Customer’s behaviour knowledge to better practices of CRM Maria de Fátima Gonçalves Member of CISUC – Centro de Informática e Sistemas da Universidade de Coimbra Quinta Agrícola – Bencanta 3040 Coimbra Instituto Superior de Contabilidade e Administração Instituto Politécnico de Coimbra – Portugal
[email protected] Abstract: Customer’s relationship management (CRM) is the result of marketing and information technologies integration. It is one of the most sophisticated and efficient management methods, which augments the actual customers’ profitability. Nowadays, the major challenge faced by organisations is to know how the buyers of their products or services typically behave, so they can anticipate their requests, attempt to influence their behaviour, attract new customers or prepare the organisation to a better service. To implement CRM, the organisations must know, exactly, who is the customer of their business and to acquire and manage the customers behaviour knowledge (CBK), Traditionally, CBK is obtained with market research; this method is based on presumptions that can not be correct and it does not consider the customer’s behaviour in the past. Nowadays, the transactions (e.g., the purchases and the search of information) the customers carry out with the organisations either through sites B2c and B2B, Call Centres or through their points-of-sale, are stored in operational databases. If the contents of these databases are used, those problems do not subsist because this knowledge is reliable as it is referred to objective facts and it is stored and updated daily, allowing to obtain the evolution of the customer’s behaviour with appropriate technologies, namely data mining tools. CBK develops along the time; therefore, it has vital importance for the business management that the organisation takes care of this knowledge and its evolution, guaranteeing that is of quality, updated and that the organisational members can use it; this can be done with appropriated knowledge systems. If the organisation knows that evolution, it will rethink their activities of CRM. Keywords: Customer, Customers behaviour knowledge, Customers Relationship Management, Knowledge System, Organisational knowledge.
1.
Introduction
A key to success in business is the capacity in attracting and maintaining the customers. Attracting new customers can involve finding customers who previously were not aware of your products, who in the past have brought from your competitors or were not candidates for purchasing your products (Berson et al., 1999). To maintain your customers, you must know the buyers of your products or services typically behave, so you can anticipate their requests, offering the products they pretend in favourable conditions, using some practices usually known by Customer Relationship Management (CRM) (Berson et al., 1999), (Brown, 2000), (Newell, 2000), (Burnett, 2001). The customers are different; therefore, their preferences to buy the goods or to request a service are not the same ones. To know what the customer pretends, the organisation must know, exactly, who is the customer of their business and to acquire and manage the customers behaviour knowledge (CBK), i.e., acquiring new knowledge, confronting it with the existent in the organisation, updating it and storing it as well its temporal evolution. This can be done with a knowledge system, developed with appropriate technology. This paper is structured as it follows: after this introduction section, some practices of CRM are presented, the customer is identified, and some considerations are made on CBK and its course. The paper ends with some considerations about the developed work.
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2.
Practices of CRM
Last years, in consequence of several factors that changed the business rules (political and economical factors, new facilities in communications, the boom of hardware and software and the Internet), the organisations can not impose their products; they only sell the products the customers pretend. So, in each contact with the customer, the organisation must offer the adapted products to a specific customer; this is possible if the organisation knows their customers with their requests and needs. To know the customer is to have with him a relationship, attending their needs and his value for the organisation. Therefore, it is necessary a new organisational activity – to take care of CBK – that allows to acquire CBK, to confront it with the existing knowledge, resolving potential conflicts, updating it and adding pertinent explanations about the temporal evolution of the behaviour patterns. A small enterprise with an individual relationship with their customers, knows their individual preferences, the process they use to pay and other important behavioural features. In a larger enterprise, it is not possible a personal contact with customers; then, they should be found new processes of customer-organisation relationships, namely possible with practices of CRM. In the literature (for instance, (Berson et al., 1999), (Brown, 2000), (Newell, 2000), (Berry & Linoff, 2000), (Burnett, 2001)) there are several definitions for CRM from the technological ones to those that consider that CRM is, by itself, the motor of Business Intelligence. In the context of this paper, it was considered CRM as a process that, attending the change of the customer’s behaviour and the learning in each interaction customer-enterprise, has as objective, a personalised treatment and stronger relationships, attending there is a strong correlation between the customer’s satisfaction and the customer’s loyalty (Newell, 2000). To implement CRM, the organisation needs (Peppers & Rogers, 2000): - to characterise the customer, that is, to have detailed information to identify the customer in each contact point (e.g., point-of-sale, mail, call centre, web page); - to differentiate the customer, that is, to adapt the offer to different customers, according their requests; - to interact with the customer, trying that the acquired information can contribute to a deeper relationship; - to personalise the customer, that is, to adapt for best assisting. Briefly, it should have a deep knowledge about real and potential customers such that the organisations can group them, attending the profits they can bring (Figure 1).
