Scientific Journal of E-Business April 2013, Volume 2, Issue 2, PP.32-37
The Study of Customer Knowledge Management in CRM Hualin Wang Industrial Clusters and Enterprise Research Center, Jiangxi University of Finance & Economics, Nanchang, China Email: email@example.com
Abstract In this article, the study of customer knowledge management is developed from the acquisition, sharing and innovation of customer knowledge; and the classification of customer knowledge and its management process are also discussed. As to the application of customer knowledge in CRM, this article investigates it from the following aspects: enterprises’ personalized customization to increase customers’ loyalty, and the interaction with customers to access customers’ needs, and the elevation of product design to enhance their service capabilities and to lock customers. In order to create and maintain their competitiveness, enterprises should hold customer knowledge as their core assets. Keywords: Customer Knowledge; Knowledge Management; CRM; Application
1 INTRODUCTION Due to the intensification of market competition, the customer demand is becoming more and more personalized. Thus, it is particularly important for enterprises to master customer knowledge. And the studies of how to obtain, share, innovate, and utilize customer knowledge are becoming important issues for scholars on enterprise management. After years of research, Gebert and Blosc maintained that customer knowledge is exactly the dynamic combination of experience, value, contextual information and expert insight produced in the exchange process between customers and enterprises. The framework of customer knowledge constituted is able to provide and absorb new experiences and value. With the development of information technology, some experts have more complete understanding and innovation ideas of customer knowledge management. Wayland and Cole held that customer knowledge management refers to the source and application of customer knowledge and how to create a more valuable customer relationship by using information technology. And in the process of acquisition, developing and maintaining profitable client portfolio, customer knowledge management act as the leverage for related information and experiences. Michael and other scholars believed that customer knowledge management is about the activities of acquisition, sharing, and extended customer knowledge. However, Luo Shuzhang, an earlier domestic introducer of customer knowledge management, held that customer knowledge management is to effectively acquire, develop and maintain knowledge and experience what benefit customer portfolio, and to obtain maximum value as far as possible. Customers, knowledge and management must be in a closed circulatory system, so enterprises can use customer knowledge in this system to gain maximum benefits in their relationship with customers.
2 CUSTOMER KNOWLEDGE Customer knowledge comes mainly from activities of corporate sales, marketing and customer services etc. Enterprises’ overall operation processes are customer-centric. And companies obtain customer knowledge from their enterprise activities. The followings of this article explore which and how to acquire customer knowledge from the perspective of the customer knowledge acquisition.
2.1 The Classification of Customer Knowledge in CRM (1) Customers’ Basic Information. Type of this information is persevered when enterprises are dealing with customers, such as the purchasing time, location, number and species of commodities. The basic information is - 32 -
the main message of the customer knowledge, which is the basis for operational decisions. In addition to the transaction information when customers purchase goods, basic information also contains customers’ basic situation and consumer conditions, which mainly includes customers’ home address, telephone, education and earning levels of their family members. Information, such as customers’ basic family situation, their regional environmental conditions as well as their previous consumer complaint information and their credit data, is an important foundation for enterprises’ analysis of customers, which can help enterprises to accurately analyse and target their customer resources and have a better understanding of their customers. (2) Knowledge of Customers’ Needs. This kind of knowledge is prepared to meet the needs of customer knowledge, including companies’ products, services, and market conditions. It is passed by the company to the customer, to make adjustment and transformation in the process of interaction with customers. It aims to help customers have a better understanding of the products and services from enterprises, in turn; this can also make the products meet customers’ needs more effectively. How to make this type of knowledge not only acceptable to ordinary customers, but also offer each customer specific knowledge is the focus of the management of such knowledge. Through the communication of such knowledge, enterprises can have a better understanding of customers’ needs, thus developing personalized services to customers or formulate one-to-one marketing strategy accordingly. (3) Knowledge from Customers. This type of knowledge is the feedback for the products and services of enterprises and their competitors. By interaction with customers, enterprises can obtain such knowledge to improve their services, innovative products and make responses to the changes of customer demands timely and adjust their marketing strategies accordingly.
