Customer Knowledge Management

Author(s): M. Garca-Murillo and H. Annabi

Source: The Journal of the Operational Research Society, Vol. 53, No. 8 (Aug., 2002), pp. 875884
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Journal of the Operational

Research

Society

(2002) 53, 875-884

?2002

Operational Research Society Ltd. All rights reserved. 0160-5682/02

$15.00

www.palgrave-journals.com/jors

Customer knowledge management

M Garcia-Murillo* and H Annabi
Syracuse University,Syracuse, NY, USA
Customerknowledgehas receivedlittle attentionin the knowledgemanagementliterature.The authorsof this exploratory
study arguethat practicesin marketingand customerrelationshipmanagementhave not been able to captureknowledge
fromcustomersthatcomes from social interactionswith firmemployees.The authorsproposea three-stepmodel by which
companiescan obtainthis knowledge.The model'stheoreticalbase comes fromthe informationretrievaland socialization
concepts of the knowledge managementliterature.The paper identifies culturalchanges requiredto make this process
successful.
Journal of the OperationalResearchSociety (2002) 53, 875-884. doi:10.1057/palgravejors.2601365
Keywords: retail; customer knowledge; knowledge management;managementlearning;customer relationshipmanagement;customer
knowledge management

Introduction
Gathering,managing,and sharingcustomerknowledge can
be a valuable competitivetool that companies and scholars
have not yet considered.A good illustrationof the type of
interactionand knowledge that we want to capture in the
model that we propose in this paper is presentedin Nash's
paper on customer knowledge.' Here he narratesa scene
from the movie 'Miracleon 34th Street'where SantaClaus
collects informationfrom kids and then relays it to parents
including not only the children'sdesires but also the availability of the toys at the Macy's store where Santaworks or
at other storeswhen Macy's did not carrythem. Like Santa,
our objective is for the salesperson to be the collector of
knowledge from customersand then use that knowledge to
help other customers.
The objective of this paper is therefore to propose a
conceptualmodel that incorporatescustomerknowledge as
part of a firm's knowledge. It attemptsto fill a gap in the
knowledgemanagementliterature,which has recognizedthe
importanceof the customer as a source of knowledge but
has not addressedit. The model proposes a process in the
knowledge exchangewith the customerwhere the company
takes advantages of the knowledge that each customer
brings to the interaction.The paper does not explain the
coding and sharing functions of knowledge management
since this has been extensively treatedin the literature.
Knowledgemanagementin generalhas been of interestto
corporationsbecause they realize that it can contributeto
their competitive advantage. Because of the recognized
*Correspondence:M Garcia-Murillo,4-206 Centerfor Science and Technology, School of InformationStudies, Syracuse University,Syracuse, NY
13244-4100, USA.
E-mail:mgarciamgsyr.edu

positive impact, scholars have devoted resources to understanding the process of knowledge sharingand acquisition.
Theseworkshavenonethelessfocusedon intra-organizational
knowledgemanagementpractices.Figure 1 presentssome of
the differentcomponentsof firms' knowledge that scholars
have identified.It highlightsthe knowledgepieces thatfirms
shouldgatheras partof theircustomerknowledge strategies.
There are several sources of customerknowledge. Some
pertainto structureddata that is gatheredfrom transactions.
Others come from interactionswith customers. This paper
will concentrate specifically on the later. Knowledge
managementscholars have indeed recognized the value of
personalinteractionsbut they have not generallyincludedthe
customer.This is because they have emphasizedthe socialization and sharingaspect of knowledge managementthat
takes place within organizations.Their focus has been on
capturingknowledgewithin organizationsto help employees
create and share their knowledge. We argue that personal
interactionswith customers,unliketransactionaldata,lead to
richercontentand can help explain why customersdo what
they do. While transactional data is useful to identify
problems and preferences, it is difficult to determine the
reasons for customer decisions. With personal interactions
firms can ask customers directly and have an idea of the
source of problems,preferences,and needs.
This paper uses Davenport and Prusak's definition of
knowledge as a 'fluid mix of framed experience, values,
contextual information and expert insight that provide a
frameworkfor evaluation and incorporatingnew experiences and information'.2 Additionally the distinction
between informationand knowledge lies in the usage of
information.In other words, knowledge is informationthat
has been processed by people.3 Additionally customer
knowledge in this paper refers to two differentaspects of

