Offering a Conceptual Model for the Effectiveness of Customer's Knowledge Management in an Organization

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1 Available online at Reef Resources Assessment and Management Technical Paper ISSN: RRAMT Vol. 40, 2014, 1 Offering a Conceptual Model for the Effectiveness of Customer's Knowledge Management in an Organization Siamak Kazemzadeh a *, Farhad Karimkhani b, Amin Allahverdi Pour c,vahed Ganjizadeh d b a Department of Management,Maku Branch,Islamic Azad University,Maku,Iran Young Researchers and Elite Club, Maku Branch, Islamic Azad University, Maku, Iran c Department of Management,Maku Branch,Islamic Azad University,Maku,Iran d Department of Management,Maku Branch,Islamic Azad University,Maku,Iran Abstract Knowledge is considered the key competitive factor in global economy, but for successful presence in today's dynamic market, we should consider another important part i.e. customer. Customers' knowledge management provides the organizations to be able to recognize the market opportunities with higher possibility and increase their competitive advantage. CKM is obtaining, sharing and developing the customer's knowledge for mutual benefit of customers and organization. KM makes the flow of knowledge about customer's issues between work groups easier and therefore by integrating knowledge related to the customer, it plays an important role in its rapidity and effectiveness to achieve its goal. In this paper, we are first acquainted with knowledge management and customer relationship management then we address the knowledge management proceedings in improving the process of customer relationship management and finally we suggest a conceptual model for the effectiveness of CKM in a customer-focused organization Published by RRAMT France Ltd. Keywords: Knowledge Management, Customer Relationship Management, Customer Knowledge Management, Customer Knowledge Management Competence; 1. Introduction Customer relationship management and improving customer relationship is critical for organizational success. Formerly, many organizations have been structured around theirs products and services. This is reflected in legacy systems available up to now and in the structure and culture of these organizations. In recent years, most of these organizations have changed and have adjusted themselves toward being customer-focused. This change includes technical and informational infrastructures, which allow the organizations to know their customer base better. Creation, saving and dispersing information and knowledge about customers, products and related services is essential to improve relationship with customers. However, creating these infrastructures is not enough to be changed toward a customer-focused organization. These facts should be accompanied by related changes in structures, process and culture of the organization. A combination of technical and informational infrastructure and related organizational and cultural changes are part of knowledge management tools for the customers. The aim of this paper is providing an understanding of customer knowledge management (CKM) as a comprehensive management method. Some ideas about market orientation, relationship marketing, subjects related to

2 CRM and KM have been used. We present CKM as a continuous process of producing, diffusing and using customer knowledge inside an organization and between organization and its customers. Moreover, "CKM competence" is related to the ability to collect customer's information and knowledge through the process and daily operations of an organization. Here, we offer a pilot theoretical framework for CKM competence. We consider CKM from relational marketing viewpoint that is how it can be used to support CRM efforts. For better understanding of the issues involved in organizational change into a customer-focused organization, the next section addresses some related literature about customer information, customer relationship management and knowledge management. Finally, a conceptual model is offered to increase the effectiveness of CKM. 2. Moving toward being customer-focused Three important contexts, which are related to moving toward being customer-focused, are customer information, customer relationship management and knowledge management. These are explained briefly in the next sections Customer information Technological development and reduction of technological costs inside organizations have made them able to collect, and save and manage the information related to their customers. In order to cope with the challenges related to the increase of competition and competing in the market, which was done through offering products before, and today is dictated through the needs and interests of the customer, using customer information is vital. Therefore, the customer information should be viewed as one of the organization's properties, which can be used to achieve competitive advantage and support the commerce to focus on the customer. This information is a necessary tool for the organizations in moving toward being customer-focused and supporting the long relationship with customers and therefore maximizing the commercial situations and opportunities [1] Customer relationship management Customer relationship management (CRM) is related to commercial processes and technologies, which are focused on the management and improvement of relation with customers in the fields of selling, marketing, supporting and customer services. Successful implementation of CRM requires the staff to have access to rich customer, products and services' information and have the knowledge of how to ascertain the current and future needs of the customers selection, delivery and relations related to the products and services should be relevant for effective development of long relations with current and potential customers. CRM process is used to develop the knowledge about the customers and their interests, habits and needs by analyzing the characteristics and behavior of the customers. Then, this knowledge is used to design marketing programs and support the customer's interaction with activities of trade counter. One of the main bases of CRM is that the decisions based on valid information should be organized and understood well [2]. Therefore, one of the considerations of CRM is quality information related to the customer, products and services. CRM has different definitions but the most useful concept is a management system, which is focused on the customers in all domains of on organization. Therefore, the CRM viewpoint is significantly different from the traditional duty-focused view of marketing toward customer retention. This theory describes the structure and philosophy a customer-focused organization, which is defined as customer relationship management [3] The reasons of failure in implementing customer relationship management An organization could claim that it has implement CRM when all of the organizational units reach this view that customer is the only life factor of the organization or they are the main property of the organization and when they have implemented this view in practice. Unfortunately, CRM in Iran has changed into a motto of being customerfocused, organizations do not utilize it in practice and the employees of these organizations are not familiar with the 495

