The Dark Side of CRM

Customers, Relationships and Management

Bang Nguyen, Lyndon Simkin, Ana Isabel Canhoto

• Publisher: Routledge
• Year: 2015
• Print ISBN: 9781138803329
• eBook ISBN: 9781317621997
• Topic: Business
• Subtopic: Business General
• Index: Business

Customers are treated badly. Not all customers. Not always. But many are and often. Some customers are bad. They treat firms badly. Firms have to react. Employees and customers endure the consequences. Such bad behaviours, by firms and customers, have consequences for perceptions of trust and fairness, for endorsements and referrals, for repeat purchasing and loyalty, and ultimately for a firm's profitability and RoI. The management of customer relationships is core to the success and even survival of the firm. As The Dark Side of CRM explores, this is an area fraught with difficulties, duplicitous practice and undesirable behaviours. These need acknowledging, mitigating and controlling.

This book is the first of its kind to define these dark sides, exploring also how firms and policy-makers might address such behaviours and manage them successfully. With contributions from many of the leading exponents globally of CRM and understanding customers, The Dark Side of CRM is essential reading for students, researchers and practitioners interested in managing customers, relationship marketing and CRM, as well as social media and marketing strategy.

Part I

Introduction

1

Introduction

Bang Nguyen, Lyndon Simkin and Ana Isabel Canhoto

1 Introduction

Customer relationship management (CRM) is now adopted by most organisations and taught within the syllabi of all leading business schools. No one disputes the importance of managing customer relationships to extract value from customers over a protracted period of time and to create mutually beneficial relationships that increase customer satisfaction and transactions. There are reported benefits for both firms and their customers. However, there are also downsides attached to these practices and to the behaviours of managements deploying CRM. These are the focus of The Dark Side of CRM.

Concerns are often directed towards firms’ use of customer tracking systems, perceived to induce both information mishandling and discrimination of certain customers. These are termed the ‘dark side’ of customer relationship management and link with unethical firm behaviours including manipulation, neglect and unfair treatment, often damaging firms’ brand reputation. As CRM schemes continue to be implemented worldwide, customers’ perceptions of CRM remain diverse, providing a perplexing environment to successful CRM development and organisation of customers, relationships and management. Differing industries, organisational cultures, development stages, resources, politics and consumption behaviours require multiple strategic directions emphasising different things in varying contexts. There is the belief that customising adverts to individual customers may not always be favourably viewed by those customers interested in privacy, and fairness and trust concerns exist about ‘big data’ such as how the data are collected, handled and stored. These are only some of the issues marketers and their partners should address.

Due to these complexities, the study of the dark side – towards customers, relationships and management – is a timely topic for further investigation. The Dark Side of CRM includes practitioner views and the thoughts of leading academics. It is of interest to far more than just students, and aims to address the following:

• Customers: Readers are exposed to the CRM dark side’s effects on consumption behaviour through extant consumer behavioural and psychological theories and research. This enables readers to understand customers’ different characteristics and subsequent applications towards managing these.

• Relationships: Readers gain insights into relationship marketing (RM) from different perspectives. The book enables readers to compare, contrast and comprehend how relationships at different levels are created and managed in the context of CRM.

• Management: An exciting aspect of this book is a wide-ranging presentation of CRM dark side cases across commercial and non-commercial sectors. These cover business-to-business and business-to-consumer, encompassing industries such as manufacturing, fast-moving consumer goods (FMCG), hotels, airlines, financial services and information communications technology (ICT) sectors. Readers are exposed to differing management approaches, which, once applied to their business, will increase their chances of avoiding the dark side and successfully implementing CRM.

