Research Article: 2021 Vol: 24 Issue: 3
Ahmed Asfahani, University of Business and Technology
Citation Information: Asfahani, A. (2021). The Impact of Covid-19 on the decision making for the customer relation management in the Middle East. Journal of management Information and Decision Sciences, 24(3), 1-12.
The Covid-19 pandemic has caused huge changes in the social, economic, healthcare, and business aspects of life. On the economic front, the pandemic caused huge disruptions in the supply chain, leading to a disruption of commerce and closure of thousands of businesses. This study seeks to determine how the Covid19 pandemic has affected the customer relation management CRM function in the Middle East. The research questions guiding the study are: how has the Covid-19 pandemic affected consumers’ purchasing behavior? How have these changes affected the CRM function in organizations in the Middle East. The study adopts a theoretical approach and the data that informs the findings is obtained from empirical studies and other trustworthy sources structured around the context of the Middle East.
COVID-19; Middle East; Customer relation; Management; Decision making
The Covid19 pandemic has enormously changed the social, economic, healthcare, and business aspects of life. Not only has it caused huge disruptions in the supply chain, but it has led to an unprecedented disruption of commerce, forcing thousands of businesses to close down (Donthu & Gustaffson, 2020). Some industries such as tourism and hospitality were hit hard, while others continued to operate, although crucial areas such as cash flows, demand, supply chain, the workforce, and sales were all severely affected. Health sectors in the world over reported huge strains, with approximately 22 million cases reported and 777,000 lives lost by the end of August 2020 (Tosun, 2020). The required physical distance between people led to the imposition of curfews and restrictions on social gatherings, which were a part of daily life before the pandemic (Tosun, 2020). To minimize physical contact with other people, customers increasingly used the internet for their activities and institutions were forced to restructure their business models to allow for remote working and minimize physical visits by customers (Mehta et al., 2020). Consequently, there has been a notable increase in the volume of ecommerce transactions in both the business-to-business and business-to-customer markets (Tosun, 2020).
At the same time, however, the mandatory social distancing rules have changed the way companies relate with their customers (Aburumann, 2020). Customer relationship management systems have been affected immensely across the board as salespeople who initially met with their customers physically have had to develop innovative ways of maintaining such relationships with their most loyal customers (Aburumann, 2020). More and more organizations have been forced to move towards virtual environments and to embrace tools of collaboration that support remote working (Eysenbach, 2020). The Bring Your Own Device (BYOD) model has become increasingly common throughout the world as sales professionals pursue mobile tools that enable sales professionals to serve their clients and prospects better amidst social distancing requirements (Rodriguez & Boyer, 2020). In a bid to boost their productivity and efficiency, sales professionals in some industries have been forced to adopt automation tools in the form of mobile Customer Relationship Management (m-CRM), which are CRM functions accessible via mobile applications (Rodriguez & Boyer, 2020).
This study seeks to assess the actual impact of the Covid-19 pandemic on the CRM function in the Middle East. The research questions guiding the study are as follows:
1. How has the remote working and social distancing regulations during the Covid-19 pandemic affected consumers’ purchasing behavior in the Middle East?
2. In what ways have these changes affected the way organizations in the Middle East carry out CRM?
The study adopts a theoretical approach where insights are obtained from empirical studies carried out in the Middle East and the findings are then compared to relevant selected theories. The aim is to assess whether the happenings in the Middle East (as shown by the findings) are supported by, or deviate from theory.
The Covid-19 pandemic has severely affected business operations, forcing many businesses to close down and millions of people out of employment. Commerce in most industries across the world has been disrupted, with companies facing serious challenges related to customer demand, marketing and sales, cash flows, the workforce, and the supply chain. While others have completely fallen as a result of these challenges, some have managed to navigate successfully. This, however, does not guarantee a rosy picture ahead for the successful ones because the world that emerges after the pandemic will be significantly different from the one before it (Donthu & Gustaffson, 2020). It is still uncertain whether businesses will resume full physical workplaces as some markets have been completely eliminated due to the outbreak, and hiring freezes are expected to continue as recovering companies try to reduce spending by either postponing or eliminating non-essential tasks (Donthu & Gustaffson, 2020). Unfortunately, the Covid-19 pandemic serves as a reminder that pandemics have occurred in the past and will keep occurring in the future. It would be prudent, therefore, for businesses to be prepared for this reality and put in place measures to minimize the effect of such pandemics. The findings of this study will go a long way towards informing organizational policymakers about the actual impact of the pandemic on customer behavior and the CRM function and hence, helping them prepare adequately for future pandemics.
