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THE EFFECTS OF INTRODUCING CUSTOMER RELATIONSHIP MANAGEMENT TO DEPARTMENT STORE ON CUSTOMER SATISFACTION AND LOYALTY

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Prof. Hao-Erl Yang Hsiu -Chun Hsu !! ! ! ! !

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Thesis for Master of Business Administration Department of Business Management Tatung University! K v m z !3 1 1 8 !

THE EFFECTS OF INTRODUCTING CUSTOMER RELATIONSHIP MANAGEMENT TO DEPARTMENT STORE ON CUSTOMER SATISFACTION AND LOYALTY

D S NA THESIS SUBMITTED TO THE FACULTY OF THE GRADUATE SCHOOL OF MANAGEMENT OF TATUNG UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION BY Hsiu -Chun HsuJULY 2007 TAIPEI, TAIWAN, REPUBLIC OF CHINA

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THE EFFECTS OF INTRODUCING CUSTOMER RELATIONSHIP MANAGEMENT TO DEPARTMENT STORE ON CUSTOMER SATISFACTION AND LOYALTY

Advisor Student

Prof. Hao-Erl Yang Hsiu -Chun Hsu

TATUNG UNIVERSITY GRADUATE SCHOOL OF MANAGEMENT MASTERS THESIS July 2007

AbstractTo implement the Customer Relationship Management (CRM) is an important topic. The main purpose of enterprises performing CRM is to handle customer demand and increase customer satisfaction in order to maintain the customer relationship, and then raise the customer loyalty to create new businesses. Using structural equation modeling (SEM), the results reveal that managing knowledge has significant effects on customer

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CRM

CRM

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THE EFFECTS OF INTRODUCING CUSTOMER RELATIONSHIP MANAGEMENT TO DEPARTMENT STORE ON CUSTOMER SATISFACTION AND LOYALTY

AdvisorProf. Hao-Erl Yang StudentHsiu -Chun Hsu TATUNG UNIVERSITY GRADUATE SCHOOL OF MANAGEMENT MASTERS THESIS July 2007

AbstractTo implement the Customer Relationship Management (CRM) is an important topic. The main purpose of enterprises performing CRM is to handle customer demand and increase customer satisfaction in order to maintain the customer relationship, and then raise the customer loyalty to create new businesses. Using structural equation modeling (SEM), the results reveal that managing knowledge has significant effects on customer satisfaction. The mediating effects of customer satisfaction on the relationship between

CRM and customer loyalty were investigated. And the results reveal that customer satisfaction positively and significantly mediating the effects of CRM function on customer loyalty. The major findings of this study are summarized as following:

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Overall, the global model fit is acceptable. This empirical result supports that the significant relationships exist among the CRM functional programs, customer satisfaction and customer loyalty.

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The strengthening of department stores CRM functional programs-customer knowledge management has positive influence on customer satisfaction.

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The department store customer satisfaction may establish the customers loyalty and will strengthen mutual interaction in future

Keywords: Customer Relationship Management, Customer Satisfaction, Customer Loyalty, Structure Equation Modeling (SEM)

ACKNOWLEDGEMENTS

The successful completion of the MBA program, which reaches its peak in the preparation of this thesis, reflects the efforts and influences of several key individuals to whom this student is profoundly grateful. First of all, this student would like to thank her thesis advisor, Prof. Hao-Erl Yang (), for his splendid advice and careful guidance during the entire period of this research. Next, much appreciation is extended to Prof. Ai-hua Chang () and Prof. Ming-chuan Pan () for their suggestion and helpful instruction. Besides, she also likes to thank Prof. Nan-hong Lin (), her tutor during the past two years. Equally, she desires to express her appreciation to her friends, Wen-hua Su (), Wei-Kun Huang(), Shih-chuan Hsu (), Chiao-yun Su (), Li-Chien Yu(), Chiou-ping Chen () and Jheng-Yi Lai (). They make her have a substantial life during the past two years.

