Your Say - Inside Knowledge

Feature

posted 1 Oct 1999 in Volume 3 Issue 2

Your Say

With the advent of fingertip information via the Internet, customers now demand J-I-T knowledge too. Mere reputation can no longer outlast immediate service when the aware consumer can easily know more than the customer service employee . It is time to focus on knowledge that companies can bring to the customer. This month's Your Say looks at what KM can do for customer relationship management.

Mental models: Speed Learning

The opportunities for a company to learn about customer needs are many, but most of these opportunities are lost through lack of appropriate knowledge management. One reason is the need to balance time required to capture knowledge against time allocated for conventional business activities. There is simply not enough time to individually analyse each customer contact for learning or experience. Is there a way to speed-up the learning process and rapidly put new customer knowledge to work?

One approach is to start by analysing the mental models that inform and shape customer behaviours. The model is then applied in key customer facing situations and adapted using feedback and observation of the model, rather than by analysing individual customer situations.

A mental model is based on the set of information and concepts that someone uses to make decisions or guide actions. Mental models can be developed from a customer or company viewpoint. Some models are discovered by analysing moments of truth (the times when a customer interacts with a business). Others are derived from business and management literature. Let me give an example. A common belief in the financial service industry is that customer loyalty is a key factor driving profitability and margins. Various commentators have suggested that if a customer uses more than three products from a single vendor then they are likely to be more loyal than a customer that uses only one service. Related studies explore the link between different combinations of three of more products and profitability. This type of knowledge provides a conceptual background for the model.

Now we add an understanding of the information that is needed for someone to make decisions using these concepts. Internally this might include information about products, the terms and conditions under which products are sold, the costs for establishing then servicing the products, and product volumes. The customer is interested in how to gain the best value from a combination of products, competitor products, and how to switch between one vendor and another.

This mental model recently provided some startling opportunities for learning and knowledge that would have been hidden. The most obvious point was that the customer view was quite different to the internal perspective. Most of the information that the customer wanted was not provided by the financial institution - so the customer had to discover it. In many cases, the customer did not bother to find the information, so 'loyalty' was in reality 'inertia'. With this knowledge we changed the mental model to explicitly analyse the barriers that prevented a customer from switching companies. More revealing was the discovery that customers make their decisions at the level of product components and features rather than the packaged or sold product level that was assumed by the company. This led to analysis of loyalty at a different level of granularity, resulting in new customer relationship insights and knowledge.

Knowing the mental models that underpin customer behaviour helps to determine the information and knowledge that must be managed effectively in order to improve customer relationships. The 'mental model' approach brings together a complementary mix of theory, practice and knowledge of the information that is used in decision making.

Roger Evernden is a director and information management consultant at WorkSpace International. He can be contacted at:
Email: Workspace@compuserve.com
Website: www.workspaceinternational.com

Know Your Customer, Know Your Supplier, Know Yourself

- Where does CRM end and KM begin?

Clearly there are close links between Customer Relationship Management and Knowledge Management, but it is less obvious where one ends and the other begins. Cap Gemini work with clients in both areas (we call our KM offer 'Knowledge Transformation Services' or KTS), so it's perhaps helpful to examine how we differentiate the two in our world, and in particular how the concept of knowledge is used differently.

At Cap Gemini, we try and make it easier for clients to understand what we can do for them by focusing around a series of Service Offers, each of which address specific sector business issues with a package of closely-related consulting, technical and management services. In simple terms, there has to be a clearly articulated need, a well-developed solution and a clear benefits case that justifies action. An understanding of these three elements in the services context helps clarify the wider issue.

CRM, is about understanding the different kinds of customer the business has (need): this is 'knowing the customer'. The response (solution) could be new products or services, or to engage more (or less) closely with a particular customer segment. Or it could be that the channels to the customer need to be modified, to make the relationship work more effectively for both parties. For example, if a business discovers a particular group of customers would prefer to buy its services over the internet and a profitable business model can be built, then the creation of a web-site would be a good investment (benefits). We are using CRM techniques and technology to help generate new value from existing customers, or bring in new customers.

