The impact of customerknowledge and customerrelationship management

on service qualityShu-Mei Tseng and Pin-Hong WuDepartment of Information Management,I-Shou University, Kaohsiung, Taiwan

Abstract

Purpose – Enterprises realize that customers are their most important asset and recognize that a highlevel of customer satisfaction can only be achieved by enhancing service quality. Thus, how enterprisesacquire customer knowledge by which to initiate and maintain customer relationships, as well as toenhance service quality has become an important issue. The paper aims to discuss these issues.

Design/methodology/approach – This study uses a questionnaire and statistical analyticaltechniques to explore the impact of customer knowledge and customer relationship management(CRM) on service quality.

Findings – The results indicated that customer knowledge has a positive influence on service qualityand CRM is the partial intervening variable between customer knowledge and service quality. That is,customer knowledge enhances the CRM, while CRM, in turn, increases service quality and providescompetitive advantages.

Research limitations/implications – This research explored the impact of customerknowledge and CRM on service quality based on the company’s perception and there was novalidation on the customers’ perception of the company. Therefore, it is suggested that futureresearch should involve company staff, current customers, and latent customers to strengthen thetriangulation.

Practical implications – The results found that customer knowledge is indeed an important sourceof competitive advantage. Hence, enterprises should acquire valuable customer knowledge in order toenhance the relationship with customers, as well as enhance their service quality.

Originality/value – There is still little related literature investigating the relationships amongstcustomer knowledge, CRM, and service quality. Hence, this study applies questionnaire methods asthe main research tools in order to conduct an in-depth investigation into the influence of customerknowledge and CRM on service quality. Furthermore, this research is expected to provide enterpriseswith valuable suggestions for management practices.

Keywords Customer relationship management, Service quality, Customer knowledge

Paper type Research paper

1. IntroductionAlong with the development of information and technology, the amount of informationavailable to customers has increased tremendously and consumers thus havedeveloped their own opinions regarding service. Moreover, customers are increasinglyputting more emphasis on the quality of the products and services that they consume,rather than the price, and this is especially true for non-consumable goods(Garcia-Murillo and Annabi, 2002). Thus, enterprises should incessantly surpasscustomer expectations in order to provide satisfying service and to enhance service

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1756-669X.htm

Received 31 August 2012Revised 7 August 2013

8 August 201313 November 2013

Accepted 15 January 2014

International Journal of Quality andService Sciences

Vol. 6 No. 1, 2014pp. 77-96

q Emerald Group Publishing Limited1756-669X

DOI 10.1108/IJQSS-08-2012-0014

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quality (Fang and Tsai, 2005). Furthermore, if an enterprise would like to improve itsservice quality, their relationships with customers are considered as importantresources of information (Probst et al., 2000). Hence, enterprises should intensivelyencourage dialogues amongst different departments and staff in different locations sothat everyone can share knowledge and interact with others to create new ideas(Varlander, 2008; Castaneda and Rios, 2008).

It is due to the fact that service quality is not the only critical success factor, but alsothe main requirement by which to gain profit and achieve sustainable competitiveness(Cronin and Steven, 1992). Moreover, service quality can provide firms with a goodopportunity to find answers to many unsolved questions related to consumer behavior(Sanchez-Perez et al., 2007; Saravanan and Rao, 2007). Thus, many companies strive toenhance their competitiveness and to gradually shift their marketing model from beingproduct-oriented to customer-oriented. Since service quality must be improved throughfinding new ways of working and service re-alignment, firms have to perform better intheir knowledge processing in order to acquire the customer knowledge needed to offerservices subsequently that can best satisfy customers (Qin and Prybutok, 2009).Thus, enterprises should establish effective channels by which to acquire customerknowledge so that they can improve customer relationships in order to enhance servicequality. Nevertheless, empirical studies on how an enterprise can actually transformcustomer knowledge to enhance its customer relationship and service quality are stillrare. Therefore, this study explores the correlation between the customer knowledgeand customer relationship management (CRM) with regard to service quality, andillustrates how firms apply the customer knowledge to enhance customer relationshipand service quality. It is expected that the results of this work can be used as areference for firms aiming to improve service quality.

