative or mutual interactive communication (Mohr, Fisher, and Nevin 103-116).

Information capture. Research in market orientation (e. g. , Kohli and Jaworski

1-19; Narver and Slater 20-36), market information use (e. g. , Menon and Varadarajan 53-72), and organizational learning (e.

g. , Sinkula 35-46) has emphasized the importance of information acquisition.Building customer relationships requires detailed and up-to-date information about customer interactions with an organization. Customers often have multiple channels to communicate with a firm and could interact with numerous departments, such as sales, customer service, and marketing.

The information from these interactions serves as the basis for future interactions in the context of CRM (Peppers and Rogers 23-45). Thus, information capture processes that acquire information from customer interactions with various sources and channels are a critical aspect of relational information processes.Information integration. All interactions between a firm and its customers through different departments and contact points are sources of customer information. However, if this information exists in disparate form with the sources that interact with the customer, it can impede consistent and efficient communication.

The development of trust is contingent on customers obtaining consistent and effective responses when they interact with the firm. Such responses are possible only when the history of a customer's relationship with the firm is available to support customer interactions.This requires information integration processes to ensure the assimilation of customer information from all firm--customer interactions to develop a detailed history of customer relationships and prevent loss of customer information. Information access. The market orientation literature (e. g.

, Kohli and Jaworski 1-19; Narver and Slater 20-36) considers information dissemination a crucial component of the information processes that enhance the responsiveness of the firm. Customers may interact with various functional areas in the firm, such as sales, marketing, and customer service.Thus, providing relevant

employees with access to updated and integrated customer information should be a priority for firms practicing CRM. Although the market orientation literature focuses on information dissemination, the preliminary research we conducted suggests that employees who are responsible for managing customer relationships viewed the issue more from the perspective of information access than information dissemination on a continuous basis.

Mere dissemination, which implies distribution, was perceived as likely to result in information overload as a result of the vast numbers of customer interactions with an organization.Thus, we consider the term information access more accurately descriptive of the information process required to sustain customer relationships. Information use. Market information use has been classified into action-oriented use, knowledge-enhancing use, and affective use (see Menon and Varadarajan 53-72). To build and sustain customer relationships, firms should deploy the acquired customer information in a manner that is consistent with the philosophy of relationship management.

Doing so would imply that firms use the information to understand the needs and behaviors of their customer (knowledge-enhancing use) and develop and offer customer-specific products and services (action-oriented use). Relationship marketing also suggests that customers should be treated in accordance with the value they offer to the firm, which in turn enhances customer lifetime value (Venkatesan and Kumar 106-125). Therefore, customer information is also used to identify high-value customers.Antecedents to Relational Information Processes Traditionally, it was assumed that firms in the business-to-business sector and those involved in marketing services had greater motivation to build relationships with their customers.

However, Coviello and colleagues (33-47) find that firms compete using transactional, relational, or hybrid approaches regardless of whether they supply services or goods in the consumer or business-to-business arenas.

These results imply that researchers need to examine factors that are more specific than the broad services/goods and business-to-consumer/business-to-business classifications as antecedents to relational information processes.Organizational learning theory provides theoretical guidance to assess the antecedents to relational information processes. The marketing literature on organizational learning (e.

g. , Sinkula 35-46) suggests that four types of factors could be antecedents to information processes: organizational culture, organizational systems, task-related factors, and environmental factors. We address two types of antecedents to relational information processes: customer relationship orientation (organizational culture) and customer-centric management system (organizational systems).Environmental factors (i. e.

competitive intensity and environmental dynamism) form the background against which the relationships are tested and used as covariates. Customer Relationship Orientation Previous marketing literature supports the view that organizational culture influences information processes (Menon and Varadarajan 53-72; Sinkula 35-46). An organization's culture is the deeply embedded values and beliefs that establish the norms for appropriate behavior (Deshpande, Farley, and Webster 23-37). Organizational culture affects a firm's choice of outcomes and the means to accomplish those outcomes (Moorman 318-36).Therefore, customer relationship orientation, which is rooted in the firm's overall culture, guides the organization's attitude toward both CRM and the implementation of the necessary processes (Day 34-54).

