Southern Taiwan University Department of Business Administration The study of the relationship between KM capability, customer life cycle activities, and CRM performance Kuo-Wei Lee Date: Oct. 22, 2009 Maneesap Rojdamrongratana

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (2) Background & Motivation  Various researchers have discussed about customer relationship management (CRM) in order to improve firm’s performance. CRM helps firm to reduce cost through improved efficiencies in managing customer interaction (Hansotia, 2004).  In this study, we try to discuss the relationships between customer life cycle activities management (CACAM) and CRM performance.

 The concept of Customer Life Cycle (CLC) is increasingly discussed in the recent years (Hansitia, 2002).  Similar to Product Life Cycle (PLC), Customer Life Cycle (CLC) has been segmented to four stages (Thomas,1998) : 1.Acquisition : Attracting new customer 2.Assimilation : Turning the first time buyers into repeat customers 3.Cultivation : Cementing life-long customer bonds 4.Reactivation: Bringing lost customer back. The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (3) Background & Motivation

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (4) Background & Motivation  The company should know about the natural of four stages in the CLC to achieve better CRM performance. By creating and delivering the suitable marketing activities to each stage, firms can improve CRM performance (Hansotia, 2002).  One of the purpose of this study is to discuss the impact of CLCAM on CRM performance.

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (5) Background & Motivation  In addition, CLCAM are supported by the firm’s ability in leverage customer data creatively, effectively and efficiently to design and implement its strategies.  Hence, the customer knowledge is one crucial resource for CLCAM. Companies need to gather a lot of information and create various kind of knowledge to make CLCAM successful. Knowledge should be managed well in order to utilize the information more effectively (Menon & Varadarajan, 1992).

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (6) Background & Motivation  In prior research, it indicated that four dimensions of knowledge architecture, including Knowledge Acquisition, Conversion, Application, and Protection are essential organizational capabilities for effective knowledge management (Gold, Malhotra, & Sehars, 2001).  There are some studies mention the importance of CLCAM and highlight CLCAM will help the business get succeed (Thomas, 1998). However, there are no scholars discuss the linkage of using KM to manage CLCAM to achieve the CRM performance.  This study will also prove the relationship between KM capability and CLCAM.

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (7) Background & Motivation  Furthermore, in recent years, the information technology (IT) has help firms to leverage and utilize the data to support the firm’s decision, especially in marketing field (Shaw, Subramaniam, Tan & Welge, 2001).  So, IT is one of most important factors that affect the relationship between KM capability and CLCAM. In our study, the moderating effect of IT on KM capability and CLCAM will be also examined.

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (8) Background & Motivation  Finally, the customer relationship is also built on the foundation of trust (Berry, 1995).  Trust is an important feature in the building and development of quality relationships through a process of making and keeping promises (Dwyer, Schurr & Oh, 1987; Gronroos, 1990; Hewett, & Bearden, 2001).  The empirical evidence in prior research also show that trust relates to the CLCAM and CRM performance.

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (9) Research objectives 1.To identify interrelationship between KM capability, CLCAM, and CRM performance 2.To investigate how the interaction of KM capability and Information Technology will affect CRM performance 3.To investigate how the interaction of CLCAM and Trust will affect CRM performance

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (10)Framework H4 KM Capability Acquisition Conversion Application Protection Customer life cycle Activities management (CLCAM) New customer Acquisition Cross sales for customer Customer retention New Product development CRM performance Customer Satisfaction Customer Loyalty H1H2 H3 H5 Moderator IT Moderator Trust

