Start up of Replacement Ink - Assignment Example

Start up of Replacement Ink Introduction This report has been prepared in response to the case concerning the start up business of inkjet cartridges. It aims to shed light on the negative consequences of the implementation of customer relationship management program in the context of business to consumer sales. Because the inkjet cartridges business is targeted towards consumers, it is likely to encounter several barriers in the pursuit of drawing out the desired benefits from the customer relationship management programs. These constraints include information asymmetry, power imbalance and several behavioural and attitudinal dimensions prevailing within business to consumer sales that are detrimental to the concept of relationship. This report, therefore, brings forth the criticism that has been levied on the CRM implementation for business to consumer relationships. Background This report encompasses a case concerning the start up of a new business of Replacement Ink jet cartridges with a limited budget. The product is newly developed and the business strives to grow rapidly by quickly increasing the number of customers in the next coming years. It is considered that the implementation of customer relationship management CRM will play a significant role towards the achievement of rapid business growth. Therefore the business plans to utilise vigorous strategies to successfully implement CRM programs that will supposedly lead to customer attraction, loyalty and retention on the basis of a long-lasting business to consumer relationship. Business To Consumer Sales: Customer Relationship Management Customer relationship management has been defined as: “CRM is an enterprise-wide business strategy designed to optimise revenue and customer satisfaction by organizing the institution around customer segments” (Fayerman, 2002, 58). The concept of CRM is very closely related to the relationship marketing. It suggests that maintaining and fostering personalised relationships, in the context of business to consumer sales, can definitely lead to profit if it is combined by a mutual exchange of benefits and fulfilment of promises on the part of both the parties i.e., buyers and sellers. CRM therefore involves managing customer information in a way that can lead the organisation to satisfy its customers in a better manner. A new business of replacement inkjet cartridges, in the same vein, needs to employ effective customer relationship management programs such as customer surveys, service evaluations, pre-sale and after sale inquiries on a database driven system so as to foster the relationship with its customers and stimulate customer loyalty. Loyalty is regarded as an important aspect of relationship management. Crosby (2002, p273) expounds that, “loyalty refers to a strong emotional attachment to a firm that is manifest in customer behaviours like staying with the company, recommending it, buying additional products and services and so forth”. At the crux of customer relationship management is the concept of customer loyalty. CRM programs are basically designed to keep the customers loyal to the organisation. The customers display their loyalty mainly by coming to the company every time the same product is needed or recommending the product to the others. CRM programs can be initiated to enhance relationships at both ends i.e., the suppliers as well as the customers. However, this report focuses on the criticism of relationship building in case of business to consumer sales. Criticism Of Customer Relationship Management In The Context Of Business to Consumer Sales: Despite the fact that there happen to be several benefits attributable to the implementation of customer relationship management, several criticisms have been levied against this concept in the context of business-to-consumer sales. In a consumer market scenario, the customer relationship management is not considered to result into enhanced customer relationship. A study of literature [for example, Mishra et al. (1998), Gronroos (1994), Bagozzi (1995), Tax et al. (1998) and Jacoby and Chestnut (1978)] suggests that an implementation of CRM becomes impractical in a consumer market because of the intrinsic differences between buyers and sellers. The various aspects that provide grounds to criticise the concept of relationship between business and consumer are discussed below. Information Asymmetry Much of the criticism against customer relationship management has been on the asymmetries that intrinsically prevail between the buyers and the sellers especially with respect to business-to-consumer sales. Mishra et al. (1998, p277) put forward that, “marketing relationships between buyers and sellers often arc characterised by information asymmetry, in the sense that the supplier possesses more information about the object of an exchange (e.g., a product or service) than the buyer”. This situation is mostly prevalent in most buyer-seller relationships where consumers are either less informed