Violating corporate integrity and consumer trust can cripple sales.
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Adhering to compliance and ethics standards may seem costly at times, but not doing so is much more costly.
Mitsubishi Motors allegedly hid defects systematically for many years to avoid costly recalls. Six Mitsubishi executives have been arrested. Largely as a result of the scandal, the company's sales fell 11.7 percent in fourth quarter 2004, the company reported in mid-February.
Boeing's original $23.5 billion deal to lease and sell 100 of its 767s to the U.S. Air Force was suspended in late 2004 in the wake of a scandal that revealed a Pentagon weapons buyer had steered business to Boeing in return for jobs for herself and her family at the company.
Perhaps the most recent example of a company running afoul of rules and regulations is drug giant Merck & Co.'s alleged nondisclosure of heart attack and stroke risks with the arthritis drug Vioxx. What Merck knew, when Merck knew it, and the extent of losses from CRM-related fallout are still in the state of flux, but as of mid-February, there were continued news reports that accused Merck of failing to pull the drug off the market when the company suspected something was wrong. The drug wasn't pulled until the company's findings were made public. It remains to be seen how or if the company's action (or inaction) regarding the drug will hurt the sale of other Merck products.
These are just a few examples of how compliance and legal violations can lead to CRM problems, sometimes serious enough that they have a devastating effect on the business, and sometimes costing more in lost customers and revenues than in actual fines or penalties.
"It takes far more energy and resources to get a customer back after you've lost him than [it is] to keep him," says Shel Horowitz, author of Principled Profit: Marketing That Puts People First.
Horowitz adds that providing good CRM is more than just providing an automated response to a customer query. Good CRM is also the human experience. "If your store doesn't live up to your company brand, then you don't get the chance to harness the power of your own satisfied customers."
According to Neil Getnick, managing partner for Getnick & Getnick, which operates a business integrity antifraud practice, companies need to go beyond just abiding by the letter of the law to developing a code of ethics in the company.
In fact, a study released in February by Booz Allen Hamilton and the Aspen Institute indicates that companies that routinely list values as a top agenda issue tend to report superior financial results.
Getnick points to the development of a positive corporate culture, in which integrity and ethics are evident to those inside and outside the organization, as being beneficial for CRM. Starbucks is an example: Getnick says the coffee company didn't force a lot of small coffee growers out of the market the way that some large corporations squeeze their suppliers. Additionally, he says, Starbucks has a commitment to investing in its communities and to affirmative action. These policies make the company's stores welcomed in most communities.
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