CRM , Analysis of the relationships between market orientation

The customer orientation is recognized as the cornerstone of the functioning of the companies. Customer relationship management (CRM) and market orientation (MO) are both in relation to this. CRM and MO have been under permanent focus of both academics and practitioners in recent years. Although these fields have been analyzed since the 1980s, there is little attention paid to the interconnections between them.

The purpose of this paper is to reveal the interconnections between MO and CRM. We also want to verify a degree of relationship between MO and customer orientation. We want to substantiate the findings of our research by statistical methods. This research is a part of Ph.D. thesis.

Generally, the concept of CRM means organizing an active relationship with a customer / with customers. CRM aims for permanent development of long-term relationship with customers in order to create a situation of two winners (“win-win“) using a relationship strategy of “what you give is what you get“. It is based on the exchange of information, emotions, and actions, during value development using different strategies. (Storbacka and Lehtinen, 2002)

 

Although CRM by definition is customer-oriented, in practice the philosophy of CRM drives its positive influence to the relations with employees, suppliers and all the other interested groups (Roberts et al., 2005). CRM is than considered to be an entrepreneurial strategy or philosophy (Hommerova, 2009). In this case, CRM is not only focused on customers and certainly it is not just about technology. This study is in complete agreement with such a wider understanding of CRM.

Although the literature on CRM is less concerned with competition monitoring compared to the literature on MO, the CRM targeted effect is still a competitive advantage.

Kohli and Jaworski include the following definition of MO: “Market orientation is the organization wide generation of market intelligence pertaining to current and future customers needs, dissemination of the intelligence across departments and organizations wide responsiveness to it.” (Kohli and Jaworski, 1990, p. 6)

The literature today presents a number of approaches to define MO. There are basically two branches of market orientation interpretation. One interpretation defines MO as a corporate culture. The other interpretation characterizes market orientation as a specific kind of company behaviour. Narver and Slater (1990, p. 21-22) compromise MO as follows: “Market orientation contains three elements of behaviour – customer orientation, orientation on competition and interfunctional coordination (and two decision criteria – long-term orientation and profitability).” Market orientation is understood as a culture concentrating on profit generation, creation of values for customers and includes orientation on the other stakeholders (Narver and Slater, 1990).

We consider it important to mention the most common features between the MO and CRM. MO and CRM have long-term focus and are not just about short-term results. MO, as well as CRM, is based upon the customer perception of value. Develop and keep the relationships with customers are not enough, care needs to be also given to those with other stakeholders. There is perception of ethical and moral aspects in both concepts (Kuntze, 2008; Wessling, 2003). MO and CRM are considered to be a motivating factor with a positive effect on employees (Cooper et al., 2008).

Companies should support the function of technologies, aim for shared and unified interpretation of information and spread them across the company. It is necessary to use the continuous learning, observe the surroundings, monitor the competition and focus on processes (Deshpandé (ed.), 1999; Wessling, 2003).

Decentralization of powers and responsibility is necessary. It is recommended that people closer to customers can make decisions, which is definitely true of CRM as well as of MO. Moreover, there exist a negative relation between centralization and market orientation (Jaworski and Kohli, 1993).

Used methods and research results
In this study we used a systematic analysis of available literature in the sphere of MO and CRM. CRM and MO bases were compared and identical principles were identified. We also statistically processed results of the research described below.
The research was carried out within the framework of the project No. 402/07/1493 supported by the Czech Science Foundation (GA CR) (Chalupský, 2009).
This research was focused on the analysis of factors supporting or hindering the application of MO within high-tech companies in the mechanical engineering industry. “High-tech” in this research means the description of companies developing the most updated available technology, particularly in the high-level technology sector. This description goes along with a high prestige. (Wikipedia, 2009)
The respondents were mostly from middle management, especially managers from the marketing or commercial fields. Addressed companies included small to large-sized organisations from the Czech Republic.
The main research method was questioning. The intention was to keep the questions concise and unambiguous. After piloting, there were 57 questions divided into thematic parts: analysis of the external environment (i.e. analysis of customers, distributors, competitors, and suppliers); analysis of internal environment; questions reflecting the level of CRM; information about the performance of the company. The respondents marked only predefined response boxes. A seven-point Likert-type scale ranging from 1 (absolutely disagree) to 7 (absolutely agree) was used to help the respondents express their opinion.
Data were collected during the years 2008 and 2009. Web questionnaires and face-to-face interviews were used. A total of 115 responses were received. Some respondents were from the same company, so the arithmetic average was used to obtain the number of 88 companies. The final number for this research paper was 69 companies with fully completed questions. Although the data are the same for the previously mentioned research and for this paper, this study examines a different topic and uses only one mutual question: the market orientation level in companies.
Every question was designed in such a way that a higher point on the scale meant a higher inclination to MO or to CRM.
The mean level of market orientation was established for each company. The companies were placed in ascending order and divided in two parts – highly market-oriented and less market-oriented. The threshold between “highly” and “less” market-oriented companies has been based on the calculation of average value of corresponding answers – the average value of 5 is taken as a limit.
The company is considered to be a CRM company (with the CRM concept) if the corresponding answers to each of the questions related to CRM match a range of 5 – 7 (agreement) in the Likert-type scale, otherwise it belongs to companies “without CRM”.
Minitab and Microsoft Excel were used for statistical analysis and graphic outputs.
We have verified that data come from a normal distribution. The results were arranged in a contingency table. The chi-square test was used to test the independence between variables. There are no cells with expected counts less than 5 and there are enough values for this test.
There were 69 companies analysed. The lowest MO level was ‘3.51’ and the highest was ‘6.64’. Exactly two-thirds of companies were highly market-oriented (the mean level of MO higher than five). This means 46 highly market-oriented and 23 less market-oriented companies. The less market-oriented companies are identified as “without MO”.
In the category of “highly market-oriented companies” (46 companies) there were 20 companies, that have developed and utilized CRM concept, while in the category of “less market-oriented companies” there was just 1 company with CRM concept. See table 1.
The null hypothesis is tested against an alternative hypothesis. H0: There is no association between MO and CRM. H1: There is association between MO and CRM.
The observed values are listed first in the table. Expected counts (if there is no association exists) are printed below observed counts and Chi-Square contributions are printed below expected counts.

