The relationship between marketing capabilities and financial performance: the moderating role of customer relationship management in Jordanian SMES

Alhawamdeh, Hamzeh et al. Article The relationship between marketing capabilities and financial performance: the moderating role of customer relationship management in Jordanian SMES Cogent Business & Management Provided in Cooperation with: Taylor & Francis Group Suggested Citation: Alhawamdeh, Hamzeh et al. (2024) : The relationship between marketing capabilities and financial performance: the moderating role of customer relationship management in Jordanian SMES, Cogent Business & Management, ISSN 2331-1975, Taylor & Francis, Abingdon, Vol. 11, Iss. 1, pp. 1-22, https://doi.org/10.1080/23311975.2023.2297458 This Version is available at: https://hdl.handle.net/10419/325955 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Cogent Business & Management ISSN: 2331-1975 (Online) Journal homepage: www.tandfonline.com/journals/oabm20 The relationship between marketing capabilities and financial performance: the moderating role of customer relationship management in Jordanian SMES Hamzeh Alhawamdeh, Mahmoud Abdel Muhsen Irsheid Alafeef, Mohammad Abdel Mohsen Al-Afeef, Bashar Younis Alkhawaldeh, Maher Nawasra, Hani Ali Aref Al_Rawashdeh, Omar Zraqat, Lina Fuad Hussien & Ghaith N. Al-Eitan To cite this article: Hamzeh Alhawamdeh, Mahmoud Abdel Muhsen Irsheid Alafeef, Mohammad Abdel Mohsen Al-Afeef, Bashar Younis Alkhawaldeh, Maher Nawasra, Hani Ali Aref Al_Rawashdeh, Omar Zraqat, Lina Fuad Hussien & Ghaith N. Al-Eitan (2024) The relationship between marketing capabilities and financial performance: the moderating role of customer relationship management in Jordanian SMES, Cogent Business & Management, 11:1, 2297458, DOI: 10.1080/23311975.2023.2297458 To link to this article: https://doi.org/10.1080/23311975.2023.2297458 © 2024 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. Published online: 21 Mar 2024. Submit your article to this journal Article views: 3469 View related articles View Crossmark data Citing articles: 5 View citing articles Full Terms & Conditions of access and use can be found at https://www.tandfonline.com/action/journalInformation?journalCode=oabm20 Cogent Business & ManageMent 2024, VoL. 11, no. 1, 2297458 The relationship between marketing capabilities and financial performance: the moderating role of customer relationship management in Jordanian SMES Hamzeh Alhawamdeha , Mahmoud Abdel Muhsen Irsheid Alafeefb , Mohammad Abdel Mohsen Al-Afeefc, Bashar Younis Alkhawaldehd , Maher Nawasrae, Hani Ali Aref Al_ Rawashdehf, Omar Zraqatf , Lina Fuad Hussienf and Ghaith N. Al-Eitang aDepartment of administrative sciences, Faculty of Business, Jerash university, Po. Box 26150 Jerash, Jordan; bMarketing Department-al Baha, university, saudi arabia P o. B. 1988 Patio saudi arab, Jordan; cDepartment of Banking and Finance, Faculty of Business, Jerash university, P. o. Box 26150, Jerash, Jordan; dDepartment of administrative sciences, Faculty of Business, Jerash university, Po. Box 26150, Jerash, Jordan; eDepartment of Human Resource Management, Jerash university, Jerash, Jordan; fDepartment of accounting, Jerash unviersity, Jerash, Jordan; gDepartment of Finance and Banking, school of Business, al al-Bayt university, Mafraq, Jordan ABSTRACT This research study addresses the complex interaction in between advertising and marketing capabilities, financial performance, and the moderating impact of consumer relationship management (CRM) in Jordanian small and medium enterprises (SMEs) in the service field. Partial Least Squares Structural Equation Modeling (PLS-SEM) analysis was used for this study. The study clearly verifies a significant and favorable relationship in between advertising alignment and financial performance, highlighting the tactical value of customer-centric approaches. It likewise highlights the prominent function of value development in driving monetary success and the positive effect of operational capabilities on financial efficiency. Furthermore, the research study discovers the reliable moderation of CRM in the connections amongst marketing alignment, value development, operational capacities, and financial performance. These searchings for highlight the central role of CRM in improving the effect of marketing abilities on financial end results and offer useful understandings for Jordanian SMEs in the solution sector looking for to optimize financial performance and boost client connections. IMPACT STATEMENT This research focused on investigating the impact of marketing strategies on the financial performance of Jordanian small and medium enterprises (SMEs) in the service sector. Partial Least Squares Structural Equation Modelling (PLS-SEM) was used to examine the correlations between marketing orientation, value innovation, operational capabilities and financial performance. The study found strong positive relationships between these factors and emphasised the importance of customer-centric approaches, innovation beyond products and efficient internal processes for the financial success of SMEs. The results of this study contribute to a broader discussion of SME management practises and strategies and emphasise the critical role of customer relationship management (CRM) in improving the impact of marketing, innovation and operational efficiency on financial performance. The findings of this study offer valuable insights not only for Jordanian SMEs seeking improved financial performance but also for understanding similar dynamics in SMEs around the world. Introduction A company’s marketing capacities are characterized as its capacity to design, implement, and measure marketing strategies and campaigns that add value for customers and eventually improve the company’s financial performance. To put it another way, a company’s marketing talents are essential to its © 2024 the author(s). Published by informa uK Limited, trading as taylor & Francis group. CONTACT Bashar Younis alkhawaldeh [email protected], [email protected] Department of administrative sciences, Jerash university, Jerash 26150, Jordan https://doi.org/10.1080/23311975.2023.2297458 this is an open access article distributed under the terms of the Creative Commons attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. the terms on which this article has been published allow the posting of the accepted Manuscript in a repository by the author(s) or with their consent. ARTICLE HISTORY Received 9 March 2023 Revised 7 December 2023 Accepted 16 December 2023 KEYWORDS Jordanian firms; cRM; financial performance; marketing capabilities; pls-sem REVIEWING EDITOR Hui Shan Loh, Singapore SUBJECTS Public Finance; International Business; Marketing MARkETING | RESEARCH ARTICLE 2 H. ALHAWAMDEH