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (11) Hypotheses H4 KM Capability Acquisition Conversion Application Protection CLCAM New customer Acquisition Cross sales for customer Customer retention New Product development CRM performance Customer Satisfaction Customer Loyalty H1H2 H3 H5 Moderator IT Moderator Trust H1: KM capability has significant effect on CLCAM H1.1: KM capability has significant effect on new customer acquisition activity management. H1.2: KM capability has significant effect on cross sales activity management. H1.3: KM capability has significant effect on retention activity management. H1.4: KM capability has significant effect on new product development activity management H2: CLCAM has significant effect on CRM performance H2.1: CLCAM has significant effect on customer satisfaction H2.2: CLCAM has significant effect on customer loyalty H3: KM capability has significant effect on CRM performance H3.1: KM capability has significant effect on customer satisfaction. H3.2: KM capability has significant effect on customer loyalty. H4: Interaction between KM capability and IT has significant effect on CLCAM H4.1: Interaction between KM capability and IT has significant effect on new customer acquisition activity management. H4.2: Interaction between KM capability and IT has significant effect on cross sales activity management. H4.3: Interaction between KM capability and IT has significant effect on retention activity management. H4.4: Interaction between KM capability and IT has significant effect on new product development activity management. H5: Interaction of CLCAM and Trust has significant effect on CRM performance H5.1: Interaction of CLCAM and Trust has significant effect on customer satisfaction H5.2: Interaction of CLCAM and Trust has significant effect on customer loyalty

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (12) Hypotheses  H1: KM capability has significant effect on CLCAM  H1.1: KM capability has significant effect on new customer acquisition activity management.  H1.2: KM capability has significant effect on cross sales activity management.  H1.3: KM capability has significant effect on customer retention activity management.  H1.4: KM capability has significant effect on new product development activity management.  H2: CLCAM has significant effect on CRM performance  H2.1: CLCAM has significant effect on customer satisfaction  H2.2: CLCAM has significant effect on customer loyalty  H3: KM capability has significant effect on CRM performance  H3.1: KM capability has significant effect on customer satisfaction.  H3.2: KM capability has significant effect on customer loyalty.  H4: Interaction between KM capability and IT has significant effect on CLCAM  H4.1: Interaction between KM capability and IT has significant effect on new customer acquisition activity management.  H4.2: Interaction between KM capability and IT has significant effect on cross sales activity management.  H4.3: Interaction between KM capability and IT has significant effect on customer retention activity management.  H4.4: Interaction between KM capability and IT has significant effect on new product development activity management.  H5: Interaction of CLCAM and trust has significant effect on CRM performance  H5.1: Interaction of CLCAM and trust has significant effect on customer satisfaction  H5.2: Interaction of CLCAM and trust has significant effect on customer loyalty

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (13) Questionnaire Design Responses were assessed using 7-point Likert scales  12 items of KM capability  16 items of CLCAM  8 items of CRM performance  3 items of IT  3 items of customer trust

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (14) Sampling Total Thai Business registration ,131 Ordinary Partnership 4,758 Limited Partnership 237,843 Limited Company 296,682 Public Company 848 Source: Department of business development of Ministry of Commerce Thailand, 2007

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (15) Data Collection  Method :Convenient Sampling  Samples: 500 Thai companies in related departments  Questionnaire: questionnaire survey  Data Collection Period: Early February,2008 to middle April,2008 ( approximately 2.5 months)  Respondents: 107 survey questionnaires were responded. (Responded rate is 21.4 %)  Missing data: 3 sets  Usable respondents: 104 respondents

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (16) Characteristics of respondents CharacteristicsCategoriesFrequencyPercentage (%) Company industry Service industry Manufacturing industry Company size < 100 employees employees ,000 employees >1,000 employees Years of company < 5 years years years > 20 years Working time of respondent < 5 years years years76.8 > 20 years11.0 Position level Staff Junior management Medium management Top management54.9

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (17) Results & Findings Note ： P*<0.1 、 P**<0.05 ， P***<0.01 KM Capability Customer Life Cycle Activity Management ( CLCAM ) (H1) CRM Performance (H3) New Customer Acquisition Cross Sales Customer Retention New Product Development Customer Satisfaction Customer Loyalty Knowledge Acquisition* Knowledge Conversion********* Knowledge Application*************** Knowledge Protection**** AR F-Value15.831***23.000***10.742***8.299***9.946***7.678***

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (18) Results & Findings Note ： P*<0.1 、 P**<0.05 ， P***<0.01 Customer Life Cycle Activity Management (CLCAM) CRM Performance (H2) Customer SatisfactionCustomer Loyalty New Customer Acquisition Activity** Cross Sales Activity Customer Retention Activity New Product Development Activity****** AR F-Value11.267***6.010***