2 The dark side of CRM: customers, relationships and management

The growing interest in CRM and the subjects of customers, relationships and management lies in the belief that customer data provide an essential source for delivering and customising offerings that meet their needs better than the competition, over a prolonged and mutually beneficial relationship between the firm or brand and its priority customers (e.g. Nguyen et al., 2015). Building relationships enables firms to learn what customers want through continuous interaction, increasing customer intimacy and loyalty intentions. Firms find ways to add value, such that customers as well as businesses operating in those markets gain from increased competencies and skills, often referred to as win-win situations. These value added customer data contribute a coherent CRM strategy reflecting management, operations, distribution and marketing, providing an opportunity for cross-sales and up-selling. This in turn generates a significant future income stream and sustainable competitive advantages.

However, as CRM has, over recent decades, developed more advanced schemes for the benefit of firms, CRM technologies are progressively extracting customer surplus by exacerbating hidden fees and surcharges (Yu et al., 2015). Concerns are often directed towards firms’ use of customer tracking systems, perceived to induce both information mishandling and discrimination of certain customers. These are termed the ‘ dark side’ of customer relationship management and link with unethical firm behaviour, including manipulation, neglect and unfair treatment, often damaging firms’ brand reputation (Nguyen, Lee-Wingate and Simkin, 2014).

To date, there are limited empirical studies in understanding the dark side of CRM, focusing on customers, relationships and management in a comprehensive text. Little is known about how the CRM dark side is perceived, the type of research methods used to understand relationships, and how companies and policy makers can manage the dark side successfully. How customers, relationships and management work in the CRM dark side context are issues still unanswered. Existing books primarily focus on general CRM applications with some practitioners’ case study examples, which are insufficient and often outdated in this fast-changing environment.

Exploring and understanding the dark side of CRM is vital for developing and managing positively perceived products and services that help a company achieve higher levels of performance, including increased sales and profits (Nguyen, Klaus and Simkin, 2014). For example, investing enormous amounts on targeted advertising may not suffice if other areas such as privacy and fairness are not considered important. By understanding how customers respond to CRM schemes, firms can induce consumer patronage. For marketers, a greater understanding of customer relationships influences decisions towards efficient use of marketing resources, lowering costs and increasing profits. Finally, by exploring management, it is possible to benchmark best practices and avoid dark side behaviour, in order to achieve sustainable competitive advantages, contributing to higher levels of goodwill and improved reputation.

3 Target market and readership

The Dark Side of CRM provides final-year undergraduate students, Master’s students and doctoral students in business and marketing with a comprehensive treatment of the nature of the dark side of customers, relationships and management in the CRM context. The book will also be of significant interest to practitioners involved with supplying CRM solutions, and their clients seeking to deploy CRM successfully. It explores current research and practices in different areas, industries, commercial and non-commercial sectors. The text serves as an invaluable resource for marketing academics and practitioners requiring more than anecdotal evidence of different CRM applications. Readers will find it interesting to compare and contrast different dark side situations covering important aspects related to customers, relationships and management. The text includes a valuable mix of theory,research findings and practices, which engenders confidence in academics, practitioners and students of marketing and management alike.

Of interest to a diversified audience, courses that could use the book include marketing management, services management, consumer behaviour, relationship marketing and customer relationship management, information systems and technology, to mention a few. These listed courses, at both postgraduate and undergraduate levels, are very widely taught globally.

4 Content of The Dark Side of CRM

Chapter 2 introduces customer relationship management and its dark side. It notes that, while CRM and RM bring considerable benefits when they work, as reports of success stories (e.g. Columbo, 2013) and case studies of companies (e.g. Duhigg, 2012) practising CRM or RM illustrate, not all is well and many RM and CRM practitioners manifest behaviour that damages or even destroys customer relationships. One report by Nucleus Research (2012) shows that 80% of the CRM returns are yet to be realised in companies, and 30% of companies have not achieved a positive return on this CRM investment. A study in 2012 of large CRM projects in five countries showed a 28% failure rate (Mieritz, 2012). The chapter focuses on customer management activity that can damage customer relationships and knowingly or deliberately exploit customers, and conceptualises this as the dark side of customer management including RM and CRM. While the focus is on service provider dark side behaviour in the business-to-consumer sector, many aspects are considered relevant to business-to-business contexts.

