Ethics in CRM

The Environment
• Liberalisation of markets- increasingly global and intense competitive
environment
• Technological advancements have boosted customer information
• Demands for more interaction between firms and customers through
blogs, forums, web communities and social networking websites;
• Increasing trends in advanced economies to be service oriented,
niche oriented and information oriented
• Fragmentation of consumer markets; customer buying patterns and
lifestyles are changing rapidly;
• Customers are more sophisticated and demanding; and there is
increasing demand for higher standards of quality
Customers Today
• Customers now know exactly what they want, and demand products
just the way they want them.
• They want flawless service, and to be treated less like ‘ a number ’and
more like the individuals they are.
• This landscape increasingly calls for more individualized, interactive
and sophisticated approaches to CRM than in the past.
• It suggests that firms must make a coordinated effort to learn more
about customers in order to attract, keep, maintain, grow and retain
valuable customers
CRM applications have largely been driven by technology and newer
approaches to customization in order to achieve more effective forms
of CRM.
Internet Explosion
• There has been an explosion of spyware that is used by firms to track
customer behaviour.
• General distrust in online shopping and a desire for more consumer
privacy.
• With the increasing use of social networking websites, blogs and forums, there is a
greater chance that customers will share their negative experiences with others by
writing for web communities or simply giving a firm a low rating.
• If customers become less trusting of a firm’s behaviour, over repeated transactions,
they will spread negative word of mouth and thereby reduce the firm ’ s value-
creation pie if they hold beliefs about a firm’s misbehaviour.
• If a firm does not consider these issues, CRM activities will potentially cross the line
in terms of what the consumers consider fair.
• This may decrease trust in firm activities and cause dissatisfaction and loss of
potential key advantages.
Examples
• Google now has advanced algorithms that personalise searches to
suit individual interests, effectively choosing the relevant information
in the vast amount of information that exists on the Internet.
• Facebook analyse users ’data including personal interests, age,
gender, location and status updates for the purpose of customising
advertisements and creating individually targeted deals
Organizational Culture
• Integrity is the foundation of trust, and trust is the grease of commerce.
• Important to establish clear ethical principles
• Employees are required to take part in annual online training with ethics
courses.
• Also participate in refresher courses throughout the year, covering various
ethical practices and relevant laws.
• Strict ethical processes for customer-facing teams and support teams
with appropriate checks and balances.
• Transparent way of going to market.
Code of Conduct
• Company-wide code of conduct for all employees, directors, vendors
and suppliers.
• Formal Supplier Code of Conduct that articulates our expectations
with respect to human rights and labor, health and safety, the
environment, business conduct and ethics.
• When retailers and suppliers know that an organization lives by a
principled code of conduct--and follows the policies that result from
that code, better business relationship are built on a foundation of
trust.
Walk the Talk
• Any activity that a company engages in with customers will be fair and
defensible, no exceptions.
• This means the approach to the biggest as well as the smaller
customers is the same.
• All potential and current customers know that everybody gets a fair
chance; everything in the process will be transparent.
• When a company models ethical behavior inside and out, when it
walks the walk, then it establishes a solid foundation of trust.
Taking a Stand
• To maintain a reputation of trust, ethical companies must take a
principled stand against customers that behave in a less than ethical
manner.
• That includes making the difficult decision of cutting off a large
customer if that customer is attempting to influence the company to
act in a way that it can't fairly defend to other customers.
• Whatever a management team can do to engender that trust with
customers, consistent with a set of values and principles that it just
will not violate is a long-term benefit
• It solidifies its reputation and makes business transactions and
partnerships happen much more quickly.
What about business growth?
• All organizations must balance the need to further top-line growth
while maintaining their ethical principles. It can be a tough balance.
