Customer relationship management (CRM) in the Internet of Things

What a good CRM tool should be able to face in the Internet of Things...

According to the XXth century works on cognitive psychology in economy or sociology, the consumer’s decision making has been demonstrated as something not based upon fully rational behavior, thinking or cognitive processes in the choice of alternatives.

In the marketing or merchandizing processes, Herbert Simon demonstrated that the consumer’s choice is not made upon:

• ·       “The identification and listing of all the alternatives,
• ·       the determination of all the consequences resulting from each of the alternatives; and,
• ·       the comparison of the accuracy and efficiency of each of these sets of consequences, (source Wikipedia)”

Actually, this model is unrealistic since the cognitive effort to produce – in context - would lead to a situation of non-decision (or a situation in which the end user would considers as useless “a service which would list all of the available alternatives”) …

The principle of “bounded rationality” that is used by human being and specifically the “consumer” to make decisions is, then, based on:

• ·        efficiency, realism,
• ·        search for a cognitive balance,
• ·        Available information in mind (understanding of the situation, mental schemes…),
• ·        Context (amount of available time, stress, etc.),

In every context of choice, there is therefore no optimal solution but “good enough ones”, which will lead the actor / consumer to satisficing himself (“Satisficing” is “a portmanteau combining satisfy with suffice", is a decision-making strategy that attempts to meet criteria for adequacy, rather than to identify an optimal solution - source Wikipedia).

In a context where a consumer will have the opportunity to scan a data carrier on a product to retrieve a list of sources of information or services on a specific product (e.g. in a supermarket), the consumer will, potentially, face two different situations:

1. 1 Either there is a few information available or a few services… in that case, the choice will be easy to make but the added value of the solution will be limited (risk of inadequacy, inaccuracy, lack of information, frustration, etc.),
2. 2.    Or there are many information or services available… in that case, the behavior of the consumer will be:

• - Described by the principle of “bounded rationality” (see above),
• - Or to give up because of a too complicated situation.

H. Simon (1947. Administrative Behavior: A Study of Decision-Making Processes in Administrative Organizations, - 4th ed. in 1997, The Free Press) emphasizes the importance of seeking information in the decision making process (cf. the theory of bounded rationality), but, besides the impact on the conditions of the choice of the actor, this theory highlights the feedback loop: “information on the real <-> change of the reality”.

This means that, when obtaining information on reality, the intelligent actor decides and acts… then stimulates or changes the evolution of the reality. When doing this, the intelligent actor is both deciding and acting according to his own objectives, his own finality. The evolution of reality is therefore driven by different finalities: those of all involved intelligent actors. This makes reality naturally either complex or chaotic, depending on the level of analysis.

In this context, the assumption of uniqueness and constancy of consumer's finality is called into question. Any deterministic approach to model the behavior of the consumer (always uncertain) is therefore subject to a potential failure.

Current CRM tools are mainly focusing on deterministic processes or behaviors. Next generations of CRM tools will have to take those important issues into account; which illustrates the need for a change in the way we conceive and program our information systems.

Muriel Lecomte, Philippe Gautier.