CONTENTPage

ABSTRACT IN CHINESE.. i ABSTRACT IN ENGLISH..ii ACKNOWLEDGEMENT...............iv LIST OF TABLE.............vii LIST OF FIGURE..................................................................................viii Chapter . INTRODUCTION ................................................................................... 1Research Background and Motivation ....................................................................... 1 Research Objectives...................................................................................................... 3 Research Procedure ...................................................................................................... 3

. LITERATURE REVIEW....................................................................... 5The Department Store .................................................................................................. 5 Customer Relationship Management.......................................................................... 6 Customer Satisfaction................................................................................................... 8 Customer Loyalty.......................................................................................................... 9 CRM, loyalty and satisfaction.................................................................................... 10

. RESEARCH METHODOLOGY ........................................................ 12Research Framework.................................................................................................. 12 Research Hypotheses .................................................................................................. 13 The Operation definition variable............................................................................. 14 Research Sample ......................................................................................................... 18 Date Analysis Method ................................................................................................. 18

. DATA ANALYSIS ................................................................................. 20Description of Data ..................................................................................................... 20 Means and Standard Deviations ................................................................................ 21 Reliability and Validity ............................................................................................... 23 Results of Structural Equation Modeling ................................................................. 25 Research Findings ....................................................................................................... 26

. CONCLUSIONS AND SUGGESTIONS............................................ 28Conclusions.................................................................................................................. 28 Managerial implications............................................................................................. 29 Limitations and Suggestions for Future Research................................................... 30

BIBLIOGRAPHY ....................................................................................... 31 APPENDIX ................................................................................................ 38 VITA ............................................................................................................. 41

LIST OF TABLESPage 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. CRM Measurement Items ................................................................................... 16 Satisfaction Measurement Items........................................................................... 17 Loyalty Measurement Items ................................................................................. 18 Sample Profile ........................................................................................................ 21 Measurement Items for Mean Value and Standard Deviation .......................... 22 Reliability for CRM, satisfaction and loyalty...................................................... 23 External Variables Convergent Validity .............................................................. 24 Chi-Squared Difference Tests for Examining Overall Discriminant Validity .. 25 Goodness-of-Fit ...................................................................................................... 26 Structure model estimate ..................................................................................... 27

LIST OF FIGUREPage 1. Research flow................................................................................................................. 4 2. Research Framework.................................................................................................. 12

CHAPTER INTRODUCTIONResearch background and motivate No matter how serious the competition on industrial marketing becomes, only consumer loyalty ensures steady and long-lasting revenue growth for any kind of business. Therefore, great deals of researchers, both from industry and academic institutes, have been trying to unveil the evolution process of consumer loyalty for decades. In recent years, the market scope of department stores extends quickly and continuously, and the level of competition is also higher and higher. To face such a changeable and competitive environment, one of the effective strategies is to adopt Joint Venture or Technical Cooperation with foreign department stores industry. Several famous large-sized department stores in Taiwan selected Joint Venture, and furthermore the targets of cooperation are all Japanese retailing clans. In the past, department stores always made efforts on diversification of merchandise, design of store and perfect service etc. This interior operation mode is not the only strategy to explore the market share. Hence, it must be consequential trend that aims target customers actively if domestic department stores want to improve competitiveness and capacity of the organization. This strategy is more positive and extended than the first one. The emerging of hypermarket intensified the competition of department stores. Each department store brings up all kinds of promotions to attractive customers for the declining growth rate. In order to survive, it is critical for department stores to

