The Effect of CRM Applications on Customer Satisfaction

Customer satisfaction has significant implications for the economic performance of firm.  For example, customer satisfaction has been found to have a negative impact on customer complaints and a positive impact on customer loyalty and usage behaviour.  Increased customer loyalty may increase usage levels, secure future revenues, and minimize the likelihood of customer defection.  Customer satisfaction may also reduce costs related to warranties, complaints, defective goods, and field service costs. 

Customer relationship management applications are likely to have an effect on customer satisfaction for at least three reasons. First, CRM applications enable firms to customize their offerings for each customer. By accumulating information across customer interactions and processing this information to discover hidden patterns, CRM applications help firms customize their offerings to suit the individual tastes of their customers. Customized offerings enhance the perceived quality of products and services from a customer's viewpoint. Because perceived quality is a determinant of customer satisfaction, it follows that CRM applications indirectly affect customer satisfaction through their effect on perceived quality. Second, in addition to enhancing the perceived quality of the offering, CRM applications also enable firms to improve the reliability of consumption experiences by facilitating the timely, accurate processing of customer orders and requests and the ongoing management of customer accounts.

Improved ability to customize and a reduced variability of the consumption experience enhance perceived quality, which in turn positively affects customer satisfaction.  CRM applications also help firms manage customer relationships more effectively across the stages of relationship initiation, maintenance, and termination.  In turn, effective management of the customer relationship is the key to managing customer satisfaction and customer loyalty.

SOURCE:

Mithas, Sunil; Krishnan M. S. and Fornell, Claes (2005) “Why Do Customer Relationship Management Applications Affect Customer Satisfaction?”, Journal of Marketing, Vol. 69, No. 4 (Oct., 2005), pp. 201-209