ETAL. financial success because they enable it to successfully position its goods and services in the market and to draw in and keep customers (Tarsakoo & Charoensukmongkol, 2020). In the academic literature, this connection between marketing skills and financial performance has been thoroughly researched (Algarni et al., 2022; Cassia & Magno, 2022; Tolstoy et al., 2022). Small and medium-sized businesses (SMEs) employ more than two-thirds of the workforce and make up more than 90% of all firms in Jordan, contributing significantly to the country’s economy (Salameh et al., 2022). However, these SMEs encounter a number of difficulties when creating successful marketing plans and solidifying client connections, which may have an effect on their financial performance (Ma etal., 2022). For the success and development of Jordanian SMEs, it is crucial to comprehend the relationship between marketing capabilities and financial performance, as well as the moderating function of CRM in this relationship. According to research on the relationship between marketing capabilities and financial performance, businesses are more likely to experience higher financial success if they have stronger marketing capabilities (Tolstoy etal., 2022). Companies that are stronger at market sensing, for instance, which entails obtaining and analyzing data regarding consumer preferences and market trends, are better equipped to create and provide goods and services that cater to the wants and preferences of customers. This can then result in greater customer retention, loyalty, and repeat business, all of which help to improve financial success. In a similar vein, businesses with great marketing communication skills—which entail convincing customers of the value of the firm’s goods or services—are better equipped to stand out from rivals and draw in clients (Alshurideh etal., 2023). Higher levels of customer acquisition and retention may result from this, which, eventually, may help to improve financial performance. Yet, there are a variety of variables that may influence the relationship between marketing capabilities and financial performance, making it not always clear-cut (Wang etal., 2022). CRM is one such element, which entails maintaining and growing client relationships in order to increase customer lifetime value (Hamida etal., 2022). In-depth research has been done in the academic literature on the relationship between marketing skills and financial performance, with varying degrees of success. According to several studies, CRM can strengthen the link between marketing effectiveness and financial performance by increasing client loyalty and recurring business (Hanaysha & Al-Shaikh, 2022; Liu & Chen, 2023). For instance, a study of Indian SMEs revealed that enterprises with higher levels of marketing capabilities and better CRM procedures outperformed those with lower levels of marketing capabilities and subpar CRM practices in terms of financial success. Similarly, a study of Malaysian SMEs discovered a substantial correlation between CRM and financial performance, with the association being stronger for businesses with more advanced marketing skills (Jalil et al., 2022). Yet, according to other studies, CRM either does not regulate the association between marketing capabilities and financial performance or its moderating effect is context-dependent. For instance, research of Dutch SMEs revealed that CRM did not modify the association between marketing capabilities and financial success, indicating that the advantages of marketing capabilities may be unrelated to CRM procedures (Hagen et al., 2022). Parallel to this, a study of South African SMEs discovered that the degree of industry competition affected how much of a moderating influence CRM had on the link between marketing capabilities and financial performance (Duffett & Cromhout, 2022). Small and medium-sized businesses (SMEs) account for more than 90% of all firms in Jordan and employ more than two-thirds of the labor force. SMEs are crucial to the country’s economy. Unfortunately, these SMEs encounter a number of obstacles when creating successful marketing plans and solidifying client connections, which may have an impact on their financial performance. There is broad agreement that organizations with greater marketing capabilities tend to generate stronger financial success. This relationship between marketing capabilities and financial performance has been extensively examined in the academic literature. Yet, in the context of Jordanian SMEs, the moderating impact of customer relationship management (CRM) in this relationship is not well known. CRM, which entails managing and nurturing client connections to enhance customer lifetime value, is essential to the success of SMEs in Jordan. Improved client loyalty and repeat business can ultimately lead to improved financial success thanks to effective CRM techniques. It is unclear, though, how much CRM modifies the connection between marketing prowess and monetary performance in Jordanian SMEs. Given their substantial contribution to the economy of the nation, it is crucial for the development and expansion of Jordanian SMEs to comprehend this relationship. SMEs can compete more effectively in the market and achieve improved financial performance by establishing excellent CRM practices and COGENT BUSINESS & MANAGEMENT 3 developing effective marketing capabilities. As a result, more jobs may be created, the economy may grow faster, and the nation as a whole may experience higher wealth. There are a number of obstacles that Jordanian SMEs must overcome in order to improve their marketing strategies and bottom lines. They generally cannot afford to invest in extensive marketing methods, which limits their capacity to reach new customers and keep existing ones. Their potential for development and innovation may also be stunted by a lack of resources. Furthermore, SMEs are under pressure to differentiate and innovate due to intense regional and national market competition. In addition, bureaucratic roadblocks and regional economic uncertainty threaten their solvency. To increase the marketing capacities and financial results of Jordanian SMEs, it is necessary to address these concerns through the implementation of customised marketing strategies, the expansion of access to financing, and the creation of a conducive business climate. Therefore, this study investigates the moderating role of customer relationship management on the relationship between marketing capabilities and financial performance in Jordanian SMEs. As this is the first study conducted in Jordan in this specific area, there is a notable research gap in understanding how marketing capabilities, Customer Relationship Management, and financial performance interact in