Your Say: KM & CRM - Inside Knowledge

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posted 1 Apr 2000 in Volume 3 Issue 7

Your Say: KM & CRM

This month's Your Say re-visits the topic of customer relationship management, as our contributors discuss what knowledge management can offer the customer service sector

Know thy customer, know thyself

In a global market where price differentials are being eroded and new entrants are popping up for the price of a website, the penny is finally dropping that loyal customers are the most valuable asset. As we entered the new millennium, customer relationship management remained high on organisations' priorities. That's CRM as a customer-centric model designed to support the three phases of a seller/buyer relationship; new customer acquisition, retention of existing customers and lifetime value maximisation. So where does knowledge management fit into the CRM picture? Let's look briefly at each of the phases in turn:

1) Finding new customers. Pareto' s principle says that 80% of profit comes from 20% of customers. Therefore, it is logical for businesses to seek out more customers like their top 20%. A common method of doing this is using statistical analysis to build a 'profile' that can be used to trawl through a database to identify and match potential 'suspects' . But what happens if you're a new entrant to the market, or offering a completely new product or service, or if there is a dramatic shift in market conditions? It is here that we need the human touch, to build up a model of potential buying behaviour, theories that can be discussed, challenged, tested and revised. This is the domain of proven KM techniques.

2) Maintaining the relationship. Once you've got them, how do you hang on to them? In the world of CRM, it is the customer's experience of dealing with a business that tests their loyalty. Yet think for a moment about how many of us have had awful times with call centres - waiting for eternity to speak to an anonymous operator who seems to have no access to your past dialogue with the company, can't answer a specific question or has to transfer you to another department. Even a very rudimentary KM solution could make a huge difference in this area, never mind the potential to help build better models of customer behaviour and service requirements.

3) Maximising lifetime value. Having got the customer who is loyal to the brand, what else can be sold to them? You've already passed the first two hurdles, they know you can deliver on your promise of service and quality so it should be possible to attract more business from them. Maybe it's just a change in circumstances, maybe the market is driving a new demand that could be filled, maybe your customers just prefer you to your competitor. The bottom line is that once the goose that lays the golden eggs has been found, only a fool would let it get away. This is where KM is priceless, it cannot only help organisations better understand their customer behaviour and motivation, but can also determine their ability to respond.

So, do I see evidence of KM being used effectively as part of CRM solutions? Are enterprises evolving into more knowledgeable, responsive, easy-to-do-business-with kind of organisations? Well, try telephoning the call centre of any major business or utility and decide for yourself based upon your 'customer experience' - I'll be waiting with a cup of tea and biscuit when you get back and need a shoulder to cry on.

Peter Dorrington is a principal consultant for ECsoft UK Ltd. He can be contacted at:Peter.Dorrington@ecsoft.co.uk

CRM is not a plug-in

I cannot understand the feeding frenzy at the moment - an insatiable need for any knowledge and expertise on customer relationship management, and yet the concept of CRM has been with us since business began.

Some of us knew it as one-to-one marketing, some as relationship marketing, and others would argue that it is the very core of marketing. All of these concepts are about being customer focused and deriving maximum long-term revenues from your most profitable customers. Organisations for years have sought to become 'customer focused' through such change activities as 'business process re-engineering' and 'valuing the customer' . So why all the fuss now about CRM?

Is it because these business change activities have failed in the past and CRM is seen as the saviour? Has the proliferation of channels, the blurring of industry boundaries and the increasing demands and expectations of customers led to a focus on CRM? Or is it due to the stratospheric growth in the Internet and, with it e-commerce, which has meant an explosion in dot coms, thereby awakening the importance of satisfying and retaining customers in order to retain market position? It is all of these and more.

CRM as a concept is therefore possibly more critical to business now than ever before. However I am concerned at the overwhelming focus on websites and databases whenever the phrase CRM is used. Building yourself a website with an attached database does not mean that you will automatically satisfy customer needs. Customers require a consistent experience independent of the channel they choose. Future organisations will have to deliver consistent customer experience through multiple (inter-linked) channels including web, WAP, voice-web, sales-people, paper, interactive TV, call-centres and ATMs.