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Vol.53,No.8
Society
Research
oftheOperational
876 Journal
Firm
|
| Knowledge

>
>

CutmrIndustry

Products

Suppliers

>
>

>

Suppliers' K of products
Suppliers'K of other
suppliers
Suppliers'K of firm and
comrpetitions
Firm's K of suppliersand
comnpetition

>

K of suppliers
K of customers
K of products
K of industry
K of market
K of operations
K of firm
history/strengths/weaknesses

>

K of product
characteristicsfrom
the firm's perspective
K of product
characteristics from
customer's
perspective

>
>
>

>
>
>
>
>
>

>
>
>
>
>

K of Market
opportunities
Product needs
K needs (product
characteristics)
K needs (firm)

Transfer K to customer
TransferK from firm to employee
TransferK from employee to fsrm
TransferK between employees
Transfer K from supplier to
flrm
TransferK to allies (suppliersand
like firms)

K of regulations
K of economic Factors
K of resources
K of market
K of competitive factors

Competitors

Operations

Employees

>
>
>
>
>
>
>

l
|

>
>
>
>
>

As collaborators
Knowledgeable
aboutcustomers
K of market
K of suppliers
K of products

K: Knowledge
Bold: Knowledge that can be useful
to the customer.

Figure 1

Components of firm knowledge.

knowledge: (a) the knowledge that the customerhas about

the issues thatarerelatedto the productor services thathe is
interestedin buying; and (b) the knowledge that the firm
should have that can be used to assist the customer in
making a purchase decision. The reason why we make
this distinction is because we are assuming an interactive
process of knowledge exchange between the firm and
the customer where sometimes the customer provides
informationwhile other times the firm does.
Literature review
Scholarly work in knowledge management is vast with
multiple disciplines contributingto the many approachesto
the subject. In the managementarenathe field began with
the idea of the learning organizations.Senge's book The
5th Discipline,4plantedthe seed for later contributionsthat
began to identify knowledge as an element of the learning
organization.Davenport'swork on knowledge management
was one of the early contributions.Furtherwork startedto
split between those scholars who focused on the codification of knowledge and those who emphasizedthe sharing
of knowledge.2 Generally, scholars who concentratedon
codification were also interested in technology. This was
the area that received the greatest attentionfrom firms that

spent millions of dollars upgrading their technologies to

captureand spread knowledge. The sharing of knowledge
has been developed more recently as a way of fostering
collaborationand idea generationin organizations.Sharing
as partof face-to-faceinteractionsis the focus of this research.
The knowledgemanagementliteraturethatprovidessome
of the background information for this study pertains
primarily to the socialization process. This includes the
work by Nonaka, who believes in the power of informal
relationshipsand the tapping of subjective insights, intuitions, and hunches of people that could eventually lead to
innovative products.5The process of socialization that he
describes in his 1998 article focuses on the process that
would normallytake place within the context of a company.
As he explains: '[S]ocializationinvolves the sharingof tacit
knowledgebetween individuals... [We]use the term socialization to emphasize that tacit knowledge is exchanged
throughjoint activities-such as being together, spending
time, living in the same environment-ratherthanwrittenor
verbal instructions'.6 Interactionswith customerscould not
reachthis level of intimacybut the idea of tryingto socialize
with the customerto tap into theirknowledgecan contribute
to the pool of knowledge of the company.This can be more
easily achieved for recurring customers with whom the
salespersoncan develop a closer relationship.

