Knowledge Management Technology Application in CRM

Group 1: Md. Afzal Jamil (st111082), Sanjib Talukdar (st111089), Park Bub Min (st110807), Aman Kurl (st112850), Dollaporn (st109861), Arjun Kumar (st111134)

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Agenda

1 2 3

A Knowledge-enabled procedure for CRM Development Stages of KM Technology in CRM Systems

Processes for KM Framework in CRM Systems

Application of KCRM Technology in a Govt. Agency

A Knowledge Enabled Procedure for Customer Relationship Management

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Customer Relationship Management

Customer relationship management (CRM) is a

widely implemented strategy for managing a companys interactions with customers, clients and sales prospects.

Formulating CRM strategies can also create

valuable marketing opportunities, increase customer value and enhance customer satisfaction which results in business excellence.

Knowledge management
Knowledge is defined as information that is
relevant, actionable, and based at least partially on experience in a business context (Leonard & Sensiper 1998).

Many organizations currently engage in

knowledge management in order to leverage knowledge both within their organization and externally with shareholders and customers.

Knowledge-enabled CRM
Tiwana (2000) defined Knowledge-enabled Customer
Relationship Management (KCRM) as managing customer knowledge to generate value-creating lock-ins and channel knowledge to strengthen relationships and collaborative effectiveness, knowledge-enabled CRM is more of a business model/strategy than a technologyfocused solution Knowledge enabled CRM helps to understand customer
needs.

Customer knowledge sources

Tiwana (2000) provided knowledge sources and
categories such as markets, competitions, customers, orders, contracts, products and services, problems and best practices. Basically knowledge about these sources and categories must be integrated into a knowledge-enabled CRM strategy.

Customer knowledge management

It is important to know how to collect, store, and distribute
useful knowledge. Customer knowledge Management is about gaining, sharing and expanding the knowledge residing in customers to both customer and corporate benefit Beckman (1997) identified 8 steps of KM: knowledge identify, knowledge capture, knowledge select, knowledge storage, knowledge sharing, knowledge application, knowledge creation and knowledge sell.

A KCRM Model
Customer Knowledge Sources Markets,Competitions,Customers, Orders,Contracts,Products and Services,Problems,Best Practises Customer Knowledge Performance Management

Customer Knowledge Management Knowledge Identity,Knowledge Capture,Knowledge Select, Knowledge Storage,Knowledge Sharing,Knowledge Application, Knowledge Creation, Knowledge Share

Hard Cost savings Customer retention Repeat purchases Market share Customer acquisition rate Cost of sales/expense reduction Stock valuation Bottom-line effects Profit margins

Soft Customer Satisfaction Customer Loyalty Customer/Employee Productivity Employee Loyalty Employee Empowerment Defection likelihood Market Leadership Organizational Stability Cultural Change

Applications of KCRM Model

The model applied to two industries-steel and textile. This model specifically performed a comparative study between two firms one firm in the steel industry and another firm in the textile industry. Model can help to identify the important factors that have key impacts on business performance like market share, repeat purchase, customer retention, customer satisfaction and market leadership.

Research Design & Method

Data Collection Methods:

47 (steel) + 40 (textile) = 87 Samples

Case Study research

Qualitative indepth interview

Structured Questionnaire survey

References used for selecting variables for each of 3 dimensions:

1) Knowledge sources - Tiwana (2000) 2) Knowledge management - Beckman( 1997) 3) 10 senior managers in steel and textile industries

Types of Statistical Methods used

Descriptive statistics to check mean, variance etc. for individual factor

Reliability Tests it means measuring something using a consistent scale , Cronbachs should be > 0.7 for high reliability

Validity Tests measuring what we want to measure , Item to total correlation should be > 0.6 for high reliability
ANOVA It is a statistical test which checks whether means of several group are all equal Regression to test which dimensions of customer knowledge sources and customer knowledge management ( as independent variables ) are most effective to explain customer knowledge management ( as dependent variable )

Findings of the research

Descriptive statistics
Customer knowledge sources

Mean Value Between 5.11 and 5.61 4.36 and 4.62

Customer knowledge management

Reliability analysis and validity For most cases, Alpha values are greater than 0.6 ,Correlation values are greater than 0.35 . Thus data is internally consistent. Especially for performance measures, values are highly consistent.

