Despite the importance of institutional factors in adopting new technologies, the role of these drivers in the use of social media technology (SMT) to strengthen customer relationship management (CRM) capabilities and improve company performance has not yet been investigated. First, drawing from institutional theory and capabilities theory, we analyze the influence of customer coercive pressure and competitor mimetic pressure on SMT use. Second, we investigate the mediator role of CRM capabilities in the relationship between SMT use and firm performance. The study’s results reveal that both institutional factors drive SMT use, their effects varying according to the size of the firm, its innovativeness, the sector and the market in which it operates. CRM capabilities were found to only indirectly mediate the relationship between SMT use and firm performance. From the study results, we derive managerial recommendations for the effective use of SMT.

Introduction

Customer relationship management (hereafter, CRM) has become an important stream of marketing research over the past two decades. Over time, this concept has evolved from a narrow understanding of CRM as a specific technological solution to a broadly “strategic approach that is concerned with creating improved shareholder value through the development of appropriate relationships with key customers and customer segments” (Payne & Frow, 2005, p. 168). Therefore, the implementation of the CRM process has the potential to significantly increase firm performance at the stage of customer relationship maintenance (Reinartz, Krafft, & Hoyer, 2004) and to predict new product success (Ernst, Hoyer, Krafft, & Krieger, 2011). Zablah, Bellenger, and Johnston (2004) argued that approaching CRM from the capabilities perspective encourages companies to invest in new resources that enhance the effectiveness and efficiency of this process. Furthermore, previous empirical research provides evidence that investment in CRM technology enhances CRM capabilities which have a positive influence on business performance (Wang & Feng, 2012) and margin growth rate (Morgan, Slotegraaf, & Vorhies, 2009). Digital technologies are changing markets, business environments and business models (Cortez & Johnston, 2017) as well as marketing communications paradigm (Mangold & Faulds, 2009). In this context, new media technologies that offer companies new ways to reach, interact with and customize communications with customers are particularly relevant for the CRM process (Hennig-Thurau et al., 2010). The huge amount of content created and shared through social media has a major impact on consumer knowledge, attitudes and behaviors (Mangold & Faulds, 2009). Therefore, empowered customers assume a more active role in marketing exchanges by engaging in two-way interactions with businesses and other customers.