chpt 1 intorduction to knowledge & customer relationships

7/30/2019 Chpt 1 Intorduction to Knowledge & Customer Relationships

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INTRODUCTION TO

KNOWLEDGE & CUSTOMER

RELATIONSHIPS

CHAPTER 1

OCS462 MANAGING CUSTOMERKNOWLDGE


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Chapter Learning Objectives

Understand the basic concept of knowledge hierarchy and the types ofknowledge.

Recognize the importance of knowledge management in buildingrelationships with customers.

Know the distinction between operational CRM and analytical CRM.

Explain the methods to increase the value of the customer base by using theGet-Keep-Grow model.

Define Customer Strategy Enterprise and understand the four quadrants ofthe Enterprise Strategy matrix.


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Knowledge Hierarchy (or DIKW Pyramid)

Wisdom

Knowledge

Information

Data


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Knowledge Hierarchy

Data

Raw and unprocessed facts and figures,

without

any added interpretation or analysis.

Characterized as being discrete, objective facts or

observations, which are unorganized and

therefore have no meaning.

Symbols

E.g

: It is raining.


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Knowledge Hierarchy

Information

Organized and structured data which can be learned,

known about or understood.

Processed data which has relevance for a specific

purpose or context.

Who, what, where and when questions.

Therefore meaningful, valuable, useful, and relevant. E.g: The temperature dropped 15 degrees and then it

started raining.


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Knowledge Hierarchy

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Knowledge

The combination of data and information, to which is added

expert opinion, skills, and experience, to result in a valuable

asset which can be used to aid decision making

through

learning experience.

It exists privately in the minds of people, and it can be made

external and public through being recorded in some way

Answers how questions

Ex: If the humidity is very high and the temperature drops

substantially the atmospheres is often unlikely to be able to

hold the moisture so it rains.


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Knowledge Hierarchy

Wisdom

Evaluated understanding of principles, which there

has previously been no understanding. It asks

questions to which there is no easily-achievable

answer.

Wisdom requires judgement; between right and

wrong, good and bad. It has the ability to increase

effectiveness.

Evaluate understanding

Ex: It rains because it rains. And this encompasses an

understanding of all the interactions that happen

between raining, evaporation, air currents,

temperature gradients, changes, and raining.


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Types of knowledge

TACIT(hidden)

Unwritten knowledgethat is hidden in the mind

of every individual.

Shared andcommunicated through

activity and interaction.

Examples:

Past experiences

On the job training

Observation

EXPLICIT (open)

Articulated knowledge,

which are expressed,codified, and

recorded/written down.

Shared andcommunicated in written

or verbal forms.

Examples:

Words, numbers & codes

Documents, Procedures

Mathematical & scientific

formula

Musical notations


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Knowledge Management (KM)

Refers to a range of practices used by organizations to identify, create, represent,

and distribute knowledge for reuse and learning across the organization.

The way a company stores, organize and accesses internal & external information.

Knowledge management applications/ tools are used to tie organizational

objectives to the achievement of specific business outcomes such as improved

performance, competitive advantage, and higher levels of innovation.


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Customer Knowledge (CK)

Knowledge for, about and from customers.

Customer knowledge helps companies to understand customers needs, wants and to

align processes, product and services to build customer relationship.

The collection of information, insights & view points that companies has about its

customer to build stronger relationship with its customers.

Customer knowledge can be

explicit the structured customer information in databases.

tacit knowledge in mind of employees and customers.


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Customer Knowledge Management (CKM)

Customer Knowledge Management is the effective power of information and experience

in the gaining, development and retention of profitable customer.

The knowledge must then be applied and managed in ways that best support investment

decisions and resource deployment.

CKM provide customer insight, profiles, habits, contact preferences and understanding toimprove a companys relationship with the customer.

In the competition for a customer, the successful enterprise is the one with the mostknowledge about an individual customers needs.


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Knowledge

management

The way a company

stores, organize and

accesses internal &

external information.

Customer

knowledge

The collection of

information, insights &

view points that

companies has about

its customer to build

stronger relationship

with its customers.

Customer

knowledgemanagement

Customer insight,

profiles, habits,

contact preferences

and understanding to

improve a companys

relationship with thecustomer.