Now suppose the CRM research has also highlighted that this newly-discovered customer segment has additional requirements that could be satisfied by another part of the company - except we don't really know too much about what they do in that area, and have even less idea of their business model (need). It may even be that, especially if we're geographically dispersed, this other part of our business already has much of what is needed to build the proposed new services - or maybe is delivering something similar but with a misleadingly different name. What is missing (solution) is common terminology, a mechanism to communicate, to share innovations, to create a culture in which it is seen as smart to re-use someone else's ideas instead of starting afresh. Maybe even to reward this? And of course if we were able to do all this, then overall the business would be able to grow faster, be more profitable and so on (benefits).

KM is about changing the patterns of internal relationships in the organisation. Which is not to say it is introspective - the subject matter is very much the lifeblood of the business, its relationships with customers (and suppliers for that matter). But KM is essentially about creating a better-connected organisation (in every sense) in which ideas flow freely, barriers are broken down and we extract the last ounce of value from what we already have, or create new value from it. KM is focusing on the organisation's ability to differentiate itself, for example through innovation. CRM is focusing on differentiation from the customer's perspective, in terms of channels, products or services. The two are certainly not mutually exclusive - and indeed, if we were really smart, then we would think about applying both approaches concurrently. Now that really would be an unstoppable combination....

Geoff Smith is Business Development Manager for Knowledge Transformation Services at Cap Gemini UK. He can be contacted at: Geoff.Smith@capgemini.co.uk
copyright 1999 Cap Gemini UK PLC.

Customer Equity

Customer Relationship Management is receiving a lot of press at the moment. The hype is being fuelled by marketing departments of software companies such as Oracle and Siebel. However, CRM is nothing new. In the early 90s a former colleague of mine ran a company called (in French) 'Customer Relationship Management'. CRM is not a software problem, it is a knowledge management problem.

One of my favourite definitions of CRM is that it is the act of maximising the long-term value of your relationships with your customers. A technique called Customer Equity Management has been developed that subtracts the total cost of attracting and retaining a customer (or customer segment) from the total revenue received from that customer (or segment) over their lifetime as a customer. This allows you to work out which customers or segments are most valuable. To do this you need reliable data on the costs and revenue associated with individual customers (or customer segments).

Most companies struggle to calculate customer equity. Even if your company can do it, the data is useless unless you can act on it. To act on it you need to know what drives the value of your customer relationships. As every good knowledge management guru will tell you data is not enough. The data held about customers has to be combined with the information in the heads of those employees that work with the customer to identify these value drivers. This customer knowledge then has to be made available to everyone who can act on it.

There are four things that have to be in place to maximise customer value:

1. A clear understanding (strategy) of how customer data will be used and the importance of maximising customer equity. One part of this strategy must be to understand (for your market) the level of segmentation at which the cost of collecting customer intelligence exceeds the benefit of acting on it.

2. The technology to capture customer data (e.g. CRM software)

3. A set of processes to ensure that the data is of sufficient quality, is turned into customer intelligence and is passed to those who can act.

4. Employees trained to understand and act on this customer intelligence.

The leading practitioners of CRM use a combination of two further techniques to maintain competitive advantage. Firstly, they are able to gather, process and act on customer intelligence faster than their competitors, with the ultimate goal of responding in real-time. Secondly, they are able to use the customer intelligence to customise their products and services to the individual customer (or segment). So it is the combination of technology, knowledge management and real-time one to one (RTM1:1) techniques, and trained employees that will allow companies to develop and maintain a competitive edge through CRM.

Mike Coker is a senior manager in Arthur Andersen's Integrated Customer Solutions team. He can be contacted at:
Email:mike.coker@arthurandersen.com
Web site: www.arthurandersen.com www.knowledgespace.com

Apply some customer intelligence

While CRM has been heralded as a shining scimitar in the fight for the customer, it doesn't fully cut the mustard as far as I'm concerned.

Frankly, there's no point storing masses of data on thousands or millions of customers - which is effectively what many CRM systems do - unless you can make it work efficiently and effectively for your business.

Industry analysts estimate that only 5 to 10% of such data is ever analysed. That's a frightening statistic. And it shows that many firms out there - perhaps even your own - are just 'flying blind' when it comes to real customer insight.

'Customer Intelligence' is the missing navigational instrument you need to add to your business control panel.

Customer Intelligence is an essential extension of CRM and is the focused application of Business Intelligence (BI). It applies the same proven methodologies and leading-edge technologies, but with the emphasis on helping organisations refine and improve their knowledge of customers and their behaviour. Only through improved understanding can they focus on and refine their product and service offerings to maximise customer value.