3 real concept of the organization's strategy based on being customer-focused or it is not observed in their action or behavior, which is a sign of failure in implementing CRM [4] CRM system operation Four operations are used to enhance and stabilize customer relationship as follows [5]: 1- Recognizing the personal characteristics of each customer 2- Creating business designs for planning profitability strategies 3- Modeling of current and potential purchase 4- Establishing the organizational activities, which requires creating closer relationship between the customer and organization. Figure 1 shows a simple modelling of CRM process for an organization. knowledge management organizing CRM CRM focusing on the key customer CRM-based technologies Figure 1. Four elements of CRM system 2.3. Knowledge management In accessing the special resources and markets' knowledge and intellectual capital are considered as the initial base of accessing the main and strategic competencies for better performance. To increase the efficiency and effectiveness of the organization, ensure the optimal presentation of goods and services to the customers and attract their consent, we should manage our knowledge about the customers. Therefore, knowledge management is the integral part of CRM. In order to create a customer-focused organization, the structural changes must be implemented in the staff of customer relationship department. This fact not only facilitates the targeted sale and marketing activities, but also it can be considered as part of the strategy of personalizing knowledge management. Sharing knowledge and experiences about the customers, their behavior, products and services information is vital for the future marketing innovation programs. 496

4 Extensive training programs are implemented to help the staff in moving toward customer services culture and enable them to update their information about new services and innovations marketing and sake section offering desirable customer services is widely dependent upon having contemporary and new knowledge about the customer, products and services. Ongoing training programs are vital to move toward a customer-focused organization. 3. Customer knowledge management Merging the two concepts of CRM and KM can promote the application benefits of both and decrease the failure risk of performing each one of them. CKM is an area of management in which the knowledge management procedures are use to support the customer knowledge exchange in the organization and between the customer and organization and this issue improves CRM process such as giving services to the customers, customer retention and profitability [6]. As mentioned before, customer knowledge is considered as a basic strategic resource for the success of any organization. Therefore, CKM could be viewed as a critical area in knowledge management. Moreover, it makes KM and CRM interdependent. CRM is an area of management in which KM tools and processes are used to support customer knowledge exchange inside an organization and between the organization and its customers, and where the customer knowledge is used for CRM to improve CRM processes such as customer services, customer retention and profitability of the relationship. We argue that CRM viewpoint is both inside the organization and in customer interaction. For example, this is the way, which is added to the concepts close to customer knowledge and the competency of market knowledge, which are both focused only on the internal processes of the organization. CRM relations occur both inside and organization and in customer interaction. The marketing orientation encourages the organizations relation to interaction and learning from the customers. Customers could help the organizations to see which items are performed well and which ones need to be improved. Moreover, customer relationship could provide a framework to create and transfer knowledge. In CKM, the focus is on determining the customer knowledge and its types and resources. According to the recent studies, this paper precedes in some aspects. Some authors prefer to observe customer knowledge as the customerspecific knowledge, instead of the gathered information about the market. Gebert et al. suggest that CKM model differentiates four aspects: 1) content, 2) competency, 3) partnership and 4) composition. This matter points to an aspect of knowledge when knowledge is separated from individuals and compiled. Davenport et al. stressed that maybe some customer data are left unassembled. Competency focuses on understanding what customer knowledge is required by the staff to complete their duty in different commercial processes related to the customers. We express CKM as a continuous process of production, distribution and use of customer knowledge inside an organization and between the organization and its customers. It is also a learning process, which is the organizational process affected by the required knowledge. 4. The features of a customer-focused organization In this section we present some suggestions to improve customer relationship using knowledge management in order to achieve the organizational goals It is critical to have a quality information infrastructure. Although customer information bases are sometimes considered as goods, the information infrastructure they provide is very critical. Providing quality customer information is very difficult by it has a direct effect on cost reduction, income production and competitive advantage. Organizations should understand the quality of their customer information and provide quality improvement programs [7]. Customer information improvement should be performed in syntactic, semantic and pragmatic levels. Based on this study, the importance of defined standards for customer information and the available problem in presenting a general view about the customer situation was depicted [8]. 497