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shift product orientation to customer orientation (Kotler, Jain, and Maesincee, 2002). Singh and Sirdeshmukh (2000) even suggest that consumer loyalty is emerging as the marketplace currency of the twenty-first century. Developing a loyal consumer is, however, easier said than done. In recent years, retail competition has intensified, generally as a consequence of new technologies, more sophisticated management practices and industry consolidation. A number of issues, such as the commoditization of products, time scarcity, greater choice of stores and products, more mobile and better informed consumers, are all to contrive to discourage strong loyalty to individual stores by consumers (Schriver, 1997). Customer satisfaction is defined as an overall evaluation based on the customers total purchase and consumption experience of getting a good or service over time (Anderson, Fornel,l and Mazvancheryl, 2004; Fornell, 1992). In the marketing literature, customer satisfaction has been recognized as an important part of corporate strategy (Fornell et al. 2006) and a key driver of firm long-term profitability and market value (Gruca and Rego 2005). More and more enterprises adopt customer relationship management system (CRM) to collect and combine customer's information, and analyze and apply the information to marketing, selling and serving activities in order to strengthen the competitiveness. The major domestic scholar's empirical researches on CRM at present have focused on the performance after implementing CRM and stressed on management operating aspect. This research attempts to stress on consumers perspectives. As to department store industry, the customer's assessment and judgment have sizable influence on loyalty and satisfaction. In the service business that always needs to contact with customer, it is important for department store to know how to develop

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customer relationship. However, this research motive is that how department store industry keeps the customer satisfied and loyal by introducing CRM. This study attempts to investigate to what extent the customer satisfaction has been promoted after the CRM was introduced by the department store and the customers received the CRM service. In addition, this study also assesses the effects of the introduction of CRM on customer loyalty. Research Objectives The essence of CRM thinking originates from three concepts in marketing management: (1) customer orientation, (2) relationship marketing, and (3) database marketing. With the advancement of information and communication technology (ICT), these three marketing tenets have come together in the paradigm of CRM (Langerak and Verhoef, 2003). (Zikmund, McLeod, and Gilbert, 2003) provide a more technology-oriented perspective by defining CRM as a business strategy that uses information technology to provide an enterprise with a comprehensive, reliable, and integrated view of its customer base so that all processes and customer interactions help maintain and expand mutually beneficial relationships. So this research purposes are as follows: 1. To explore the components of CRM implemented in the department store. 2. To explore the influence of the introduction of CRM on customer satisfaction in department stores. 3. To explore the influence of the introduction of CRM on customer loyalty in department stores.

Research Procedure

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According to the research motives and objectives mentioned above, a research procedure is presented in figure1:

Identifying Research Motivation and Objectives

Collecting and Exploring Related Literature

Establishing Research Scope and Framework

Proposing Research Hypotheses

Questionnaire Design

Pretesting and Revising Questionnaire

Data collection and Analysis

Conclusions and Suggestions

Figure 1. Research Procedure. Source: This Study.

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CHAPTER LITERATURE REVIEWThe department store With the reviving of the economy, our highly improved life quality booms service industries and causes economic growth. Among the service industries, the department stores having a great to do with economic development for its great amount of cash flow is especially worthy of attention. Furthermore, many large department stores have been opened in the recent years and they do their best to promote in order to attract consumers and boost sales. Since 20% off for all and price reduction is very common, sellers start rewarding their customers with large numbers of prizes to draw their attention. One of the most special in department store is that it provides customer with service. In order to offer complete consultation and assistance, the department store must employ a lot of sales force, so their human cost higher than other retailers who sell general goods. In order to mold the excellent atmosphere in sales field, they pay much attention to the use of the promotion skills. For example, on Christmas Day, the department store creates the atmosphere of celebrating a festival which cant be overtook, even in dull season, it still carry on promoting to stimulate buying. Shopping in the department store is a main recreation to many urban residents. In recent years, many new department stores are opening from the north Taiwan to the south Taiwan. Therefore, there are more than one hundred and fifty department stores in Taiwan. The consumption of Taiwan people absolutely can not be looked down. In the intensely competitive market of department stores, how to entice and