Quite simply, if your company wants to offer the right products or services at the right time to the right customers, you must first differentiate between them. Some may be Kings, others may be Princes, some are probably mere serfs - but do your current CRM systems offer any way of telling the difference? By applying Customer Intelligence techniques, such as simple segmentation or individual profiling, you can move towards treating different customers differently based on their actual or potential value to your business.

Segmenting customers by value and loyalty to the business means low loyalty, high value customers can be offered loyalty bonuses, whilst high loyalty, low value customers can be encouraged via incentives to increase their spending level. New and prospective customers can also be matched with existing customer profiles to help predict likely future behaviour.

With a fully integrated view of your customers 'good, bad or indifferent' and a detailed understanding of their behaviour and what influences it, you have a much better chance of winning the competitive fight. That's what Customer Intelligence is all about.

When you consider that in some businesses the top 30% of customers generate 130% of the profits (because a percentage of customers may actually be losing them money) and that reducing customer attrition by as little as 5% can double the bottom line figure, who can afford to ignore Customer Intelligence as an essential part of their CRM strategy?

The demand to obtain a 360-degree view of the customer has never been greater. The Customer Intelligent business is one that is ready to meet that challenge&

Ian Maclachlan is Managing Director of Accurate Business Solutions, which provides high quality independent consultancy and development services in the fast growing area of Customer Intelligence. He can be contacted at: ian.mac@accurate.uk.com

The Trust Paradigm

It is claimed that the secret of success for business is to develop superior capabilities in managing relationships with customers. This relatively recent management theory is based in the long established traditions of commerce and trade! One principle that is paramount is that we buy from and sell to people that we trust. The seller needs to know that the product is fit for the buyer's purpose and that the buyer can pay; the buyer needs to know that the seller is reputable, that his product is capable and reliable and that he will get good service.

The keyword is 'know'. Only 10 years ago most business was conducted face to face, or perhaps through formal correspondence and normal human courtesies led to buyers and sellers establishing a trusting relationship without thinking about it. Improvements in communications have led to a new business model where commerce is transacted over the telephone or over the Internet. The reasons for this are clear; improvements in speed, convenience and efficiency are examples of dramatic change through these new channels.

Technology has driven many organisations away from their customers. However these new channels introduce a new problem in that they can severely depersonalise the human contact experience. Unless a considerable effort is made the buying/selling experience can become dull and unpleasant. If the transaction works, all well and good, but if it fails the buyer will become quickly disillusioned while the seller is left wondering what went wrong.

Customer Relationship Management (CRM) has been introduced in recent years in an attempt to use the power of technology to address this newly developing problem. Often the solutions are incomplete and are designed around the things that computers are good at and are easy to sell rather than addressing the human aspects of the problem.

For example, in order to improve the rate at which call centre agents can make sales calls and not spend time waiting for their prospective customers to answer the phone, so called power dialling technology has found favour with cost and efficiency conscious call centre managers. But the agents themselves are instructed to deal with the objectives of the call and hang up quickly to start the next: hardly an opportunity to get to know your customer here.

At the other end of the technical machine, marketers spend huge amounts of money in ever increasing attempts to divide their customers into smaller and smaller segments based on their previous and extrapolated buying patterns so that the mass mailing machine can spring to action with another post bag full of tempting offers. The customer can feel ignored: there is not much opportunity to listen and learn when the focus is on 'push'.

The solution

Implementing a valuable and useful CRM solution is now recognised to be less about technology deployment than about organisational change; and that means a change back to the 'trust' paradigm of before. The problem with technology based CRM is that the obsession with information processing blinds us to the issue that information without interpretation and correlation is worthless. This is where knowledge theory comes into play.

A world class CRM organisation needs to use its information to derive knowledge about its customers. That means using the information it has, to adapt its dialogue with the customer in order to gather more, better and different information and then turn this information into real and valuable knowledge. At the other end of the process, the agent must be helped and encouraged to make use of contact opportunities and take time to develop a dialogue with the customer. From the customers' perspective, this new approach will allow them to develop precisely the right kind of trust that will deliver continued business. Customers will become willing to share the information that is desired. Customers share information when they perceive a benefit; loyalty cards provide an excellent example of this.

The efficiency conscious and targeted organisation may baulk at the apparent cost of spending time and money 'getting to know'. Efficiency without a human face can drive customers away however. Unless organisations begin to use technology to support the new business culture of trust and transform information into knowledge they will quickly be left behind in the race for customer loyalty by organisations that are able to provide longer lasting and more profitable business relationships.