5 4.2. Information and knowledge should be considered as vital properties. Both the information related to the customers and the knowledge of how to use this information in the best way must be considered as vital properties in a customer-focused organization. These intangible properties are more important in knowledge-sensitive organizations. The organization must move in this direction by providing a commercial unit and focusing on creating a general idea about the customer The counter staffs are the key mediums. The counter staff in contact centers and other sections, which are in direct relation with the customers, are the first reference center for must of the customers. They are vital for making relations with the customers and if we want them to work well, we should train them about how to use the customer information and the products and services of the organization. This training must be a periodical course, since innovation in products and services continues steadily. It is critical for the counter staff to be known as key mediums in the more toward being customer-focused. 5. Conceptual framework CKM requires organizational competency to completely use the customer knowledge and fulfill the promises of superior customer knowledge for the organization's performance and competitive superiority. Based on the ideas from Li and Calantone based upon the market knowledge competency, Campbell, based upon the customer knowledge competency and Gamble et al. based upon CKM, we express that in determining the competency, CKM is considered as the ability to collect customer information and knowledge to the processes and CRM operation of an organization [9]. Based on the available literature about market orientation and relation marketing and studies about successful application of CRM and KM, we suggest that CKM competency should consider five areas: 1) inter-operation cooperation, 2) supporting organizational systems, 3) cooperating with customers, 4) supporting IT systems and 5) organizational culture, which assists the organizational learning and customer orientation. These five areas should be managed in such a way that production, distribution and use of customer knowledge increases and they become an integral part of customer management operations and processes. This five-area list is not comprehensive. Organizational culture, which supports organizational learning and customer orientation, could be expressed as a framework for CKM competency. In order to manage the personal relation of customers, customer knowledge and information should be available everywhere for every one inside the organization where it deals with customers and every one should utilize the customer in decision-making. Moreover, customer knowledge and information could be available for operations, which are not directly dealing with customers, like accounting and financial affairs, especially in commercial markets [9]. There are two main reasons why it is necessary to have cooperation among different departments inside an organization in customer knowledge management. First, customer knowledge is distributed inside formal and informal visits and discussions among the staff of different departments: i.e. the personal customer knowledge is shared implicitly and it changes into organizational knowledge explicitly. Second, inter-operational collaboration is required to develop and maintain a common customer database because some customer information and knowledge are created at different times by different departments to be used. Common rules are required, for example deciding what type customer information are required or saved and how the data should be in the database to be analyzed Organization support systems: They are formal management systems, which are used by people. These include management systems, employee rewards and evaluation, responsibility and duty hierarchies and other manifestations of formal organizations. In this paper, we just address senior management systems, employee rewards and evaluation. In many studies, supporting 498