2. Literature review2.1 Customer knowledgeCustomer knowledge refers to an enterprise’s understanding of its current andfuture customers’ needs and preferences (Lee et al., 2011). Enterprises usually acquirecustomer knowledge by creating interactions and dialogues with customers, byobserving how customers use products or experience service, as well as by analyzingcorporate data and information in order to forecast customer behavior (Wayland andCole, 1997). Gibbert et al. (2002) noted that enterprises should carefully observe, interactand create dialogues with their customers to acquire customer knowledge so that theycan provide customized service and maintain long-term relationships. Mithas et al.(2005) also stated that through interactions with customers, an enterprise can obtaincustomer knowledge related to new demands about products or services that can behelpful references for improvement; moreover, this process is beneficial to customersatisfaction, customer loyalty and employee productivity. Hence, firms that canintegrate customer information and insights about them across core business processeswill be the most successful (Srivastava et al., 1999). Liao et al. (2010) further indicatedthat enterprises can use data warehouse and data-mining tools to integrate product andmarketing knowledge and to extract knowledge about customers, respectively. Then,this knowledge can provide distributors and retailers with information by which todevelop new products and increase the relationship between corporations and theircustomer. In other words, enterprises should use existing or potential customer

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information in order to extract customer knowledge and, through sharing andpromoting customer knowledge, enhance their customer value.

Yeung et al. (2008) mentioned that the application of knowledge about customers isnot the same as marketing-oriented applications. Marketing-oriented applications areresponsive behavior towards marketing information designed to create the highestcustomer value. Furthermore, customer knowledge applications are devoted tocreating an extremely crucial intangible asset to yield competitive advantage. Hence,if an enterprise can integrate marketing orientation and customer knowledge, then itcan provide operational flexibility to increase corporate agility and create higherlevels of customer value (Jayachandran et al., 2004; Tuominen et al., 2004). Theyfurther proposed a conceptual framework based on product quality, customer service,effective sales personnel, effective communication, and social compliance as mainattributes of customer knowledge in order to explore how such knowledge improvesfirm operational performance, as well as suggested that firms should allocate resourcesto these significant attributes while organizing their improvement activities.Salomann et al. (2005) and Khodakarami and Chan (2014) stated that customerknowledge can be broadly categorized as knowledge for customers (i.e. knowledgeprovided to customers to satisfy their needs), knowledge about customers(i.e. knowledge about customers to optimize customer profiling and segmentation,and campaign management processes), and knowledge from customers (i.e. knowledgeacquired from customers for product innovation), which is the knowledge thatcustomers possess that organizations can obtain by interacting with them.

Based on a review of relevant literature, this study found that customer knowledgeis a critical asset that can be changed into an indispensable source of competitiveadvantage, as well as gather, manage, and share customer knowledge can be avaluable competitive activity for organizations (Khodakarami and Chan, 2014). Firmsthus should use the customer knowledge to understand the needs and behavior of theircustomers and develop and offer customer-centric products and services. In otherwords, the ability to continuously generate and use customer knowledge is essential forfirms to create superior customer value, while the ability of acquiring customerknowledge should be developed through generating, structuring, and organizingcustomer information (Li and Calantone, 1998).

2.2 Customer relationship managementThe concept of CRM emerged in early 1980 and was called “contact management”, whichmainly compiled and documented all information regarding companies and theircustomers in order to conserve valuable customers (Gordon, 1999). CRM focused onrelationship management, lifetime value marketing, loyalty marketing, and one-to-onemarketing (Davids, 1999). It is a kind of holistic strategic procedure that includescustomer acquisition, selection, retention and collaboration to support selectiveretention of customers and to manage the customer relationship in order to enhancecustomer loyalty and profitability (Kandell, 2000; Parvatiyar and Sheth, 2001; Swift,2001). In other words, a CRM strategy must support the addition of value to thecustomers in terms of relationship management, loyalty programs, good productdevelopment, etc. (Sen and Sinha, 2011). Kamakura et al. (2005) further classified CRMinto analytical and behavioral CRM. Analytical CRM refers to how an enterprise extractsand analyzes valuable knowledge through interactions with the customers. At the same

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time, this information is to be developed into customized strategies to enhance customerloyalty and to raise switching costs in order to obtain sustainable corporate advantage(Deng et al., 2010; Liu et al., 2011). While behavioral CRM is the integration amongstconnection channels with its customers that include such things as stores, the internet,customer service, and so on, for which customer purchase and service records aredocumented that help enterprises to understand customers’ purchase behavior.Therefore, CRM is a strategic application designed to integrate information, processes,techniques, and talents (Becker et al., 2009; Kincaid, 2003). It aims to improve therelationship between companies and their customers by managing all customer-relatedactivities, such as marketing, sales, service and support in order to identify and retainthe most profitable customers and improve the profitability of less profitable customers(Wang, 2012).

