Customer Relationship Management: A Comparative Analysis of Family and Nonfamily Business Practices*

Article excerpt

It has been reported that family businesses perceive excellent customer service as critical to the future of their businesses. However, little research into the customer relationship management (CRM) practices of family businesses has been performed. In this study, we examine CRM implementation among 82 family and 370 nonfamily firms. Family and nonfamily businesses report similar attitudes toward the importance of CRM, their knowledge of CRM, and their success when they do implement it. However, using a logit regression model, we find that the actual implementation strategies of family businesses are significantly different from those of nonfamily businesses. These results remain constant when controlling for size and industry sector.

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Introduction

Several authors have suggested that family businesses are in a unique position to leverage relationship building into a sustainable competitive advantage (Ashley-Cotleur and King 1999; Ward 1997; Hart and Stevenson 1993). Quick customer response, an obsession with a quality product or service that bears the family name, and a genuine desire to provide outstanding customer service are the bases for developing strong customer relationships (Hoover and Hoover 1999; Poza 1995). Moreover, anecdotal evidence suggests that family businesses that can create and maintain superior customer relationships enjoy competitive advantages associated with customer loyalty, perceptions of trustworthiness, and good-will (Biberman 2001; Stone 2000).

At the same time, a formal commitment to customer relationship management (CRM) is increasingly being seen throughout the business community as an essential tool in a company's competitive arsenal. CRM, which has evolved in recent years from several areas of marketing, including database marketing and relationship marketing (Sheth and Parvatiyar 1995), often requires significant changes in company processes, policies, and strategy. CRM methods of building and maintaining strengthened relationships with customers may lead to expensive investment in software, hardware, and employee education, so the decision to engage in a CRM initiative is one that many companies approach cautiously.

Although family businesses may appear to already have an advantage in the battle for customer acquisition, service, and retention, it is not clear how formalized these efforts have become. Few studies investigate the specific implementation strategies by which family businesses cultivate, maintain, and exploit their relationships with customers; and it is not clear how family businesses and nonfamily businesses differ in this respect (Sharma, Chrisman, and Chua 1996). This article provides a comparative analysis of which CRM practices have been adopted by both family and nonfamily businesses, along with how important and successful family and nonfamily businesses perceive those efforts to be.

Background and Hypotheses

Theoretical Framework

The field of marketing is evolving from a primary emphasis on activities that facilitate transactions to an emphasis on building and sustaining profitable relationships (Webster 1992). In many ways, this shift is a return to the preindustrial era of marketing, characterized by direct marketing practices that foster the potential for an emotional commitment between buyers and sellers and that transcend mere economic exchange (Sheth and Parvatiyar 1995).

Sheth, Mittal, and Newman (1998) argue that relationship marketing should be delimited as a subset of marketing, having a specific focus on understanding and managing customers' buying, paying, and consuming behaviors. Some have argued that business alliances are also an important form of relationship marketing (Hunt, Lambe, and Wittmann 2002). Others have gone so far as to characterize relationship marketing as having the core variables of relationships, networks, and interactions--intrinsic to the nature of all societies and omnipresent, regardless of what people choose to call them (Gummesson 2002). …