the Jordanian SME landscape. While the global literature has extensively studied the relationships between marketing capabilities, Customer Relationship Management, and financial performance in various contexts, a significant knowledge gap exists due to the lack of Jordan-specific research. Understanding these dynamics in the Jordanian SME context is critical for both academic and practical reasons, as the local business environment, customer behavior, and cultural factors can significantly influence these relationships (Al-Hawary & AlFassed, 2022). In addition, this study pioneers the study of the impact of CRM on Jordanian SMEs and represents a crucial and pioneering endeavour in this field. What is unique about this study is that it is the first research to address the moderating effect of Customer Relationship Management in Jordanian SMEs. The inclusion of managers from different industries operating in Jordan enhances the unique contribution of the study by providing diverse insights into different sectors and bridging the critical gap in understanding the interactions between marketing capabilities, financial performance and Customer Relationship Management dynamics in the diverse landscape of Jordanian SMEs. Literature review R-A theory The R-A theory is a disequilibrium-based economic theory of competition that was first presented by Hunt and Morgan (1995). According to Hunt (1997), the theory aims to present a thorough framework for elucidating how neoclassical and evolutionary theories might cooperate rather than compete with one another. Dickson (1996) argues in favor of the disequilibrium approach but criticizes the lack of dynamism in R-A theory. Hunt (1997) changed the endogenous process in the R-A theory to emphasize the function of the learning organization as a result. R-A theory’s epistemology was contested by Deligönül and Cavuşgil (1997), who contended that it could not be distinguished from the perfect competition paradigm. In contrast to the neoclassical conception of the economic system as equilibrium, Hunt and Morgan (1997) countered by emphasising the disequilibrium-provoking conduct of enterprises during the endogenous innovation process. According to Hunt (1997), the R-A theory is an evolutionary, equilibrium-inducing, process theory of competition in which innovation and organizational learning are endogenous, firms and consumers have incomplete information, and entrepreneurship, institutions, and public policy have an impact on economic performance. R-A theory is especially beneficial for marketing and adds to marketing theory (Varadarajan, 2023). The three fundamental R-A theory principles that apply to marketing are: (1) the diversity of tastes and preferences across industries, (2) competition as a process that emphasizes competitive advantage, and (3) resources as both tangible and intangible. Diversification is necessary to meet dynamically changing demand, and heterogeneity in tastes and preferences affects a firm’s strategy relative to rivals. In order to create greater performance in light of the firm’s goals and competitive position, resources should be reallocated. Resources produced in marketing interactions include financial, legal, physical, human, organizational, relational, and informational resources, according to Morgan and Hunt. Even though marketing capabilities have been extensively researched, 4 H. ALHAWAMDEH ETAL. there is little consensus on what constitutes a marketing capability and how to quantify it. There are two categories of marketing capability research: The ability to engage with advertising, price, product attributes, distribution, communication, selling, planning, and plan implementation; and organizational power, responsibility, and ability to connect with customers. Marketing capabilities The role of Marketing within the dynamic capability framework is pivotal due to the contribution of Marketing Capabilities in acquiring knowledge about customer needs, competitive products, and distribution channels (Barrales-Molina et al., 2014). Marketing capabilities encompass human capital, social capital, and managerial cognition, all of which play a vital role in generating, using, and integrating market knowledge and marketing resources to adapt to market and technological changes (Bruni & Verona, 2009). These capabilities are a subset of dynamic capabilities, with a specific emphasis on delivering customer value (Fang & Zou, 2009). Market Orientation, a cornerstone of modern marketing, involves identifying, comprehending, and satisfying both stated and latent customer needs (Narver etal., 2004). In dynamic environments, proactive market orientation becomes crucial for organizations to gain and sustain a competitive edge (Tsai et al., 2008). Market Orientation provides profound insights into customers and competitors, guiding resource allocation (Atuahene-Gima, 2005) and supporting capability building and reconfiguration within organizations (Atuahene-Gima, 2005; Day, 1994). Proactive market orientation, in particular, interacts synergistically with other organizational capabilities, reinforcing their impact. Value Innovation Capability involves systematically generating value innovation initiatives to create significantly improved customer value by reshaping the business model and industry relationships (Alkhawaldeh et al., 2023). Value innovation enables organizations to create new market spaces and outcompete rivals by changing the competitive landscape. It often leads to business model transformation, necessitating the realignment and reconfiguration of organizational resources and capabilities. Customer knowledge and value play a central role in this process. Operational Marketing Capabilities refer to integrative organizational processes aimed at leveraging the collective knowledge, abilities, and resources to meet marketing-related business needs. These capabilities empower organizations to organize marketing activities effectively, creating unique customer solutions and attaining competitive advantages. Operational Marketing Capabilities facilitate resource transformation into outputs by orchestrating the marketing mix and other inputs (Day, 1994). Marketing concept-based strategy In the 1950s and 1960s, as extensively documented in various works (Hunt & Goolsby, 1988; Wilkie & Moore, 2003; Shaw & Jones, 2005; Shaw, 2012), there was a significant shift in the field of marketing. This shift transitioned marketing from its earlier focus on understanding marketing systems to a new emphasis on developing a marketing strategy (Acikdilli, et al., 2022). This transformation, occurring under the umbrella term ‘marketing management,’ was profoundly influenced by the Aldersonian research tradition. This tradition stressed several key ideas: firms striving for competitive advantages, significant heterogeneity in both demand and supply within industries, and the pivotal role of market segmentation in initiating successful strategies. The term ‘marketing strategy’ was coined and the marketing management technique developed in response to a confluence of events and trends. Specifically, General Electric (GE) pioneered the ‘marketing concept,’ which emphasised three key factors: catering to customers’ wants and needs, encouraging coordinated marketing activities, and placing a premium on revenue growth. Although all of them were important, the focus on the client’s requirements stood out. In his 1953 presidential address to the American Marketing Association, Neil Borden contributed to this transition by stating that a marketing manager’s primary responsibility was to develop a ‘marketing mix.’ Borden’s idea has 12 components, from product design to research and analysis. Combining Alderson’s demand segmentation with Borden’s marketing mix notion, as given by Alfred Oxenfeldt, is key to any effective marketing plan. One definition of this tactic is tailoring one’s marketing plan to a certain group of consumers. The ‘mix’ used by Oxenfeldt comprised things like product quality, advertising budget, and COGENT BUSINESS & MANAGEMENT 5 channel selection. These ideas were brought together in ‘Basic Marketing’ by E. Jerome ‘Jerry’ McCarthy, who emphasised the need of putting the needs of the client first. McCarthy argued for breaking down consumer markets into smaller subsets, then tailoring their own marketing strategies to those markets. To help students remember the various parts of the marketing mix, he came up with the memorable ‘4Ps’ (product, pricing, promotion, and location). In the late 1960s, the ‘market-segmentation strategy’ emerged as a result of the influence of McCarthy’s book on the business world. In the present day, this idea has gained widespread acceptance and is regarded as a cornerstone of contemporary marketing (Layton, 2002; Myers, 1996; Piercy & Morgan, 1993; Wind, 1978). Financial performance Financial performance is a term used to describe how effectively a business generates profits and raises shareholder value over a given time frame. It is critical to the decision-making process of creditors, investors, and other stakeholders because it is one of the fundamental elements of determining the health of a corporation (Gofwan, 2022). Financial performance, which is measured by financial and market-based metrics including market share, annual sales, return on sales, and return on assets, is a crucial sign of a company’s success (Chen & Xie, 2022). These metrics show how successfully a company can use its resources to produce revenue. Quantitative financial performance yields result that are essential for assessing an organization’s financial success. The ability to assess a firm’s development, efficiency, and effectiveness makes measuring financial performance crucial (DasGupta, 2022). Firms can evaluate their financial status, pinpoint areas for development, and set realistic goals for the future using financial performance measurements. Due to the fact that it offers an unbiased assessment of their financial standing over a specific time period, it also helps businesses to compare themselves to other businesses in the same industry (Yoo & Managi, 2022). Market share is an important indicator of financial performance since it shows how much of the market a company control. A company’s market share can be used to gauge how competitive it is and how much market domination it currently has. Market share, particularly in markets where they have a smaller market share, can assist businesses in determining possibilities for growth (Saygili etal., 2022). Businesses can enhance their financial performance, raise revenue, and gain a competitive edge by expanding their market share. A firm’s entire revenue produced over a given period is reflected in annual sales, another crucial financial success indicator. Businesses can assess their capacity to generate income and monitor their development over time by analyzing annual sales. This measurement is very helpful for spotting patterns and trends in a company’s revenue generating. A financial performance indicator that shows a company’s profitability is return on sales (ROS). According to El khoury etal. (2023), it is calculated by dividing the company’s net income by its sales revenue. ROS allows for the tracking of a company’s profitability over time and allows for comparison with other companies in the same industry. It can also assist companies in figuring out how to boost earnings through strategies like raising prices or lowering expenses. Return on assets (ROA) is a financial performance indicator that measures a company’s ability to generate profits from its asset base. To get this number, we need to divide the company’s net income by the total value of its assets. The ratio of a company’s profit to its total assets is a strong indicator of management efficiency. Customer relationship management Companies employ customer relationship management (CRM) to boost customer happiness and loyalty (Ledro etal., 2022). Data collection, consumer behaviour analysis, and targeted marketing are all components of customer relationship management (CRM) (Ngelyaratan & Soediantono, 2022). Businesses that take the time to learn about their customers’ wants and requirements are in a better position to provide their customers with the products and services they need. Businesses can increase sales and profits by utilising this strategy to keep more of their existing customers happy. In industries where customer interaction is high, such as telecommunications, hospitality, and retail, customer relationship management is essential. An integral aspect of customer relationship management is data collection (Alshurideh, 2022). Store visits, internet transactions, and social media activity are just a few of the ways that companies 6 H. ALHAWAMDEH ETAL. amass client information. Information like demographics, spending habits, and personal preferences could fall under this category. By compiling this information, businesses may better understand their customers’ habits and preferences, which in turn can be utilised to improve marketing and customer service (Monod et al., 2022). Another crucial CRM feature is analysis. Using data analytics tools, businesses look for patterns in customer actions. This information can be used by companies to better serve their customers, hence boosting loyalty and satisfaction. behind instance, if a business sees that a significant percentage of its customers are abandoning their shopping carts without completing their purchases, it can investigate the reasons behind this behaviour and implement solutions. Customer