The best Big Medium Small Inactives Prospects Suspects The rest of the world
Figure 1 – Potential and real customers pyramid (Adapted from (Curry & Curry, 2000))
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It is possible to conclude that the success of CRM depends on the analysis of the CBK, attending this knowledge evolves along the time; with this analysis, the organisation knows the products the customer wants, how he prefers to acquire them, the preferential time to buy them, the products associations and if they are or they are not sensible to marketing campaigns. The focus of the analysis of the customers’ behaviour is: - to keep the loyal customers; - to acquire new customers; - to decrease the conflicts with the customers; - to sell different products to the same customer; - to sell more of one product to a customer. Some events are usual in the customers’ life (e.g., to change home, to have a new job, to marry, to have a child or to go on holidays) and they can generate the need to acquire new products or to request some services; then, these events can trigger several practices of CRM. Other events as asking some information in a call centre or stopping to buy in a supermarket can also trigger practices of CRM. Nowadays, with the technological development it is not difficult to know about those events because, probably, they are stored in the organisational databases; some programs, called triggers, can detect those situations, leading to CRM activities (Silberschatz et al., 1996) (Berson et al., 1999). To have success in a practice of CRM, the organisation must consider that: - the information about a transaction or the request of a service should be integrated, immediately, in a system that is accessible to all the channels in the enterprise; - the historic information about the customers’ purchases and its temporal evolution should be available, in real time, to the managers of the appropriate services; - quantification processes should be implemented to calculate the advantage obtained with each customer and with the results of the marketing campaigns; - CBK should be considered in marketing campaigns; - specific programs should exist to reward the customers' loyalty; - the organisation should contact the customers through their favourite channels (e.g., call, mail, fax, personally).
3.
The customer
To a convenient practice of CRM it is necessary to identify the customer of the business, and to analyse, along the time, the evolution of the customer-enterprise relationship (Figure 2); to know this evolution, it is very important to know how loyal the customers are.
Customer’s satisfaction/loyalty
The loyalty relationship
The first relationship
The courtship
C
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M Strategic customer care
Customer’s retention
Customer’s acquisition
Value of the customer-organisation relationship
Figure 2 – Evolution of the customer-organisation relationship (Adapted from (Brown, 2000)) 3
That evolution can be exemplified with the access to the portal of an organisation that makes available e-commerce: - at first, the customer consults the portal and asks some questions; he is a potential customer; - the second step is to register in the portal, filling out a form; this can be useful to know the customer’s profile; - the third step is to buy some products; these purchases are stored in the organisational databases and the customer becomes a real customer; - eventually, after some time, the customer do not access any more to the portal; the causes of this abandon must be analysed, preventing future situations like this. To a meaningful relationship, the organisations must be focused on customer retention more then in acquiring new customers.