Graham Knight is Principal of CRM Consulting within IBM. He can be contacted at: graham_knight@uk.ibm.com

The Arms Length Relationship

We're all customers so we all know what it's like to be managed. Even Imust admit a complete contact history is very reassuring when telephoning from the roadside, in the pouring rain, with a crumpled car on what is supposed to be the family holiday. Before long you find yourself on first name terms with someone who behaves as if they were at school with you and seems to know more about you than you can remember - even your ten digit policy numbers! Dismay only sets in once you find that your idyllic holiday spot is outside the limits of the geographic computer model because no one's supposed to have an accident there! It seems to me that I'm on holiday in one of the less 'valuable' customer locations. Next, my long-time buddy on the end of the phone wants to pick up the car for repair from my home - a mere 300 miles away! Visions of stranded bikes, surfboards, clothes and kids flash before my eyes - will I ever get them home again? But when I insured the car, they never asked where I would be going on holiday. Anyone could have worked out from my credit card history that here was a high probability I would be engaged in something sporty on a remote offshore island. They could have pushed the limits of their database, and scheduled my recovery in anticipation - or is that too much to ask!

The Close Up Relationship

You're newly promoted to field sales to care for a long standing, strategically important customer account. The handover was a hurried, frequently interrupted half hour briefing from your predecessor. You're confused about what is expected of you and concerned about remembering everything. However, managerial reassurance is forthcoming because 'everything you need to know' will be at your fingertips. Won't it? Next day you arrive in foreign climes, in your newly pressed suit, eagerly clutching your precious laptop. You feel confident and secure because you have the entire knowledge base of your organisation with you. This includes a complete account history, specific objectives for the meeting, detailed specification and utilisation information for all 2,000 + products in the range and even an extremely sexy multi-media presentation! What more could you wish for? You hit the button ... bang ... your laptop has decided on this exact moment to suffer terminal exhaustion. It's hot ... sweat drips down your neck ... you can't even remember the names of the customers' children ... what next? Are you worse off than if you had no technology at all?

Some hard earned tips:

The science fiction of your childhood is your science fact of today. Tomorrow's technology is incredible so be impressed and use it to advantage. Be prepared for it to go wrong, otherwise work on your improvisation skills.

Knowledge exists in our minds and only a fool would assume to control such things. Human beings are awe inspiring so be humbled by their capabilities and share with them for mutual advantage. Be prepared for them to be wrong, even in a low contrast world, otherwise you may miss the moment. We all have sense but not much of it is common. Common sense goes a long way but not as far as a sense of humour. Sharing a beer brightens the day but can dull the next. Sharing a smile can ignite relationships which are not only rewarding but fun.

Seriously though

Customer relationship management seeks to nurture mutually productive relationships between individuals representing their personal or organisational interests and goals. People naturally interact by sharing knowledge and in so doing build relationships. The strength and productivity of these relationships is influenced by many factors including congruence of goals, geographic distance, time, trust, availability of information and technological support. The discipline of knowledge management seeks to understand the influence and impact of such factors in order to reduce barriers and optimise positive contributors. Thus, the success of a customer relationship management programme is dependant upon the support of a good knowledge management programme. Conscious consideration of knowledge management is not essential but the customer will recognise it's absence.

Helen Duncan is a Senior Consultant within the Knowledge Management Group of ICI PLC. She can be contacted at: helen_duncan@ici.com

How can Knowledge Management contribute to the creation of Customer Capital?

Today's economy can be characterised in a few words: shorter business cycles, complex customer needs and increased competition. To survive in the future, it will be even more important for businesses to understand and anticipate the needs of the customer. The new and simple truth is that corporations which succeed in transforming themselves into learning organisations are the organisations of the future.

Companies are investing seriously in the knowledge infrastructure to get to know their clients better, and for a very good reason. A better understanding of the customer can lead directly to higher revenues. ABN AMRO Bank wants to make better use of customer information to stimulate cross- and deep-selling. Internet bookseller Amazon offers related products to customers buying books. For instance, a client buying a travel guide might automatically be sent information on hotel deals. Knowing Your Customer has become big business. Customer relationships are highly valued on the stock markets. In retail it comes to between USD 300 - 1000 per client for the company that 'owns' the relationship!

