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How Do They Know Their Customers So Well?

Many firms know about their customers, but few know the customers themselves or how to get new ones. Leaders in customer-knowledge management go beyond transaction data, using a mix of techniques, and they aren't afraid to tackle difficult problems.

Davenport, director of the Institute for Strategic Change, Accenture (formerly Andersen Consulting) and coauthors Harris, also from Accenture, and Kohli, professor of marketing at Emory University, report results from interviews with 24 leading firms and describe seven practices that the leaders share. The companies interviewed -- including Harley-Davidson, Procter & ; Gamble, and Wachovia Bank -- have undertaken specific and successful initiatives centered around the management of customer knowledge.

Within the seven practices, two results stand out: First, firms are beginning to rely more on data from actual interactions, such as sales and service. They are learning that customers are more than transactions, and they are seeking creative ways to turn data from these interactions -- human data -- into knowledge. Second, even the most ambitious firms are keeping data from different approaches separate. They are not accepting the notion of an integrated data repository.

Focus on the most valued customers. Know which customers are worth the organization's resources.

Prioritize objectives. Successful firms begin all customer-knowledge management initiatives by prioritizing business strategies and customer-relationship objectives. They know which customers to focus on and what new behaviors the customers should exhibit.

Aim for the optimal knowledge mix. There's no single solution to knowledge management. Use a variety of approaches.

Don't use one repository for all data. The fully integrated customer-knowledge environment seems more an intriguing idea than a practical reality. Diverse forms of information are difficult to combine in one set of database records, and firms risk having a departing employee walk away with highly developed knowledge. Consequently, customer data is fragmented across multiple systems and locations. No one has been able to combine hard (transaction-based) and soft knowledge in one customer database.

Think creatively about human knowledge. This is the main practice that separates the leaders from the laggards. We saw many creative solutions to managing both explicit (documented and accessible) and tacit (understood but undocumented and not accessible) knowledge.

Look at the broader context. Customer-knowledge initiatives do not exist in a vacuum. Their success depends on the organization's roles and responsibilities, the workplace culture, and the organizational structure.

Establish a process and tools. Many firms seem to stop working when they've selected a management strategy -- avoiding the planning that is critical to implementation. The leading firms work hard to deliberately manage customer knowledge, using a defined process and creating tools as needed.

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