For CRM to be successful the combination of technologies used is vital, but technology alone will not solve the business issues of blurring industry boundaries, demanding customers and aggressive dot coms. Having a CRM strategy in place as well as the technology is not necessarily enough. To be successful in customer relationship management takes more than a strategy and appropriate technology; for CRM to be successful it has to become an ethos, the very culture itself. It may start with a website, but it cannot and must not finish with one.

So what does this mean to businesses chasing CRM? It means that when you are looking at your CRM strategy and technology, do not think of it as something that you add on to the organisation but as the driving force for the whole organisation. It is still critical that company strategy, internal processes, organisational matrices, performance management, supply chain management, logistics, customer services and legacy systems all support and meet the customer's requirements of the organisation.

A company is only truly customer focused when all purpose and activity is concentrated on satisfying profitable customers, acquiring and retaining these customers and growing long-term revenues from them. Buying a CRM capability and 'plugging it in' to your current organisation may well achieve nothing more than making your current inefficiencies more customer focused!

Gideon Davenport is an e-business innovator at Adario. He can be contacted at:gdavenport@adario.com

The formula for a successful business

Knowledge management is often associated with exploiting the internal assets of an organisation - the people and processes. It is, however, the knowledge and understanding of customers and suppliers that is really the key to differentiation and competitiveness. Today's customers demand and expect bigger bargains, better products and faster service, all on a personalised scale. These are dealt with by customer relationship management approaches, but the boundaries between KM and CRM are becoming blurred.

In fact, the terms KM, CRM and e-business are almost interchangeable, and will become more so as business-to-business (B2B) and business-to-consumer (B2C) interactions achieve ever higher levels of sophistication. From the web-based shop-front, right through to customer knowledge repositories and supply and demand chain management systems, the ways in which today's organisations manage each stage of the customer interaction process will mark the difference between their survival and demise. Nevertheless these are issues few organisations have resolved. The number of on-line initiatives is increasing, but the preoccupation with the marketing front-end is occurring at the expense of the back-end integration requirements and personalised customer interaction (an issue dealt with by Don Cooper later in this section).

For B2C relationships, it is the ability to personalise products, services and treatment that KM provides to support the CRM customer contact. By applying analytics appropriately, a business can ensure that each customer is treated in a personalised and individual manner, improving customer retention and loyalty as well as generating new revenue-creating opportunities. Combining customer knowledge with CRM enables an organisation to target high net-worth customers using the most appropriate channels, leading to further opportunities for growth. Customer intimacy is an essential ingredient of the modern organisation's recipe for success.

While consumers demand a personalised service, it is the knowledge of industry-specific processes that must be tailored to meet the needs of businesses. Organisations involved in on-line B2B commerce can differentiate themselves through innovative business models, exploiting different competencies within a flexible value chain or network to meet individual organisations' demands. In fact, the entire corporate buying and selling model must be so dynamic as to enable each customer to receive the optimum outcome based on the combination of suppliers, services and processes most appropriate to its own business model and vertical industry. In order to achieve this dynamism, an organisation must be able to access information about its own business operations, its customers and their vertical processes and business models. Managing this extended enterprise-knowledge will be the differentiating factor for on-line intermediaries whose chief value-add is the way they apply knowledge of their vertical industry.

Customer intimacy and flexible business models may seem easily attainable goals for a 21st century business, but there is an added complication; these goals must be achieved in as near to real-time as possible. As consumers, we expect an immediate and well-informed response to our needs. Businesses, too, expect instant satisfaction, but these expectations require the real-time matching of buyers' needs and sellers' offerings - in essence, an on-line auction optimising the entire supply and demand chains for real-time results.

To achieve these goals, the combination of sophisticated analytics, an integrated view of an enterprise's knowledge and rapidly adaptable processes is essential. KM supplies the knowledge that defines how a business operates, and CRM defines the nature of each customer interaction. By combining these two business disciplines, an organisation can tailor every aspect of its business to ensure the effectiveness of each customer relationship. In doing so, the threat from competitors can be significantly reduced.

Susan Colling is a KM specialist at Syntegra. She can be contacted at:susan.colling@syntegra.bt.co.uk

A good reason for KM

There are many bad reasons for launching a knowledge management project. Perhaps the chairman has seen the phrase in the FT, or read it in a competitor's annual report. But the only good reason for launching into the world of knowledge management is that there is a compelling business case.