6 the senior management is considered essential for CRM success. Senior management plays an important role in making customer knowledge value relations for an organization and it can perform as a driving force to view the customers as a valuable source of knowledge. In order to encourage the staff to collect data and sharing it to be used, evaluation and reward system should be connected to measure customer satisfaction and knowledge sharing. For example, Campbell suggests that the organizations first redesign evaluation and reward system toward internally focused measurements such as knowledge sharing and over time step toward customer-oriented rewards. Although Gamble et al. pointed out that producing and sharing customer knowledge are not the only issue raised in reward and in this regard, culture is effective too Cooperation with customers This is essential in customer knowledge management for many reasons. First, customer can provide their experiences and knowledge about the products and services of a company and mostly about the competitors' products and services. Second, customers change into active parties in many trades dependent on IT development, especially dependent on internet and electronic advertisements and changes in commercial environments. Establishing a creative environment for customer interaction can be regarded as the main goal of an organization, which creates and develops long customer relations. Therefore, companies seek for opportunities to interact with customers. For example, Microsoft and Amazon have used customer knowledge efficiently to improve, test and even produce some of their products and services IT support system They point to the channels and frameworks to produce knowledge and share it inside an organization and between the organization and its customers. These systems are internet, intranet and extranet, , customer communities and contact centers which are designed to create dialog among the customers. These IT systems, which include customer information and data, are essential in order to diffuse and use customer knowledge [10]. Figure 2 is our proposed framework for customer knowledge management competency to achieve the goals of a customer-focused organization. Organizational culture, which is supporting organizational learning and being customerfocused. Inter-operational collaboration Organizational supporting systems Collaborating with customers IT supporting systems Customer knowledge competency Figure 2. Experimental framework for CKM competency 6. Conclusion In fact, one of the reasons of failure in implementing customer relationship management in organizations is the lack of senior management attention in organizations to the organization structure and the staff's attitude toward the customers or the lack of investment to create process structure or any change in organizational infrastructure. 499

7 Therefore, merging the two theories of CRM and KM, which is known as CKM, is a suitable solution to obtain knowledge from the customer and propose the best and most suitable knowledge to them to offer unique products or services in order to obtain competitive advantage. The findings of this study should be considered by those organizations, which are moving toward being customer-focused and those, which have started other KM projects. The proposed framework in this study to implement CKM helps the specialists in applying knowledge successfully from and about the customers to achieve higher efficiency in CKM processes. There is a need to extend CKM competency view to include customer relationship and customer medium. CKM competency is considered a corporate concept. We suggest the customers and their mediums to be part of CKM competency from the viewpoint of production and use of customer knowledge. References [1] Khalil, O.E.M, and T.D. Harcar (1999). Relationship Marketing and Data Quality Management, Society for Advanced Management Journal. Spring 64(2) [2] Child, P., R.J. Dennis, T.C, Gokey, T.I. Mcguire, M. Sherman and M. Singer (1995). Can Mraketing Regainthe Personal Touch?, The McKinsey Quarterly. Number 3.0 [3] Jahaniyan. S., B. Ebrahimi "customer relationship management: a competitive advantage in todays' business value", Iranian research institute for information science and technology, N. 96. Pp , 2006 [4] Majidi, J., N. Esma'il zadeh, "ways of achieving citizen-orientation according to the system missions", 137, national conference of customer relationship management, January 2008 [5] Aligholi, M., S. Asgari Masoole "the role of customer knowledge management in stable competitive advantage in trading companies" the third national conference of knowledge management, February 9 th, 2011 [6] Yin, R. (1984). Case Study Research: Design and Methods (1st ed.). Beverly Hills, CA: Sage Publishing. [7] Darke, P., G. Shanks, And M. Broadbent (1998). Successfully Completing Case Study Research: Combining Rigour, Relevance and Pragmatism, Information Systems Journal, 8, pp [8] Li, Tiger & Calantone, Roger (1998). The Impact of Market Knowledge Competence on New Product Advantage: Conceptualization and Empirical Examination. Journal of Marketing,vol.62,october 1998,pp [9] Sheth, Jagdish, Sisodia, Rajenda & Sharma, A. (2000). The antecedents and consequences of customer-centric marketing. Journal of the Academy of Marketing Sciences, Vol. 28, No. 1, pp [10] Foss, Bryan, Henderson, Iain, Johnson, Peter, Murray, Don & Stone, Merlin (2002). Managing the quality and completeness of customer data. Journal of Database Marketing, Vol. 10, No. 2, pp