Modern technology, in the form of Internet-based e-commerce or SFA (Sales Force Automation), makes it possible to store and retrieve a wealth of information on your customers, yet an organisation investing in technology alone will only use part of the potential benefits that customer relationship management can generate. If they are to make optimal use of the knowledge available, organisations will need to change the way they operate.

It is here that Knowledge Management can make a difference. Knowledge Management basically structures and facilitates the process of analysing, retrieving, sharing and using information.

KM process in a nutshell

The first step is an analytical step. Identifying relevant knowledge requires an understanding of an organisation's own strategy and its business processes, as well as the key value drivers of the customers. Since many organisations don't know what they know, it might be a good idea to make the required knowledge areas explicit by creating customer knowledge maps. Subsequently, missing information needs to be gathered. Account managers, relationship managers and marketing researchers can be valuable sources, but ICT tools can also be of tremendous help here. Unilever, for instance, captures knowledge from people who exchange recipes via the Internet.

The next crucial step is to share that information throughout the organisation. All too often employees have no idea who their clients are. Especially in business-to-business, value can be added by seamlessly connecting the business processes of customer and supplier. This might include the exchange of knowledge and information with the customer.

This requires understanding of the customer' processes (and sometimes the supporting IT infrastructure). Marketing or sales people cannot always gather and process this knowledge. It is essential for all employees in a learning organisation to share and appreciate customer knowledge on every level. They should learn how they can contribute to and benefit from this knowledge. This is often a process of crossing barriers, one where implementation can call for a complete change management project.

The final step in the process is to make use of the customer knowledge and transform it into Customer Capital, by offering more and better products that boost customer value. Technology can act as an enabler, but the famous equation: NT+00=EOO (New Technology + Old Organisation = Expensive Old Organisation) holds. Without the necessary organisational and personal conditions, technology cannot enhance value.

Summary

Investing in customer relationship management is not only highly profitable, it is one of the key factors for success in today's and tomorrow's business economy. However, spending money on technology alone won' t do the trick. Knowledge Management can be of help in crossing that bridge towards becoming a learning organisation. Finally, we strongly believe that personal contact will always remain essential for building and leveraging customer relationships. These moments are the most important, and sometimes unanticipated knowledge from or about the customer can be discovered.

Prof. Dr. Paul Louis Iske is Vice President of Knowledge Management at ABN AMRO Global Transaction Services, Holland. He can be contacted at: paul.iske@nl.abnamro.com

Roel Vente is Managing Director of Direct Sales, Bookmark. He can be contacted at: r.vente@bookmark.nl

Customer Lobbyists

A well-known charity I met recently faces an enormous challenge. One of its objectives is to change the law in England and Wales in a highly controversial area of moral principle. It knows that this will take years - possibly up to two decades to accomplish. But its campaign is professionally managed, well-funded and very serious.

Those involved don't particularly like the term "Lobbyists", but that is what they are. And neither would they recognise nor use the term "Knowledge Management". Yet that is exactly what they are doing. For they are systematically building an enormous databank of the great and good in this country, with particular emphasis on their viewpoints on the issue for which the charity is campaigning. So they are monitoring the political careers of politicians, civil servants and probably leading journalists and opinion-formers.

On top of this base-level of knowledge - that which is in the public domain, if you like, they are faithfully recording every event in their relationship with these persons. An invitation to an MP to attend a Reception; his or her response; meetings held about the subject; correspondence exchanged; telephone calls of significance; questions asked in the House; early-day motions signed; a fact-finding tour or visit; and a dozen other types of interaction.

In time they build a comprehensive chronology of what has happened in the relationship they have sought to build with that person. There is nothing new in this. Diplomats do it all the time (much of the work of a Political Attaché in any Embassy is building relationships with local politicians in order to build credit in the "favour-bank", and if they strike lucky, the long-haired guitar-strumming backbencher they befriend ends up being Prime Minister fifteen years later!). All the big Companies have Public Affairs departments with a brief to build such relationships; and Public Affairs Consultancy is one of the most rapidly growing areas of Public Relations. Even Executive Agencies and parts of the Civil Service need to build such connections.

What is new is that these databanks are now knowledge repositories. They previously only existed in people's heads. A good Lobbyist five years ago was one who knew and understood a large number of Ministers or top civil servants, and could probably dredge the recesses of his or her mind to recall why so-and-so was a friend, and why someone else was an opponent. When such people left to join another firm, they carried all this knowledge with them. Hence the large salaries paid to top Lobbyists.