2.2 The Characteristics of the Customer Knowledge In terms of its shape, value etc., customer knowledge enjoys the following characteristics. (1) Valuable to the Organization. By using customer knowledge, enterprises can have an understanding of customer preferences. And the abilities for an organization to develop new products come from the knowledge of its customers and competitors, and their abilities to integrate such knowledge by using science and technology. CRM, by using customer knowledge, enables enterprises to have innovative opportunities to explore emerging market, thus reducing potential risks and avoiding products which fail to meet customers’ demands. (2) Dynamic and Transferability. Both the changing range of corporate customers and the changing of customers’ needs as well as satisfaction degree decide the dynamic of customer knowledge. Through enterprise integration process, customer knowledge can transfer across personal, space and time etc. Explicit knowledge can be shown through communication, and easy for communication is its basic characteristic. By using the CRM system, enterprises can share customer knowledge. While customers’ tacit knowledge can also be obtained by observation, thinking and encouragement. (3) Inferred-containing Component. Customers’ buying patterns or potential demands which are dug out by using technical means are likely suffering from some actual bias, so they need constantly correcting. Therefore, customer knowledge obtained in this way must contain inferred ingredients. Applying
Locking the correct target customers
Integrating & Analysing
Creating customer knowledge
FIG. 1 THE PROCESS OF CUSTOMER KNOWLEDGE MANAGEMENT
3 CUSTOMER KNOWLEDGE MANAGEMENT Customer knowledge management is about how to effectively acquire, share and innovate knowledge and experience which benefits customers’ combination. In order to obtain the maximum value, "customer", "knowledge" and "management" must be in a closed loop system. It is a lasting process of knowledge exploration and value elevation. - 33 -
Customer knowledge management enables competitors to obtain and use customer knowledge more quickly, thus providing better services for customers. And through constant interaction and learning, enterprise can build a barrier and win comparative advantage, and thereby increasing customers’ switching costs and competitors’ entry barriers. By using customer knowledge in this loop system, enterprises can take actions which gain the largest benefits.
3.1 Acquisition Customer Knowledge This type of customer knowledge comes mainly from the structured data during the transaction process. By using POS systems, information such as customer data, customer transaction records and customer database have been stored in the day-to-day transactions. And these data have become a data source to obtain customers' knowledge. However, in order to become such kind of customer knowledge helpful to corporate decision-making, there is also need for the use of modern information technology. Firstly, by using ETL (extract, transform and load) tool, it can extract data from multiple customer data sources, clean data and integrate data. And ETL is also equipped with an efficient storage and maintenance of a large number of customer data ability. Secondly, through the management of customer data, those data that comes from different sources have the same unified format and remove redundant and wrong data stored in the data warehouse. Finally, it may mine and discover knowledge through analysis and processing to data. Then ultimately customer knowledge used for decision-making can be formed. (1) Extraction. Select and acquire customer-related data from enterprises’ various types of database. (2) Cleaning. Cleaning includes elimination of noises, determination of missing value data, elimination of duplicate records and conversion of data types. Thus, it determines and filters out incomplete and duplicate customer data. (3) Conversion. Conversion is mainly to reduce the number of data dimensions, i.e. to find the truly useful features from the initial features, and to reduce the features and the number of variables to be considered when mining data. And then extract features and variables associated with customer knowledge in this process. (4) Classification. Classify customers according to the classification standards and customers’ comprehensive evaluation value. According to Tiwana, customers can be divided into the most valuable customers, the most growth potential customers and the negative value customers. According to the results of classification, fragment the data of customers who have already been classified by using the method of clustering and segmentation etc. (5) Analysis. By using certain technical methods, such as statistical, OLAP (Online Analytical Processing), DM (Data Mining) technology etc., to analyse and mine the classified data. (6) Interpretation and evaluation. Customer knowledge obtained through the above steps needs to determine its correctness and to correct its deviation. And ultimately form the customer knowledge after judgment, in order to help businesses to accurately analyse and locate customers.