relationship management also comprises tailoring marketing initiatives to distinct subsets of customers based on collected data, as suggested by Das and Hassan (2022). Businesses can discover groups with similar characteristics, such age, gender, or purchase patterns, by analyzing consumer data. They can then develop niche marketing initiatives that resonate with these groups. This can be accomplished through several means, including social media advertising and email marketing. Businesses must have a customer-centric approach in order to implement effective CRM. This entails placing the consumer at the forefront of all business decisions and creating goods and services that cater to their requirements. CRM-savvy companies can design a cohesive customer experience across all touchpoints, from online buying to in-person interactions. Managing the enormous amount of client data that firms collect is one of the problems of CRM (Del Vecchio et al., 2022). Systems must be in place for businesses to handle, store, and analyze this data. Additionally, they must make sure that the manner in which they are gathering data complies with data privacy laws. Making sure that customer interactions are consistent across all channels is another problem for CRM. Whether they are purchasing in-person or online, customers want the same level of service. Systems must be in place for businesses to guarantee that every employee, regardless of position or location, has access to client data (khan et al., 2022). In conclusion, CRM is a potent tactic that companies may employ to forge enduring bonds with their clients. Businesses may increase customer satisfaction and loyalty, which in turn boosts sales and profitability, by gathering and analyzing consumer data, customizing marketing efforts, and providing a seamless customer experience. Yet, to implement effective CRM, companies must have tools in place to handle and analyze client data as well as a customer-centric mindset. Hypotheses development The relationship between marketing capabilities and financial performance The development of organizational capabilities is intricately connected to the understanding of the market’s evolution in which a business operates. This knowledge serves as a foundation for identifying opportunities and identifying gaps in existing capabilities. Proactive Market Orientation (MO) plays a pivotal role in this context, enabling organizations to uncover latent customer needs (Narver etal., 2004). Consequently, organizations with varying levels of proactive MO approach customer needs differently, shaping their marketing efforts accordingly. This empowers organizations with superior proactive MO to make more informed decisions regarding resource allocation and capability utilization. For instance, a deep understanding of competitors and latent customer needs, stemming from proactive MO, leads to more effective product development, market positioning, segmentation, and targeting (Narver et al., 2004). Moreover, organizations engaged in value innovation strive to create novel value for customers, necessitating the accumulation, configuration, and exploitation of resources. However, the pursuit of value creation can render existing resources and capabilities obsolete. Hence, when a firm embarks on delivering new customer value, it must adapt, evolve, and transform its organizational resource base, including its marketing capabilities. Marketing capabilities are instrumental in executing marketing activities that generate unique customer value (Day, 1994). They are crucial for achieving and sustaining competitive advantages and enhancing overall firm performance (Day, 1994). For example, a heightened awareness of competitors’ pricing tactics, a facet of marketing capabilities, positively influences a firm’s performance. This implies that superior pricing capabilities enable firms to optimize product or service pricing, thereby enhancing profitability and market effectiveness. Operational marketing capabilities have the potential to serve as a source of competitive advantage due to their value, rarity, difficulty of COGENT BUSINESS & MANAGEMENT 7 imitation, and non-substitutability. Therefore, businesses that invest in developing their operational marketing capabilities can increase customer value, profits, and competitiveness. There is a substantial body of research documenting a correlation between a company’s marketing prowess and its bottom line. The ability to attract and keep consumers and create larger revenues are two key factors in a company’s financial performance, and studies have shown that businesses with stronger marketing capabilities have a higher likelihood of success financially (Algarni et al., 2022; Cassia and Magno, 2022). The term ‘marketing capabilities’ is used to describe a company’s potential to develop, share, and provide value for its clientele. Researching the market, managing the brand, advertising, promoting sales, and setting prices are all part of this (Yoo & Managi, 2022). There is a correlation between a company’s marketing prowess and its bottom-line success (Ali et al., 2022). Mostafiz et al. (2022) conducted research that showed how companies with better marketing capabilities beat their rivals in terms of revenue growth, profitability, and market share. The R-A theory has not been formally adopted by studies examining the connection between marketing capabilities and performance. However, some studies have utilized the resource-based view (RBV) approach. While RBV recognizes the importance of marketing-specific resources such as brands, customer and distribution relationships in gaining and maintaining a competitive edge, it is limited in explaining the dynamic processes of resource transformation and value creation for customers through managerial guidance (Lutfi et al., 2023). In contrast, R-A theory proposes that intangible capabilities can potentially help a firm produce a market offering more efficiently or effectively than its competitors. Two main types of marketing capabilities can be distinguished from previous research (Malhan etal., 2022). The first type is concerned with tactical marketing objectives rather than strategic objectives or organizational dynamics, while the second type comprises intangible resources that support marketing performance, not just financial performance (Terry et al., 2022). Given the R-A theory’s emphasis on institutional factors and endogenous innovation process, the authors develop hypotheses centered around the second type of capabilities and marketing performance (Lutfi et al., 2022). Prior studies have typically used financial measures of performance, despite the benefits of using more comprehensive measures (DasGupta, 2022; Gofwan, 2022). Therefore, the study justifies the use of two