The p-value is 0.001. If we choose the significance level 0.05, we conclude that the null hypothesis is false. If we choose the significance level 0.01, we still conclude that the null hypothesis is false. The data give sufficient evidence against the null hypothesis. We rejected H0 in favour of H1. The result is that there is a relationship between MO and CRM.

It would be interesting to test the relationship between market orientation and customer orientation. The company is considered to be “with customer orientation” if the corresponding answers to each of the questions related to the customer orientation match a range of 5 – 7 in the Likert scale, otherwise it belongs to companies “without customer orientation”. (Chalupský, 2009).
From 46 highly market-oriented companies there were 37 with the customer orientation. From 23 less market-oriented companies there were 8 companies with the customer orientation and 15 without it.
H0: There is no association between MO and customer orientation.
H1: There is association between MO and customer orientation.
Table 2 shows the results.
The observed values are listed first in the table. Expected counts (if there is no association exists) are printed below observed counts and Chi-Square contributions are printed below expected counts.

The p-value is 0.000. We rejected H0 in favour of H1. The conclusion is that there is a strong relationship between MO and customer orientation.
Discussion
The results show that from 46 highly market-oriented companies there were 20 with the CRM concept and from 23 less market-oriented companies there was only one with the CRM concept. The evidences clearly demonstrate that in highly market-oriented companies is the CRM concept more frequently utilized, than in less market-oriented companies. Our findings indicate that MO and CRM are very closely related.
From 46 highly market-oriented companies there were 37 with the customer orientation. From 23 less market-oriented companies there were 8 companies with the customer orientation. The evidence seems to be strong that the highly market-oriented companies are much more interconnected with customer orientation than the less market-oriented companies. The statistical results confirm that there is a relationship between MO and customer orientation. Moreover, this is logical, because customer focus is an essential part of the MO.

These findings must be considered within the limitations of this study. In the secondary research (see e.g. Frejková, 2009), we found the same principles of both concepts (CRM and MO) and therefore questions for determination of CRM and MO were sometimes similar. This may be a limiting factor, but we believe that CRM and MO are sufficiently similar.
Conclusions for the whole business may be drawn after the comparison of experiences across business sectors from different countries, because this study focused only on the high-tech companies in the Czech Republic.
The conclusions from this study provide many opportunities for future research. According to OECD the aerospace sector belongs to High-technology industries, so we are going to make more specific research on companies in the field of aeronautical industry.

Conclusions
In this work we wanted to confirm that there are relationships between MO and CRM and also between MO and customer orientation. Our figures clearly demonstrate that this assumptions were right.
In the present hyper-competitive economy, customer orientation has become a central issue for companies. MO and CRM are strong concepts to help companies to achieve success. This study shows that there are both theoretical and practical relationships between the concepts. When we harmonize the positive aspects of these concepts, we could uncover barriers negatively affecting implementation of them. This could help companies to be successful.
The findings indicate that the companies involved in this research have considerable room for improvement. We found that from 46 highly market-oriented companies there were 56 % without the CRM concept and from 23 less market-oriented companies there were 95 % without the concept of CRM. From 46 highly market-oriented companies there were nearly 20 % without the customer orientation. From 23 less market-oriented companies there were 65 % companies without the customer orientation. This is alarming.
In today’s world, customer orientation is regarded as essential to success, but we can still see that the theory differs from practice in many cases and the companies really does not take the customer as a priority.
To become more customer-oriented may be the first step to have satisfied customers who are loyal. This is closely related to CRM and MO, when using them, companies can have satisfied employees, partners, and achieve the higher performance.
Ing. Daniela Frejková