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Customer’s behaviour knowledge
CBK (Gonçalves, 2003) is part of the organisational knowledge; it should be understood as the necessary knowledge to carry out the business in the organisation. It can be considered as CBK: - the consumers’ habits like: - what products they usually buy; - in which amount they acquire each product; - combination of products that are bought together; - preferential places to acquire certain products; - chosen occasions for certain types of purchases; - preferential hours throughout the day; - the favourite week days; - the most frequent periods of the year; - the geographic distribution of customers’ groups; - how the customers contact the organisation; - the impact that the marketing campaigns or other initiatives of contact have on the customers; - the evolution of the customers’ satisfaction. CBK is useful to predict which is the customers’ profile that will answer to specific mails, will react to a marketing campaign or will buy certain products and to verify the efficacy of actions towards the change of customers’ behaviour. Other benefits that CBK can bring for the organisation are: - the possibility to determine the customers’ satisfaction level facing the products or the services the organisation commercialise; - the attainment of elements to commercialise new products or services; - the determination of changes in the habits of purchases that can lead to the need of introducing new innovations in the organisation; - the definition of market segments where the products of the organisation are used, those where they aren’t and those that present all the conditions to effectively be so; - the redefinition of web sites used for e-commerce or for the publicity of products and services; - the establishment of a personalised relationship between customer and organisation; - the loyal customers’ identification; - the detection of customers involved in transactions that include some kind of risks like liquidity and fraud. CBK characterizes the customer in full detail, allowing to answer questions like: “Who?”; “Where?”; “What?”; “Whom?”; “How many?” (Figure 3).
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Figure 3 – Fundamental questions for customer’s behaviour knowledge CBK can contribute to a competitive advantage for the organisation and it represents an important strategic resource. Nowadays, customer-organisation relationships are very different from what they were some years ago; the customers did not have neither the information they have now nor a large possibility to choose; therefore, the customer’s behaviour patterns were the same along the time because the preferences, the perceptions and the availability to choose, do not changed frequently. Fundamental changes in business environment (e.g., the globalisation generated by e-commerce, the technological evolution) modified the customers’ behaviour and, consequently, the process as the organisations acquire new customers and retain the loyal ones. So, CBK is very important for the organisations and they must be worried with the management of this knowledge and its evolution.
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The course of Customer’s Behaviour Knowledge
Traditionally, CBK is got with market research; this method is based on presumptions that cannot be correct and it does not consider the customers’ behaviour in the past. Nowadays, the transactions (e.g., the purchases and the search of information) the customers carry out with the organisations, either through sites B2C and B2B, Call Centres or in their points-of-sales, are stored in the operational databases. If the contents of these databases are used, those problems do not subsist because this knowledge is reliable as it is referred to objective facts and it is stored and update daily, allowing obtaining the evolution of the customers’ behaviour with appropriate technologies, namely data mining tools. However, as the knowledge evolves along the time, it is important to store CBK but also to manage it, this is, to confront it with other organisational knowledge, resolving potential conflicts and updating it. So, the course of CBK (Figure 4) does not finish. When the facts change, the inference mechanisms generate new conceptual knowledge that should be confronted with existing knowledge, consolidating it. With this knowledge, actions should be developed to influence the customers’ behaviour or to offer better services.
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Factual knowledge
Conceptual Knowledge
Inference mechanisms
Course of CBK
Actions to influence the customers
Detection of events and its storing
Customer-organisation events
Figure 4 – The course of CBK (Gonçalves, 2003) Several technologies support the activities to obtain and transform factual knowledge in conceptual knowledge (Figure 5).