3.2 Customer Knowledge Sharing Customer knowledge sharing is the key to customer knowledge management. Customer knowledge, as a special economic resource, can only fully realize its economic value when shared within the enterprises and turned into their shared resources. The sharing of customer knowledge will help the enterprises to detect changes in the market and grasp of marketing opportunities. What’ more, it can prevent the loss of customer knowledge with the employees’ resignation or retirement, and help to enhance the confidence of customers. Customer knowledge sharing is to break down the barriers between different knowledge owners and to achieve the free flow and use of knowledge within a certain range. Customer knowledge sharing may solve how to build a harmonious culture of sharing and flexible and effective incentive mechanism, in order to promote the full flow of customers between different groups of enterprises and to reduce repetitive input of customer knowledge production, thus saving knowledge acquisition costs to the maximum and conducing and benefiting the application and innovation of customer knowledge. There are also some obstacles in customer knowledge of sharing. One of the main reasons is that knowledge represents a source of personal power, especially tacit customer knowledge which is gained by the organization members in their process of dealing with customers. And those organization members think that it is where their - 34 -
personal values lie, thus they are reluctant to share with others. While on the other hand, some employees are afraid of being considered as incompetent and ignorant, thus unwilling to accept or use other people’s ideological achievements. In addition, there are also obstacles in knowledge sharing between different professional backgrounds, thus having large differences and lacking communication backgrounds. The conditions in which employees agree to share knowledge are reciprocity, reputation and selfless attitude. In fact, there is a kind to internal knowledge market in enterprises. Knowledge is exchanged between demand-side and supply-side, and mentalities, such as reciprocity, reputation and selfless, playing a dominant mechanism in which trust is a necessary condition in the smooth functioning of market. By using CRM concepts and appropriate tools, enterprises can effectively solve the problems appearing in the process of transfer and sharing of customer knowledge, thus improving their competitiveness and their ability to adapt to the market.
3.3 Customer Knowledge Innovation After these four stages of socialization, externalization, combination and internalization, personal tacit knowledge can achieve knowledge transfer between individuals and between the individual and the organization, and ultimately to generate new tacit knowledge. In this process, there are transformations both in explicit knowledge and tacit knowledge. It is a dynamic, progressive, and knowledge innovation process in essence which can be called “knowledge spiral”. “Socialization” transfers from explicit knowledge to explicit knowledge. Experience sharing is achieved through observation, imitation and hands-on experience. “Externalization” transfers from tacit knowledge to explicit knowledge. It uses analogy, metaphor and assumptions to clearly articulate the tacit knowledge, in which listening and talking are important tools to promote tacit knowledge transfers to explicit knowledge. “Combination” transfers from explicit knowledge to explicit knowledge. It further makes explicit knowledge systematic and complicated, and arranges employees’ fragmented knowledge into organizational knowledge. “Internalization’ transfer explicit knowledge into tacit knowledge. Employees apply the systematized explicit knowledge to work to create new tacit knowledge, which means that organizational knowledge is transferred into other members’ tacit knowledge. Knowledge innovation is a spiral process. For example, the tacit knowledge which relates to customers’ tacit knowledge can be transformed into the concepts of new products through socialization and externalization. And this kind of conceptualized knowledge can generate systematic knowledge and develop new product prototypes through combination. And systematic knowledge can be transformed into operational knowledge by internalization and conduct mass production. In this way, experience-based knowledge starts a new round of knowledge innovation process. Known by the knowledge innovation process, enterprises, who aim to stimulate customer knowledge’s innovation, must create a favourable environment to promote the conversion between tacit customer knowledge and explicit customer knowledge.
