Abstract
In light of the growing relevance of customer-oriented business strategies IT investments in the field of Customer Relationship Management have increased considerably. However, firms often could not realize sufficient returns on these IT investments. One major reason for this failure seems to be the lack of appropriate approaches to determine the economic impact of such investments ex ante. Therefore, we develop an economic model to determine the optimal level of Customer Relationship Management IT investments. Using this approach, firms can evaluate, to what extent investments in Customer Relationship Management IT are reasonable. One major result is that in most cases the “all or nothing strategy” pursued by many firms does not lead to the optimal level of investments. To illustrate the practical utility and applicability of the approach, we provide a real world example of a German financial services provider.
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Notes
Other functions fulfilling the characteristics lead to similar findings.
Other functions which fulfill the characteristics lead to similar findings.
The fact that the new AS also positively affects the acquisition of new customers and the exhaustion of their potential is not taken into account here as the management wished for a conservative forecast.
The index 1, …, i represents the cumulated functionalities 1 to i.
When applying the continuous model the optimal project size has to be determined as shown in the previous section. Afterwards, a realizable project size “near” this optimal solution should be adopted.
S 1 and S 2 are seen as must investments which induce ΔCE 1 =ΔCE 2 = 0 and are therefore not subject to a variation.
This holds for a variation of LOC i in a symmetric interval from −16 % to +16 % and of ΔCE i in a symmetric interval from −14 % to +14 % around the respective initial values.
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We thank the Austrian Science Fund (FWF): P 23567-G11 for funding this research.
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Heidemann, J., Klier, M., Landherr, A. et al. The optimal level of CRM IT investments. Electron Markets 23, 73–84 (2013). https://doi.org/10.1007/s12525-012-0096-0
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DOI: https://doi.org/10.1007/s12525-012-0096-0