Essentially, customer relationship orientation establishes a "collective mind" (Weick and Roberts 357-83) or a belief system for the organization that considers customer relationship an asset and drives the choice of means (processes) to accomplish this outcome (Day 34-53). Because relational information processes are the means to establishing effective relationships, customer relationship orientation motivates their implementation.Customer-Centric Management System Information processes are likely to be influenced by an organization's management system (Menon and Varadarajan 53-72). The management

system represents the organizational climate, which comprises the structure and incentives that motivate behaviors consistent with a culture (Slater and Narver 63-75).

As such, a management system or configuration (Day 34-53) that is consistent with a customer relationship orientation and reflects the design of the organization's structure and incentives is likely to influence the implementation of CRM.A customer-centric management system should consist of structural aspects that ensure that organizational actions are driven by customer needs and not by the internal concerns of functional areas. In addition, employee evaluation schemes and incentives should be designed to encourage behaviors consistent with a customer relationship oriented culture by augmenting the organization's ability to focus on customer interactions and by ensuring that expertise from different functional areas is deployed to promote the quality of customer experience (Day 34-53).A customer-centric management system helps organizations initiate relational information processes by breaking down functional barriers to customer-centered actions and ensuring adequate focus on customer interactions. Relational Information Processes and Customer Relationship Performance In this study, customer relationship performance focuses on two key aspects of relationships: customer retention and customer satisfaction. By providing quick and effective responses to customers, relational information processes are likely to enhance customer satisfaction by providing consumption-related fulfillment (Oliver 44-55).

Apart from shaping responses to customers, by enabling customers to communicate easily with the organization, relational information processes help register customers' complaints and provide them feedback. In addition, the integration of customer information and the sharing of it with key customer contact employees enable customers to communicate with firms more effectively. Cannon and Homburg (29-44) find that frequent and open communication between a supplier and a customer boosts the customer's

efficiency in using the firm's products or services, thereby improving customer satisfaction and loyalty.Relational information processes may also boost customer relationship learning (Selnes and Sallis 80-96) by providing customers with a greater understanding of organizations' attempts to respond to their demands and enhancing customer satisfaction and loyalty.

CRM Technology Use and Customer Relationship Performance Customer relationship management technology entails IT designed for CRM. In this study, we consider CRM technology use distinct from the relational information processes that drive CRM.This approach is consistent with that advocated by prior research in technology use in organizations that regard technology as a resource that supports the implementation of information processes (e. g. , Brynjolfsson and Hitt 23-48; Hitt and Snir n/a; Reinartz, Krafft, and Hoyer 293-305). The use of CRM technology is expected to boost the ability of an organization to sustain profitable customer relationships by enabling information to be integrated and shared smoothly, thus facilitating more efficient and effective firm--customer interaction, analysis of customer data, and customization of responses (Day 77-83).

Technology components of CRM include front office applications that support sales, marketing, and service; a data depository; and back office applications that help integrate and analyze the data (Greenberg 28-46). Sales support is designed to help the sales force acquire and retain customers, reduce administrative time, and enable the efficient management of accounts (Speier and Venkatesh 98-111). Therefore, sales support permits the management of sales leads and supplies competitor and customer information to the sales force.In addition, sales support helps manage sales through multiple channels by tracking product availability and delivery.

Marketing support includes market planning, campaign execution, and campaign performance measurement (Greenberg 45-63). As such, marketing

support comprises the generation of customized offers and communications and the assessment of product profitability. Service support coordinates the request and delivery of service and helps customers serve themselves by providing ready access to a knowledge base of solutions (Meuter et al. 0-64). These front office or customer interaction solutions are supported by a customer data depository and software that helps integrate and analyze the data.

