Case Let: Impact of Reduced Staff

Empowerment
CRM success is highly reliant upon the motivation and performance of a firm’s
customer contact staff. Considering this point, review the situation below – do you
think that the management has made the right decision?

ACTIVITY/TASK

Assume that you have just started working at a supermarket, in their marketing
department. the supermarket’s management team has just introduced a ‘no-refund
policy’. This is because their old full-refund policy was costing them an average of $50
per year for each of their customers. And as they have around 10,000 regular
customers, this change represents a cost saving of around $500,000 per year for the
firm.

Some of your fellow staff members have discussed with you that this change will make
it much more difficult for staff to deal with customer complaints. Being in the
marketing area, you are aware of the following information:

Average sales per customer $5,000 per year

Average profit margin on sales 10% (thus, $500pa)

Average time a person remains a customer 5 years

QUESTIONS

1. Do you think that management has made the right decision by introducing their
‘no-refund policy’? Justify your answer with supportive calculations.
2. Would you expect the marketing function to be involved in this type of decision?
Why/why not?
3. What are the implications of this change for:

• Customers?
• Staff?