Kalakota and Robinson (1999) assumed that CRM should depend on corporateactivities to support its operation. At the same time, they also explained that CRMactivities could be classified into three phases as follows: acquisition, enhancement, andretention. On the other hand, Peppers et al. (1999) classified CRM activities into fourphases, including identifying, differentiating, interacting, and customizing while Sin etal.(2005) defined CRM activities involving manufacturers practice to satisfy customerneeds, identify customer preferences, resolve customer complaints, provide after-saleservice, and establish long-term relationships with their customers. Ngai et al. (2009)indicated CRM activities as customer identification, attraction, retention, anddevelopment. Ramani and Kumar (2008) indicated that good CRM helps firms refinetheir knowledge about customers’ tastes and preferences. Based on the literature review,it has also been found that customer demands keep changing; therefore CRM systemsshould keep improving to provide customers with satisfying products and services sothat companies can maintain customer retention. If a company successfully maintainsenthusiasm, participation and interaction with its customers, as well as continuouslyintegrates sales, marketing, and customer care, then it is possible to enhance customerloyalty and expand customer lifetime value (Chalmeta, 2006; King and Burgess, 2007;Ozgener and Iraz, 2006). Customer loyalty means that by personalizing its products andservices, the firm can optimally satisfy customer needs and thereby generate long-termloyalty relationships (Garrido-Moreno and Padilla-Melendez, 2011). Customer lifetimevalue means that the firms estimated each individual customer taking into account thecustomers next purchase probability, contribution margin, and predicted individualcustomer-level marketing costs. Firms can derive individual predictions for customervalue (Verhoef and Lemon, 2013). Furthermore, customer behavior can be understoodthrough customer lifecycles and then can provide customized products and servicesbased on customer demands in order to attract, develop, maintain and retain customers(Alexandra, 2003). For example, credit card issuers provide customers with financialvalue, such as cash back and flier miles programs. Based on a review of relevantliterature, this study found that CRM aims to improve the relationship betweencompanies and their customers by managing CRM activities, such as customeridentification, attraction, retention, and development in order to enhance the profitability(Ngai et al., 2009).

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2.3 Service qualityThe current global market is highly competitive, and service providers have becomemuch more focused on achieving high levels of customer satisfaction by offeringexcellent service quality (Sharabi and Davidow, 2010). Parasuraman et al. (1985)explained that service quality should be measured during the process of providingservice and suggested that it usually takes place when the customer and the staff aredealing with the service. Hence, service quality is measured based on a comparisonbetween the perceptions and expectations on the service delivered. At the same time,they also classified ten interrelated factors that influence service quality as follows:reliability, responsiveness, competence, courtesy, access, communication, credibility,security, understanding and tangibles. In 1988, they further proposed the SERVQUALmeasurement that simplified the aforementioned ten factors into the following fivemain factors: tangibles, reliability, responsiveness, assurance, and empathy(Parasuraman et al., 1988). Syed and Amiya (1994) proposed five factors thatincluded perceived fairness of the facility, empathy, responsiveness, reliability, andconvenience in order to examine customer assessments of the service quality of an autoservice facility. The results of their study showed that when the task was complex, andthe customers did not feel knowledgeable, perceived fairness was found to besignificantly more important than were the other four factors. On the other hand,Brady and Cronin (2001) suggested that service quality measurement should consistof interaction quality, physical environment quality, and outcome quality. Theinteraction quality covers the interaction between the enterprise and the customerincluding attitude, behavior, and expertise; while the physical environment qualitydescribes the real conditions, including ambient conditions, design, and social factors.The outcome quality is the results of service provided by the enterprise that includeswaiting time, tangibles, and valence.

As a result, service quality is the premise of customer satisfaction and is givensignificant importance owing to its close relationship with cost, financial performance,and customer retention (Saravanan and Rao, 2007). Furthermore, it is also a potentialsolution for issues related to consumer behavior or human resource management(Sanchez-Perez et al., 2007). Hence, enterprises have started focusing on the customerperceptions of service quality and subsequently on developing strategies by which toachieve customer satisfaction.

3. Research model and hypothesesFigure 1 shows the correlation between customer knowledge and CRM on servicequality. The purpose of this research is to understand how customer knowledgeinfluences the relationship between enterprises and their customers, as well as how itcan enhance service quality.

In order to enhance service quality, companies should focus on their customers andcollect customer knowledge so that they can enhance their customer service skills.Salojarvi et al. (2010) emphasize that firms should generate information not only abouttheir customers but also from them. In other words, customer knowledge is not onlyabout customer needs and purchasing history of the customer but also from thecustomer’s knowledge about products, services and the market place in general. Theseknowledge can enhance companies to understand the reason why customers purchasetheir products and what services are their needs (Garcia-Murillo and Annabi, 2002;

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Davenport et al., 2001). Salomann et al. (2005) further indicated that such customerknowledge can be implemented in the service process to generate new ideas and improveproducts and service. Thus, enterprises should effectively utilize their knowledge aboutcustomers to increase service quality so that customers will grow their repeat-purchasewillingness and behavior (Butler, 2000). If enterprises possess outstanding customerknowledge, they can help their customers understand their demands and problems. As aresult, they can provide appropriate service and problem solutions that will eventuallyenhance service quality (Hedaa and Ritter, 2005). Hence, this research assumes that ifenterprises can acquire effective customer knowledge, then it is possible to enhanceservice quality. This research proposes the following hypothesis:

H1. The degree of customer knowledge will have a positive effect on servicequality.

