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Foundations of Management, Vol.

11 (2019)
eISSN 2300-5661, pISSN 2080-7279, DOI: 10.2478/fman-2019-0002 23

CORRELATION BETWEEN CUSTOMER RELATIONSHIP MANAGEMENT


SYSTEM USAGE, PRODUCT INNOVATION, AND CUSTOMER SATISFACTION
Wouroud ELFARMAWI
University of Phoenix, Tempe, Arizona, USA
e-mail: wouroud@email.phoenix.edu

Abstract: This quantitative correlational research examined the correlations between customer relation-
ship management (CRM) usage, product innovation, and customer satisfaction. The general problem
was the lack of evidence indicating the use of CRM system as effective in improving small- to medi-
um-size companies’ performance. Hence, the specific problem was to determine the beneficial use
of a CRM system for customer satisfaction and product innovation. Data were gathered through sur-
veymonkey.com. A total of 97 respondents were selected as sample from 10 small- to medium-size
companies to answer the survey questions. Respondents were top managers, middle managers, and
first-line managers of the selected organization. Statistics of the study were provided with the help
of IBM Statistical Package for Social and Sciences version 23. The findings showed a strong correla-
tion between the use of CRM system and customer satisfaction. They indicated the use of CRM system
could improve the relationship with existing customers, could help attract prospective customers,
and could win back former customers.
Keywords: correlation design, CRM system, customer satisfaction, product innovation, quantitative re-
search.
JEL: M11, M15, O32, O33.

1 Introduction (2015) and Mavuram (2013), for example, discussed


the reasons why most businesses find the CRM sys-
As businesses acquired larger customer bases, tem hard to implement. The lack of resources in the
the requirement to manage the relationships between scientific literature supporting the use of CRM sys-
business and customer became a challenge (Akroush, tem for these two purposes compounds the problem.
et al., 2011). This challenge provoked the evolution The intent of the present research was to remedy this
of technology to address this requirement through issue by investigating whether a correlation exists
customer relationship management (CRM) system between the use of a CRM system and both customer
(Verrill, 2013). The CRM system initially started as satisfaction and product innovation.
a database to log in the contact information of cus- This paper gathered information concerning the ben-
tomers and eventually grew into a more advanced efits of using a CRM system, particularly in small-
management tool that improved business communi- to medium-size companies in the United States.
cation (Asghar, et al., 2013). The recent evolution The quantitative correlational design was used to
of CRM system established features that increased determine whether the selected companies have ben-
the flexibility of tracking customers’ expectations efited from the use of CRM system in satisfying their
(Akroush, et al., 2011). consumers’ needs and improving their products.
The potential of increasingly detailed customer rec- In this correlation, the predictor CRM system and the
ords led to growing investments in CRM by US criterion variables of product innovation and cus-
companies. Mavuram (2013) asserted that 73% tomer satisfaction were evaluated to determine if the
of the US companies have invested in CRM system variables are interconnected with each other.
to modernize their business. Yet, some business The existing CRM Behavior Theories, which charac-
leaders still lack the belief that CRM system could terized the interrelated perspectives of CRM associ-
affect customer satisfaction and increase their profit- ated with the managing of customer satisfactions,
ability (Colman, et al., 2011). Broetzmann, et al.
24 Wouroud ElFarmawi