Use knowledge management to solve a problem, or maximise an opportunity. Never implement knowledge management for its own sake: you will be trying to solve a problem you do not have.

In early 1998, BT set about creating knowledgenet, an interactive information-sharing database for account management teams. The challenge was customer relationship management. Customers expect companies to know more and remember more about them; BT had to meet that expectation.

BT s massive corporate customer base meant that it was learning and re-learning a lot of things that it, as a company, already knew. It was wasting a lot of effort by re-inventing the wheel over and over again. The problem was lost time and money, and missed opportunities.

BT had to free up the knowledge it held about its customers and its prospects to offer a better service, and improve its own sales performance. It identified that much of the knowledge its account managers used was tacit, not explicit. Building a huge database of this tacit knowledge was not feasible, and did not fit the way sales, service and marketing people prefer to work.

For this reason, a codification approach was inappropriate. Creating an interactive encyclopedia of all relevant knowledge is not an effective way of marshalling this kind of knowledge, and this kind of knowledge-holder.

For this reason, instead of codification, the knowledge-sharing in BT's knowledgenet is based on a personalisation approach. Not an encyclopedia, it is more an intelligent phonebook. If a salesperson is seeking a particular piece of information, knowledgenet is less concerned with providing that information, and more with putting the seeker in touch with an expert - or at least someone who has done it before.

For a knowledge management system that is concerned with CRM, this is surely the most effective way. A sales process is a human challenge, so knowledge exchanged on a person-to-person basis is likely to be much more valuable and easily applied than anything taken from a written report.

Most importantly, knowledgenet does not work by just asking people nicely. As with anything that is people-based, incentives are everything. Through knowledgenet, BT's account managers are rewarded every time they pass on information that the recipient values. This is not a very large payment, but enough to make the account managers take notice. It is also an important first step in breaking down the traditional incentives to hoard information. It augments the sense of internal competition with a reason to work as a team.

But the real payday comes later. If an account manager provides some knowledge to a colleague, as well as the initial payment for doing so, they get a much bigger payment when any subsequent business is won based on that knowledge. In this way, the account manager who hands on knowledge to a colleague will retain an interest in the lead, even after giving the information and taking the initial knowledge-sharing bonus.

If there is one area where knowledge management can make a major difference for large companies, then it is customer relationships. Knowledge management can help companies use the whole volume of knowledge they hold to their own advantage, but still use the personal touch with customers.

Simon Mills is head of knowledge management for BT Corporate Clients. He can be contacted at:simon.mills@bt.com

Knowledge is power - data is the key

The number of retail sites now on the Internet would surpass the number in many high-street towns or cities. The cyber shopper has ample choice - browsing and buying at a click of a button. With such a selection, shoppers are no longer loyal and organisations are finding it a challenge to retain them. This was emphasised in a recent Forrester report, highlighting that 60% of online shoppers showed no brand preference at all.

Customer relationship management is a key weapon in the battle to retain existing customers, in addition to enticing new ones. Building effective relationships with your customers is based on knowledge - knowing your customer. Yet, this is a hurdle that many organisations stumble at.

Customers are demanding a personalised level of service - whether that is through the web, by email, fax or over the phone. Knowing your customer helps build loyalty in this virtual world.

To gain this knowledge, a company can implement a data warehousing strategy. This would involve marshalling together data from diverse parts of an organisation, in order to build up a centralised knowledge base - a corporate memory - inside which a complete view of the customer may be contained. The weapons in the armoury of those responsible for setting up a data warehousing strategy are data marts, online analytical processing (OLAP) tools, and tools for data mining.

Data marts are central databases where data from separate parts of the business is stored. Data mart designs have to take account of a number of factors, including time zones, conflicting data representations and different customer identification conventions before raw data can be stored. This ensures that the data makes sense when looked at from an enterprise-wide perspective. Consequently, designing a data mart from scratch requires specialist skills because the central repository is far more than just a replication of a series of local databases. That said, it's possible to obtain off-the-shelf data mart products for use in specialised business areas, for example a contact centre data mart.

