The Effect of CRM Applications on Customer Knowledge

A primary motivation for a firm to implement CRM applications is to track customer behaviour to gain insight into customer tastes and evolving needs. By organizing and using this information, firms can design and develop better products and services.  It is argue that customer knowledge has certain attributes that make it one of the most complex types of knowledge.  . For example, customer knowledge may be derived from multiple sources and media and may have many contextual meanings. Customer knowledge is also dynamic, and it changes rapidly. 

Customer relationship management applications facilitate organizational learning about customers by enabling firms to analyze purchase behaviour across transactions through different channels and customer touch points.  For example, FedEx and American Airlines used their investments in IT systems at the customer interface to gain valuable customer knowledge. More recently, firms have invested in an integrated set of tools and functionalities offered by leading software vendors to gather and store customer knowledge. Firms with greater deployment of CRM applications are in a better position to leverage their stock of accumulated knowledge and experience into customer support processes. In addition, firms with a greater deployment of CRM applications are likely to be more familiar with the data management issues involved in initiating, maintaining, and terminating a customer relationship. This familiarity gives firms a competitive advantage in leveraging their collection of customer data to customize offerings and respond to customer needs.

Customer relationship management applications help firms gather and use customer knowledge through two mechanisms. First, CRM applications enable customer contact employees to record relevant information about each customer transaction. After this information is captured, it can be processed and converted into customer knowledge on the basis of information-processing rules and organizational policies. Customer knowledge captured across service encounters can then be made available for all future transactions, enabling employees to respond to any customer need in a contextual manner. Firms can also use customer knowledge to profile customers and identify their latent needs on the basis of similarities between their purchase behaviours and those of other customers. Second, firms can share their accumulated customer knowledge with customers to enable those customers to serve themselves by defining the service and its delivery to suit their needs. 

The process of customer self-selection of service features provides additional opportunities for firms to learn about their customers' evolving needs and to deepen their customer knowledge. 

SOURCE:

Mithas, Sunil; Krishnan, M. S. and Fornell, Claes (2005) “Why Do Customer Relationship Management Applications Affect Customer Satisfaction?”, Journal of Marketing, Vol. 69, No. 4 (Oct., 2005), pp. 201-209