were assessed to determine the link between them livery of quality products to the consumers, so as to
(Labus and Stone, 2010). improve business outcomes.
RQ1: What association, if any, is there between the
2 Problem statement use of a CRM system and satisfaction of customers
for small- to medium-size companies in the United
Before CRM system usage, forming a relationship States?
with customers was a fairly complex process for The second research question examined whether
companies (Mavuram, 2013). Theoretically, the using CRM systems contributes to product innova-
CRM system would help businesses to understand tion with a view to meet customer expectation. Dur-
their customers because it includes activities such as ing the decline stage of product life cycle, innovation
tracking customers’ response to new products, which is necessary to satisfy the changing and evolving
could prompt product improvement and innovation needs of customers.
(Bovee and Thill, 2013, Darvish, et al., 2012; Ku,
RQ2: What association, if any, is there between the
2010). There is, however, a lack of empirical re-
use of a CRM system and product innovation for
search indicating that the use of CRM system is effi-
small- to medium-size companies in the United
cient in enhancing small- to medium-size companies
States?
(Coltman, et al., 2011; Cuesta, 2014; Josiassen, et
al., 2014). This problem was noted by Doyle (2012)
and Gummesson (2014) who asserted that determin- 4 The hypotheses
ing the beneficial use of a CRM system for product
innovation and customer satisfaction was difficult. Correlation was used to accept or reject the hypothe-
ses.
Moreover, Chen and Popovich (2013) claimed that
studying the relationship between CRM system us- H10: There is no significant association between
age and customer satisfaction should not be limited the use of the CRM system and customer satisfaction
to satisfying customer desires, but must also extend for small- to medium-size companies in the United
to offering an ongoing healthy communication with States.
the company. Doyle (2012) and Gummesson (2014) H1a: There is a significant association between
agreed on a need to prove the beneficial use of CRM the use of the CRM system and customer satisfaction
system for product innovation and customer satisfac- for small- to medium-size companies in the United
tion. States.
H20: There is no significant association between
3 Research questions the use of the CRM system and product innovation
for small- to medium-size companies in the United
The study investigated the relationship among the States.
three variables: CRM system usage, product innova- H2a: There is a significant association between
tion, and customer satisfaction. The quantitative the use of the CRM system and product innovation
correlational design was used to address the problem for small- to medium-size companies in the United
by answering the research questions and identifying States.
the interaction between variables (Bettany-Saltikov
and Whittaker, 2013). The study considered the hy-
potheses by detecting the existence of statistical cor- 5 Significance of the study
relations between the variables.
The CRM system has generally been advocated as
The first research question addressed whether the a powerful tool for progress (Hassan and Parvez,
CRM system contributes to customer satisfaction 2013). Yet, many of the hyped benefits have not
with the company’s products and services. The ques- been scientifically proven. This study about the use
tion examined whether the CRM system can provide of CRM system in the small to medium-size US
critical information for the company to improve de-
Correlation between Customer Relationship Management System Usage, Product Innovation, . . . 25

businesses can therefore be informative on a number 6 Literature review


of levels. Valuable information might be gathered
in the business following categories: As the trend of business modernization continued
 Innovation to progress, sellers and buyers lost their close rela-
tionships. Before Industrial Revolution, traders knew
This quantitative correlational design can impart
their customers well, understood their demands, and
information to increase product innovation. CRM
sometimes knew them by name. When mass produc-
system usage offers processes for generating new
tion crept in, the wall between sellers and buyers was
ideas into valuable products. The advantage of CRM
created. As a result, the first imperative became how
system usage provides knowledge that is significant
to find customers for standardized products (Wang
for product innovation so as to develop the compa-
and Hui, 2012; Hailey, 2015).
ny’s financial benefit.
Over the past years, the CRM system has evolved
 Leadership from different business programs. Using CRM sys-
The present study result may encourage business tem for medium-size businesses in the United States
owners to use CRM system in their organizations is becoming prevalent because of companies’ interest
to help their leadership. CRM system allows leader- in boosting their competitive advantages. The essen-
ship to develop their business practice by managing tial use of CRM system is to integrate technology
the relationship with their customers in order to help and business process to satisfy the needs of custom-
satisfy their needs. ers (Bose, 2012). Ru-Jen, Rong-Huei and Kuan-Shun
 Business organizations (2010) opine that, with the advancement of technol-
ogy, the use of CRM system has the potential
The present research can contribute to the literature
of facilitating companies–customer interaction.
of several schools of thought on diverse business
The objective is to deliver the required information
strategy and customer service models, leading
to customers to create an effective communication
to higher customer retention and profit. Business
(Ernst, et al., 2011).
organizations are still persuaded to adopt CRM sys-
tem to create and manage their relationship with CRM system has begun to make information more
customers. practicable by releasing solutions of newer software
that were adaptable through industries (Ku, 2010;
 Customers
Hailey, 2015). Today, the CRM system is still em-
The present study result may benefit the customers ployed by businesses that are dependent on two fea-
because it offers information that helps consumers tures: innovation and customer satisfaction (CRM
determine their significant roles in the business. Switch Staff, 2013). The CRM systems focused pri-
It helps generate a concern for customers as stake- marily on the needs of the consumers (Bovée and
holders and hence prompts businesses to establish Thill, 2013). The CRM systems concentrate on one
effective communication between them. Businesses customer at a time, establishing a lasting relation-
obtain better profitability, which stems from satisfy- ship, and then build an equally beneficial relation-
ing consumers. ship (Gummesson, 2014).
 Education Some companies nowadays experience certain diffi-
The present study offered valuable theories that can culty in furthering success in customer service.
be used as starting points by academicians in their The main issue that they reason out is lack of human
discussions and debates. This research provides interaction because they render their services in the
a base knowledge about the correlation between virtual platform. Josiassen, Assaf and Cvelbar (2014)
using a CRM system and customer satisfaction. Es- asserted that the development of CRM system
tablishing a correlation between product innovation to advance innovations could be traced in the com-
and the use of CRM system remains an open subject pany’s business system.
for further studies. In the literature, outcome variables such as product
innovation and customer satisfaction were directly
26 Wouroud ElFarmawi