Firms develop a central data bank in which all customer-related information is stored. Creating a database that is guided by market intelligence is a critical component of a firm's attempts to create customer assets through long-term relationships (Berger et al. 39-55). The database should be accessible to relevant functions, such as sales, customer service, and marketing.The data are integrated and analyzed by means of software to understand customer preferences and estimate customer lifetime value, retention, and loyalty (Greenberg 45-63).

Prior research suggests that IT plays a complementary role by enhancing the effectiveness of organizational processes (Hitt and Snir n/a; Melville, Kraemer, and Gurbaxani 283-322). Two factors are considered complementary if an increase in the level of one factor enhances the marginal value of the other factor (Milgrom and Roberts 179-208).Although IT does not substitute for organizational processes, it increases their marginal value by enabling effective implementation (Hitt and Snir n/a). Therefore, firms adopt IT solutions to complement organizational processes by enhancing their marginal value (Brynjolfsson and Hitt 23-48).

Relational information processes are implemented so that the information required to establish trust and commitment between a firm and its customers is developed, provided to decision makers, and used effectively.Relational information processes concretize the implementation of customer relationship orientation by laying

out the way that a firm should use customer information to develop strong and enduring relationships with valuable customers. In the absence of a clear delineation of these processes, the implementation of CRM technology might not be consistent with employees' expectations of customer information management.The mismatch between the customer information management practices in the organization and the information-handling and -processing capability of the CRM technology system could prevent the organization from taking advantage of the capabilities of the CRM technology system. Using IT solutions without designing appropriate processes may create "significant productivity losses as any benefits of computerization are more than outweighed by negative interactions with existing organizational practices" (Brynjolfsson and Hitt p. 25).

If relational information processes are delineated, CRM technology ensures that their implementation is rendered efficient by enabling a smoother reciprocal flow of information and by limiting information loss and overload by capturing, integrating, and providing information access to decision makers. Reinartz, Krafft, and Hoyer (293-305) note that CRM technology is a facilitator of CRM activities. By playing a complementary role, CRM technology enhances the marginal value of relational information processes, thereby improving customer relationship performance. ConclusionAlthough extant marketing literature has emphasized the importance of information processes (e. g. , Menon and Varadarajan 53-72; Moorman 318-36), information processes relevant to CRM have not received adequate attention.

Thus, an important contribution of this article is the conceptualization and measurement of relational information processes and the demonstration of its antecedents. We also developed a measure for CRM technology use and showed that CRM technology use moderates the influence of relational information processes on customer relationship performance.Overall, the literature supports the contention that relational information processes

provide guidelines to help firms manage customer information and interact with customers in ways that are consistent with the demands of CRM. These processes are necessary to enhance customer relationship performance while CRM technology performs a supportive role. Reinartz, Krafft, and Hoyer (293-305) speculate that CRM technology use may even have a negative effect on performance, and our study implies that this could occur when appropriate relational information processes are not implemented.

Delineation of relational information processes enables managers to track and evaluate the information routines that are relevant for CRM. Furthermore, this paper explores key antecedents of relational information processes, helping firms assess whether their customer relationship orientation and customer-centric management system, both of which managers can control, are consistent with the demands of relationship management.Designing effective relational information processes and enhancing them using CRM technology could help a firm develop customer-relating capability (see Day 56-73). Recommendations Firms should deploy CRM technology to enhance the effectiveness of relational information processes. Although CRM technology use by itself is not a panacea to CRM problems (see also Rigby, Reichheld, and Schefter 101-109), in the presence of properly designed relational information processes, the technology promotes customer relationship performance.

Customer relationship management technology is a complex suite of applications. Implementing this technology successfully to improve customer relationship performance requires a thorough understanding of relational information processes within the organization. Therefore, the key decision that managers who are deliberating the use of CRM face is not whether to implement CRM technology but whether their organization could benefit from relational information processes.