A data warehousing strategy needs to consider not just the acquisition and storage of data in a data mart, but also needs to define how the company intends to use the data mart investment by identifying the most appropriate data analysis tools, and altering business processes to best use them. The terms OLAP and data mining have been coined to describe various ways of examining data mart information, which goes beyond the use of purpose-built reports. OLAP tools can empower business users to search for customer trends within a customer data mart. Data mining tools are more advanced - they can look for the trends themselves based on rules built in by product designers.

For example, by using OLAP or data mining tools a company can proactively analyse transactional data to examine the operational efficiency of the organisation. The data may show that more customers are using email to contact the organisation during the day, but then reverting to the phone in the evening. The result will be to ensure the organisation has the appropriate skilled agents at the different times of the day.

This example highlights the resource issue that a data warehousing strategy can help overcome. However, the benefits can stretch far beyond simple quantitative measures. Analysing and mining data can reveal trends that companies can act on to develop business initiatives to ensure good customer relations.

A manager in a retail firm could analyse the effects of region, time of year, customer demographics and promotional campaigns on the sales of a particular product. If the data revealed that sales have reduced in the north of the country, the company can then implement a regional marketing campaign to bolster sales. Individual customers could be targeted depending on their desired channel of communication and their buying preferences.

By combining transactional data with the information about each and every customer, the organisation can build a full 360º view of its customer base and the resources needed to fulfil their demands.

Data warehousing adds business value by allowing companies to gain a unique insight into their customer base by creating a corporate memory. One-to-one marketing is the underlying principle of CRM and data warehousing is a key tool to help form relationships with each and every customer.

The retail adage 'the customer is king' has never been so true. Building customer loyalty is the responsibility of the organisation. There are many sophisticated data storage and analysis tools on the market and companies should seize the opportunity to implement these solutions if they want to see a profitable growth.

Gary Coville is director of marketing at Aspect Communications UK. He can be contacted at:Gary.coville@aspect.com

Front to back integration

As the business world evolves, customer retention and loyalty are no longer merely desirable aims to bring increased success; they are now essential to ensure survival. Effective customer relationship management is the key to building a long-term relationship with customers and thereby retaining a loyal and profitable customer base. And the integration of front and back office processes is an essential element of successful CRM.

The front and back office functions have a natural synergy, combining to provide an overall value greater than the sum of the component parts. However, there is a risk that this synergy may not reach its full potential and gaps may develop. This is because companies have traditionally been focused on increasing efficiency and reducing costs by automating back office systems such as payroll and human resource management. Hence, the more customer-centred front office systems in areas such as marketing, sales and service have become more isolated, despite the fact that they also contain valuable customer information, which is essential to successful CRM.

Effective knowledge management can bridge this gap, and provide the key to successful integration, but only if all the processes have been suitably adapted to facilitate effective knowledge sharing. The latest technology must be utilised to link all the separate knowledge bases throughout a single organisation to provide a comprehensive, composite customer history and profile.

Distinguishing between those customers wanting remote access to services via the Internet and those who need face-to-face contact, for example, ensures provision of optimum service. However, the ability to recognise that these requirements might change at different points of the sales/service cycle, and the flexibility to adapt to meet these needs is also vital. Sharing all customer knowledge improves each salesperson's effectiveness, promotes effective team working, and demonstrates the company's enhanced customer focus to the consumer.

This integrated approach to CRM is vital to avoid the dangers of inconsistency and inefficiency that prevent an organisation from presenting a positive customer-focused image to the consumer. Organisations need to capitalise on the ability they now possess to update their customer knowledge bases with every transaction to enable them to build and maintain customer profiles in real-time, increasing both the value of this information to the organisation and building customer confidence in their enterprise.

Combining KM, an effective customer service culture and advances in technology will all support increased integration between the front and back office. Successful organisations will achieve a major shift in focus by implementing a more customer-centric business strategy. Close attention to all elements of the complete customer care lifecycle is the key to leveraging the knowledge necessary to improve customer service and increase sales.

Successfully exploiting knowledge about its customers enables an organisation to provide a more personalised level of service, which will in turn lead to improved customer relationships, and to higher levels of loyalty and retention.

Don Cooper is Associate Director with Capita Consulting. He can be contacted at: cooperd@capitagroup.co.uk

Next month in Your Say, we examine the knowledge management system - what makes a good KMS stand apart from the rest? Other topics to appear in future issues include: Measuring return on investment; KM and competitive intelligence; and KM in the financial sector.