linked with the CRM system. Using CRM allows selected to solicit information about their use of
corporate representatives to concentrate on one cus- CRM. This approach resulted in a generalization
tomer at a time, establishing first a lasting and then gleaned from a sample population and the measure-
an equally beneficial relationship (Gummesson, ment of the different perceptions and opinions in a
2014). In the early 21st century, various companies given cohort (Bettany-Saltikov and Whittaker,
are competing to establish a new connection with 2013).
existing customers and raise long-term customer
allegiance and profitability for their company (Chen 7.2 Setting, population, and sample
and Popovich, 2013; Hailey 2015). A CRM strategy
could strengthen existing customer’s relations The study population comprised of individuals work-
and create new ones (Wang and Hui, 2012). ing in the categories of top managers, middle man-
The CRM system allows a coherent strategy that can agers, and first-line managers of small- to medium-
maximize the relationships among the customers size US companies using the CRM system for prod-
(Bovée and Thill, 2013). Knowing each customer uct innovation and customer satisfaction. A total
by using a business strategy of customer-centric data of 97 respondents were selected to answer the survey
mining techniques, the organization can consistently questions. All participants who agreed to participate
and proactively offer and sell better products or ser- in the survey were redirected to the survey form,
vices for a longer period (Kindström and Kowalkow- whereas participants who disagreed received a word
ski, 2014). Besides the technological improvements, of thanks while their survey monkey session auto-
CRM system initiatives signify a mean change matically closed. The minimum sample size of the
in weight from managing the portfolios of the prod- participants was calculated using the statistical soft-
uct to managing the portfolios of the customers and ware G*Power version 3.1.9.2. The probability sam-
requiring changes to business process. pling method was used because it utilizes a form
of random selection.
7 Method
7.3 Materials and instruments
7.1 Method and design

The instrument derives data from the responses to


The goal of the quantitative method with correlation- the survey (Black, 1999; Vogt, 2003). The questions
al design was to link the use of CRM system focused on the participants’ perceptions and expecta-
to product innovation and customer satisfaction in tions about the CRM system usage based on product
small- to medium-size companies in the United innovation and customer satisfaction. The results of
States. The use of quantitative correlational design the study were tabulated based on participants’ re-
helped discover a linear relationship between the sponses to the survey. All confidential information
predictor, CRM system usage, and criterion variables that pointed to the identity of participants was pro-
such as product innovation and customer satisfac- tected. No name of any participants was disclosed.
tion. The use of a quantitative method is to calculate Research quality revolves around the solution to a
the research data (Neuman, 2011; Vogt, 2003). particular issue (Davies and Dodd, 2002). Incorpo-
The nature of this study required data collection from rating trustworthiness through consistent procedures
primary sources. This task was accomplished by in this study suggested the validity and reliability
asking participants their opinions in a structured way of the collected data and data gathering were accu-
to allow a production of statistical maps and facts rate and free of doubt.
to guide in explaining the issue under investigation
(Nenty, 2009; Neuman, 2011). Information was 7.4 Data collection and analysis procedure
gathered through SurveyMonkey electronic platform
where participants from small- to medium-size After IRB approval, three volunteers served as pilot
American companies, which use CRM system, were study participants from small- to medium-size organ-
Correlation between Customer Relationship Management System Usage, Product Innovation, . . . 27

