Measuring CRM Effectiveness: Construct Development, Validation, and Application of a Process-Oriented Model

Abstract

The quality of customer relationship management (CRM) is usually evaluated by outcome indicators such as customer loyalty and business performance. To maintain or improve these indicators, CRM managers should regularly evaluate the progress of CRM practices. In this paper, we propose and develop a construct, called CRM effectiveness (CRME), comprising three dimensions: relationship marketing (RM), customer-focused information technology (CFIT) and customer-focused organisational climate (CFOC). The development of CRME followed the three-stage methodology of Churchill (1979). A survey was conducted at 523 financial services institutions and 407 manufacturing companies in Taiwan with 221 usable returns. The survey evaluated reliability, convergent validity, discriminant validity and nomological validity of the construct. The results support the proposed construct and its three dimensions. The three dimensions and their measures offer a parsimonious and practical approach for evaluating CRME and identifying its strengths and weaknesses. They reflect the process perspective of CRME and provide a better operationalisation of CRME for businesses and researchers to apply in practices.