This section reviews literature on the impact of Covid-19 on customer behavior and CRM strategies. The first subsection reviews theoretical literature, which provides the theoretical underpinnings of the study. The second subsection is a review of empirical literature, and focuses on reviewing selected empirical studies in the area of interest. The empirical review is divided into three sections. Section 1 reviews literature on the relationship between CRM and sales performance, section 2 reviews literature on the impact of the Covid-19 pandemic on customer behavior, and the final section reviews literature on the responses by sales professionals to these changes.
Review of Theoretical Literature
Normative decision theories: Expected utility theory
The study analyzes the judgments and decisions of salespeople in the CRM function in response to the Covid-19 pandemic that unpredictably changed the way companies relate with their customers. It draws from decision theory, which studies an agent’s choices and judgment when faced with unexpected situations (Clemen, 2001). For this study, judgment will be defined as the assessment of the alternative or choosing between alternatives. Shaban (2005) holds that if a decision is to be considered sensible, then the decision-maker ought to have some knowledge about what the future might look like after the decision is made. Thus, decision theory assumes that when making decisions, individuals draw on a range of information sources, including stored facts or knowledge, as well as the expertise and experiences of others (Shaban, 2005). As such, decisions are not always made with true or complete objectivity and often encompass some expectations about the future (Pitz & Sachs, 1984).
Decision theory can be broken down into two subcategories: normative and descriptive decision theory, both of which carry in them several theories. Normative theories focus on how rational agents make decisions and judgments, with the aim of determining how decisions ought to be made in an optimal situation (Zsambok & Klein, 1997). An optimal situation is where agents make decisions based on known and logical conclusions that are supported by clear evidence, which in most cases is based on probabilities and statistics (Einhorn & Hogarth, 1981). The aim of normative theory, as Shaban (2005) points out, is to propose rational decision-making procedures that may be theorized and are logical.
Common decision theories under the normative approach are the subjective expected utility theory and the expected utility theory (Shaban, 2005). Both theories assume rationality on the part of the decision-maker such that they choose the decision that maximizes their utility. The subjective expected utility theory postulates that a rational decision-maker will identify the optimum decision by assigning weights and probabilities to their beliefs, values, and attitudes in a rational context (Shaban, 2005). The expected utility theorem, on the other hand, quantifies the probabilities of various alternatives, and selects as the optimum decision, the option whose outcome is most likely and most desirable (Shaban, 2005). Researchers have used the expected utility theorem in many different contexts - for instance, Lanza and Bantley (1991) conducted a clinical study that made use of the expected utility theorem to identify the best intervention for violent and aggressive psychiatric patients.
Descriptive decision theories: Information processing theory
Descriptive theories are behaviorist and naturalistic and focus on identifying why agents make certain choices or decisions (Shaban, 2005). They consider the decision-making agents as ordinary and hence, do not place restrictions on whether they are rational or irrational (Shaban, 2005). The descriptive theorist will seek to determine why an agent makes a certain choice or decision in a real world based on real conditions and environments (Shaban, 2005). Descriptive theorists focus on understanding the cognitive capabilities of ordinary decision-makers and then determining whether the same is rational. Of particular relevance is the information processing theory, which suggests that human reasoning and decision-making is limited and bounded by their cognitive capacity/reasoning ability (Shaban, 2005). An agent’s cognitive/reasoning ability influences their ability to positively process information within their environments and hence, make the most desirable solutions (Chapman & Sonnenberg, 2000; Thompson & Dowding, 2002).
Based on the precepts of the information processing theory, therefore, the study hypothesizes that consumers’ purchasing decisions and the subsequent organizations’ responses in crises are influenced by the prevailing situations then, and not by the expected utility of the expected outcome. In times of crises, being able to survive, and not rationality, is the primary influencer of agents’ decision making. As such, agents act to address the challenges that arise then, and may not focus so much on the future consequences (outcomes) of such actions as suggested by the normative theories.