izations with knowledge and current use of CRM 8 Results of analysis


system. A pilot study became a necessity in research
study using a survey crafted for gathering the data The study findings articulated the ideas, opinions,
(Black, 1999). Pilot study participants were able and behavior of the participants to determine how the
to rate statements regarding CRM system usage and use of CRM system ascertains the relationship with
its relation to the two related variables. In the actual customer satisfaction and product innovation. Data
study, respondents were asked to sign an informed gathered from the 97 participants were classified into
consent form. The survey comprised mostly of struc- three different layers of positions. These were the top
tured statements that the respondents rated from 1 managers, middle managers, and first-line managers
to 5, with 1 meaning strongly disagree and 5 strongly of the selected organizations. The survey participants
agree. served as a core for assessing the correlation between
The data collected from SurveyMonkey were entered CRM system usage, product innovation, and custom-
into the IBM SPSS version 23 and then the degree er satisfaction. Data gathered from the participants
of the relationship was determined by tabulating were used to determine how the use of CRM system
the data in a frequency distribution table. The mean establishes the relationship with product innovation
average for each statement was computed. In a Lik- and customer satisfaction. The researcher chose
ert-style case, this research computed the total score to analyze the data using the ordinal analysis, be-
for the scale; after that it was correlated with other cause the variables of this study are treated as con-
continuous variables. The process of data analysis tinuous. Each variable is composed of six statements
involved tabulating, classifying, and connecting that the research participants rated from strongly
the data with the context of the study. Pearson corre- agree to strongly disagree, using the Likert-scale
lation was used to measure the linear relationship model. The IBM SPSS version 23 helped determine
between CRM system usage (X) and product innova- the reliability of the data in this research study.
tion (Y) and between CRM system usage (X) and Cronbach’s alpha is a measure of internal consisten-
customer satisfaction (Y). The results of these statis- cy of scale reliability as shown in Table 1.
tical analysis procedures were recorded so that they
could be easily retrieved.

Table 1. Cronbach’s alpha parameters (Source: Authors’ own research)

Cronbach's Alpha Internal Consistency

ὰ ≥ 0.9 Excellent
0.9 ≥ ὰ ≥ 0.8 Good
0.8 ≥ ὰ ≥ 0.7 Acceptable
0.7 ≥ ὰ ≥ 0.6 Questionable
0.6 ≥ ὰ ≥ 0.5 Poor

The first research question formed a correlation be- ficient r takes a range of values from +1 to –1.
tween CRM system usage and customer satisfaction A value of 0 indicates that there is a negative correla-
by using Pearson correlation. Six statements under tion between the two variables. The standard devia-
RQ1 served as the core for assessing the first two tion (std) showed that the data around the mean are
variables: the use of CRM system and customer sat- concentrated. It is shown by smaller standard devia-
isfaction. There were two hypothesis derived from tions of 11 and 6, respectively. The correlation coef-
RQ1 for testing the acceptance or rejection, using the ficient (r) of .622 measures the strength and direction
IBM SPSS version 23. The Pearson correlation coef- of a linear relationship between the CRM system and
28 Wouroud ElFarmawi