different performance measures, one with respect to the firm’s internal objectives and the other with respect to competitors’ performance. This dual nature of performance is recognized by Hunt and Morgan, and most previous studies have employed direct effect models, which serve as the baseline hypothesis for the authors’ study (Acikdilli et al., 2022). H1: There is significant positive relationship between marketing capabilities and financial performance H1a: There is significant positive relationship between marketing orientation and financial performance H1b: There is significant positive relationship between value innovation and financial performance H1c: There is significant positive relationship between operational capabilities and financial performance The moderating role of customer relationship management In order to build and keep loyal customers, businesses must employ a customer relationship management (CRM) strategy. Marketing that focuses on the consumer includes initiatives including customer acquisition, retention, and loyalty programmes (Das & Hassan, 2022). In order to generate sales and profits, a company needs strong marketing capabilities that allow it to produce and deliver value to its consumers. However, a company’s level of customer relationship management adoption may affect the efficacy of its marketing skills (Monod etal., 2022). Several research (Cao etal., 2022; Saygili etal., 2022) have examined the impact of CRM as a moderator between marketing capabilities and financial performance. Research in this area looks at the relationship between a company’s level of customer relationship management and its financial performance, and how the latter can be improved through the use of the former. The level of customer relationship management acts as a moderator between marketing capabilities and financial performance, suggesting that this link can either strengthen or weaken. Several studies have investigated CRM’s potential moderating effect on the correlation between marketing efficacy and financial results. Luo and Huang, for example, revealed that CRM significantly moderates the connection between marketing capabilities and financial performance. The 14 H. ALHAWAMDEH ETAL. Table 6. Heterotrait–Monotrait ratio. Variables Customer acquisition Customer Relation Customer Relation Management Customer satisfaction Financial Performance Marketing orientation operational Capabilities Value innovation Customer Relation Management x operational Capabilities Customer Relation Management x Marketing orientation Customer acquisition Customer Relation 0.674 Customer Relation _Management 0.455 0.744 Customer satisfaction 0.626 0.734 0.775 Financial Performance 0.722 0.754 0.659 0.644 Marketing orientation 0.705 0.703 0.682 0.693 0.554 operational Capabilities 0.631 0.653 0.687 0.701 0.66 0.661 Value innovation 0.679 0.67 0.683 0.663 0.702 0.726 0.532 Customer Relation Management × operational Capabilities 0.151 0.144 0.139 0.138 0.18 0.076 0.162 0.097 Customer Relation Management × Marketing _orientation 0.27 0.316 0.286 0.276 0.141 0.213 0.067 0.123 0.558 Customer Relation Management × Value innovation 0.241 0.234 0.23 0.207 0.153 0.144 0.037 0.142 0.48 0.813 COGENT BUSINESS & MANAGEMENT 15 SMEs who invest in enhancing their operational capabilities. This outcome is consistent with the more general knowledge that financial success and competitive advantage can be fueled by operational excellence. One of the main ramifications of this discovery is that Jordanian SMEs should view operational efficacy and efficiency as strategic requirements. In addition to cutting expenses and raising productivity, SMEs can better meet market demands by streamlining their internal operations and making better use of their resources. Better financial results, such as increased profit margins and overall profitability, may follow from this. Furthermore, the positive correlation emphasises how crucial it is for SMEs to be flexible and always improving. In today’s fast-paced business environment, the ability to streamline operations, minimize wastage, and quickly adapt to changing circumstances can be a significant source of resilience and competitive advantage. The significance of the relationship between operational capabilities and financial performance extends beyond Jordanian SMEs and has relevance for SMEs globally. Efficient and effective operations are fundamental to the success of businesses regardless of their size or industry. Therefore, SMEs in other regions and contexts can also benefit from the lessons drawn from this study. The culmination of the study’s findings is the recognition that Customer Relationship Management (CRM) plays a vital and positive moderating role in the relationship between marketing orientation, value innovation, operational capabilities, and the financial performance of Jordanian Small and Medium Enterprises (SMEs). This result underscores the critical importance of effective CRM strategies in maximizing the impact of these key factors on SME financial performance. CRM encompasses a wide range of practices and technologies aimed at managing and nurturing customer relationships. The moderation effect observed in this study suggests that CRM not only independently influences financial performance but also amplifies the positive effects of marketing orientation, value innovation, and operational capabilities on SMEs’ financial outcomes. CRM helps SMEs in Jordan to better use their operational strengths, value innovation, and marketing orientation to improve financial performance. Prioritising CRM allows SMEs to maximise customer value and service by leveraging customer insights, matching products and services to customer needs, and streamlining operations. Good CRM procedures assist SMEs in creating and sustaining enduring, solid client connections. In today’s cutthroat business environment, keeping and gaining new customers is crucial. CRM may give SMEs the methods and resources they need to stand out from the competition and maintain a competitive edge. The moderation effect highlights the importance of a holistic approach to business management. SMEs should not view marketing, innovation, operational efficiency, and CRM as isolated components but as interconnected facets of a comprehensive strategy for success. Integration across these areas can result in synergistic benefits for financial performance. The positive moderation effect suggests that CRM can help SMEs adapt to changing market conditions and evolving customer preferences. A dynamic CRM strategy that incorporates customer feedback and adapts accordingly can lead to improved financial performance in the face of uncertainty. Table 7. Result of path analysis. Relationship estimate standard deviation t statistics p values Decision Marketing