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retain customers is the most important lesson to every business owner. Especially in the modern society, shopping in the department stores is not only the way to satisfy customers experiential desires but also a social activity. Department stores have become indispensable for the domestic customers to do shopping and to spend their leisure time. It does not merely provide the sales of commodities but also combines entertainment and fashion authority. Furthermore, the prospect of department stores could indicate the economic status of a country. It also reflects the standards of education level and culture for a country. That is why it is called Window of Economy. The decreasing demand of consuming market and the expansion of enterprises size caused competition become more and more intense. The enterprises make all their efforts to draw customers attention through certain strategies and extra resources. In the service business that always needs to contact with customer, it is important for department store to know how to develop customer relationship. Therefore, this research explores the influence of the customer relationship management on the department store industry and we first probe into the literatures related to customer relationship management in the following chapter. Customer Relationship Management Enterprises can make the customer satisfied and create larger commercial profit for company and raise the market share if the CRM was well done. So a large numbers of companies introduce the CRM system in order to provide customers with customized services. CRM, as an emerging discipline, urgently cries out for theoretical assistance (Gummesson, 2002a) if it is to be properly embedded within organizational strategy

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(Langerak and Verhoef, 2003). Some even argue that, without prompt conceptual and measurement attention, CRM could be largely abandoned and perhaps experience a premature death (Fournier, Dobscha, and Mick, 1998). In view of the wide variation among CRM definitions, (Yim and Frederick, 2002) attempts to provide more conceptual clarity of CRM by synthesizing the relevant marketing, management, and IT literature to identify four key areas necessary for successful CRM implementation: (1) strategy, (2) people, (3) processes, and (4) technology (Crosby and Johnson, 2001; Fox and Stead 2001; Ryals and Knox 2001). Previous studies have focused on components of CRM strategy, such as the link between satisfaction and business performance (Kamakura et al., 2002), the link between customer loyalty and profitability (Reinartz and Kumar, 2000), customer profitability heterogeneity (Niraj, Gupta, and Narasimhan, 2001), and customer loyalty programs (Verhoef, 2003). CRM has emerged in recent years as the convergence of a number of factors. Berry (1983) coined the term relationship marketing, which encouraged a new movement towards customer relationships rather than customer transactions. Increasingly companies realize that consumers are their most important asset and view customer relationships as mutual beneficial exchanges and as opportunities that need to be managed (Bowman and Narayandas, 2001). Service industry in Taiwan has a great advance during these decades. But one characteristic of the service industry is that competitors easily and immediately copy service. In order to cultivate more loyal customers, it is important to create excellent customer relationship management process and to expend every marketing budget wisely. We have learned from above-mentioned, customer's relationship management

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may change the relations between customer's loyalty and customer's satisfaction. So this research hopes to verify the relationship between satisfaction and loyalty at the same time.

Customer satisfaction The first research involving the measurement of customer satisfaction occurred in the early 1980s. Works by Oliver (1980), Churchill and Surprenant (1982), and Bearden and Teel (1983) tended to focus on the operationalization of customer satisfaction and its antecedents. By the mid-1980s, the focus of both applied and academic research had shifted to construct refinement and the implementation of strategies designed to optimize customer satisfaction (Zeithaml, Berry, and Parasuraman, 1996). For many years marketing educators and researchers have considered customer satisfaction, defined as pleasurable fulfillment by Oliver, a conceptually sound and practical post consumption outcome measure. Satisfaction has not, however, been without its critics. Reichheld(1996), led a challenge to satisfaction as a useful predictor of behavior and has argued for replacing it as an operational target with loyalty. Customer satisfaction has significant implications for the economic performance of firms (Bolton, Lemon, and Verhoef, 2004). For example, customer satisfaction has been found to have a negative impact on customer complaints and a positive impact on customer loyalty and usage behavior (Bolton 1998; Fornell, 1992). Increased customer loyalty may increase usage levels (Bolton, Kannan, and Bramlett, 2000), secure future revenues (Rust, Moorman, and Dickson, 2002), and minimize the likelihood of customer defection (Anderson and Sullivan 1993). Customer satisfaction

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may also reduce costs related to warranties, complaints, defective goods, and field service costs (Fornell, 1992). Cardozo (1965) cited that customer satisfaction with a product presumably leaded to repeat purchase, acceptance of other products in the same product line, and favorable word-of-mouth publicity.