ANOVA Results
Type of industry Customer knowledge performance Customer knowledge sources Customer knowledge management management Hard Soft measures measures Customer Customer retention satisfaction Repeat Customer Best practice purchases loyalty Market Market Customer Complaint Knowledge application share Leadership Customer satisfaction Customer loyalty Cost Market Savings Leadership Customer Customer Best practice retention and Market Employee Product and service information Knowledge sharing Share Productivity Market information Customer information Customer complaint information All are significantly different Soft knowledge performance measurement

Steel Industry

Textile Industry Significant difference

Types of Regression Models Tested Regression models are used. For example M1 = 1 + 11*A1 + 12*A2 + 13*A3 + 14*A4 + 15*A5 + 1 4 models have been tested as follows: M1 Knowledge source on Hard performance M2 Knowledge source on Soft performance M3 Knowledge management on Hard performance M4 - Knowledge management on Soft performance

ANOVA Results Steel Industry

ANOVA Results Textile Industry

Summary of Research Paper

Proposed KCRM model addresses relationship among 3 dimensions - customer knowledge sources, customer knowledge management, and customer knowledge performance measurement. Identifies important factors that affect business performance.

Can be modified and fitted to other industries as well.

Learnings from the Article

Different industries have different importance and different needs of customer knowledge sources. How knowledge management can help collect required customer knowledge sources? How knowledge management can help manage customer relationship in each industry? Different knowledge sources can have benefits on different hard and soft knowledge performance measurements. It gives directions to achieve key performance indicators.

Further scope of Study

How IT solution can be integrated with this KCRM model?

How to account for difference between two countries? Additional research in Collaborative marketing, Integrated marketing communications and other type of industries.

Development Stages of KM Technology in CRM Systems: an empirical research

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Building relationship with customer and gain competitive advantage

CRM software systems

Customer satisfaction

Level of customer service

Relationship Marketing, Customer Satisfaction and Complaining

Relationship marketing aims at building long-term, mutually satisfying relations with customers, suppliers and distributors with the objective to earn and retain their long-term preference and businesses. .

Customer Satisfaction

-Reduce price sensitivity - Reduce switching cost - Increase referral - Increase repeat of purchase

Increase revenue Reduce cost

Increase profit

A market feedback is enabling the company to pin-point the problems related to product quality, pricing, communication with customers and other aspects of the marketing mix.

CRM and Customer Knowledge Management

Knowledge is the process of capturing the collective expertise and intelligence in an organization and using them to foster innovation through continued organizational learning. Knowledge, unlike data or information, is embedded in people and not in IT.

CRM is strongly related to KM and especially to customer KM.

Companies should explore and refine CRM knowledge management methods in order to get value-added knowledge for themselves and their customers and understanding not only customer purchasing patterns and trends but attitudes and preferences as well.

CRM in Information Systems

CRM is an enterprise-wide integration of technologies working together.

CRM might be a major part of a firms e-commerce strategy.

The company should integrate the Internet with the front and back office company functions.

A Conceptual Model of CRM Development Stages

Effective customer personalization management requires that CRM software systems should not only be operational but also highly integrated into the IT architecture of the organization.

Customer-centric knowledge management requires a positive attitude and a desire to extract value for the organization by managing customer relationships over time.

The organization, in order to really manage customer relationships, has to develop a culture, motivating employees at all levels with learning and facilitating them in selecting, using, and sharing knowledge by providing the means and the technology required to do so.

Comparative Study
Dr. Paul Wang & Dr. Arthur Hughes from the Database
Marketing Institute. Study of the costs involved with Acquiring New Customers vs. costs of Retaining and Reactivating Old Customers. Used a measure to determine the rate of return on customer investment, using the following formula:
ROI = Lifetime Value of Customers/Investment
Lifetime Value of a Customer assumed to be $100 in this study

Results of Study
New Customer Acquisition
No. of Prospective, Existing or Lost Customers
Success Rate Acquired Customers No. of Marketing Efforts/Customer Variable Marketing Costs/Customer Total Marketing Investment Average Cost Return on Investment