CRM integrates and manages all aspects of customer interactions with the organization toenhance the efficiency and effectiveness of marketing, sales and customer service (Dong,2011). CRM systems improve not only the organization’s ability to initiate, enhance, andsustain relationships with customers, but also the ability to increase their knowledge aboutthem. In other words, the long-term relationships with customers are based largely oncustomer knowledge (Garrido-Moreno and Padilla-Melendez, 2011). For example, throughpurchase behavior based on the records and related information processed, compiled,and analyzed using statistical methods, firms acquire customer knowledge, predictcustomer demands, customize a strategy for specific customers, and eventually enhancecustomer relationships and service quality (Lin et al., 2006). With the accumulationof customer knowledge, firms can be able to plan and carry out its CRM to cater to unmetcustomer needs better than its competitors and to retain the most valuable customers(Torkzadeh et al., 2006). Hence, firms that have greater knowledge of their customers aremore likely to increase their ability to establish good customer relationships and to enhanceservice quality. In other words, firms can enhance the customer relationship through theprocess of sharing customer knowledge so that the staff can also enhance their creativityregarding the development of new products and enhanced service ability (Shi and Yip,2007). Therefore, this research assumes that CRM is a process-oriented variable and not anoutcome-oriented one and that it can mediate the relationship between the customerknowledge and service quality. Hence, this research proposes the following hypothesis:

H2. The association between the degree of customer knowledge and servicequality is mediated by CRM.

Figure 1.Basic research model

CustomerKnowledge

ServiceQuality

CustomerRelationshipManagement

Base Model(Hypotheses 1)

Mediating Model(Hypotheses 2)

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4. Research method4.1 Measure developmentAfter developing the basic research model, a series of interviews with senior managersfrom different companies was conducted to assess the external validity of the model. Theindividual in-depth interviews that we will conduct are face-to-face and semi-structurednature, which is one of the most common approaches to interviewing in qualitativeresearch (Bryman and Burgess, 1999). That allows the respondents todetermine the direction and content of the interview within a broader frameworkprovided by the interviewer. After interviews with each senior manager were completed,the results were assembled, transcribed and e-mailed to the respondents for their reviewand approval eliminating any misinterpretations. This is expected to provide a richer andmore holistic appreciation of the problems regarding research model. A questionnairewas designed and developed based on an extensive literature review and in-depthinterviews. The definitions of constructs, variables and references are shown in Table I,and all the measures items used for individual constructs are shown in Appendix. Thedraft questionnaire was tested by scholars and experts, which led to minor modificationsin the wording of some survey items. All multiple-item variables were measured on aseven-point Likert-type scale from “strongly disagree” to “strongly agree”.

4.2 Sample and data collectionData was collected in Taiwan to test the above hypotheses by means of aquestionnaire. The questionnaire was mainly distributed through the internet at thebeginning of February 2011. The sampling frame was based on the top manufacturerslisted in the 2009 Common Wealth Magazine, from which the top 500 corporationswere invited to take part in the survey. The survey questionnaire and a cover letterexplaining the purpose of this study were mailed to 500 companies. Among them,117 were valid; the other four were incomplete or unclear, and hence discarded. Table IIshows the demographics of the respondents that included genders, age, education level,type of occupation, job position, years of experience and average monthly income.

4.3 Reliability and validity of the constructsItem analysis was applied to measure the relevance of each questionnaire item. Then,exploratory factor analysis was employed to verify the relevance of each defaultdimension variable. This research is based on the review of related literature and theresults of factor analysis to suggest that customer knowledge should be divided intothree dimensions: quality and service, effective sales personnel and communication, andsocial compliance. CK17 digressed and was hence deleted. The CRM consisted of thefollowing dimensions: customer identification, attraction, and retention. C9, C14, C15,and C16 were deleted due to digression, while service quality was divided into thefollowing dimensions: tangibles, reliability, assurance, and empathy. Q4 was deleteddue to digression. Based on the results of the item analysis, customer knowledge waseventually divided into quality and service, effective sales personnel andcommunication, and social compliance; CRM was divided into customer identification,attraction, and retention; service quality was divided into tangibles, reliability,assurance, and empathy.

