Coping with earthquakes and COVID-19: A perspective of customer relationship management/Afrontando terremotos y COVID-19: una perspectiva de gestion de la relacion con el cliente/Lidando com terremotos e COVID-19: uma perspectiva da gestao do relacionamento com o cliente.
| Autor | Orengo-Serra, Karen L. |
| Cargo | Research article |
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Introduction
Every year, businesses are impacted by disruptive events, which has motivated them to reformulate management strategies to mitigate the negative effects of these events and take advantage of the opportunities presented (Morrish & Jones, 2019). Around 400 natural disasters and 40 armed conflicts occur worldwide each year (Waldman, 2019). Together, these and other disruptive events imperil the survival of businesses. Disruptions caused by natural events such as hurricanes, earthquakes, and pandemics, or human acts such as terrorism, sabotage, and technology (e.g., cyber-attack) threaten communities around the globe. Scientists predict that due to climatic change, the frequency and intensity of natural disasters will increase (USGS, n.d.), especially dangerous weather events in coastal areas. Another disruptive event that has caused economic and social disruption recently is the COVID-19 pandemic. International health experts agree that despite being rare, health pandemics will continue to occur; hence, the world should be prepared to cope with their effects (Donthu & Gustafsson, 2020; World Health Organization, 2020).
Located in a zone highly vulnerable to natural disasters, Puerto Rico (PR) has experienced three major disruptive events since 2017: hurricane Maria, a series of earthquakes, and COVID-19. These events have aggravated its economic crisis and exposed its vulnerabilities in critical infrastructure and food dependence. Most recently, a series of earthquakes caused severe material damages in which approximately 300 homes were destroyed and two-thirds of the island population was left without electric power. Commercial infrastructure collapsed or remained in unsafe conditions, forcing many businesses to close or relocate their facilities to other municipalities. Van Der Elst, Hardebeck and Michael (2020) reported that aftershocks are expected to persist for years to decades; they stated that the probability of having a magnitude 6 or greater earthquake within a given year, going forward, will not fall below 25 percent for another 3 months to 3 years, and the risk of having a magnitude 5 or greater earthquake will not fall below 25 percent for a decade or more. In countries constantly exposed to earthquakes, businesses are often displaced and cyclically need to reinvent their operations to meet customer demand (Kay et al., 2019).
A few weeks after the 6.4 magnitude earthquake in PR, the COVID-19 pandemic outbreak reached the U.S. and spread to the island. According to the U.S. Centers for Disease Control and Prevention (CDC), the COVID-19 risk is high in PR but is lower than in most parts of the U.S. Globally, long-term quarantine, lockdowns, and suspension of public and private activities have had a large and adverse impact on aggregate demand, especially on consumption and exports (Shen et al., 2020). The total shutdown of economic activities has led many businesses to the brink of bankruptcy, while others closed temporarily or laid off employees, increasing inequality and displacement of affected people in hotspots such as the Caribbean and Latin America (United Nations, 2020). These measures to contain COVID-19 have spread disrupted global supply chains of goods and services and reduced the demand for imports significantly, with small and mid-size enterprises (SMEs) being the most impacted sector (Organization for Economic Cooperation and Development, 2020). Thus, the COVID-19 pandemic has disrupted consumer habits, and advancements in technology have helped accommodate these changes (Sheth, 2020). As in many countries affected by COVID-19, in PR lockdown meant that the few businesses authorized to open never recovered to normal profit levels; about 95 percent of SMEs in Puerto Rico, that is, 43,000 private businesses that have less than 50 employees, have been impacted by COVID-19 (Ramos Segarra, 2020). Tourism, retail, and restaurant industries are the sectors most impacted by the ongoing pandemic, with 100,000 jobs lost from March to May 2020 (Ramos Segarra, 2020).