Review of Empirical Literature
The definition of CRM and its impact on sales performance
Akram et al. (2017) define CRM as a strategy of maintaining relationship with one’s customers. Its aim is to integrate customer focus in all parts of the organization’s operations to ensure customer retention by delivering the right products to the right customer, at the right cost, and through the right channel (Akram et al., 2017). CRM is a process, therefore, that addresses the aspects of identifying customers, building relationships, creating customer knowledge, and shaping perceptions about one’s products (Reinartz et al., 2004). Its main focus lies in building and maintaining long-term relationships with loyal and strategically-significant customers (Akram et al., 2017). There is contention across the literature that CRM positively impacts both sales performance (Akram et al., 2017) and company performance (Reinartz et al., 2004).
Impact of the Covid-19 pandemic on customer purchasing decisions and behavior
Customer buying decisions and patterns have an influence on CRM decisions. Changes in customer buying decisions or patterns will often drive a subsequent change in CRM strategy as the organization attempts to align itself with customer needs. Identifying ways by which customers’ purchasing decisions and patterns have changed as a result of the Covid-19 pandemic would be crucial in assessing how CRM systems responded and hence, the impact of the pandemic on CRM. Studies contend that the Covid-19 pandemic has significantly affected customers’ buying patterns and decisions (Butu et al., 2020; Loxton et al., 2020; Pham et al., 2020; Sheth, 2020).
In their study, Loxton et al. (2020) sought to determine the extent to which the Covid-19 pandemic has affected consumer behavior. The researchers assessed the impact of Covid-19 based on three forms of customer behaviors experienced during past crises: panic buying, herd mentality behaviors, and the prioritization of essential goods over Maslow’s lower order needs (Loxton et al., 2020). The study also assessed the media’s role in influencing such decisions. The study findings showed that customer purchasing behaviors/decisions during the Covid-19 pandemic followed panic buying mentalities as in previous crises, and that customers demonstrated herd mentality behaviors and prioritized essential needs (Loxton et al., 2020). Customer behaviors during the pandemic were comparable to those experienced during past crises and the media played a significant role in influencing customer mentality (Loxton et al., 2020).
These findings were replicated in another study by Sheth (2020), who found that at the height of the Covid-19 pandemic, customers engaged in stockpiling essential products such as tissue paper and exhibited the tendency to postpone purchase of discretionary or non-essential products. Further, consumers were shown to be more open towards digital technology during the pandemic as compared to before it (Sheth, 2020). Customers mainly used digital technologies to participate in virtual events such as classes and meetings as well as to order items online when they could not make physical visits to the store (Sheth, 2020).
Similar findings were reported by a cross-sectional study carried out to analyze customer buying behavior of fresh vegetables in a quarantined area in Romania (Butu et al., 2020). The prioritization of essential products and panic buying decisions are evident, with the study findings indicating that the number of customers placing orders for fresh vegetables grew by 60 percent following the imposition of quarantine (Butu et al., 2020). The study further established that fresh vegetable consumers had an overwhelming inclination to purchase specific products and quantities according to their own needs, rather than purchasing a pre-defined basket of items (Butu et al., 2020).
The findings mirror those of another study by Hoekstra and Leeflang (2020),which reported substantial decreases in sales of non-essential products such as clothes (a drop of 60 percent), shoes (45 percent), and cars, whose sales were 40 to 50 percent lower at the height of the Covid-19 pandemic in May 2020 than same time the previous year. According to the study, the drop in non-essential sales was reported even among the very established and popular brands such as Nike and G-Star (Hoekstra & Leeflang, 2020).
Other studies such as Pham et al. (2020) have adopted a different approach by studying the intention behind customer buying or purchasing decisions. In their study, Pham et al. (2020) sought to determine why more Vietnamese opted to shop online rather than make physical visits to the store during the Covid19 pandemic. Using a sample of 472 online shoppers, the study established that although more customers preferred to shop online during the Covid19 pandemic, their decisions were not driven by heightened awareness about Covid19 or changes in organizational marketing strategies (Pham et al., 2020). Customers decided to shop online because they were aware of the ease of use of online shopping platforms, appreciated the convenience that such platforms offer, and understand the perceived benefits of shopping online (Pham et al., 2020). Organizations’ marketing policies thus did not have a significant influence on customer purchasing decisions among Vietnamese shoppers during the Covid19 pandemic (Pham et al., 2020). This is a crucial finding for businesses, although it contrasts other studies such as Hoekstra and Leeflang (2020), which have emphasized the role of marketing policies and strategies in influencing customer buying decisions in times of crisis.