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (19) Results & Findings IT * KM Capability Customer Life Cycle Activity Management ( CLCAM ) (H4) New Customer Acquisition Cross Sales Customer Retention New Product Development IT*Knowledge Acquisition******* IT*Knowledge Conversion********* IT*Knowledge Application******* IT*Knowledge Protection* Note ： P*<0.1 、 P**<0.05 ， P***<0.01 AR F-Value51.031***57.627***42.628***49.293***

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (20) Results & Findings Trust * CLCAM CRM Performance (H5) Customer SatisfactionCustomer Loyalty Trust*New Customer Acquisition Activity ** Trust*Cross Sales Activity ** Trust*Customer Retention Activity ** Trust*New Product Activity ***** Note ： P*<0.1 、 P**<0.05 ， P***<0.01 AR F-Value67.319***41.390***

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (21) Results & Findings

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (22) Results & Findings Results & Findings

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (23) Results & Findings Results & Findings KM Capability Customer Life Cycle Activity Management ( CLCAM ) (H1) CRM Performance (H3) New Customer Acquisition Cross Sales Customer Retention New Product Development SatisfactionLoyalty Knowledge Acquisition* Knowledge Conversion********* Knowledge Application*************** Knowledge Protection**** Customer Life Cycle Activity Management CRM Performance (H2) SatisfactionLoyalty New Customer Acquisition Activity** Cross Sales Activity Customer Retention Activity New Product Activity******

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (24) Results & Findings IT * KM Capability Customer Life Cycle Activity Management ( CLCAM ) (H4) New Customer Acquisition Cross Sales Customer Retention New Product Development IT*Knowledge Acquisition******* IT*Knowledge Conversion********* IT*Knowledge Application******* IT*Knowledge Protection* Note ： P*<0.1 、 P**<0.05 ， P***<0.01

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (25) Results & Findings Trust * CLCAM CRM Performance (H5) Customer SatisfactionCustomer Loyalty Trust*New Customer Acquisition Activity ** Trust*Cross Sales Activity ** Trust*Customer Retention Activity ** Trust*New Product Activity ***** Note ： P*<0.1 、 P**<0.05 ， P***<0.01

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (26) Contribution  This study contributes to the theoretical development of a relationship model of KM and CRM as customer life cycle activity management (CLCAM) and CRM performance.  It provides the view of which KM capability is valued to concern in each CRM activity which related to CLCAM and CRM performance. Also, the CLCAM affects CRM performance significantly.  The results of this research can make more understanding about how KM effect CLCAM and how to use KM capability with CLCAM more effectively to enhance CRM performance.

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (27) Limitation  This study uses the convenient sampling because it is quite difficult to balance the characteristics of samples.  Only a few prior research to discuss the concept of the customer life cycle activity management (CLCAM). It has some theoretical limitation. Due to this few prior research, it would be argued that the validity and reliability of the construct and questionnaire design is quite weak. However, since factor analysis is examined in this study, we believe that the reliability and validity of this construct is still acceptable.

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (28) Managerial Application  At first, new customer acquisition activity management should be concerned in knowledge acquisition and knowledge conversion more than others. Since the two variables have a significant effect on this activity.  Second, from the empirical evidence, it indicates that cross sales activity management need to synergize more knowledge capability. That is to say, managers who handle this kind of activity should enhance the knowledge management to make it more productivity.

The study of the relationship between KM capability, customer life cycle activities, and CRM performance Master’s Thesis Southern Taiwan University by Maneesap Rojdamrongratana (29) Managerial Application  Third, for managers, customer retention activity management mostly depend on if the knowledge can be used very well or not. For them, how to convert, apply and protect the existing knowledge in the right way is very important.  Finally, the most important capability for new product development is knowledge application because this activity needs to translate the new knowledge into tangible things. It means that the team of new product development should consist of different background persons in order to have different and broader views to develop new concept.

Thank You For Your Attention