Today, it is possible to capture this information and structure it in a Corporate KnowledgeBase. It becomes an asset of the organisation - in some cases, its most valuable asset. And because of the long-term nature of some of these relationships, as in the charity example, that knowledgebase needs to outlive the people, and the IT systems and processes - all of which will come and go as the years pass. But this knowledgebase will continue to accumulate.

This true tale from the highly specialised world of Parliamentary Lobbying illustrates a much wider truth. Knowledge Management is already far more widely used than either its practitioners or commentators believe. For the occasional Lobbyist, substitute the thousands of Sales Executives. For Lobbying is but a highly specialist form of CRM - Customer Relationship Management. In essence, the charity or pressure group trying to "sell" its message to the politician is undertaking a similar process to the Salesman trying to sell a strategic product. And whilst there are differences, both have a better chance of success by building a long-term relationship. Hence the need for Knowledge Management.

So the next time you hear of a free vote in the House of Commons on a certain topic... and hear the commentators saying that campaigners lost - but still managed to secure 20 more votes than last time, reflect on the role of KM in securing the latest converts.

Rhion Jones of I.H.A. Ltd is an international Consultant specialising in CRM and Customer Service. He is also Founder of Campaign Information Ltd, the UK's leading supplier of Lobbying Management systems. He can be contacted at: rhion@rhion.com

Customer Relationship Management... Or a new form of harassment?

I tremble every time I hear the words Customer Relationship Management. I can almost hear the first cries of dissatisfied customers who have had their relationship abused. One can foresee the situation where some poor soul will be harangued by a highly managed call centre agent in search of a sale. The often adopted approach to CRM is to hungrily gather data.

CRM must be part of strategy. If you don't know where you want to go, any road will do. (And any data will do). Let me give two examples to illustrate the point.

Amazon.com are highly successful with 58% share of the on-line books market. They trade on building relationships using convenience as a key differentiator. They need relevant information, such as address and credit card. They don't need my inside leg measurement or the name of my dog. They need just enough information to make it easy to buy books and keep me informed until the book is delivered. I love it.

Compare this to a major retail bank I met with recently. I ran through the Amazon example with the senior executive responsible for implementing CRM. He couldn't understand my enthusiasm for buying a book with one click. The bank's CRM system excludes anyone who isn't an existing customer. Right now the executive's focus is on analysing all of his company's existing internal data.

The case for improving the understanding of customers is overwhelming. Products are being commoditised at an ever-increasing pace. Differentiation is key to creating value. Three distinct but related strategies are required to create sustainable competitive advantage; a market strategy, a knowledge management strategy and a people management strategy.

We need both customer and market information to understand the needs of customers. Only when the two are combined can we analyse segments and build propositions. The information must relevant for the purpose. Much of the organisation's knowledge is tacit and risks being lost as people move. How many CRM projects try to capture the knowledge of front line sales people?

The approach to managing people has a vital role to play. People build fulfilling relationships at home but apparently need scripts and databases at work. The business environment is increasingly complex. For example, multiple and complementary channels are required, such as on-line and call centres, and need to be handled differently. Marketing and CRM systems should be collateral for front line sales people, not part of command and control based constraints.

The banker missed the point. Customers want service at a good price, from a supplier with a brand they can trust. Relationships aren't founded on an intrusive knowledge of individuals. Relationships are built where customer needs are satisfied and the needs of your organisation are explained. That's a mature win/win deal. The approach to CRM must not be data-centric. It must be strategic, with properly integrated market-led, knowledge and people management. The end game must be to improve the effectiveness of front line sales forces. The best way to do this is by supplying good intelligence and allowing the freedom to use it.

Mick Cope is a Consultant with Catalyst Development and the author of Leading the Organisation to Learn. He can be contacted by email at mickcope@btinternet.com
Paul Oliver is responsible for strategic projects aimed at improving corporate performance for BT in the UK. He can be contacted by email at paul.fj.oliver@bt.comor by calling 0207 492 3844.