customer satisfaction that has a negative value lower direction of a linear relationship between the CRM
than 1.0. The value of r is continuously between +1 system and product innovation, which has a value
and –1. It describes the correlation between the two of 0.47. As a result, the Pearson correlation gave
variables. Customer satisfaction is exactly +1, which a negative value on the three variables. The value
means there is a perfect linear relationship with of 0 indicates that there is a negative association
CRM system usage. The results led to the rejection between the two variables. However, as the value
of null hypothesis. of one variable decreases, the value of the other vari-
The second research question determined the correla- able increases. As a result, the null hypothesis is also
tion between CRM system and product innovation. rejected.
Six statements were covered under RQ2. These per- The findings of this study showed that CRM system
tained to the correlation between CRM system and usage has a significant association with customer
product innovation. Two hypotheses were derived satisfaction. The perfect linear relation between
from RQ2 for testing the acceptance or rejection, CRM system and customer satisfaction is determined
using the IBM SPSS version 23. The standard devia- by a perfect positive linear relationship. On the other
tion (std) showed that the data around the mean are side, correlation between CRM system and product
concentrated. It is shown by smaller standard devia- innovation has a negative linear relationship. This
tions of 113 and 129, respectively. The correlation means that the decrease is in the linear relationship.
coefficient (r) of 0.371 measures the strength and

Table 2. Analysis of the research question (Source: Authors’ own research)


N Range Mean Std. Deviation Variance
Statistic Statistic Statistic Statistic Statistic
Awareness 97 4 4.00 1.146 1.313
Difficulty 97 4 4.03 1.159 1.343
Acclaims 97 4 3.95 1.014 1.029
Easy to use 97 4 4.06 1.019 1.038
Accurate result 97 4 3.96 1.030 1.061
Useful solution 97 4 3.74 1.013 1.027
Service satisfaction 97 4 4.14 0.890 0.791
Positive remarks 97 4 4.12 0.949 0.901
Saying good things 97 4 4.12 1.013 1.026
Customer loyalty 97 4 4.04 1.050 1.102
Feeling rewarded 97 4 4.01 1.015 1.031
Increased customers 97 4 3.97 1.015 1.030
Product innovation 97 4 4.01 1.046 1.094
New products 97 4 4.09 1.032 1.064
New ideas 97 4 3.72 1.125 1.265
Introduce more products 97 4 4.01 1.123 1.260
Competitive new products 97 4 4.01 1.015 1.031
Innovative products 97 4 3.92 1.038 1.076
Valid N (listwise) 97
Correlation between Customer Relationship Management System Usage, Product Innovation, . . . 29

9 Discussion The findings of this research showed that the use


of CRM system has a significant association with
In this quantitative correlation study, the three varia- customer satisfaction. There was a perfect linear
bles include CRM system usage, product innovation, relationship between CRM system and customer
and customer satisfaction. The purpose is to deter- satisfaction. The result indicated that the use of CRM
mine the correlation among these variables. system in small- to medium-size company in the
The research questions were distributed randomly to United States has a greater chance of delivering ad-
selected participants from small- to medium-size mirable customer service, which leads to satisfied
companies in the United States. This process started customers.
after participants agreed to the informed consent In fact, on the four statements pertaining to customer
(located at the very first page). Those who agreed satisfaction (“The customers are satisfied with our
were automatically guided to the survey instrument. service,” “The customers expressed positive remarks
The study results were collected and tabulated using about our organization,” “The customers feel re-
the IBM SPSS version 23 to give the statistical com- warded from their purchases in our company,” and
putation of the study findings. The intent is to deter- “The increase of our customers signifies their satis-
mine more precisely if the use of CRM system faction with us”), participants overwhelmingly re-
improves the operation of small- to medium-size sponded positively. The rounded percentages were
organization in the United States. 63%, 83%, 75%, and 73%, respectively.
The measurements under customer satisfaction in- RQ2: What association, if any, is there between
volved customers expressing positive remarks about the use of a CRM system and product innovation
our organization, customers’ satisfaction with our for small- to medium-size companies in the United
service, customers commending our services to their States?
relatives and friends, customers remaining loyal
The findings of the research showed that the correla-
to the organization, and customers feeling rewarded
tion between CRM system and product innovation
from their purchases in our company. The increase
has a negative linear relationship and the effect
of the customer base is generally taken to signify
is moderate. This only proved that the CRM system
their satisfaction with the organization’s offerings.
is mostly meant to deliver better customer service
In contrast, measurements of product innovation
rather than offering the business organization with
examine whether our organization develops new
ideas for new products to advance to the market.
products regularly, always seeks for new ideas, in-
The hypotheses of the study were:
troduces more products to our customers, offers
competitive new products to the market, gains com- H10: There is no significant association between
petitive edge in product innovation, and offers inno- the use of the CRM system and customer satisfaction
vative products to a variety of customers. for small- to medium-size companies in the United
States.
The core research problem was to determine the
significance of CRM system usage to customer satis- H1a: There is a significant association between
faction and product innovation in the operation the use of the CRM system and customer satisfaction
of small- to medium-size companies in the United for small- to medium-size companies in the United
States. Two subquestions reinforced the central re- States.
search question. Each research question had state- The null hypothesis is rejected stating that there is no
ments which the participants rated using the Likert- significant association between the use of the CRM
scale model. system and customer satisfaction for small- to medi-
RQ1: What association, if any, is there between um-size companies in the United States. Because
the use of a CRM system and customer satisfaction the value lower than 0 indicates a negative associa-
for small- to medium-size companies in the United tion, when the value of one variable decreases, val-
States? ues of the other variable increase.
30 Wouroud ElFarmawi

