HOW TO MEASURE THE IMPACT OF A CRM STRATEGY ON THE FIRM
PERFORMANCE
M. Rosa Llamas and M. Aránzazu Sulé
Área de Comercialización e Investigación de Mercados
Facultad de Ciencias Económicas y Empresariales
Universidad de León
Campus de Vegazana, s/n
24071 León (Spain)
M. Rosa Llamas e-mail: [email protected]
Tl: +34 987 291455
Fax: +34 987 291454
M. Aránzazu Sulé e-mail: [email protected]
Tl: +34 987 291000 Ext. 5451
Fax: 34 987 291454
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HOW TO MEASURE THE IMPACT OF A CRM STRATEGY ON THE FIRM
PERFORMANCE
ABSTRACT
CRM strategy (Customer Relationship Management) is a business philosophy, stemming from
Relationship Marketing that joins strategy and technology, with the aim of creating value for
both customers and the company. In this paper we justify the interest of establishing a formal
system to measure CRM performance. In order to do that, we first focus on the role of
marketing performance measurement throughout the time. Then, we compare different
frameworks and metrics used to measure performance in the CRM era. Finally, challenges to
face in CRM performance measurement as well as some ideas for future research are discussed.
Keywords: CRM, marketing performance measurement.
1. INTRODUCTION
The importance of customer relationship management as source of competitive advantages has
been recognized for decades (McKenna, 1993; Woodcock, 2000), nevertheless, it has been in
recent years, with the deployment of the information technologies, when CRM has gained
growing popularity.

Plakoyiannaki and Tzokas, 2001; Srivastava, Shervani and Fahey, 1999; Winer, 2001;
Woodcock, 2000), there is not an accepted academic model of measurement. The increasing
interest in developing measurements which justify investments in CRM includes financial and
non-financial measures, since the latter ones are receiving more and more importance (Clark
1999; IMA 1993; 1995; 1996; Marketing Science Institute 2002; Marketing Week, 2001;
Moorman and Rust, 1999; Shaw and Mazur 1997; Schultz, 2000).
The objective of this paper is to shed light on CRM performance measurement in order to foster
empirical academic research on this field, which has become of increasing interest for both
academics and managers. First of all, we focus on the business performance measurement,
placing a particular emphasis on marketing metrics. Next, we study the evolution of the
measures used in the marketing field and compare different frameworks and metrics used to
measure performance outcomes of a CRM strategy. Finally, we discuss the challenges to face in
CRM performance measurement as well as some ideas for future research.
2. MARKETING PERFORMANCE MEASUREMENT: FROM FINANCIAL METRICS TO
SCORE CARD METHODS
Business Performance Measurement (BPM) has a lot of branches in a wide variety of
disciplines, including accounting, economics, human resource management, marketing,
operations management, psychology and sociology. In the field of marketing, performance
measurement has not been developed all that much. In fact, it has been the target of criticisms
due to its short term orientation (Dekimpe and Haussens, 1995, 1999), its limited diagnostic
power (Day and Wensley, 1988), the lack of consensus in relation to the number of measures
and the subsequent difficulty for making comparisons (Clark, 1999; Ambler and Kokkinaki,
1997).
The reasons for this poor development of marketing accountability are the difficulties in
measurement which involves the assessment of the results derived from the implementation of
different marketing strategies. One of these barriers is the complexity to isolate the effects of a
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particular marketing strategy (Bonoma and Clark, 1998). Another one, is that those effects are
perceived, in most of the cases, in the long term (Dekimpe and Hanssens, 1995).
Nevertheless, it is very useful and neccessary to measure performance in order to evaluate the

During the 90s, customers are viewed as assets (Rust, Zeithaml and Lemon, 2000) or equity of
the firm (Blattberg and Deighton, 1996; Blattberg and Thomas, 2001; Rust, Zeithaml and
Lemon, 2000). This customer-centered viewpoint is reflected in the concepts and metrics that
drive marketing management, so a measurement literature arises (Berger and Nasr, 1998;
Gupta, Lehmann and Stuart, 2002; Jain and Singh, 2002; Mulhern, 1999; Reinartz and Kumar,
2000; Rust, Lemon and Zeithaml, 2003). Furthermore, the relationship between non-financial
measures such as customer satisfaction (e.g. Anderson, Fornell and Lehmann, 1994; Ittner and
Larcker, 1998b; Szymaski and Henard, 2001), customer loyalty (Dick and Basu, 1994), brand
equity (Keller, 1998), employee equity (Amir and Lev, 1996; Srivastava, Shervani and Fahey,
1998) and profitability was proved, and subsequently this type of measures started to have a
great deployment.
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Nowadays the increasing dynamic and competitive business environment demands holistic
measurement systems which provide the company with a complete “map” of different aspects
influencing the results of companies, in order to neutralize their weaknesses, reinforce the
strengthens and create new ones. In a CRM world, companies have a great amount of data
which can be transformed into useful information by easing strategic management and control
process. Managing this information in a systematic and dynamic way can yield a competitive
advantage.
According to Ambler, Kokkinaki and Puntoni (2002) the evolution of marketing metrics seems
to fit the following pattern:
- Little awareness regarding the necessity of using marketing metrics at top executive
level.
- Measurement systems based exclusively on financial metrics.
- Broad vision of performance measurement including non-financial metrics.
- Seeking some rationale(s) to reduce the number of metrics, about 25 or less (Unilever,
1998).
Performance measurement metrics can be classified into different categories: financial versus
non-financial; one-dimensional versus multi-criteria (Grabner-Kraeuter and Moedritscher,
2002); input, management and output measures (Clark, 1999); hard versus soft (Ang and Buttle,

In spite of academics think that non-financial metrics should leader performance measurement,
practitioners remain using predominantly classical ones. We can find the explanation for this
behaviour in the fact that these indicators are much easier to measure. In addition, conventional
methods have the advantage of being investment evaluation settings. Their major drawback of
evaluation is that they focus on the estimation of cash flows and accounting criteria (Kim, Suh
and Hwang, 2003). Nevertheless, traditional performance systems do not provide a full
understanding of the influences on profits. The major criticisms to classical metrics are
summarized in the following:
- Accounting metrics have a focus on the short-term and take little account of the value to
the firm of long-term customer preference, or the marketing investment which created it
(e.g. Ambler, Kokkinaki and Puntoni, 2002).
- They are not adequate for assessing investments whose benefits will be intangible,
indirect or strategic (e.g. Bukowitz and Petrash, 1997; Grembergen and Amelinckx,
2002).
- They only report functional processes (e.g. Ittner and Larcker, 1998a).
- They do not take into account the influence of marketing decisions on such variables as
inventory levels, working capital needs, and financing costs that need to be managed for
the well-being of the enterprise (e.g. Srivastava, 2004).
- They do not let aggregation from an operational level to a strategic one They just look
backwards, recording historical data so their prediction power is limited (e.g.
Chakravarthy, 1986; Ittner and Larcker, 1998a; Yeniyurt, 2003).
- They are not suitable for strategic decisions (e.g. Kaplan and Norton, 1992).
- The do not measure the value created (e.g. Lehn and Makhija, 1996).
- They provide little information on deviations (e.g. Ittner and Larcker, 1998a).
- There is a high number of metrics, so researchers should find some convergence in
order to describe more with less numbers (e.g. Frigo and Krumwiede, 2000; Kaplan and
Norton, 1992).
- They do not link the non-financial metrics to financial numbers (e.g. Kaplan and
Norton, 1992).
Traditionally financial and non-financial measures have been seen as opposed, but there are