Old Customer Retention 2,500 40% 1,000 4/year/customer

Old Customer Reactivation 12,500 8% 1,000 2/customer

40,000 2.5% 1,000 1

$1.00
$40,000.00 $40.00 2.5

$0.80
$8,000.00 $8.00 12.5

$0.80
$20,000 $20.00 5

Customer Satisfaction

Brand Loyalty

Repurchase Intention
Repeat Sales

COMPETITIVE ADVANTAGE FROM CUSTOMER RETENTION

Stages of CRM Development

Evolution in CRM Systems

Integrated-CRM Customer Personalization

IT-automated CRM Customer Accounts-Orders IT-assisted CRM Non ITassisted CRM

Customer Satisfaction-Complaint

Defensive Relationship Marketing

Stages of CRM Development

very limited or not at all use of IT. use customer related knowledge management instruments. mostly manual customer satisfaction and/ or complaining data recording/processing system. Manual process that uses IT to enhance the company-customer relationship and analyze customer-related data. using spreadsheets, database systems and statistical packages to manually collect customer data. Emphasizes customer interaction by using a number of technologies, such as the Internet and telephone/computer integration. Active Web Presence, use EDI systems, engage in e-commerce, implemented ERP and operational CRM systems. Customer Personalization software: data mining, collaborative filtering, rules engines. Supply Chain optimization & analytic functions. Sophisticated CRM information systems providing highly integrated backoffice, front-office and Internet functions.

Preliminary non ITassisted

IT-assisted CRM

ITautomated CRM,

Integrated CRM (iCRM),

A Study on Greek Organizations

Textiles 7% Chemical processing 10% Food processing 13%

Sample characteristics
Retail 12%

Finance/bankin g/insurance 5%

Wholesale/dist ribution 53%

Study Results
Customer Oriented KM Instruments
Never/sometimes Frequently/always

44 54.7

26.7 51.3 47.1 17.5 15.6 51.3

37.8 16.6 Assess customers Carry out customer satisfaction research

Carry out market research

Obtain Evaluation of knowledge external from environment customers and markets

Study Results
Customer Satisfaction/Complaining Recording System
70 60 50 40 30 20 10 0 58.5 61.7

41.5

38.3

Customer satisfaction recording system

Yes

Customer complaining recording system

No

Study Results
Technology used to analyze Customer data
MS Excell-Access Statistical package Outsourced to third party

4
24

0 6.7

93.3

72

Customer satisfaction

Customer complaints

Study Results
Type of Information System Implemented

53.4

21.9

24.7

ERP

Packaged applications Custom made/in-house (non-ERP) development

Conclusions of Study

Nearly 50% of the largest Greek enterprises fall

under the two lower stages of CRM Maturity. Only a small percentage (1.85%) assumed to fall in higher stages of CRM Maturity. Greek companies need to develop an organizational culture which is oriented around the construction, employment and exploiting of customer-oriented KM instruments. A study on large European and North American Organizations found similar results.

Processes for KM Framework in CRM Systems

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Framework provides:

KM based CRM framework

Single view of each customer across the enterprise and throughout his life-cycle.

Architecture that promotes and supports knowledgebased, analysis driven interaction with each customer

Processes of KM framework
Knowledge Identification and Generation Knowledge Codification and Storage Knowledge Distribution Knowledge Utilization and Feedback

Processes of KM framework

Technologies supporting KM
Intelligent agents

Automating repetitive tasks

Finding & filtering information

Summarizing complex data

XML Extensible Markup Language (XML) is a set of rules for encoding documents in machine-readable form. Characteristics of XML

Descriptive markup language

Vendor independent

Human legiable

KM capabilities
Presentation FAQ, Online Chat

Integration indexing, Document Management

Personalization Collaborative filtering , Intelligent agents

Categorization Visualization, Common Semantic Definitions

Collaboration Workflow, Discussion Forums

Integrated search Search engines, Search Agents Publishing and distribution Authoring, Webcasting

Process Decision Support, Supply Chain

Architecture for KM-based CRM systems

Prototype Implementation
Login screen Authentication, Different Levels of Access Initial menu Specify tasks, Create new knowledge elements, Ask to gather information View Transactional history of customer

Look at Organizational processes

Perform Situation Analysis Get Recommendations Predictive Modeling and Marketing Automation

Discussion of Article
Positives Framework reduces cognitive burden on user for decision making and problem solving Easy integration of KM and CRM Interoperability between different applications View information at different levels of aggregation Negatives Not comprehensive for all knowledge elements of CRM Needs consistency across businesses Third party software compatibility

Further scope of study

How to bring it to a full blown system Additional components for knowledge acquisition and utilization Field testing and empirical validation Explore other enabling technologies like UDDI Managing evolution of consistent set of knowledge repositories

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