H20: There is no significant association between and leverage their competencies by introducing
the use of the CRM system and product innovation CRM system into their business. The CRM system
for small- to medium-size companies in the United permits leadership to develop their business perfor-
States. mance by managing their relationship with custom-
H2a: There is a significant association between ers and keep them satisfied.
the use of the CRM system and product innovation Business organizations reflect innovation because
for small- to medium-size companies in the United it includes the intentional application of information,
States. imagination, and creativity in deriving various values
The null hypothesis is rejected asserting that there is from resources. The CRM system offers practical
a significant association between the use of the CRM processes for creating new ideas about the business
system and product innovation for small- to medium- cycle. This study provided direction to business or-
size companies in the United States. The negative ganizations to increase profit and avert financial
correlation defines that the value lower than 0 indi- losses because of disorganized infrastructure and
cates a negative association; as the value of one vari- unsatisfied customers. It showed improved customer
able decreases, values of the other variable increase. satisfaction and consequently retention. This is a
modest contribution to the vast literature on different
The outcome of this study is a cooperation between
business strategies and customer service models.
the researcher and the management of small- to me-
Business organizations of several sizes are still stim-
dium-size companies in the United States. The par-
ulated to foster CRM system to create and manage
ticipants agreed that the use of CRM system has
an effective relationship with their customers.
significant relation on customer satisfaction whereas
showing a weak relationship on product organiza- Furthermore, this research may help raise customers’
tion. The collected data showed that the use of CRM awareness of their important position in the business
system has significant relationship to customer satis- process. This awareness could be harnessed for the
faction and more likely increases profitability benefit of both companies and customers, who can
of small- and medium-size companies. support the organizational efforts in establishing
steady communication, which could serve them bet-
The participants stated that the CRM system usage
ter. Finally, the results are significant to anyone de-
improved their approachability and provided a com-
siring to create a healthy competition in the business
prehensive outlook on the entire customer life cycle.
environment.
The relation between CRM system and customer
satisfaction is determined by a perfect positive linear This research was a result of collaboration between
relationship. The result of the study only proved that the researcher and the management of small- to me-
by using the CRM system, small- to medium-size dium-size companies in the United States. Results
companies in the United States have a greater chance of the analysis helped to highlight the impact
of delivering commendable customer service, result- of CRM system application on business processes,
ing in satisfied customers. On the other side, especially with respect to customer satisfaction.
the study indicated a weak relationship on product The findings of this study suggest that the business
organization. It showed that the correlation between community, business leadership, and customers may
CRM system and product innovation has a negative reap benefits from proper implementation of CRM
linear relationship. systems:

The business community, the customers, and the  Management


academe may find this study significant and informa- The study result can be used to gauge the extent
tive in the business process, mainly because this to which the management of small- to medium-size
quantitative correlational study provides information organizations in the United States is developing their
about rich business practices to improve customer business process by using CRM system. This may
satisfaction. The study results also encourage man- allow business organizations to develop competitive
agers and business owners to join their talents approaches in global marketplace to attract and
Correlation between Customer Relationship Management System Usage, Product Innovation, . . . 31

maintain more customers, and thereby increase their 10 References


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