Table III outlines the results of the reliability and validity tests performed on thesurvey items. Internal consistency measures (Cronbach’s a) were obtained in order to

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assess the reliability of the measurement instruments. The item-to-total correlation,which was calculated between each individual item and the sum of the remainingitems, was used to determine the convergent validity. When the item-to-totalcorrelation score was lower than 0.4, the case was eliminated from further analysis.The reliability level is acceptable if the value is at least 0.8 for the basic research and0.7 for the exploratory research (Nunnally, 1978). The content validity of theinstruments was established by adopting the constructs that have already beenvalidated by other scholars and experts. From the analyses mentioned above, it wasfound that the survey items on each construct met the requirements reliability andvalidity.

Constructs Variables References

Customerknowledge

Product quality. Customer’s demands have beenfulfilled by the physical delivery performance

Wayland and Cole (1997), Limand Palvia (2001), Gibbert et al.(2002), Hedaa and Ritter (2005),Yeung et al. (2008), Liao et al.(2010)

Customer service. Customer orders are efficiently andeffectively handledEffective sales personnel. The salesperson’sunderstanding of product and conditions of use, andhis/her ability to solve problemsEffective communication. Employee’s technicalability to communicate with customersSocial compliance. Accountability and responsibilityregarding human rights, working conditions, andenvironmental concerns

CRM Customer identification. The analytical comparisonof customers’ basic information used to segment andclassify, as well as to clarify their characteristics andneeds

Holmlund and Kock (1996),Peppers et al. (1999), Woo et al.(2005), Kamakura et al. (2005),Torkzadeh Chang and Hansen(2006), Ngai et al. (2009)Customer attraction. After verifying the target

customers, the enterprise is able to attract morecustomers through direct sales and marketingCustomer retention. The ability to retain customersby increasing customer satisfaction so that they arewilling to purchase againCustomer development. Transferring service to thecustomers in order to increase corporate profit and toallow satisfied customers to recommend productsand services to other potential customers, as well asthe development of customer value

Servicequality

Tangibles. Staff appearance, physical facilities andinstallations

Parasuraman et al. (1985, 1988),Syed and Amiya (1994), Bradyand Cronin (2001)Reliability. The perceived ability to render the service

in order to provide it in a precise wayResponsiveness. The ability of the staff to interactwith customers to provide responses and fast serviceAssurance. Employees’ competence and courtesy, aswell as their ability to stimulate confidenceEmpathy. Customer care ability regarding anunderstanding of customer’s personal needs and theprovision of customized service

Table I.Definitions of constructs,variables and references

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5. Analysis and results5.1 Testing the base modelRelationship between customer knowledge and service quality. Pearson’scorrelation analysis was adopted for the purposes of this study to determinethe correlation between customer knowledge and service quality. Table IV shows thecorrelation matrix for all research variables. The correlation coefficients betweencustomer knowledge and service quality were 0.845, showing a highly positivecorrelation. The correlation coefficients of each customer knowledge factor – qualityand service, effective sales personnel and communication, and social compliance – withservice quality were 0.806, 0.804, and 0.667, respectively. With regard to the correlationamong all customer knowledge factors, the results showed a strong correlation and

Variable Type Percentage

Gender Male 61.5Female 38.5

Age #22 8.523-27 45.328-32 9.433-37 10.338-42 18.0$43 8.5

Years of work experience ,1 29.01-3 32.54-6 1.77-9 7.710-12 6.013-15 6.0$16 17.1

Job position Basic-level staff 74.4Basic-level manager 9.4Middle-level manager 7.7High-level manager 8.5

Education High school and lower 3.4Undergraduate 61.6Graduate 33.3Post-graduate and above 1.7

Type of occupation Manufacturing 20.5High-tech industries 12.8Financial services 45.3Others 21.4

Average monthly income #19,999 NTD 18.820,000-49,999 NTD 47.050,000-59,999 NTD 22.280,000-99,999 NTD 6.8$100,000 NTD 5.2

Note: n ¼ 117

Table II.Demographic

characteristics of theresponding firms

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reached a significant level ( *p , 0.01). This meant that customer knowledge had asignificantly positive correlation with service quality.