There is contention across the literature, therefore, that the Covid19pandemic has shifted customers priorities towards essential commodities based on Maslow’s hierarchy of needs and increased the preference for online shopping (Butu et al., 2020; Hoekstra & Leeflang, 2020; Sheth et al., 2020). However, studies give conflicting results on whether marketing policies or strategies have any significant influence over customer buying decisions in times of crisis.
Organizations’ responses to changes in customer behavior
Literature on the impact of Covid-19 on business operations in general is rich. However, studies focused specifically on the CRM function are limited, and those available focus on specific industries. In one such study, Tosun (2020) conducted an analysis to determine how flexible and remote working during the pandemic has affected CRM in retail banking and whether factors such as gender, network size, and work experience made a difference in CRM perceptions. Survey questionnaires were distributed to 91 bank employees including customer relationship managers, branch managers, and sales personnel (Tosun, 2020). The study findings showed that generally, sales personnel felt that their relationship with customers had improved during the pandemic as they could reach them easily via online platforms (Tosun, 2020). ANOVA results showed that there were no significant differences among participants’ CRM perceptions according to their gender, age, network size, or work experience (Tosun, 2020). The study established that generally, CRM is a significant influencer or sales performance in retail banking, with changes in CRM explaining 70 percent of changes in sales performance (Tosun, 2020). It is not clear, however, whether these findings could be generalized to other industries aside from the banking industry.
Like Tosun (2020), Heinonen and Strandvik (2020) have also found the social distancing regulations that came with the pandemic to be beneficial to CRM based on their role in driving innovations. The study samples 221 innovations (grouped into 11 categories) that have come up during the pandemic, and helped to revolutionize the way organizations relate with their customers (Heinonen & Strandvik, 2020). Of the 11 categories, five are related to the CRM function. These include delivery innovations, remote presence innovations, health and well-being innovations, professional consultation innovations, and social connection innovations (Heinonen & Strandvik, 2020).
Notable delivery innovations include the use of robots to deliver groceries among Asian retailers, Carrefour’s collaboration with Uber Eats to facilitate the home delivery of groceries to customers, as well as the use of online booking/scheduling and dedicated shopping hours for at-risk customers as a means to retain them and appeal to their needs (Heinonen & Strandvik, 2020). In some cases, organizations transformed their customer service channels to offer other forms of support and education to customers (Heinonen & Strandvik, 2020). For instance, Indie beauty brands Indie Lee, Wander Beauty, and Goop transformed shifted from skin care and make-up tutorials to sharing tips around mental health such as anxiety reduction, yoga, and meditation as a way of promoting mental wellness among customers stuck in quarantine (Heinonen & Strandvik, 2020). A similar innovation was undertaken by the Kiehl’s beauty brand, which, in an attempt to reach more customers and boost declining store sales, turned its sales personnel into virtual consultants to provide customized consultations and customer support via text chat or video (Heinonen & Strandvik, 2020). Unfortunately, the study by Heinonen and Strandvik (2020) does not provide empirical evidence of the impact of these innovations on sales performance during the Covid-19 pandemic.
The study by Rodriguez and Boyer (2020) addresses this shortcoming by analyzing the impact of one such innovation (mobile CRM) on sales performance and sales collaboration. Mobile CRM, simply referred to as m-CRM, are CRM functions accessible over a mobile application, allowing sales personnel to better serve their customers and prospects (Rodriguez & Boyer, 2020). Regression results did not show a significant association between m-CRM and collaboration among sales professionals, although the impact of such technologies on sales performance was significant. The results further showed that m-CRM has a positive impact on the relationship performance with customers, but only when collaboration is present (Rodriguez & Boyer, 2020). The researchers thus conclude that m-CRM has a positive impact on sales performance when collaboration is involved (Rodriguez & Boyer, 2020). Such technologies may thus be a beneficial innovation for companies wishing to thrive in the post-pandemic period (Rodriguez & Boyer, 2020).