Customer loyalty Selnes(1993) thinks that customer's loyalty represents consumer behavior inclination to the products and service. It can be regarded as the important factor to control consumers buying behavior actually. and its also called the brand loyalty. Reichheld and Sasser (1990) consider that customers satisfaction will raise the enterprises loyalty, and the rising of loyalty means that customers will increase greatly in the repeated probability bought in the future. Jones and Sasser(1995) divide the measurement of customer's loyalty into three kinds: intent to repurchase, primary behavior, and secondary behavior. Consumer loyalty has been defined in various ways ranging from a probability of repurchase to proportion of purchase (Sivadas and Baker-Prewitt, 2000). Jacoby and Chestnut (1978) identified over fifty operational definitions of loyalty and concluded that the idea that is central to many of these definitions is that loyalty is related to the proportion of expenditure devoted to a specific brand or store (East, Harris, Willson and Lomax, 1995). At a more general level, consumer loyalty can be described as a positive propensity toward a store or brand. Dick and Basu (1994) argued that much of the existing research on consumer loyalty has focused on measurement and segmentation issues, and that more emphasis

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should be placed on integrating loyalty into the larger body of marketing theory (Macintosh and Lockshin, 1997). Henry (2000) cautions though that loyalty, despite its importance, is a fuzzy and under-analyzed concept and is often confused with consumer retention and more importantly the reasons for consumer retention. In an effort to provide a more integrated perspective of loyalty, Dick and Basu (1994) proposed a conceptual framework based on the strength of a consumers relative attitude and repeat purchase behavior. This conceptual framework also considers the antecedents of attitude and factors that may mediate the attitude/behavior relationship. We have clarified many related terms and now we are going to discuss the loyalty concept itself. Simply put, loyalty is about improving retention and increasing share of customer.

CRM, loyalty, and satisfaction Developing a loyal customer base requires not only a clear value proposition and marketing strategy, but also an understanding of the retailer-customer relationship, the different types of loyalty strategy, and the cost effective deployment of (CRM techniques. Understanding the basis of the relationship between retailers and customers is central to creating a robust loyalty strategy. Customer satisfaction is a vital CRM variable that must not evade our empirical scrutiny. Indeed, customer satisfaction is central to successful application of the marketing concept. Many company mission statements and marketing plans are designed around the goal of increasing customer satisfaction (Fournier and Mick 1999). Customer satisfaction can be defined as the extent to which a products perceived performance in delivering value matches a buyers expectations (Armstrong and Kotler 2003).

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Many evidences support that the relationship between satisfaction and loyalty is positive. For example, Reichheld and Sasser (1990 ) suggest that to improve customer satisfaction can make customer's loyalty increase in the future. Bitner (1990) concludes that customer satisfaction is the antecedent to loyalty and has a positive influence on loyalty. Anderson and Sullivan (1993) suggest that customer satisfaction has a positive influence on repurchase behavior, and repurchase behavior and intention is a representation of loyalty. As a result, there exists a positive relationship between satisfaction and Loyalty.

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CHAPTER RESEARCH METHODOLOGYResearch Framework This research framework is put forward that CRM-Focusing on Customers and Knowledge Management has effects on satisfaction, and which in turn influence loyalty. This study presents the research framework in Figure 2.