The regression analysis for customer knowledge regarding service quality. Becausecustomer knowledge had a significant correlation with service quality, as indicated inTable IV, multiple-regression analysis was used in this study to understand the linearrelationship between a group of forecast variables and a valid variable. Themultiple-regression analysis is shown in Table V. As indicated in this table, the b-value,Beta value, t-value and all other values achieved a positive level. The Beta values for thebase model were 0.406, 0.381 and 0.149, respectively. The model: was

Constructs ItemsConvergent validity

(item to total correlations)

Reliability(Cronbach’s

a)

Customerknowledge

Quality and service CK1-8 0.794; 0.792; 0.731; 0.794;0.816; 0.791; 0.772; 0.801

0.904 0.963

Effective sales personneland communication

CK9-16 0.852; 0.844; 0.793; 0.770;0.808; 0.813; 0.807; 0.642

0.939

Social compliance CK18-21 0.763; 0.759; 0.853; 0.621 0.883CRM Customer identification C1-4 0.679; 0.772; 0.782; 0.527 0.843 0.943

Customer attraction C5-8 0.740; 0.729; 0.842; 0.771 0.894Customer retention C10-13 0.844; 0.893; 0.880; 0.846 0.944

Service quality Tangibles Q1-3 0.905; 0.938; 0.845 0.950 0.978Reliability Q5-8 0.819; 0.837; 0.892; 0.807 0.931Assurance Q9-16 0.894; 0.861; 0.894; 0.859;

0.897; 0.879; 0.884; 0.9060.971

Empathy Q17-20 0.851; 0.725; 0.828; 0.903 0.924

Table III.The reliability resultsfor each variable

Quality andservice

Effective sales personneland communication Social compliance Customer knowledge

Service quality 0.806 * 0.804 * 0.667 * 0.845 *

CRM 0.797 * 0.777 * 0.637 * 0.817 *

Note: Significant at: *p , 0.01

Table IV.Correlation matrix forall constructs

Service quality

Variables b SE Betat-

valuep-

value

Customerknowledge

Constant 1.468 1.196 1.227 0.222Quality and service 1.631 0.331 0.406 4.926 0.000 *

Effective sales personnel andcommunication 1.527 0.339 0.381 4.509 0.000 *

Social compliance 0.539 0.248 0.149 2.171 0.032 *

Adjusted R 2 0.727

Note: Significant at: *p , 0.05

Table V.The multiple-regressionanalysis for customerknowledge on servicequality

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y1 ¼ 1:468 þ 1:631x121 þ 1:527x122 þ 0:539x123, (where x121 is quality and service,x122 is effective sales personnel and communication, and x123 is social compliance).All variables showed a positively significant relation. The adjusted R 2 was 0.727, andthe explainability for all variables was higher. Consequently, the research resultsfavored H1, indicating that the degree of customer knowledge will have a positive effecton service quality. Moreover, the higher the degree of the quality and service, effectivesales personnel and communication, and social compliance of customer knowledge, thenthe level of the service quality will be higher. Hence, H1 was proven valid.

5.2 Testing the mediating effects of CRMThe correlation coefficient between customer knowledge and CRM is illustrated in thesecond row of Table IV. The simple-regression analysis for customer knowledge onservice quality and CRM are shown in Table VI. The multiple-regression analysis forcustomer knowledge and CRM on service quality is shown in Table VII. As indicatedin these tables, the b-value, Beta value, t-value and all other values achieved apositive level. Based on Tables IV, VI and VII, it was found that the standardizedcoefficient of customer knowledge on service quality was 0.845, while the standardizedcoefficient of customer knowledge on CRM was 0.817. The standardized coefficient ofcustomer knowledge and CRM on service quality was 0.365 and 0.589. The mediatingeffect of CRM is illustrated in Figure 2. The path coefficient for customer knowledge onservice quality decreased from 0.845 to 0.365, showing that CRM had a partialmediating effect on customer knowledge and service quality. Furthermore, this impliesthat the influence of customer knowledge on service quality during the service process

Variable b SE Beta t-value p-value

Service qualityConstant 1.696 1.225 1.358 0.169Customer knowledge 1.214 0.072 0.845 16.980 0.000 *

Adjusted R 2 0.712CRMConstant 2.174 0.956 2.273 0.025 *

Customer knowledge 0.848 0.056 0.817 15.185 0.000 *

Adjusted R 2 0.664

Note: Significant at: *p , 0.05

Table VI.The simple-regressionanalysis for customerknowledge on service

quality and CRM

Service qualityVariables b SE Beta t-value p-value

Constant 20.074 0.971 20.076 0.939Customer knowledge 0.524 0.096 0.365 5.450 0.000 *

CRM 0.814 0.093 0.589 8.796 0.000 *

Adjusted R 2 0.827

Note: Significant at: *p , 0.05

Table VII.Multiple-regression

analysis for customerknowledge and CRM on

service quality

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will partially affect CRM and then in turn, will affect the service quality. In otherwords, during the process of enhancing service quality, customer knowledge thatpossesses higher value will improve the relationship between customers and theassociated company. After the company and its customer maintain good interaction,the service quality provided by the company will also increase.

