Ethical Issues in CRM

Presented by:
Ashish Noel
Danish
Mudit
Samarth
Siddharth
 Introduction
Why Ethics in CRM ?
• CRM systems are also referred to as Knowledge management system as these
systems collect data which helps gaining knowledge about customers and
clients
• The ‘Utopian view’ of CRM systems fails to incorporate the ethical issues
• The focus has always been on the brighter side of the system, whereas the
underlying methods and motives for the use and impact of CRM systems on
individuals are rarely mentioned
• The darker side in which knowledge is suppressed, distorted or
misappropriated due to personal or organizational motive is what is known as
mismanagement of knowledge

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 Ethical Issues in CRM
Privacy and Confidentiality
• Privacy and confidentiality are at the heart of many ethical issues related to
CRM
• Companies have a responsibility to collect their information from legitimate
sources without violating the privacy of the customer
• In some cases, sensitive data is gathered, including credit card or bank details.
In these cases, the company must protect this information
• Poor data security or sloppy procedures could result in harm to the customers
that CRM is intended to benefit

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 Ethical Issues in CRM
Customer Participation
• One of the most important features of ethical CRM is that customer
participation is voluntary
• Companies who collect data on customers or potential customers without
their knowledge or agreement are taking an easy but potentially unethical
option
• Similarly, some customers may wish to withdraw from a CRM program -- if
this is the case, data stored about these customers needs to be destroyed
• Collecting or maintaining this information without the consent of the subject
is a violation of privacy

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 Ethical Issues in CRM
Usage of CRM Data
• In addition to obtaining and storing CRM data responsibly, companies have an
obligation to use it for the purpose for which it was obtained
• Sharing customer data with other companies, for instance, can be a useful
part of CRM, but selling on customer information or allowing other
companies to use it for their own purposes represents a violation of the
relationship between company and customer
• Most companies take pains to make it clear to their customers that they do
not resell or share customer information

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 CRM Paradigm
• There are two forces in organizations that are in conflict and ‘pull in opposite
directions’. There is conflict between the knowledge management paradigm and the
paradox of ethical issues such as freedom of information, privacy of data and
protection of intellectual property.

• On one hand we have the KM paradigm that claims to increase, create, store, share
and apply knowledge towards improving organizations and their competitiveness

• On the other hand we have to consider the ethical approach of doing what is right
conduct (deontological approach) and doing what has the right outcome/result
(teleological approach)

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 CRM Paradigm
• The ethical approach aims to decrease the sharing of certain information, protect
privacy, protect employee power / intellectual capital and avoid applying knowledge
to the detriment of any stakeholders
• Two potential ethical issues in KM approach are the overwhelming data banks of
information that never become knowledge and also the risks of the data collection
being leaked to competitors or outright criminals
• Trethewey and Corman proposed that two ethical paradoxes can be used to assess
knowledge management practices, namely inclusive-exclusive and transparent-
opaque
• The inclusive-exclusive dimension concerns whether a CRM/KMsystem is designed
for public or collective good
• The transparent-opaque dimension focuses on whether customers know that
knowledge is being collected about them, when and how the data is used and the
consequences of such monitoring
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 External Factors Influencing CRM practices

• Industry practices
• Country culture
• Individual behavior
• Competitive forces
• Laws/legal requirements
• Ethical approach in the country and the company
CRM has to concern itself with the ethical issues that go hand in glove with
human behavior.

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 Threat from Data Miners
• Data mining is where legality and ethics rarely meet
• The main question they face is, 'It may be legal, but is it ethical?‘
• The threat is not the data being used for providing enhanced customer
services, but the profiling that is happening outside the existing B2C
relationships
The Slippery slope concept
• This pertains to the ease with which a person can go from doing
something that doesn't really seem unethical, to doing things that are
increasingly unethical
• Such as scanning the customer data to modifying or compromising it
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