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What is customer knowledge?

Customer knowledge refers to understanding your customers, their needs, wants and aims. It is essential if a business is to align its processes, products and services to build real customer relationships. It includes intimate and tacit knowledge such as that of key account managers, and distant or analytic knowledge including database information about sales, web-behaviour or other analytical piece of data.

Obviously companies know about their customers, but frequently this is in a fragmented form and difficult to share or analyse and often it is incomplete or just in the head of one or two people. To be effective customer knowledge needs to be visible throughout the organisation to ensure the voice of the customer is heard.

Customer knowledge has become a big topic since we started. It now encompasses Big Data, Data Science and Business Intelligence drawing in Web analytics. One recent study of business failures concluded that often failure can be put down to complacency creating a gap between what you think customers want and will put up with, compared to what customers really want and what they will go to your competitors for.

Customer knowledge can be approached from two viewpoints. Firstly, you could say that customer knowledge is the "collection of information and viewpoints that an organisation has about its customers". Using this definition, the role of customer knowledge management is to capture and organise this data to allow it to be shared and discussed throughout the organisation. This can include sales and Customer Relationship Management (CRM) systems, account reports, but also includes detailed analysis of more quantifiable factors such as purchasing patterns or contact activity, website and social media behaviour.

An alternative definitive of customer knowledge is that it is the "collection of information and insight that you need to have to build stronger customer relationships". From this point of view what you currently know about your customers may not be sufficient. You may need to put in processes and systems to gather more information and data about who your customers are, what they do and how they think. It is likely that the business only has a partial view of customer activity. You may know what the customer spends with you, but not what they spend with competitors for instance.

For practical purposes, customer knowledge management is more often than not biased towards the collection of easy information you have, rather than useful information you should have. For example, you could go to the extremes of looking for a complete psychographic breakdown of each of your customers individually, but in practice this would be excessive. Consequently a judgement is necessary to determine what value you are getting from any customer knowledge you collect and so what level of detail do you need.

The aim of building up a strong body of customer knowledge is to develop and manage customer relationships now and over the longer term. Customer knowledge should be determining what to offer, when to offer it and how much for and to monitor and affect customer behaviour in the way you market and promote your products. In the long term the company has to design new products, offer new services, compete in new markets, but even in the short term if you lost a top salesman, would you know enough about her customers in order to keep her key accounts? Would you know which customers are most likely to switch to a competitor if their price dropped?

Customer knowledge draws on two converging strands. Firstly, because customer knowledge has a cost, it was normally associated with larger accounts in business-to-business markets where the value of the account is large enough to sustain the cost involved in keeping and analysing the data. And secondly, it draws on data streams and tools from consumer marketing like CRM and database analysis aiming to build 360 degree view of all customers they have to improve cross-sales and retention.

One problem with customer knowledge, is that it can be confused with CRM (customer relationship management) and contact management and analysis system. Although there is some overlap, we like to see customer knowledge as including a wider variety of less structured information that will help build insight into customer relationships.

Ideally, customer knowledge should work at both a micro and a macro level. That is it should include information about individuals that helps explain who they are, what they do and what they are looking for, but it should encompass the macro view across the customer database to enable broader analysis of customers a whole and so allow for modelling of behaviour and needs and the implementation of algorithmic systems to tailor products and services to specific customers one-by-one.

Thus customer knowledge includes both quantitative insights such as numbers of orders placed, value of business - elements that can be understood numerically, and qualitative insight such as the "MD's just been in post for 3 months, still finding his feet" or personal preferences like works a home on Friday.

A successful customer knowledge programme should include information viewpoints and perspectives on key customers and analytics and trend information across the broad customer base allowing individuals to be targeted for communication and research and burgeoning relationships to be nurtured and grown.

It also has to address issues and concerns about privacy and fairness and so recognise that customers are people and not just data subjects. Clarity and transparency in what customer knowledge is held and how it is used can reassure the customer that they are not being manipulated and use of the data is in the customer's best interest.

For help and advice on building customer, competitor or marketing knowledge systems with our Cxoice Insights Platform contact

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