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CRM & Customer Satisfaction

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Not many academic studies look at the effect of CRM applications on CSAT. One that does is the Journal of Marketing article, "Why Do Customer Relationship Management Applications Affect Customer Satisfaction?" The authors are Sunil Mithas, M.S. Krishnan and Claes Fornell, best known for his work pioneering the American Customer Satisfaction Index.

The authors tested the following four hypotheses:

1. The use of CRM applications is associated with an improvement in the customer knowledge that firms gain.
2. Firms with greater Supply Chain Integration are more likely to benefit from their CRM applications and achieve improved customer knowledge.
3. The use of CRM applications is associated with greater customer satisfaction.
4. Customer knowledge mediates the effect of CRM applications on customer satisfaction.

Here's my take on graphically representing these hypotheses:

To test theses hypotheses, the authors used CRM and IT data from an Information Week survey of 300 large U.S. firms and used the ACSI database. For analytical purposes, the authors used the Information Week results to develop an IT/CRM index of 13 items and an SCI index of 5 items. Their conclusions:

1. CRM applications are positively associated with an improvement in customer knowledge.
2. The joint hypothesis test for the IT/CRM index and interaction between the IT/CRM and SCI indices was statistically significant.
3. A positive association exists between CRM applications and customer satisfaction.
4. Firms reporting an improvement in customer knowledge from CRM had ACSI scores 4.3 points above those who reported no gains. Besides this evidence of an indirect effect of CRM on CSAT, CRM applications may also have a direct effect on customer satisfaction.

While our own CE IQ research was less rigorous, and focused on CRM and loyalty rather than CRM and satisfaction, we found similar CRM/CEM benefits: 0.47 positive correlation between loyalty and having a standard CRM system, 0.49 correlation between loyalty and integrating other applications with CRM, and so forth.

For another take on the role of CRM and customer knowledge, check out this diagram from Forrester on EFM as a CRM hub.

The research from Mithas, Krishnan and Fornell gives us another way to consider and prioritize CRM initiatives. CRM projects that improve our knowledge of customers--and this would include most social CRM initiatives--are the most likely to improve customer satisfaction. As the authors conclude, "Overall, our results suggest that firms that make investments in CRM applications reap significant intangible benefits, such as improved customer knowledge and customer satisfaction. Achieving such customer-focused business objectives is a critical ingredient for success in increasingly competitive markets."