Attract a following

Do you know your customer? You should do. As more people use the Internet to buy and sell goods, they increasingly expect the 'corner shop' experience - personal service, in-depth knowledge of their preferences and the all-important feel-good factor. But businesses that use the Internet to sell goods and to provide service often don't know who their customers are. Too many believe they understand the customer and far too many are paying lip service to customer's demands. It's no good spending all of your money on the shop front - what you sell and how you sell are key. To succeed in all this, there are two types of knowledge you need to manage - knowledge on the customers themselves and knowledge that needs to be pushed back to the customer.

Managing your customer relationship means knowing your customer. What are their preferences? Why do they come back? What do I need to give them? Knowledge is the key to unlocking loyalty, but how much is lying dormant in company files? Gathering information is one thing, using it effectively is another. At the end of the day, loyalty cards are a commodity - customers want an experience, not plastic.

Engaging customers in your business is easier than you think. What is needed is a little imagination and an eye for the experience you want to create. The Internet is the ideal medium for building a stage for customer interaction. Multimedia is an excellent tool, and one that is being used successfully as businesses move away from the FAQ sheet and on to providing a more interactive experience.

Video and sound can be used to help customers with a technical question - for example, how do I change a disk drive? Instead of a call centre rep dealing with the question over the phone, or shouldering the cost of a call-out, customers can help themselves via a video demonstration. Developments in 3D technology mean that customers will soon be able to see before they buy - for people buying mobile phones over the Internet, they want a true representation of size, not a 2D box shot.

Self-service via the Internet is another way to use knowledge for the benefit of all. Having access to information when you want and how you want is essential for many people. If your business is flexible enough to work with thousands of different timescales (which, lets face it, is one of the key concerns for many consumers) then you are bound to attract a following. Also, by empowering the customer, you reduce reliance on the call centre. As empowerment and personalisation can equal increased sales, it's a strategy that should be considered seriously.

So, the message is that if the Internet is competing with the high street, then the experience of being online is of paramount importance to your customers. If they are engaged in your business, there are more opportunities to build a knowledge base. Having access to, and using this knowledge underpins you customer relationship management strategy.

We also need to recognise that knowledge management is much more than stored information on products and services, just as customer relationship management is more than FAQ's. If we focus on the customer experience, combined with knowledge gathering and sharing, the future is bright.

Terry wilcox is Managing Director of Silknet Software. He can be contacted at: twilcox@silknet.com

We're Talking about an Evolution

CRM is about putting customers at the heart of a business. It's not a new idea and it's certainly not revolutionary. Customer relationship management really started with the corner shop and as businesses grew the practice all but disappeared. Although relationship marketing has been practised for a number of years it has been to a limited degree, largely inhibited by the technology available and by company culture.

The technology is now on offer, data warehouses of customer information have been created and competition to win customers and keep them loyal has never been so hard fought. Customer relationship management could therefore be regarded as a natural progression to give businesses greater control over the customer base and to track customer needs across the whole of the business. Crucially, decisions can be based on fact and knowledge, not whims and guesses.

CRM brings knowledge so that businesses have a better understanding of the market for their product. They can fine-tune aspects of their service, ensure the channel to market will actually reach their chosen audience and in the same way, conduct marketing campaigns using the media to which that audience is most receptive. It is a continual process of planning, tracking and improvement.

Information is collected at every point of contact with the customer. The range of information collected can span from the time of day the customer calls to the leaky salad box they picked up last Thursday and complained about. Advances in technology should in theory make this data collection a simple process, over complication will lead to failure.

Businesses have long since grasped that collecting customer information is important but many now have huge data warehouses without knowing how best to use the information. CRM to some degree has evolved out of the desire to utilise this information more effectively.

The information stored and collected is accessed and used across the business as a whole on an on-going basis. For example, customer facing staff, such as call centre operators can immediately gain a picture of a customer's history when in conversation with them. Product development, pricing strategies, service levels can all be driven by the information gained and because the information is not static, response to changes in products etc. can be monitored and strategies adjusted accordingly. This is made possible through software which enables links to be created between departments so that staff at all levels of the business can access up to the minute customer information.

Used in combination with external data such as lifestyle and credit information a full and dynamic picture of a customer base is created. The end goal is the ability to determine the lifetime value of a customer, their propensity to buy or defect, the relationship they might have with a competitor, what can they afford, even what product they will buy next and when. With this knowledge businesses can actually anticipate demand for products and services and determine the appropriate marketing strategy and channel for delivery to bring them greatest reward.

Tony Reynolds is Business Development Director of Equifax. He can be contacted at: tony.reynolds@equifax.com