The dimensions of implementing CRM

Focusing on Customers

H1a

Customer Satisfaction H3

H1b

H2a Knowledge Management Customer Loyalty

H2

Fig.2: Research framework Source: This research

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Research Hypotheses Customer Relationship Management (CRM) One of the primary goals of CRM is to retain customer or to maintain customer loyalty (Anderson and Srinivasan, 2003; Aspinall, Nancarrow, and Stone 2001; Verhoef 2003). The application of CRM also through the stages of relationship initiation, maintenance, and termination helps firms manage customer relationships more effectively (Reinartz, Krafft, and Hoyer 2004). In turn, the effective management in customer relationship is the key to managing customer satisfaction and customer loyalty. Thus, the following hypotheses are proposed: H1a, H2a, H1b, and H2b. Customer Satisfaction Woodruff et al., (1993) regarded that value and satisfaction affected with each other in consumers attitude about product experience. More and more firms know that analyzing the customer satisfaction is an important thing. If the manager can look for the key factors of products or service satisfaction which affected the consumers, the firms might to transfer the experience of using products or getting service by consumers and make the consumers getting the best satisfaction (Petrick, Morais and Norman, 2001). In other words, creating the better experience value will create the more satisfaction. H1aCustomer Satisfaction will be positively influenced by Focusing on Customers. H1bCustomer Loyalty will be positively influenced by Focusing on Customers. H2aCustomer Satisfaction will be positively influenced by Managing Knowledge.

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H2bCustomer Loyalty will be positively influenced by Managing Knowledge. Customer Loyalty Reichheld and Sasser (1990) proposed that increasing customer loyalty can increase customers loyalty in the future. Most studies on the relationship between consumer satisfaction and loyalty consistently support that these two constructs are strongly related (Fornell, 1992). It is hypothesized that: H3Customer Loyalty will be positively influenced by Customer Satisfaction. The operational definition of variables There are four research dimensions in this study, including external variable: CRM (Focusing on Key Customers, knowledge management), and mediating variables: customer satisfaction and dependent variables: customer loyalty. Customer relationship management (external variable) The subjects of this research are department store's consumer. This research will emphasize on the department store customer relation management: (1) Focusing on Key Customers, (2) knowledge management. Focusing on Customers All interactions in focusing on customers, who are often identified to be lifetime value computations, its must fully, reflect the CRM focus on in the company (Jain and Singh 2002; Schmid and Weber 1998). The final goal is to achieve the absolute necessary customer relationships between seller organization and deep customer (Vandermerwe 2004). Knowledge Management

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Salespeople are equipped with the mean of customer knowledge to meticulously adjust marketing to offer the idiosyncratic needs of each customer (Armstrong and Kotler, 2003). Managing knowledge exhibits a significant and direct effect on both customer satisfaction and retention. Chonko et al. (2003) stress that it must to establish a continuous organizational learning environment to achieve, creative and promote the long-term relationships and business performance of customer knowledge. Cooper (1992) also observed that the customer knowledge procedure will become essential condition of deciding products performance, and defined that ability of customers knowledge is the key factor to raise the new products characteristic. Customer knowledge will not be produced automatically, and itself also can't create the direct performance (Demarest, 1997), it must rely on the customers knowledge management ability in the organization, and achieve the goal of meeting customer's demand in enterprises. Customer Satisfaction (Mediating variable) The alteration of customer satisfaction is often the factor that settler to plan product marketing strategies. According to Ostrom and Iacobucci (1995), a kind of relative judgment, at the same time, they considers the quality and interests obtained by customer through one buy, and how much costs and hard to afford in order to reach the buy (Nicholls et al., 1998). Customer Loyalty (dependent variable) Griffin (1998) proposed customer loyalty has four characteristicsrepeat purchasing frequently, purchasing other products or services that the company provided, building word-of-mouth, and a resistance to promotion that other

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competitors follow out. Moreover, Sirohi et al. (1998) mentioned that three measures for the store loyalty are: willingness to repurchase, willingness to purchase more in the future, and willingness to recommend the store to others. Dimensions and Measurement Item Function of the CRM This study adapts the research of Yim, Frederick H.k., Anderson and Swaminathan, to develop the measurement indicate, as listed in Table 1.

Table 1 CRM Measurement Items Constructs Operational Definitions 1. 2. Offer the service to meet customer demand, and establish the loyalty relation with the customer. 3. Measurement Items Department store provides customized services and products to its key customers. Department store provides special services and products to its key customers. When Department store finds that customers would like to modify a product or service, the other related departments make efforts to coordinate. Department store makes an effort to find out whats the customer needs. Department store treats every customer with great care. Department store provides channels to do the two-way communication continuously between its key customers and itself. Customers can expect exactly when services will be performed. Department store fully understands customers needs.