Literature on the impact of Covid-19 on businesses is rich. However, studies focused specifically on the context of the Middle East are limited, with most existing studies focused on the west, China, and India. Further, most researchers study the impact of the pandemic on business operations in general, without focusing specifically on the CRM function. This study seeks to address this knowledge gap by applying the findings from past studies to the context of the Middle East to identify the impact of the Covid-19 pandemic on CRM in industries in the Middle East.
Data used to answer the research questions was sourced from selected relevant studies carried out within the context of the Middle East.
Research Question 1: How has the remote working and social distancing regulations during the Covid-19 pandemic affected consumers’ purchasing behavior in the Middle East?
Surveys conducted during the Covid-19 pandemic have shown that like consumers in the rest of the world, those in the Middle East modified their buying habits or patterns. Data from the Global Consumer Insights Survey 2020 carried out by Price Waterhouse Coopers (PWC) showed that 62 percent of respondents in the Middle East experienced a fall in income, while 15 percent had lost out on their earnings as a result of caring for others or themselves after falling ill (PWC, 2020). Differently from other surveyed territories, however, 49 percent of residents in the Middle East reported that they planned to spend more during the pandemic as compared to the pre-pandemic period (PWC, 2020). This was higher than 43 percent of respondents in China, 39percent in France, 38 percent in Germany, and 33 percent in the UK, indicating that customers in the Middle East were more optimistic in the face of crises than their counterparts in other parts of the world (PWC, 2020).
As with other surveyed territories, prioritization of essential expenditure over discretionary expenditure was evident among customers in the Middle East (PWC, 2020). In the survey carried out in February 2020 prior to the lockdowns, residents in the Middle East reported spending more of their disposable incomes on restaurants (42 percent), travel (41 percent), and accommodation (PWC, 2020). During the pandemic, however, residents reported a shift in spending, with the highest expenditures reported in the purchase of groceries (61 percent), and media (41 percent) (PWC, 2020). Customers prioritizing non-food expenses such as clothing and footwear, health and beauty products, sports equipment, and office supplies/equipment fell by 50 percent, 41 percent, 39 percent, and 38 percent from pre-pandemic levels (PWC, 2020). A 2020 report by McKinsey and Company shows that between 56 and 72 percent of Middle East and Africa residents reduced their expenditure in restaurants and reallocated the same to food items during the Covid19 pandemic (Exarchos et al., 2020).
According to the PWC survey, mobile money payments and shopping via mobile apps grew in popularity among customers in the Middle East during the pandemic, with 53 percent of residents reporting that they had increased their use of smart phones for shopping. Further, 63 percent of residents were very likely to continue with this purchasing method beyond the pandemic, making mobile shopping an attractive platform for businesses in the region (PWC, 2020).
The survey results also showed a growing trend towards online grocery shopping, with 73 percent purchasing their grocery online during the pandemic, as compared to 16 percent before the pandemic (PWC, 2020). A significant 92 percent of residents reported that they were either very likely or likely to continue purchasing their groceries online after the pandemic (PWC, 2020). The influence of social media, including messaging apps such as WhatsApp, video chat apps such as Zoom and House Party also grew in the Middle East during the pandemic as people sought to stay connected to their families during the lockdowns. 75 percent of residents reported that they had increased their consumption of social media during the pandemic, and 95 percent reported that they were likely to continue using these platforms to the same extent after the containment measures are removed (PWC, 2020). Moving forward, therefore, it may be beneficial for companies in the Middle East to expand their use of mobile apps for shopping, online grocery sales, and social media marketing to appeal better to the needs of customers.
Research Question Two: In what ways have these changes affected the way organizations in the Middle East carry out CRM?
With the changes in customer buying patterns, companies in the Middle East have been forced to adapt their CRM systems through technology to enhance relationships and engagement with customers (Akpan et al., 2020). One of the most notable innovations is a shift to virtual customer engagement in response to the increase in remote working and growing popularity of mobile-based services (KPMG, 2020). One notable innovation in this regard is the HSBC UAE Bank’s Customer Service Unit, which provides a mix of in-person and technology-enhanced advisory services (KPMG, 2020). The bank’s service staff is equipped with smart watches, which offer alerts when a customer needs help and activate requests by SMS. This makes it possible for service staff to respond to customers queries in real-time, which consequently helps to enhance loyalty and customer satisfaction. Under the CSU, customers can fill out digital e-forms and make real-time applications for credit cards and new accounts remotely (KPMG, 2020). Customers with wealth and financial advisory needs can engage self-service kiosks or contact their relationship managers via video conferencing tools (KPMG, 2020).
