Gaining customer knowledge through analytical CRM
| Published date | 01 September 2005 |
| Date | 01 September 2005 |
| DOI | https://doi.org/10.1108/02635570510616139 |
| Pages | 955-971 |
| Author | Mark Xu,John Walton |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Gaining customer knowledge
through analytical CRM
Mark Xu and John Walton
Department of Strategy & Business Systems, Portsmouth Business School,
University of Portsmouth, Portsmouth, UK
Abstract
Purpose – This paper aims to examine how customer relationship management (CRM) systems are
implemented in practice with a focus on the strategic application, i.e. how analytical CRM systems are
used to support customer knowledge acquisition and how such a system can be developed.
Design/methodology/approach – The current practice of CRM application is based on examining
data reported from a four-year survey of CRM applications in the UK and an evaluation of CRM
analytical functions provided by 20 leading software vendors. A conceptual model of an analytical
CRM system for customer knowledge acquisition is developed based on the findings and literature
review.
Findings – Current CRM systems are dominated by operational applications such as call centres.
The application of analytical CRM has been low, and the provision of these systems is limited to a few
leading software vendors.
Practical implications – The findings shed light on the potential area in which organisations can
strategically use CRM systems. It also provides guidance for the IT industry as to how an analytical
CRM system should be developed to support customer knowledge acquisition.
Originality/value – The latest findings on CRM systems application are reported, and an innovative
analytical CRM system is proposed for customer knowledge acquisition.
Keywords Customer relations,Information systems, Knowledgemanagement, Customer information,
Customer retention,United Kingdom
Paper type Research paper
Introduction
Customer relationship management (CRM) has been widely regarded as a compa ny
activity related to developing and retaining customers through increased satisfaction
and loyalty. IT-based CRM systems have been applied in many industry sectors, and
research on advancing these systems is continuing (Kotorov, 2002; Rowley, 2002; Xu
et al., 2002; Bose, 2002; Choy et al., 2003; Ferguson et al., 2004; Sweet, 2004). One
approach to address future CRM systems development is to link knowledge
management (KM) and CRM in order to maximize not only operational, but strategic
efficiency of CRM through gaining and sharing knowledge about customers (Campbell,
2003; Rowley, 2004; Minna and Aino, 2005). Rowley (2004) argues that there is a need to
develop an understanding of the interaction and interface between KM and
relationship marketing (RM), and to operationalise this in the parallel contexts of
systems, people and processes. The key KM process includes knowledge creation,
sharing, dissemination and exploitation, and the RM process includes communicatio n,
creation of loyalty and stable customer base, customer service, trust cultivation and
relationship maintenance. Rowley (2004) suggests that from a practical per spective,
customer data or information can be used as a platform for both relationships and
knowledge. Tzokas and Saren (2002) recognised some convergence of knowledge and
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Gaining
customer
knowledge
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Industrial Management & Data
Systems
Vol. 105 No. 7, 2005
pp. 955-971
qEmerald Group Publishing Limited
0263-5577
DOI 10.1108/02635570510616139
relationship marketing and competitive advantages, and developed a
conceptualisation of the dynamics of the two significant management paradigms.
Minna and Aino (2005) conclude that there is an evident need in the marketing
discipline to further elaborate on the concepts of “customer knowledge” and “customer
knowledge management”.
Knowledge is the only meaningful economic resource (Drucker, 1996), and gaining
this knowledge is becoming an important differentiator for competitive advantage
(Paiva et al., 2002; Tzokas and Saren, 2002). In the context of studying manufacturing
companies, Paiva et al. (2002) found that customers’ information is the type of
information that is most frequently updated, and the company focuses on specific
customer information instead of general market information. Bose (2002) argues that to
gain competitive advantage, there needs to be a shift from mass marketing and
traditional customer segmentation towards customer-centric orientation and
one-to-one marketing, which is centred on treating every customer individually and
uniquely, according to the customer’s preference. Ahn et al. (2003) acknowledges that
managing relationships with customers is a key point to solidify competitive power of
a company. However, effective use of customer information and kno wledge,
particularly in the context of marketing decisions, is still inchoate in many
organisations (Bose and Sugumaran, 2003).
The customer is a strategic element in a company’s downstream supply chain. It
relates to the immediate business environment that a company needs to scan for
strategic information (Xu et al., 2003). The customer, according to Daft et al.’s (1988)
environment sector classification, is in the layer closest to the organisation’s task
environment that has direct transaction with an organisation. Changes in the type of
customers, behaviour and patterns of customers are likely to have immediate effect on
the operations of a company and also have implications for decision making relating to
strategy setting in the future. It is recognised that not every customer is equally
important to an organisation in terms of his/her lifetime value, thus, customers need to
be segmented in order to identify strategically important customers. Important factors
for improving customer service are to identify the reasons why customers defect and
also ways of preventing customer defections. This requires information about
customers’ preferences and behaviour patterns. However, very few studies have been
established to address customer knowledge acquisition in the context of CRM
implementation.
Although a range of CRM technologies, particularly CRM software, are witnessed
being developed and implemented in practice (Luck and Lancaster, 2003; Feinberg et al.,
2002; Ferguson et al., 2004), there is little research addressing to what extent CRM has
been implemented to provide strategic customer information – i.e. to gain customer
knowledge. Research on how to incorporate analytical functions into operational CRM
has been limited (Xu et al., 2002; Bose, 2002), and the conceptualisation of such systems
tends to be general and vague. As suggested by Ahn et al. (2003) the main concern in
CRM systems is to understand and make practical use of customer information, and
argue that with an enormous amount of data stored in databases and data warehouses,
it is increasingly important to develop powerful tools for the analysis of suc h data and
mining interesting knowledge from it.
This study aims to examine the implementation of CRM systems in practice with a
focus on its strategic application, i.e. to gain customer knowledge, and to explore the
IMDS
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