There is evidence that dark side practices are widespread and appear to be growing. For example, McGovern and Moon (2007, p. 80) point out that many companies infuriate customers by deliberately ‘Binding them with contracts, bleeding them with fees [and] confounding them with fine print’. They observe that certain industries including mobile phone service providers, banks, video stores, book-purchasing clubs, car rental companies, health clubs and credit card companies seem especially prone to ‘dark side’ behaviour. Frequently, service providers find it profitable to confuse and mislead customers into making poor purchase decisions through use of complicated and detailed rules and conditions of sale. Common practices include confusing usage rates on mobile phones, high penalties when customers exceed credit limits, overdrafts and payment deadlines, or fall short of minimum balances in bank accounts. As a result, customer anguish and retaliation may contribute to service providers increasing their antagonistic strategies. This can create dysfunctional vicious cycles leading from ‘Transparent, customer-centric strategies for delivering value … [to] opaque, company-centric strategies for extracting it’ (McGovern and Moon, 2007, p. 80). Two key reasons for poor customer management that may result in dark side service provider behaviour are identified (Frow et al., 2011). First, it is suggested that a poor understanding of the strategic focus of CRM may lead to inappropriate exploitation of customers, especially when service providers use intrusive technology. Second, maliciously motivated service providers can explicitly abuse customers, as CRM technology can equip them with powerful resources to do this (Payne and Frow, 2013).

Chapter 3 reviews major theories in the field of unfairness perceptions, examines sources of such perceptions, as well as consequences when perceptions of unfairness arise in the context of CRM. For example, The Wall Street Journal reported that Orbitz showed Mac users costlier hotels than Windows visitors see. Consequently, Apple users spent as much as 30% more a night on hotels (Mattioli, 2012). Even though the sites do not change the prices of hotels per se, the cry of unfairness is still loud and common in the marketplace, and has been shown both to constrain firms’ pursuit of profit and to damage customer relationships (Kahneman et al., 1986; Xia et al., 2004). Pricing is a marketing element that can easily provoke such cries.

Why does fairness matter? From the incidents in which unfairness occurred, such as the Orbitz case, we can glimpse the consequences of the perception of unfairness. In general, perceptions of unfairness induce dissatisfaction (Herrmann et al. 2007; Van den Bos et al., 1998) and constrain firms’ ability to maximise their profit when customers with a grudge leave the relationship and/or seek retribution through negative word-of-mouth (WOM) or revenge (e.g. Campbell, 1999; Kahneman et al., 1994).

Negative affect is an integral part of the perception of unfairness (Xia et al., 2004). Various negative emotions associated with these perceptions include, most commonly, anger and hostility. These emotions are evoked when customers attribute the responsibility to the seller and are considered outward emotions (Barclay et al., 2005). Perceptions of unfairness coupled with strong outward negative emotions lead to behaviours intended not only to restore financial equity but also to vent negative emotions, reinforce relationship norms, rebuild self-concept and damage the seller. These behaviours may include complaints, switching, negative WOM and/or boycott of the seller’s product or service. Given the potential damage of the perceptions of unfairness on customer relationships and firms’ profitability, it is important to understand how consumers form these perceptions and the sources of perceptions of unfairness.

Chapter 4 incorporates social media tools into CRM. Formally, social CRM has been defined by marketing scholars as the integration of social media applications into the traditional customer-facing activities of the firm to engage and collaborate with customers and enhance customer relationships (Greenberg, 2010; Trainor, 2012). When properly leveraged, social media technologies and tools can enhance CRM systems and boost efficiency and effectiveness of customer interactions and resultant customer relationships. Social CRM has provided companies with an array of benefits including low-cost customer interaction, increased response time, an extended number of communication platforms, and marked efficiencies in customer relationship processes. However, the growing emphasis on social media as a crux of customer-facing communications i...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of illustrations
• Contributors
• Part I: Introduction
• Part II: Customers
• Part III: Relationships
• Part IV: Management
• Part V: Conclusion
• Index