regarding the product or service, or they are constrained with a lack of knowledge. For example, in the case under consideration, customers purchasing inkjet cartridges might not be fully informed of different brands of product or differences in prices with respect to quality. In such a situation, sellers may be induced to conduct certain unprofessional activities that are very likely to hamper a long-term relationship with the customer. Mishra et al. (1998, p280) says that, “information asymmetry creates a severe moral hazard problem because suppliers have both the ability and the motivation to cheat”. Hence customer relationship management does not hold good when information asymmetry exists between buyers and sellers, which is the case in most of business to consumer sales. This disparity involved in business to consumer sales can lead to the chances of failure of CRM implementation in managing customer relationship in the inkjet cartridges business, which is greatly required for the rapid business growth in the coming years. Power Imbalance The concept of a relationship between buyers and sellers has also been criticised on the grounds of inequality of power existing in business to consumer sales. Palmer (2002, p24) “many buyer-seller relationships can be characterised as one-sided in terms of the exchange of cooperative acts”. A relationship between two parties develops only if the process of mutual exchange entails certain benefits for both the parties. Gronroos (1994) criticises that there cannot exist an individual relationship between buyers and sellers because of the reason that seller remains as an active side of the relationship whereas buyer happens to be on the passive side. Sellers may remain at the powerful side of the relationship when consumers have less bargaining power, for instance, in case of dearth of certain products as compared to the number of buyers available etc. This situation creates a scenario where repeated purchases fail to exhibit a sense of attachment on the part of the consumers. Business relationships do not tend to last for a longer period if business to consumer relationships are characterised by power asymmetry in the market. Palmer (2002, p26) “A tendency towards increasing selfishness may invigorate relationships, especially in business to consumer markets where an imbalance of power causes passive behaviour by one party”. Where there is power asymmetry in relationships and one party becomes exploitative of the other, relationships do not last long. Behavioural And Attitudinal Dimensions Behaviour and attitude also play a significant role in the determination of business to consumer relationships. Tax et al. (1998, p64) illuminate that “the attitudinal and behavioural consequences of customer satisfaction play a central role in driving long-term customer relationships”. Consumers actively respond to their behavioural and attitudinal choices while making purchase decisions. Bagozzi (1995) propounds that relationship theory fails to take into consideration the behavioural norms that consistently guide a customer towards certain acts. Behavioural aspects play a significant role in determining customer actions even if these actions apparently serve their interests. The relationship theory therefore seldom holds good in real life business scenarios. In business to consumer sales, customer relationship management will not lead to enhanced relationship only by means of customer satisfaction through product and service because of certain behavioural traits displayed by customers. In the case of inkjet cartridges also, the business may fail to successfully implement a customer relationship program to stimulate loyalty and long-lasting relationship if certain norms or attitude of buyers prevent them to do so. Jacoby and Chestnut (1978) users the term the attitude interchangeably with “commitment” which includes feelings, beliefs, emotions and intent to behave in a certain way. Attitudinal dimensions of business to consumer relationship can be determined by the extent to which the buyers feel committed to a company’s products. For instance the consumers will switch to a new supplier if the is not emotionally connected to the company’s products. Business to consumer relationship is not likely to exist for long even when a company implements a customer relationship programs if consumers are driven by their attitude for change. Albeit CRM guides a seller to take into account the individuality of customers on the basis of information gathered from each customer individually, yet it fails to consider the consequences of attitudinal barriers to relationships. For instance, the ink jet cartridge business may also find a customer attitudinally reluctant to provide information needed for the company’s database. This can weaken the business’ focus on individual consumer due to lack of information. Hence, CRM may consequently fail to create and enhance business to consumer relationship because of the attitudinal dimensions. Sheth & Parvatiyar (1995) propound