orientation -> Financial Performance 0.211 0.063 3.346 .001 accept Value innovation -> Financial Performance 0.152 0.053 2.878 .004 accept operational Capabilities -> Financial Performance 0.391 0.043 9.191 .000 accept Customer Relation _ Management × operational Capabilities -> Financial _Performance 0.090 0.039 2.318 .021 accept Customer Relation Management × Marketing orientation -> Financial _Performance 0.141 0.048 2.935 .003 accept Customer Relation Management × Value _innovation -> Financial _Performance 0.093 0.047 1.976 .048 accept 16 H. ALHAWAMDEH ETAL. Conclusion This study delved into the intricate relationship between marketing capabilities and financial performance, with a specific focus on the moderating role of Customer Relationship Management (CRM) within the context of Jordanian Small and Medium Enterprises (SMEs) in the service industry. The research findings have yielded significant insights, affirming the acceptance of hypotheses H1a, H1b, and H1c, and providing compelling evidence of CRM’s positive and significant moderating impact on the financial performance of these SMEs. The findings clearly showed that among Jordanian SMEs in the service sector, marketing orientation and financial performance had a substantial and favourable link. This research emphasises how crucial market research, client-centric strategies, and a thorough grasp of customer Figure 2. Result of path analysis. COGENT BUSINESS & MANAGEMENT 17 needs are to SMEs’ financial success. Accepting H1a signifies our agreement that Jordanian SMEs in the service sector can perform financially better when they strategically prioritise marketing orientation. The results of our study also demonstrated a strong and favourable correlation between value innovation and Jordanian SMEs’ financial performance. Value innovation has become a key factor in driving financial success. It entails developing distinctive value propositions for customers. This finding, which supports H1b, highlights how SMEs can enhance their financial results by actively looking for novel ways to satisfy the demands and expectations of their customers. The study demonstrated that operational capabilities have a positive and significant effect on the financial performance of Jordanian SMEs in the service industry. The significance of effective internal procedures, effective resource management, and operational excellence in propelling financial prosperity is emphasised by this. By agreeing to H1c, we recognise the vital part that improving operational capabilities plays in raising these SMEs’ financial success. The beneficial and strong moderating influence of CRM on the links between marketing orientation, value innovation, operational capabilities, and financial performance within Jordanian SMEs is one of the study’s most noteworthy findings. This result highlights that effective CRM practices not only independently influence financial performance but also enhance and amplify the positive impact of marketing capabilities. This underscores the vital role of building and maintaining strong customer relationships in maximizing financial outcomes. this study contributes to our understanding of the dynamics within Jordanian SMEs operating in the service industry by affirming the critical role of marketing capabilities and the significant influence of value innovation and operational capabilities on financial performance. Moreover, the study underscores the transformative power of Customer Relationship Management as a moderator, emphasizing its potential to magnify the positive effects of marketing, innovation, and operational efficiency. These findings offer valuable guidance for Jordanian SMEs in the service sector, encouraging them to prioritize marketing orientation, value innovation, and operational excellence while recognizing the pivotal role of CRM in enhancing financial performance. This research also provides a foundation for future studies exploring similar relationships in different industries and regions, contributing to the ongoing advancement of SME management practices and strategies. Limitations and recommendation for future studies Although this study produced some intriguing results, there are some limitations that should be taken into account when evaluating the data. First off, the study’s focus on Jordanian businesses means that its conclusions might not apply in other situations. The study also uses cross-sectional data, which restricts the use of causal inferences. Lastly, other potential moderating variables were left out of the research because the study only takes CRM’s moderating impact into account. To improve the generalizability of the findings, future studies should try to repeat the study in different settings. A longitudinal research strategy should be used in future studies to evaluate the causal links between the variables across time. Future research should take into account additional moderators such company culture, leadership, and technology adoption. Usage of alternative performance metrics: To better understand the relationship between marketing skills and financial performance, future studies should take into account employing alternative performance measures like market share and customer happiness. To better understand the underlying mechanisms driving the relationship between marketing capabilities, CRM, and financial performance, future studies may supplement the quantitative data with qualitative research techniques like focus groups and interviews. Managerial implication Regarding the positive and significant correlation between marketing communication effectiveness, customer value creation, product innovation, and financial performance, the study reveals a number of key management implications for Jordanian businesses. First, businesses ought to spend money on initiatives that increase the efficiency of their marketing communications. With better customer communication of their value proposition, businesses are able to increase customer retention, boost sales, and ultimately improve their financial performance. Second, firms should concentrate on delivering value to their clients through cutting-edge goods and services. The research demonstrates that 18 H. ALHAWAMDEH ETAL. product innovation significantly improves financial performance. As a result, businesses should invest in research and development to produce new products that cater to the changing demands and tastes of their clients. Thirdly, businesses need to guarantee the efficacy of their customer relationship management (CRM) initiatives. By establishing and maintaining strong relationships with customers, learning about their needs and preferences, and using this knowledge to create and deliver products and services that meet those needs, effective CRM activities