6. DiscussionThis research showed that customer knowledge has a positive influence on service quality.This demonstrates that if an enterprise can acquire valuable customer knowledge, it willbe possible to improve service quality. Due to the growing customer demand for servicequality, enterprises will be highly likely to lose customers if they are not satisfied. On thecontrary, if an enterprise thoroughly understands customer demands regarding productsand services and is able to provide service beyond customer expectations, then it ispossible to highly enhance service quality (Romano and Vinelli, 2001). Furthermore, thisresearch indicated that effective sales personnel and communication, quality and serviceare the most crucial variables to determine service quality. This implies that if asalesperson is equipped with professional knowledge and excellent communication skills,the service quality will increase; while good product quality and customer service canincrease customer satisfaction and eventually enhance service quality (Abdul-Muhmin,2005; Lo et al., 2005). Therefore, this research suggests that enterprises should establishreliable quality management standards, as well as emphasizing first-line sales training sothat sales personnel will be equipped with excellent communication skills and adequateprofessional knowledge. If enterprises can respect staff’s expertise and pay attention tostaff safety, then they will acquire the support and trust of their staff members as well asincrease staff satisfaction and willingness related to their duties. Furthermore, if the staffare satisfied with their jobs, it is possible to provide service that brings satisfaction andpleasurable experiences to customers.

Moreover, the research results showed that CRM is the partial intervening variablebetween customer knowledge and service quality. In other words, customer knowledge

Figure 2.The mediating effectsof CRM

CustomerKnowledge

ServiceQuality

CustomerRelationshipManagement

0.365*** (t = 5.450)

CustomerKnowledge

ServiceQuality

0.845*** (t = 16.980)

0.817***(t = 15.185)

0.589***(t = 8.796)

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has a positive influence on CRM, while CRM also has a positive influence onservice quality. This shows that if enterprises can acquire adequate levels of customerknowledge, they will enhance their relationship with their customers. Furthermore, thebetter the relationship between enterprises and their customers, the higher the servicequality will be. Unfortunately, most companies have limited customer knowledgeabout CRM and thus cannot better leverage knowledge assets. Thus, to enablecompanies to become more efficient and effective in delivering products and/or servicesto customers, customer knowledge will have to be managed to ensure that the companiesprovide are those that will address customer needs (du Plessis and Boon, 2004).Moreover, CRM can be used to build customer knowledge related to interactionsoccurring between enterprises and their customers during the process of service deliveryand can as a result, eventually enhance service quality.

7. ConclusionsThis research applied a questionnaire method (developed through literature reviewand in-depth interviews) and statistical analysis to investigate the influence andrelationship amongst customer knowledge, CRM, and service quality. The resultsindicated that customer knowledge has a positive influence on service quality andCRM is the partial intervening variable between customer knowledge and servicequality. This research further showed that enterprises should effectively gain customerknowledge regarding their perceptions of product quality and customer service, theeffectiveness of sales personnel and related communications, as well as socialcompliance, so that they can properly manage customer dynamics and market trendsin order to increase customer relationships, improve overall service quality, andadvance corporate competitiveness (Claycomb et al., 2005). Therefore, companiesshould realize the significance of providing quality service as a crucial measure tomaintain high levels of customer satisfaction (Baran et al., 2008). It showed that a highrate of service quality is positively and highly influenced by the rate of customersatisfaction, and eventually, operational performance can be enhanced (Anderson et al.,2004). Due to the fact that customers sometimes cannot express their demands,enterprises should be equipped with excellent communication ability to effectivelyinteract with customers in order to gain knowledge regarding their demands.In addition, feedback mechanisms can be applied to retrieve customer knowledge aboutproducts so that it is possible for the enterprise to enable systematic improvement andproduct innovation (Gibbert et al., 2002). In other words, enterprises should acquirevaluable customer knowledge during the service process. Subsequently, the enterpriseshould then identify, attract, and retain customers, as well as establish long-termcustomer relationships by which to enhance service quality and customer satisfaction(Johnson et al., 2003).

This research explored the impact of customer knowledge and CRM on servicequality based on the company’s perception and there was no validation on thecustomers’ perception of the company. Moreover, there are many people that did notanswer the questionnaire/did not complete it in a valid way. It would be preferable if ashort analysis of this dropout rate was done. Therefore, it is suggested that futureresearch should involve company staff, current customers, and latent customers tostrengthen the triangulation.

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(The Appendix follows overleaf.)

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Appendix. Questionnaire items

1 – strongly disagree; 2 – somewhat disagree; 3 – neutral; 4 – somewhat agree; 5 – strongly

agree.