• You have to stick to your principles, to your code of conduct, while
working toward delivering performance
• When you come across a red flag from a customer, you just have to
be principle-based, keeping that far-reaching perspective, and do the
right things for the business in the long haul
Impact of Compromise
• Mitsubishi Motors allegedly hid defects systematically for many years
to avoid costly recalls. Six Mitsubishi executives were arrested. Largely
as a result of the scandal, the company's sales fell 11.7% in Q4 2004
• Boeing's original $23.5 billion deal to lease and sell 100 of its 767s to
the U.S. Air Force was suspended in late 2004 in the wake of a scandal
that revealed a Pentagon weapons buyer had steered business to
Boeing in return for jobs for herself and her family at the company
CRM Reality
• By using CRM to build relationships, firms build ties with their
customers through information and learning, resulting in successful
profitable strategies that coordinate marketing, customer service and
quality programmes.
• This learning relationship is a key factor for success in CRM with
numerous benefits, including repeat purchases, increased sales,
cross-sales, up-selling, reduced costs, free word-of-mouth
advertisements, employee retention, added customer life-time value,
partnership activities and less price sensitivity
Think Before You Leap
• Without careful consideration of differential treatment of customers,
inappropriate usage and misuse of CRM may put organisations
marketing efforts at risk of long-term failure.
• Dilemma: The foundations of CRM lie in the fact that certain
customers have certain needs, and want different products and
services – even different prices and methods of promotion.
Setting Limits
• When interacting with customers, the firm must anticipate that
customers are likely to set limits in terms of what type of firm
behaviour or request is acceptable and what is not.
• Privacy issues are at the centre of collaboration between a firm and
its customers owing to the sensitivity in handling customer data that
is often linked to exploitation.
What’s fair, what’s not
• Customers have norms for what is perceived as fair and unfair in
terms of differential treatment of customers, and that it is easy for
firms to cross over the line of unfairness.
• Consequently, firms need to recognise the concerns about different
treatment and manage perceptions of trust and fairness because
these issues are connected to customers ’willingness to provide data
and their overall satisfaction with the relationship.
Example – Airfares differ and its ok – but book prices on Amazon differ
is not ok – especially if an offer is made to a new customer
CRM Ethics – The interdependencies
• Trust and Commitment
• Satisfaction
• Symmetry and Dependence
• Fairness
Challenges
• 2 broad concerns
• Customer Privacy
• Accuracy of Data
Collecting Customer Data
• Ethical issues originating with the collection of customer data for CRM
are related to secure collection methods and to the verification of the
information.
• Ethical companies ensure that sensitive information such as credit
card numbers or medical histories are collected in a secure
environment and transmitted back to the databases securely.
• During data collection, it is also critical to verify the identity of the
customer and the accuracy of the information being submitted.
• High security for these functions is costly but ethically necessary
Storing CRM Data
• Once customer data is safely in a company database, ethical
companies adhere to principles regarding storage.
• Data is only stored with the agreement of the customer.
• Customers must be able to view their data and either change their data or ask
for it to be changed.
• Customers can withdraw from the program, and such a withdrawal causes
their data to be erased.
• The ethics behind these principles are that the data belongs to the
customer and the customer must be able to control his data.
Using CRM Data
• Given that much of the customer data for CRM is sensitive, ethical
companies ensure the data is kept private to the maximum extent
possible.
• The company must store the data in a form or in a location not generally
accessible.
• The data must only be consulted when necessary for the fulfillment of a CRM
task, and only those employees who handle the data to complete the task are
able to access the data.
• When sub-suppliers need to use the data, they must first commit to
restrictions similar to what the CRM company has in place.
Disposing CRM Data
• Since customers must be able to withdraw from the CRM program
and then their data is erased, the company needs a procedure in
place for safely destroying customer data when it is no longer
needed.
• While deletion from the database is initially sufficient as long as the
database remains secure, data on obsolete equipment and
equipment that changes status to non-secure is at risk.
• An ethical company has detailed policies and procedures for tracking
and destroying data and keep accurate records of such activities