that customers are more likely to withdraw from a relationship, which lacks novelty and assortment. Although however a customer may be satisfied with a product, he might terminate the relationship with a company who does not induce an attitudinal or behavioural reaction on the part of the customer. This can be done by exceeding customer’ expectations with regard to the product or services associated with the product. On the contrary, customers would be willing to cherish a relationship that has the ability to demonstrate unexpected performance (Oliver et al 1997). Businesses that endeavour to serve their consumers with a consistency in products or services often induce a feeling of boredom on the part of consumers. Customers stay long with a company that excites them every time by exceeding the standard level of performance. Hence customer satisfaction achieved through CRM can also fail to build strong business to consumer relationship in the absence of novelty. Customers are behaviourally more bound to a relationship that involves free will and discretion. The more the customers repeat purchases the more they behaviourally perceive this relationship to be based on free will (Barnes, 1997). Repeat purchase on the part of the consumers cannot be treated as an indication of close relationship or emotional attachment, as consumers might be coming back to the company feeling forced or coerced to do so. For instance when customers have less choices available pertaining to a certain product or service, they might come back not with a sense of attachment but with a feeling of coercion. Such customers will show a great tendency to switch over to other suppliers. This is very dangerous for the inkjet cartridges business because it aims to grow rapidly through consistent relationship with its customers. Customers are also likely to remain committed to a relationship if it provides a sense of empowerment to them i.e., when customers actively participate in the process of product development, employee appraisal and evaluations etc., they are more likely to remain bound to the relationship (Ulrich, 1989). But if this is done to the extent that evokes power imbalance, the relationship will end. Therefore it is true to say that concept of a relationship is rather ambiguous in the context of business to consumer sales because it is characterised by several disparities between both the parties that are debilitative to any relationship. In such cases CRM will fail to deliver the desired objectives and foster long-lasting relationships between buyers and sellers. Conclusion The above report aims to highlight the negative consequences of CRM implementation in business to consumer sales based on criticism of the theory available from literature. Inequalities prevailing between buyers and sellers in a consumer market lead to the failure of customer relationship management in converting single purchases into strong buyer-seller relationship. Factors such as information asymmetry and power imbalance make one party exploitative and thus debilitating the relationship, whereas certain behavioural and attitudinal dimensions may also render a business to draw out desired benefits from CRM implementation in consumer market. References Bagozzi, R.P. (1995), “Reflections On Relationship Marketing In Consumer Markets”, Journal Of The Academy Of Marketing Science, 23(4), pp. 272-277 Barnes J.G. (1997), “Closeness, Strength, and Satisfaction: Examining the Nature of Relationships between Providers of Financial Services and Their Retail Customers”, Psychology & Marketing, 14(8), December, pp. 765-790 Crosby, L.A. (2002), “Exploding Some Myths About Customer Relationship Management”, Managing Service Quality, 12(5), pp. 271-277 Fayerman, M. (2002), “Customer Relationship Management”, New Directions For Institutional Research, 113, pp. 57-67 Gronroos, C. (1994), “From Marketing Mix To Relationship Marketing: Towards A Paradigm Shift In Marketing”, Management Decision, 32(2), pp. 4-20 Jacoby; J, and Chestnut, R, W. (1978), “Brand Loyalty Measurement and Management”, New York: John Wiley & Sons Mishra, D.P. Heide, J.B. And Corp, S.G. (1998),“Information Asymmetry and Levels of Agency Relationships”, Journal of Marketing Research, 35, August, pp. 277-295 Oliver, R.L., Rust, R.T. and Varki, S. (1997), “Customer Delight: Foundations, Findings, and Managerial Insight”, Journal of Retailing, 73(3), pp. 311-336 Palmer, A. (2002), “Selfishness In Buyer-Seller Relationships”, Marketing Intelligence And Planning, 20(1), pp. 22-27 Sheth, J.N. and Parvatiyar, A. (1995), “Relationship Marketing in Consumer Markets: Antecedents and Consequences”, Journal of the Academy of Marketing Science, 23(4), pp. 255-271 Tax, S.S., Brown, S.W. and Chandrashekaran M. (1998), “Customer Evaluations of Service Complaint Experiences: Implications for Relationship Marketing”, Journal of Marketing, 62, April, pp. 60-76 Ulrich, D. (1989), “Tie the Corporate Knot: Gaining Complete Customer Commitment”, Sloan Management Review, Summer, pp. 19-27 Read More