However, some businesses have taken advantage of these disruptive events by adopting a new business model, incorporating new product/service offerings, and reshaping operations and inputs. Other businesses relocated their operations and/or integrated innovations and technologies to satisfy the needs of customers and newcomers (Donthu & Gustafsson, 2020; Kay et al., 2019). Disruptive events may generate dramatic changes in everyone's life, forcing the business community to face a quickly changing market environment. In this scenario, customer relationship management (CRM) allows firms to be flexible and adapt to new issues, embrace product or service innovation, meet the expectations of new customers, and develop new channels to communicate with customers (Kumar & Reinartz, 2018). CRM is a marketing intelligence concept aimed at managing business strategies using a relational approach; it aims to increase customer satisfaction, retention, and loyalty and discover new business opportunities (Rahimi & Berman, 2009; Wakabayashi & Merzthal, 2015). Since technology plays a vital role in any CRM approach, when disruptive events such as earthquakes or pandemics occur, businesses rely on resiliency tools or strategies to cope and continue operations.
This study investigates how companies in PR adopted CRM resilience strategies to meet customer needs during the first five months of lockdown due to the COVID-19 pandemic and the earthquakes experienced before and during the pandemic. The data presented here were generated from 121 firms surveyed and 7 in-depth interviews with business owners and managers under a grant awarded by the Resiliency and Business Innovation (RBI) (1) project in early 2020. The goal of this project was to conduct case study research on successful innovative and resiliency practices adopted by companies in Puerto Rico that helped them cope with the earthquakes and COVID-19 and can be replicated or serve as a model of business disruptive event management practices.
Even though research has increasingly focused on business recovery and resilience measures after disruptive events, very few CRM studies have examined how disruptive events affect customer relationships during and after them. This study describes CRM resiliency activities carried out by SMEs during earthquakes and COVID-19 in an innovative manner, by providing strategies for businesses to move forward and cope with negative effects of unexpected disruptive events. From a theoretical perspective, this research contributes to the scarce literature on resilience CRM by being the first study using the resilience framework to consider effects of two different disruptive events on multisectoral businesses in an insular territory. It shows what marketing strategy companies can use to re-establish CRM programs during and after disruptive events. Prior studies present general company strategies after disruptive events, but none analyze how to develop strategies from the perspective of resilience CRM.
The paper will first examine research on the CRM literature and how customer relationships are affected during and after a disruptive event, followed by a methodology and results for the empirical study. Then, the discussion and conclusion are presented.
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Literature review
Research has increasingly focused on business recovery following catastrophic events and examined the resilience measures of companies (Morrish & Jones, 2019). However, few empirical or conceptual CRM investigations explore how customer relationships are affected during and after a disruptive event (Baker et al., 2015; Biggs et al., 2012; Miles et al., 2016). Also, few studies consider CRM resilience strategies used by companies as mitigation techniques.
CRM strategies focus on customer orientation in a constantly evolving environment (Javalgi et al., 2006), "selecting customers that a firm can most profitably serve and shaping interactions between a company and these customers. The goal is to optimize the current and future value of customers for the company" (Kumar & Reinartz, 2018, p. 5). When disruptive events occur, the intersection between CRM and resilience is considered to assure business continuity and meet the new needs of customers (Liu & Black, 2011). A disruptive event (glitch, disturbance, crisis, etc.) is an unintended, untoward situation that generates corporate risk (Folke et al., 2010). For affected firms, it is an exceptional, anomalous situation compared to everyday business. Natural disasters, sabotages, terrorism, and health pandemics are examples altering human lives and the financial and natural resources of the affected community (Baker, 2009).
Disruptive events pose challenges to long-term consumer relationships, leading companies to develop new strategies to reestablish their customer value. Shen et al. (2020) indicate that internal marketing is an essential component of a CRM strategy; it is defined as the way a company treats employees as internal customers to promote service quality and customer satisfaction, achieving long-term business benefits. From the perspective of entrepreneurial marketing, Miles et al. (2016) and Morrish & Jones (2019) focus on resiliency in the context of natural disasters. The recent literature investigates business resiliency during the COVID-19 pandemic in terms of firm performance, financial impact, consumer behavior, and the role of innovation and technology (Albuquerque et al., 2020; Shen et al., 2020; Eggers, 2020; Gu et al., 2020). However, few studies approach COVID-19 from marketing, strategic management, or entrepreneurial perspectives (Liguori & Pittz, 2020; Sheth, 2020; Wang et al., 2020). There is a research gap between marketing management strategies and resiliency to cope with these types of disruptive events. This is the first study approaching resilience from the perspective of CRM amid two different...
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