In an attempt to retain its loyal customers, Vox Cinemas also had to adapt its business strategy through the development of Vox Cinemas Drive-In, which allowed the company’s most loyal customers to keep watching their favorite movies on the big screen from the comfort of their vehicles (Rego, 2020). Vox Cinemas is the Middle East’s largest cinema, with 32 cinema complexes scattered across the UAE, Qatar, Lebanon, Bahrain, Egypt, and Oman (Rego, 2020). Customers book tickets for drive-in cinema shows through mobile apps on their smart phones (Rego, 2020). The company’s sales personnel engage with customers via the Voice of the Customer platform, which also allows the customer to rate their visit. The company sales personnel then aggregate these insights and use them to identify areas of and hence, enhance customer satisfaction (KPMG, 2020). Sources emphasize the need for organizations to go out of their way to take care of their loyal customers (Deloitte, 2020). One way to do this is by deciding what special resources and services to supply to them in times of crises (Deloitte, 2020).
Carrefour, one of the worlds’ largest retailers with a huge presence in the Middle East, has also had to change its CRM strategy to better serve the needs of customers during the Covid19 pandemic. In response to the pandemic, the retailer launched the click and Collect feature, which allows customers to fill their grocery carts online, place orders, and select stores from where they would love to pick their packages (Illankoon, 2020). The groceries are then packaged and, whenever necessary, refrigerated until the customer can pick them (Ilankoon, 2020). This strategy takes advantage of the growing popularity of online grocery shopping in the region to ensure that customers get what they need at the right place and in a convenient way. The retailer additionally runs Mobimart, the first ever grocery bus in the region, which brings groceries to the doorstep of customers in vulnerable neighborhoods across Dubai (KPMG, 2020). This ensures that the company reaches its loyal customers and potential customers in underserved communities, engages them, and keeps them satisfied.
Some companies have responded to the pandemic by modifying their physical stores or offices to offer a more virtual experience for customers wishing to carry out their businesses remotely. This includes the use of robots to engage customers and offer assistance (KPMG, 2020). One such organization is the Dubai Electricity and Water Authority (DEWA), which has shifted to providing digital services through robots, AI, and smart apps (Dubai Electricity and Water Authority, 2020). Through the agency’s smart self-service platforms, Rammas, the virtual employee, offers customer support remotely and engages customers in developing and shaping DEWA services (DEWA, 2020). The use of AI and virtual employees helps to ensure that customers receive real-time support and help even with the agency’s employees working remotely.
Evidently, these responses were made based on real information gathered through observing customer’s behaviors. There is little focus on what the expected future outcomes of such decisions may be or whether or not these decisions are optimal as suggested by the normative decision theories. Organizations only respond based on what they have actually observed from customers. As such, in times of crises, agents’ judgments and decisions are explained better by the descriptive theories of decision-making.
This research paper sought to determine the impact of the Covid-19 pandemic on the buying habits of customers in the Middle East and analyze the steps that companies have taken to adapt their CRM strategies to better serve customers during the pandemic. The findings will go a long way towards informing organizational policymakers about the actual impact of the pandemic on the CRM function and hence, helping them prepare adequately for future pandemics. The study derives its theoretical framework from descriptive and normative decision theories the literature supports the idea that customers across the world, including the Middle East are more appreciative of online shopping and have prioritized the purchase of essential commodities over discretionary commodities amidst falling incomes. Companies in the Middle East have put forth a swift response to these changes by adapting their CRM strategies to make more use of online ordering and shopping, mobile payments, shopping via mobile apps, Cinema drive-ins, and the use of robots or virtual employees. All these strategies are targeted at enhancing engagement and maintaining relationships with customers as a means to keep them satisfied and retain their loyalty. From this study, it is evident that the Covid-19 pandemic has had the effect of revolutionizing CRM systems in the Middle East to better reflect customers’ changing buying patterns. All in all, there is a need for organizations to develop strategies that increase customer engagement through digital systems.