Focusing on Customers

4. 5. 1.

Knowledge Management

Adjust the marketing tactics and provide service to different customer.

2. 3.

SourceAdapted from Yim et al., 2004, p. 265.

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Satisfaction This study adapts the research of Harris and Goode (2004) to develop the measurement indicate, as listed in Table 2.

Table 2 Satisfaction Measurement Items Constructs Operational Definitions 1. After purchasing goods or receiving services, the benefit brought customers an integral attitude. 2. 3. 4. Measurement Items To sum up, the products / services of the department store fit my expectancy. To sum up, I feel satisfied with these service and products in this department store. It is a clever choice that I choose to buy from this department store. I am very satisfied with the purchase decision of this department store.

Satisfaction

Source Adapted from Harris and Goode, 2004, p.140.

Loyalty This study adapts the research of Srinivasan, Anderson and Ponnavolu (2002) to develop the measurement indicate, as listed in Table 3.

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Table 3 Loyalty Measurement Items Constructs Operational Definitions 1. 2. Customers have a positive attitude toward a particular brand and promise and intent to revisit the department store. Measurement Items I think that I am the faithful customer in this department store. In the future, I am still willing to purchase the commodity or the service, which I need in this department store. When I want buy this goods, this department store is my first choice. I will recommend this department store for relatives and good friends. Even other department stores have cheaper prices, I will buy here. Generally speaking, I thought it is very trouble to change another department store.

3. 4. 5. 6.

Loyalty

Source Srinivasan et al., 2003, p.134.

Research Sample The subjects of this study are those customers who were shopping in the department stores including Shin Kong Mitsukoshi, Sogo, Taipei 101, Living Mall, and Far East in Taipei. The main survey scope is the department stores in Taipei City. The study conducts convenient survey to do questionnaires near each department store on February 5 to April 15, 2007. This survey collected 350 questionnaires among then 322 usable.

Data Analysis Method According to the need of each research variables and hypothesis, SPSS 14.0 for Windows and AMOS 6.0 were used to analyze data and estimate the relationships among the constructs in the model with structural equation modeling (SEM) and data

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analysis with the collected data. 1. Descriptive StatisticsTo describe the sample structure. This study use frequency distribution to understand the distribution of samples. 2. Reliability and Validity AnalysisAfter completing exploratory factor analysis, reliability test was conducted to know the reliability and efficiency of pretest. The internal reliability refers to the internal consistency of the items within a pretest. The Cronbachs greater than 0.7 indicate minimum acceptable reliability for research. 3. Confirmatory Factor AnalysisThis study adopted AMOS 6.0 statistical package to process CFA and showed standard model evaluation criteria, and test convergent validity. Discriminant validity was evaluated for all construct pairs by examining the observed correlation of the constructs.

4. Structural equation modelingThe method also known as analysis of covariancestructures, or causal modeling. The present study adopted Amos statistical package to construct and assess the proposed model with commonly used criteria.

CHAPTER DATA ANALYSISSample Profiles

As shown in Table 4, there are 322 valid respondents, representing a response rate of 92%.

Description of the basic data of valid samples is as follows: In terms of gender, the size of female samples (56.8%) is greater than male samples (43.2%); the size of unmarried samples (81.4%) is greater than married samples (18.6%); most samples are at 21-30 years of age (59.5%) with an education attainment of university or higher (73%); most of them are working for service (34.2%) with a dispensable income at $20,001-30,000 (37.6%).