Variables Code Questions

Items measuring customer knowledgeProduct quality CK1 Our company offers excellent, high-quality

productsCK2 Our company’s products have fulfilled the

customer’s demandCK3 Our company’s products are good value for

customer’s moneyCK4 Our company’s products possess attractive

designsCustomer service CK5 Our company can fulfill customer’s order (or

purchase procedure) quicklyCK6 Our company is able to finish product delivery

after receiving the orderCK7 Our company has a reliable order processCK8 Our company provides customers with good

after-sales serviceEffective sales personnel CK9 Our company’s front-line staff is well-equipped

with knowledge of the products we sellCK10 Our company’s front-line staff is equipped with

the ability to understand customer demandsCK11 Our company’s front-line staff is equipped with

the ability to help customers solve their problemsCK12 Our company’s front-line staff shares their

experiences and knowledge with their colleaguesCK13 Our company’s front-line staff is able to

immediately fulfill customer demandsEffective communication CK14 Our company’s staff is equipped with excellent

communication abilityCK15 Our company’s staff appreciates customer

feedbackCK16 Our company has a customer service center to

collect feedback from customers face-to-faceCK17 Our company provides a customer service

hotline, e-mail, fax, snail mail, and othercommunication channels by which to collectcustomer feedback

Social compliance CK18 Our company complies with the Labor StandardsLaw

CK19 Our company highly respects staff expertiseCK20 Our company conforms with work safety

regulations that guarantee staff’s safetyCK21 Our company possesses high environmental

awareness

(continued )Table AI.

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Variables Code Questions

Items measuring CRMCustomer identification C1 Our company can effectively analyze and

compare customer data to understand customercharacteristics

C2 Our company can segment and classify ourcustomers in order to provide effective marketingstrategies that suit our target customer

C3 Our company can discover the customers thatwill bring the highest profit

C4 Our company can discover the customers thatcannot bring profit

Customer attraction C5 Our company has established a user-friendlyweb site for our customers so that they cansearch for product information, success stories,and other information

C6 Our company can design a customized marketingand sales plan based on customer preferences

C7 Our company has provided a comfortableshopping environment for the customers

C8 Our company can use TV commercials, e-mail,a web site, catalogues, and various media topromote itself

Customer retention C9 Our company provides products and servicesthat fulfill our customers’ demands

C10 Our customers are willing to repurchase ourcompany’s products and services

C11 Our company always maintains closeinteractions with our customers to establish long-term relationships

C12 Our company has established a good after-salessupport service

Customer development C13 Our company has comprehensive marketing andsales plans

C14 Our company can transfer products and servicesto our customers

C15 Our customers are willing to recommend ourcompany to their friends

C16 Our company is equipped with the ability toattract potential customers

Items measuring service qualityTangibles Q1 Our company has the latest service

equipmentQ2 Our company’s service equipment is attractiveQ3 Our company’s staff appearance is appropriateQ4 Our company’s service facilities are appealing

and appropriateReliability Q5 Our company’s service staff can fulfill their

promises to our customersQ6 Our company’s service staff can accomplish

tasks on time

(continued ) Table AI.

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About the authorsShu-Mei Tseng is an Associate Professor in the Department of Information Management atI-Shou University, Taiwan (ROC). She received her PhD in the Department of Industrial andInformation Management at National Cheng Kung University, Taiwan (ROC). Her works havebeen published in International Journal of Information Management, Expert Systems withApplications, Industrial Management and Data Systems, Journal of Knowledge Management, andManagement Research News. Her current research interests include knowledge management,information technology management, customer relationship management, and service quality.Shu-Mei Tseng is the corresponding author and can be contacted at: y97576@isu.edu.tw

Pin-Hong Wu is a graduate student at the Department of Information Management, I-ShouUniversity in Taiwan. His current research interests include knowledge management andcustomer relationship management.

Variables Code Questions

Q7 Our company’s service staff can place itself in ourcustomers’ shoes

Q8 Our company’s service staff is reliableResponsiveness Q9 Our company’s service staff can immediately

respond to customer demandsQ10 Our company’s service staff can help customers

solve problems immediatelyQ11 Our company’s service staff has the willingness

and passion to provide service to our customersQ12 Our company’s service staff can precisely tell our

customers their waiting timeAssurance Q13 Our company’s service staff is equipped with the

professional ability to provide serviceQ14 Our company’s service staff can make our

customers feel respectedQ15 Our company’s service staff is polite and friendlyQ16 Our company’s service staff can effectively

communicate with our customersEmpathy Q17 Our company’s service staff is proactive in

understanding customer demandsQ18 Our company’s service staff can provide

customized service based on customer demandsQ19 Our company’s service staff can think based on

benefits to customersQ20 Our company’s service staff can provide

empathetic serviceTable AI.

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