4 THE APPLICATION OF CUSTOMER KNOWLEDGE IN CRM The final content of CRM is the use of customer information and knowledge. The success of CRM, to a large extend, determined by whether the generated customer knowledge can be put into use. Enterprises deal with customers through marketing, sales and customer service and support. Customer knowledge acts on customers by use and integration. Customer knowledge management regards customers’ lifetime value as its core content. And customers’ business processes can be understood through customer identification, exchange, access and retain. A good CRM can be used as a significant competitive advantage in e-commerce businesses. And in the process of interaction with customers, enterprises can increase corporate value and maintain competitive advantage by creating, exchanging and applying knowledge. Specifically, the use of customer knowledge is helpful for enterprises’ decision-making.
4.1 The Creation of Customization Services CRM’s increasing of enterprises competitive advantage, not only means the maximization of the size of customers and profit, but more important is to win the maximum value of existing customers and their loyalty. Generally, enterprises will change their way and content of management according to customers’ demands, as well as customer knowledge they mastered. It means that enterprises must confirm and track customer information and interact with - 35 -
customers, then provide products or services which meet customers’ specific requirements according to their mastered information. In enterprises interaction with customers, every exchange must promote enterprises’ ability to meet customers’ current and potential demand.
4.2 Across the Subdivision Model Enterprises are not restrict to the traditional subdivision market, but the personalized customer system to target markets, develop business strategies, grasp market changes, predict customer behaviour and select the appropriate channel strategy. Although enterprises have to make use of customer information, the amount and quality of customer information is not a standard to measure enterprises’ success which rather depends on their abilities to increase customer loyalty and maintain the number of customers and improve the quality of customer relationships through acquisition, storage and use of customer knowledge.
4.3 The creation of a learning relationship Customer loyalty largely depends on the degree of learning relationship between enterprises and customers in a business. Learning relationship will make both sides more and more intelligent in their continuing process of interaction. Each time when enterprises are interacting with customers, they will add one more experiences. And when enterprises obtain customers’ demands or discover for themselves the customer needs, and then they improve their products or services accordingly. During the process of this cycle, enterprises will naturally receive customers’ enthusiastic responses, and get feedback in customers’ loyalty. Once the learning relationship formed, it will be very stable. And the direct benefit this relationship brings is that when competitors attract customers in the same way, customers will refuse to transfer but continue their loyalty to the enterprise because of the high switching costs, and in this way it helps enterprises lock customers. The longer the time the learning relationship takes to build, the greater the costs of customers leave. By maintaining a long-term learning relationship with customers, enterprises can not only retain customers, but also expand profit margins.
5 CONCLUSION Customer knowledge management is a hot research field of customer management in the future. By using the theories and methods of knowledge management administer customer relationships make customer knowledge to become the core assets of enterprises. Thus, it makes customers no longer to be the passive recipients of corporate knowledge, but knowledge creator and sharer. In the process of interaction, it achieves the maximum value of the customer knowledge. Customer knowledge application is an important issue in the management of customer knowledge. With the advancement of customer knowledge, it has been extensive and deep understanding on this study, but the acquisition, sharing, and innovation of customer knowledge and knowledge of customer needs are still in the exploratory stage. This paper does some useful researches from the perspectives customer knowledge classification, customer knowledge sharing and innovation, as well as customer knowledge applying.
Guo Guoqing, General Theory of Marketing[M], Beijing, Renmin University of China Press, 2009
Huang Tiyun, Management Information Systems[M], Beijing, Higher Education Press, 2003
Hao Yufeng, Large Customer Market and Customer Management[M], China Economic Publishing House, 2005
Ma Gang, Li Hongxin, Customer Relationship Management[M], Dalian, Dongbei University Press, 2006
Ma Gang, Li Hongxin, Customer Relationship Management[M], Dalian, Dongbei University of Finance and Economics Press, 2009
Zhang Hui, Customer Loyalty-oriented Gap Analysis Model of Customer Knowledge[J], China Paper Download Center, 2008.8.12
Zhou Xiaoning, Research on the Acquisition of Customer Knowledge in CRM[J], China Paper Download Center, 2008.8.12
- 36 -
- 37 -
Published on Aug 29, 2013