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Table4 Sample Profile Demographic Gender Marriage Item Female Male Unmarried Married Under20 21~30 31~40 41~50 Over 51 Public official Service Occupation Industry Business Household Student Other Under elementary school Junior Senior College Graduate Over post Graduate Degree Under15,000 15,001~20,000 20,001~30,000 30,001~45,000 45,001~50,000 Over50,001 Number of Responden Percentage (%) 183 139 262 60 15 235 61 8 3 14 110 55 8 10 73 52 4 5 53 196 64 77 92 121 18 6 8 56.8 43.2 81.4 18.6 4.7 73 18.9 2.5 0.9 4.3 34.2 17.1 2.5 3.1 22.7 16.1 1.2 1.6 16.5 60.9 19.9 23.9 28.6 37.6 5.6 1.9 2.5

Age

Education

Income

Source: This study. Means and Standard Deviations

The means and standard deviations for all variables were computed and are shown in Table 5. Given the 7-point Likert scale adopted in questionnaire, the mean

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of 18 variables ranges from 2.711 to 4.662. The standard deviation of 18 variables ranges from 1.073 to 1.681. Table5 Measurement Items for Mean Value and Standard Deviation Function item CRM- Focusing on Customers FKC1 Provides customized services and products FKC2 Provides special services and products to meet customers demand. FKC3 When Department store finds that customers would like to modify a product or service, the other related departments make efforts to coordinate. FKC4 Department store makes an effort to find out whats the customer needs. FKC5 Department store treats every customer with great care. CRM-Knowledge Management KM1 The two-way communication continuously between ours key customers and us. KM2 Customers can expect exactly when services will be performed. KM3 I am very satisfied with the purchase decision. Customer Satisfaction Sat1 The products / services accord with my expectancy. Sat2 I feel satisfied with service and products Sat3 It is a clever choice to buy Sat4 Satisfied with the purchase decision Customer Loyalty Loy1 I think that I am the faithful customer. Loy2 I am still willing to purchase the commodity or the service in the future. Loy3 This department store is my first choice. Loy4 I will recommend for relatives and friends. Loy5 Even other department stores have cheaper prices and I will buy here. Loy6 I think that I am the faithful customer. Source: This study. Mean 2.835 2.711 2.969 2.919 2.950 Standard Deviation 1.213 1.091 1.138 1.149 1.188

3.180 3.112 3.080 2.717 2.811 2.957 3.040 3.183 2.835 3.202 3.165 4.662 4.118

1.284 1.228 1.244 1.081 1.073 1.227 1.161 1.349 1.163 1.323 1.243 1.702 1.681

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Reliability and Validity Reliability analysis This study uses SPSS 14.0 for Windows to calculate all reliabilities of the constructs. As Table 6 shows, and all constructs reliabilities are above the minimum level of 0.7 recommended by Nunnally and Bernstein (1994). Table 6 The Tests of Reliability of the Constructs Constructs Focusing on Customers Knowledge manager Satisfaction Loyalty Source: This study. Cronbach 0.869 0.875 0.893 0.860

Variance extracted After using AMOS 6.0 to run CFA, this study computed the variance-extracted values of each construct. Guidelines suggested that the variance-extracted value should exceed 0.5 for a construct (Fornell and Larcker, 1981). The variance extracted values for all the constructs are above 0.5, except the loyalty is 0.340, and it was also acceptable. It is shown in Table7.

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Table 7 Results from Test on Validity Constructs and Dimensions FKC1 FKC2 FKC3 FKC4 FKC5 Standardized factor loading Standard Error Variance Extracted 0.559 0.045 0.044 0.034 0.026 0.023 13.58 14.39 22.47 32.77 36.13 0.646 0.026 0.017 0.021 30.27 51.00 41.05 0.558 0.038 0.037 0.031 0.028 20.53 21.62 26.16 29.29 0.340 0.022 0.030 0.022 0.031 0.048 0.041 37.45 27.63 38.77 25.77 8.63 14.24

t value*

Focusing on Key Customers (FCK) 0.611 0.633 0.764 0.852 0.831

knowledge manager (KM) KM1 KM2 KM3 0.787 0.867 0.862

Customer Satisfaction(Sat) Sat1 Sat2 Sat3 Sat4 0.780 0.800 0.811 0.820

Customer Loyalty(B2CLOY) Loy1 Loy2 Loy3 Loy4 Loy5 Loy6 *: p0.9 >0.9 >0.9 >0.9 0.9 >0.9 >0.9