Databases
Knowledge base
KDD Inference mechanisms
Factual knowledge
Conceptual knowledge
Tools to register the events Detection of events and its storing
Actions to influence the customer
Customer-organisation events
Figure 5 – Technologies to obtain customer-organisations events and to transform them in CBK (Gonçalves, 2003) The existing technology allows the detection of the occurrence of the customer-organisation events and its storing in operational databases. The records of these databases, concern the purchases that the customer does but also the claims, consultations on products and services, attempts of no satisfied acquisitions and attritions that, eventually, appear. There are numerous examples of devices allowing those registers as bar code readers, systems of electronic monitoring, transponders and magnetic cards. From those databases, different tools, (e.g., data mining, (Fayyad et al., 1996)), generate knowledge bases (Frost, 2000), (Stefix, 1995) of different types that can go from a single report or a graph, 6
registered in paper or visualised on the screen, to a text file where the rules representing the behaviour patterns, are stored. The knowledge bases are integrated in the organisational knowledge in order to be used in several activities in the organisation, namely marketing campaigns. Usually, these knowledge bases are static; therefore, the generated patterns are stored without being object of any treatment; there isn’t a dynamic process of updating and analysis of the evolution of its content. That knowledge will be of interest if it will be legalised, updated, validated and integrated dynamically in the organisational knowledge from where it can be used in numerous activities, leading to a better performance of the organisation Aiming this, the acquisition of CBK should be followed by a phase of updating and memorisation where the patterns obtained from DM will be memorised in a knowledge base, allowing an updating of the existing knowledge; this can be done with an adequate knowledge system (e.g., ZACCAR (Gonçalves, 2003)) that confronts the new knowledge with the existing knowledge, consolidating it, including a temporary dimension and comments that can bring for the system, the knowledge of the expert of the domain.
6.
Conclusion
Environmental changes or organisational actions aiming to better services or the offer of new products, lead to change customers behaviour purchases. These changes, in consequence of new acquisitions, are stored in organisational databases, modifying the customer’s behaviour patterns and also the organisational knowledge. Therefore, it is necessary to manage CBK leading to its updating, memorisation and use in several actions in the organisation. In this paper, it was presented CRM, an organisational activity that is essential in any organisation. To practice CRM, the organisations should know who their customers are aiming to acquire the correspondent CBK and to manage it. Some considerations about CBK were made as well as the benefits it can bring to the organisation and the possibility of obtaining it from the organisational databases where the customer-organisation events are stored. This knowledge has a course that begins with the detection of the occurrences of the customerorganisation events and its storing and transformation in conceptual knowledge that is used in actions to influence the customer-organisation relationship. Adequate technologies to carry out that course were presented. CBK develops along the time; then, it has vital importance for the business management that the organisations take care of this knowledge and its evolution, guaranteeing it is of quality, updated and that the organisational members can use it; this can be done with an appropriated knowledge system (e.g., ZACCAR). If the organisations know that evolution, they will rethink their activities of CRM. References Berson, Alex; Smithy Stephen; Thearling, Kurt (1999) - "Building Data Mining Applications for CRM", McGraw-Hill, New York. Brown, Stanley A. (2000) - “Customer Relationship Management”, John Wiley & Sons Canada, Lda.Ontario. Burnett, Ken (2001) – “The handbook of key customer relationship management”, Prentice Hall, London. Curry, Jay; Curry, Adam (2000) – “The Customer Marketing Method”, The Free Press, New York. Fayyad, Usama M.; Piatetsky-Shapiro, Gregory; Smyth, Padhraic; Uthurusamy, Ramasamy (Eds.) (1996) – “Advances in Knowledge Discovery and Data Mining”. AAAI Press/The Mit Press, Menlo Park, California. Frost, R.A. (1987) - "Introduction to Knowledge Base Systems", William Collins Sons & Co. HD, 2ª Ed., London. Gonçalves, M. F. (2003) – “ZACCAR – Sistema de Conhecimento para Apoio à Gestão do Relacionamento com Clientes”, Tese de Doutoramento, Universidade do Minho, Escola de Engenharia, Departamento de Sistemas de Informação. Newell, Frederick (2000) – “loyalty.com – Customer Relationship Management into the New Era of Internet Marketing”, McGraw-Hill, New York. 7
Peppers, Don; Rogers, Martha (2000) - "O triunfo da intimidade", executivedigest, Ano 6, nº 71, pp 51-6. Silberschatz, Abraham; Korth, H. F.; Sudarshan, S. (1996) – “Database System Concepts”, Third Edition, WCB/McGraw-Hill. Stefix, Mark (1995) – “Introduction to Knowledge Systems”, Morgan Kaufmann Publishers, Inc.,.
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