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Issues of Customer Knowledge

In B2B marketing, each

salesperson knew each customer

and prospect as individuals.

Well-trained salesperson

recognized each customers

buying habits, behaviors and

preferences.

However, much of this

information was never codified or

recorded.

When a salesperson retired or

quit, the company lost a great

deal of specific customer

information.

Implementation of CRM information

systems and loyalty building programs,

allows capturing detailed customer

information on the companys database.

Management of customers

knowledge allows the company to

allocate resources to key business

activities in order to gain

competitive advantage.


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Importance of

Managing Customer Knowledge

To understand

customers needs,

wants .

To meet their

expectation and

perception.

To build stronger

long-term

customer

relationships

To ensure that

information is

captured and can

be shared across

organization and

also for future

usage.

To support

business make

informed

decision.


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Competitive advantage

Condition which enables a company to operate in a more efficient and higher-quality

manner than the companies it competes with, and which results in benefits go to that

company.

Thus, competitive advantage means having low costs, differentiation advantage, or a

successful focus strategy.

By applying customer knowledge management (CKM) and customer relationship

management (CRM), companies can focus on allocating resources to key business activities

in order to gain competitive advantage


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Source of competitive advantage

The ability to learn more about thecustomers faster than the

competition

Companies knows who their customers are, howthey behave and what buying patterns they display

The ability to turn that learning andcustomer knowledge into action

faster than the competition

Companies more likely to spot up-and-comingmarket opportunities before their competitors, andrapidly create economic value for the business, its

shareholders, and its customers.


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Customer Relationship Management (CRM)

Application of technology in making managerial decisions with the end goal of increasing

the value of the customer base through better relationships with customers, usually on an

individually basis.

CRM involves the purchase of hardware and software that will enable a company tocapture detailed information about individual customers that can be used for better target

marketing.

By examining a customers past purchases, demographics, and psychographics, the

company will know more about what the customer might be interested in.


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Customer Relationship Management (CRM)

The company will send specific offers only to those with the highest possible interest and

readiness to buy, and will save all the mailing or contact costs usually lost in mass marketing.

Using the information carefully, the company can improve customer purchase, cross-selling,

and up-selling.

CRM helps track data and information about customers to enable better customer service, by

treating different customers differently.


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Examples of CRM initiatives

A car rental customer rents a car without having to complete another

reservation profile.

An online customer buys a product without having to reenter his credit

card number & address.

A supervisor orders more computer components via web page that

displays his firms contract terms, his own spending to date, and his

departmental authorizations.


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CRM Process:

Operational & Analytical

ANALYTICAL CRM

The analysis of data created on the

operational CRM and other operationaldata sources for the purpose of business

performance management and customer-specific analysis.

Involved gaining information on customer& strategic planning to build customer

value.

CRM systems manage and evaluateknowledge about customers for a betterunderstanding of customers behavior.

Data warehousing and data miningsolutions are typical systems in the area.

OPERATIONAL CRM

Automation of integrated business

processes involving front-office acrosssales, marketing & customer service via

interconnected delivery channels.

Involved software installation and thechanges in process affecting the day-to

day operations of a firm.

CRM systems improve the efficiency ofCRM business processes comprise

solutions for sales force automation,marketing automation, and call center

management.


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Analytical CRM

Focuses on the strategicplanning needed to build

customer value

Measurement,

organizational changesrequired to implement

strategy successfully

Operational CRM

Focuses on the softwareinstallation and thechanges in process

affecting the day to dayoperation of the firm


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Differences Among KM,CRM & CKM

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Roots of customer relationship management

Steps to increase the Value of the Customer Base is as follows:

Acquire profitable customers

Retain profitable customers longer

Win back profitable customers

Eliminate unprofitable customers

GET

KEEP

Up-sell additional products in a solution

Cross-sell other products to customers

Referral and word-of-mouth benefits

Reduce service and operational costs

GROW


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Customer Strategy Enterprise

An organization that builds its business model around, increasing value of the customerbase.

Applies to companies that are product-oriented, operations-focused, or customer-intimate.

The exchange between a customer and the enterprise becomes mutually beneficial, ascustomers give information in return for personalized service that meets their

individual needs.

