Why do some businesses bend over backwards to keep customers happy, and why do some of them appear not to care? What is the impact of poor customer service on a business and how much does it cost them to invest in improving their infrastructure?
To delve deeper into this topic, Professor Sally Dibb, internationally renowned academic in Marketing at the Open University Business School, is here to answer a few more questions following this week’s episode of The Bottom Line. Sally's research is at the forefront of theoretical and relevant issues in marketing strategy, segmentation, customer relationship management (CRM) and consumer behaviour.
What is customer relationship management (CRM)? And why has it become so increasingly important to a diverse number of businesses and organizations?
Organisations see building a relationship with their customers as a crucial step in understanding and meeting their needs. Customer Relationship Management (CRM) is the term used to describe the processes for capturing data about these customers and managing relationships with them. The aim of CRM is to maintain the ongoing interest and support of the most worthwhile and valuable customers in the target segments that the organisation is prioritising. CRM databases build up knowledge of individual customers’ characteristics and buying behaviour, using these insights to tailor the product and service offers made to the most valuable customers. The objective is to develop loyalty and encourage these customers to continue to buy. Amazon tailors purchasing suggestions to its customers, Tesco’s Clubcard analyses individual shoppers’ buying behaviour and responds with bespoke offers and menu suggestions, while John Lewis offers different propositions to its customers based on their loyalty and consumption patterns. The same happens in business-to-business markets and in the marketing of services. Marketers invest huge sums in building profile for their brands and attracting consumers. If these customers do not continue to buy and build a relationship with ‘their’ brand, marketers fail to achieve pay-back
The last two decades – at least – have seen the rise of the “ethical consumer” ranging from customer boycotts of what they see as “unethical” products to demands for “fair trade” and “organic” produce. What are some challenges and opportunities that businesses have for encouraging more sustainable consumer behaviour?
We have witnessed invasions of Topshop stores in London and the blockading of Vodafone and Starbucks branches as so-called ‘tax-shaming’ sought to campaign against the tax-paying (or alleged lack of paying) policies of these businesses. Social media and the immediacy of consumer-to-consumer communication in the digital era have fueled such protests. Multinationals such as Google, Amazon and Starbucks have been criticised by the Public Accounts Committee over tax avoidance. In order to counter the negative publicity, Starbucks plans to change its arrangements and pay UK corporation tax while Google has just made such a settlement. Calls for more ethically produced and sustainable products is a similar reaction to the perception that big business behaves badly. The Institute of Business Ethics is just one body striving to encourage corporates to improve their behaviour.
When over a thousand garment workers died in the Rana Plaza disaster in 2013, considerable public debate was generated about the ethical approaches of clothing manufacturers and retailers in the West. Although some of these firms have taken steps to improve the lot of these workers, consumers remain confused about what makes one garment more ethical or sustainable than another. It is, though, important to recognize that good practices do already exist. Timberland’s social responsibility agenda, for example, rests on its four ‘pillars’ of climate (protecting the outdoors), product (innovating responsibly), factories (improving workers’ lives) and service (engaging communities). Each pillar is associated with specific short- and long-term targets that Timberland has established with the input of its stakeholders.
How has CRM been impacted by globalisation? How, for instance, are multi-national companies adapting to and meeting the needs of customers across national and cultural contexts? Is there an attempt to create a “global” customer?
No. A decade ago the prevailing view was that, for example, Europe would homogenise into one group of consumers all wearing Levi’s and Nike, drinking Coca-Cola and watching MTV or Sky. Yet it patently has not happened. Even global brands such as McDonalds flexes its operations and menus to suit local tastes (ice-creams in Portugal, beer and wines in Switzerland, dim sum in Hong Kong). The big beer brands are global, but each of the big five brewers has dozens of regional brands catering for local tastes. It is true that big brands seek economies of scale and strive to operate with a global brand strategy. The brands Dove, McDonalds, Goodyear, Duracell are to be found just about everywhere around the world. However, the role of a global brand manager is to understand the nuances of markets, address varying cultures and buying behaviours, and ensure that global brands remain fit for purpose locally. While there is some evidence that consumer tastes, behaviours and expectations have aligned, they are far from the same across the globe. Brand managers know this and respect these differences. There is now a realisation that a ‘one-size fits all’ approach to marketing does not work in practice. The challenge for most marketers is nearer to home; addressing the increase in consumer-to-consumer communication about brands and products, which takes the power from the brand manager and, thanks to social media, gives voice to consumers and other third parties.
An increasing worry for many in this age of digital advancements is personal privacy. How do corporations collect and use customer data? Do you feel that this should be a concern for individuals?
Digital advancement is making it much easier for organisations to gather personal data. As our use of the internet and social media increases, many people are routinely sharing more personal information about themselves, so much more data is available. This raises interesting questions about what it is that motivates us to share our data, whether we are happy to do so in some circumstances but not in others, and whether it depends with whom we are sharing it. One area in which our data is increasingly shared – sometimes without our knowledge – is to support the work of governments and security services to identify and pre-empt security threats. The rise in global unrest, terrorism and crime has focused the minds of governments, security chiefs and their advisors on security threats, resulting in significant resources being brought to bear on using data to address the problem.
Research examining the extent to which the public is prepared to trade off their personal privacy in exchange for feeling more secure, suggests that a crucial factor is the extent to which we trust those with whom the information is shared. While most people accept that government and security agencies should be able to gather information to support their efforts to protect national security, many are less happy if the process involves commercial organisations. Yet there are many circumstances in which commercial organisations are required by government to share data about their customers. For example, anti-money laundering and counter-terrorism financing legislation requires financial services firms to report suspicious spending behaviour; air carriers are required to collect and electronically transmit travel document and service information for anyone entering or leaving the UK; Internet Service Providers must retain their customers’ browsing data for scrutiny if requested; and universities must collect information about the attendance behavior of overseas students. Although the acceptability of this data sharing varies across Europe, public awareness is growing with more questions being asked about the implications for privacy and human rights.
This article was written to accompany the Winter 2015-16 series of The Bottom Line.
For more information on the series, visit the series page.