can strengthen the positive relationship between marketing capabilities and financial performance. Furthermore, the study’s conclusion that customer relationship management (CRM) positively modifies the association between the success of marketing communications and financial performance in Jordanian businesses has significant managerial ramifications. First, Jordanian businesses ought to think about spending money on CRM initiatives to boost the beneficial effects of good marketing communications on their financial performance. Strong customer relationships may be developed and maintained by businesses with the aid of effective CRM strategies, increasing customer loyalty and enhancing financial success. Second, businesses should put more effort into developing targeted and successful marketing campaigns to increase the effectiveness of their marketing communications. Firms may strengthen their brand image, cultivate client loyalty, and eventually improve their financial performance by utilizing marketing communication tactics that connect with their target customers. Lastly, firms must make sure that their CRM initiatives complement their marketing communication plans. CRM and marketing communications can be successfully integrated to assist firms improve their client relationships and boost their financial performance. Furthermore, the discovery that customer relationship management (CRM) in Jordanian enterprises negatively modifies the association between customer value generation and financial success has significant managerial consequences. First, firms need to understand that improving financial performance might not be possible by concentrating only on customer value generation. While providing value to consumers is crucial, it is equally crucial to make sure that CRM operations are coordinated with efforts to provide value to customers in order to maximize the favorable impact on financial performance. Second, firms should think about implementing a more balanced strategy that combines CRM and customer value generation operations. By doing this, firms can make sure that they are adding value for their clients and developing trusting relationships with them, which will promote client loyalty and boost financial performance. Finally, firms should assess their CRM plans to find possible areas for development. Firms can lessen the negative moderating effect on the relationship between customer value creation and financial performance by improving the effectiveness of CRM efforts. Last but not least, the discovery that customer relationship management (CRM) has a considerable managerial impact on the relationship between product innovation and financial performance in Jordanian enterprises. First and foremost, firms should acknowledge that product innovation is a significant factor in financial success and should be a primary area of attention for firms trying to enhance their financial performance. To develop solid relationships with customers, firms should keep spending money on CRM initiatives. CRM is crucial for increasing customer loyalty and improving long-term financial performance even if it may not significantly influence the relationship between product innovation and financial performance. Lastly, firms should assess their approaches to product innovation to find any potential room for development. Firms can boost their capacity for product innovation, increase financial results, and maintain market competitiveness. Author’s contributions Hamzeh Alhawamdeh and Mahmoud Abdel Muhsen Irsheid Alafeef played a crucial role in supervising the research and approving the final submission. Mohammad Abdel Mohsen Al-Afeef made an important contribution by refining the manuscript and ensuring grammatical accuracy. Bashar Younis Alkhawaldeh was instrumental in working out the methodology, conducting a thorough analysis of the data, and deriving meaningful interpretations from it. Maher Nawasra was in charge of writing the discussion section and provided critical insights into the research findings. Hani Ali Aref Al-Rawashdeh skillfully wrote the conclusion, summarising the main findings of the study. Omar Zraqat was responsible for the important task of data collection and gathered the necessary information for the study. Lina Fuad Hussien and Ghaith N. Al-Eitan made important contributions by writing an extensive literature review, providing the basic context for the study. The contribution of each author was crucial in shaping the study and ensuring a comprehensive and well-rounded scholarly work. COGENT BUSINESS & MANAGEMENT 19 Disclosure statement No potential conflict of interest was reported by the author(s). About the authors Bashar Younis Alkhawaldeh, Assistant Professor at the Faculty of Economics at the University of Jerash, specialises in research in the field of administrative sciences. His work focuses on exploring the complex dynamics between marketing strategies and financial performance, especially in Jordanian SMEs operating in the service sector. The research he is involved in examines the correlations between marketing orientation, innovation, operational capabilities, and financial performance using sophisticated modelling techniques. This study emphasises the importance of customer relationship management (CRM) in enhancing the positive impact of these factors on the financial performance of SMEs. Alkhawaldeh’s research contributes to a broader discussion on SME management practises and offers valuable insights for optimising financial performance and improving customer relationships, not only at the local level but potentially for SMEs in various global contexts. Its contributions are in line with the evolving landscape of business strategies in the SME sector aimed at improving their competitiveness and financial viability. Hamzeh Alhawamdeh, Mohammad Al-Afeef, Bashar Alkhawaldeh, Maher Nawasra, Hani Al-Rawashdeh, Omar Zraqat, and Lina Hussien are professors and researchers specializing in administrative sciences, banking, finance, accounting, and human resource management at Jerash University, while Mahmoud Alafeef focuses on marketing at Al Baha University. Ghaith AlEitan specializes in finance and banking at Al al-Bayt University. ORCID Hamzeh Alhawamdeh http://orcid.org/0000-0002-6515-9333 Mahmoud Abdel Muhsen Irsheid Alafeef http://orcid.org/0000-0003-4473-8253 Bashar Younis Alkhawaldeh http://orcid.org/0000-0002-4921-5702 Omar Zraqat http://orcid.org/0009-0000-9165-4277 Ghaith N. Al-Eitan http://orcid.org/0000-0002-2364-1500 References Acikdilli, G., Mintu-Wimsatt, A., kara, A., & Spillan, J. E. (2022). Export market orientation, marketing capabilities and export performance of SMEs in an emerging market: A resource-based approach. 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