Ethics in CRM

Presented by
Prateek Shah (42)
Pankaj Sagar (41)
Components of a CRM System
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
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
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
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
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)
 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
databanks 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/KM
system 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
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.
 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
Thank You