Ex : Insurance for women


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Enterprise Strategy Map

A model which categorize and rate an enterprise capabilities in the arenas of interactingwith customers and tailoring products/services for them.

An enterprise can be mapped in terms of two dimensions:

interaction with customers.

tailoring (customizing) products/services for them.

Based on its rating in these two dimensions, a company can be pinpointed on theEnterprise Strategy Map


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Interactivity Dimension

High- if it knows the names of its

individual customers, send

different messages to different

customers, and remembers the

feedback from each one.

Low- if it doesnt know itscustomers identities, and sends

the same messages the same way

to every customers.

Tailoring Dimension

High- if it mass-customizes a

product or service in many

different attributes and features

Low- if it sells the same product

or service, the same way to every

customers.


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Enterprise Strategy MapIII

Database

Marketing

IV

1 to 1 Learning

Relationships

I

Mass Marketing

II

Niche Marketing

Interacting

TailoringStandardProductsTailored

Products

Customers addressed

only in mass media

Interaction with

customers individually

low

high

high


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Quadrant I: Mass Marketing

LOW in individual interaction, LOW in tailoring/customization of products and services.

Companies that competes primarily on cost efficiencies based on economies of scale and lowprice.

Products are massively manufactured, distributed and advertised.

Company may sell millions ofstandard productsto as many customers as possible

Less direct contact with end users, therefore less knowledge about the needs of the customers.

E.g. GM was the largest carmaker in the world in 2008, now reduce in rank to 2ndbehind newleader, Toyota.


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Database

Marketing

IV

1 to 1 Learning

Relationships

I

Mass Marketing

II

Niche Marketing

Interacting


Products

Customers addressed

only in mass media

Interaction with


low

high

high


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Quadrant II: Niche Marketing

LOW in individual interaction, HIGH in tailoring/customization of products and services.

Companies that focus on target markets, produce goods & services designed for those definedcustomer groups.

Customers can participate in the actual design and product development.

E.g. Mortgage products can have:

3 different interest rates (fixed or floating according to BLR)

3 different payment schedules (monthly, quarterly or annually),

2 different types (Islamic or Conventional)

2 down payment options (zero-entry costs or normal entry fees).


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Database

Marketing

IV

1 to 1 Learning

Relationships

I

Mass Marketing

II

Niche Marketing

Interacting


Products

Customers addressed

only in mass media

Interaction with


low

high

high


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Quadrant III: Database Marketing

HIGH in individual interaction, LOW in tailoring/customization of products and services.

Companies utilizes database management to get better & efficient use of mailing lists and

other customer information.

Technology has made it possible for a an enterprise to deal with the customers individually.

Database helps enterprise to identify and track the customer, by remembering informationabout the customer, and making the purchasing process easy and convenient.


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Database

Marketing

IV

1 to 1 Learning

Relationships

I

Mass Marketing

II

Niche Marketing

Interacting


Products

Customers addressed

only in mass media

Interaction with


low

high

high


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Quadrant IV: One-to-One Learning Relationships

HIGH in individual interaction, HIGH in tailoring/customization of products and services.

One-to-One Marketing involves selling a single customer as many products as possible over along period of time, and across different product lines.

Interacting with customers on a personal basis and customizing products to meet the customers

needs.

Companies use data about customer to predict what each one needs next.

Able to treat different customers differently and increase mutual value with customer.

E.g. Insurance, finance & investment service, nutritionist & dietician, personal tutor, travelagency.


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III

DatabaseMarketing

Companies utilizes database

management to get better &

efficient use of mailing lists and

other customer information.

IV

1 to 1 LearningRelationships

Companies use data about

customer to predict what each

one needs next. Able to treat

different customers differently and

increase mutual value withcustomer.

I

Mass MarketingCompanies that competes

primarily on cost efficiencies

based on economies of scale andlow price.

II

Niche MarketingCompanies that focus on target

markets or niches, and produce

goods & services designed forthose defined customer groups.

Interacting

TailoringStandard

Products

Tailored

Products

Customers addressed

only in mass media

Interaction with



low

high

high


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If retention is so much more profitable than acquisition, why

have companies persisted so long in spending more on getting

new customer than keeping the ones they have? What would

persuade them to change course?