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MGarcfa
Murillo
andHAnnabi-Customer
knowledge
management
877

Perhapsbecause the socialization process with the customer entails unpredictableand unstructureddata, companies as well as scholarshave devoted little attentionto this
issue in spite of the fact that they recognize its importance.
Koenig and Srikantaiah,for example, examine customer
knowledge. They believe that having good processes and
systems to managecustomerknowledge is importantfor the
following reasons:7
* better and more timely design of new products and
services;
* early warning and competitiveintelligence;
* customercommitmentand loyalty;
* the synergy of collaboration.
Nonetheless, they do not elaborateon how customerknowledge is to be managed.
Butler,on the otherhand,warnsus of the lack of attention
paid to customer knowledge. She states that 'customers
invariably know more about the organizations they do
business with than the business knows about its customers.
Whilst all businessesrecognizethatthey arenothingwithout
their customers,they rarelyfully capitalizeon the customer
knowledge that their employees informallycollect'.8 Butler
states that 'customer intimacy' is one of the business
strategies that organizations adopt for competitive gains.
Customerintimacy focuses on capitalizing on information
of customer'sneeds to improve customer satisfaction and
increase buying behaviour. She also states that once customer intimacyis achieved,the customerwill avoid the high
costs of switching to other businesses. Although Butler is
accuratein her statements,she does not provide insight on
how to capitalize on the customer'sknowledge, or how to
improvethese practices.
The most recent contributionto the knowledge management literature that specifically addresses the value of
customer knowledge is Davenport's most recent piece
'How do they know their customers so well?'9 His paper
focuses on three elements of customer knowledge: (1)
companyeffortsto capturecustomerknowledge;(2) marketing; and (3) customerrelationshipmanagement(CRM). He
presents a comprehensivereview of the efforts that companies have made to captureknowledge about customers.
Among the efforts presentedis the value of personal interactions, which is the focus of this paper.In this respect his
paper concentratesprimarilyon examples that companies
have adoptedto take advantageof the knowledgethatcan be
generated from customer encounters.The other areas that
Davenportidentifies as contributingto customerknowledge
are explained below.
The marketingapproach
In marketingthe customer is the centre of attention. The
purposeof marketingstudies is to increaseunderstandingof
customer preferences.One approachhas been throughthe

development of market intelligence, where the company

tries to collect information on various factors that can
potentially affect the profitability of a product. Among
these factors are customer preferences. This approach
consists of environmentalscanning techniques, formal and
informal interviews with stakeholders, analysis of sales
reports,analysis of customerdatabases,and formal market
research.10In these studies, nonetheless, the customer is
only one of multiple componentsthat a company studies to
determine future product strategies. Customers can be a
good source of market research that has not yet been
consideredto its fullest potential as a source of knowledge
for the firm. Most marketingefforts rely on studies that are
conductedinfrequently.
A more recent marketing approachaims to understand
customersby using ethnographicand anthropologicaltechniques that can help firms understandnot only customer
preferencesbut also the subcultureassociatedwith belonging to certain groups. A study that illustratesthis type of
consumerresearchis the Schoutenand McAlexanderarticle
on the Harley Davidson owners, where the researchers
interact with bikers for an extended period of time to
1 Today companies are
understand the group's culture."
making similar attempts to try to understand'generation
X' teenagers,who are consideredto have a differentculture
than preceding generations.Although this type of research
provides a rich understandingof the customer,it is expensive, making it impossible for all companies to carry out
such extensive studies.
In the effortsmentionedabove the aim of researchersis to
learn as much as possible about customers in terms of
preferences and characteristics.Marketing research does
not aim to capture what the customer might know about
competitors,products, and new marketsor what customer
needs for knowledge the firm should fulfil. As a result,
processes have not been establishedand adaptedto gather
the kind of knowledge that the customerholds or needs.
Viewing every single interactionwith the customer as a
source of knowledge on customerneeds can help the firm
attaina competitiveadvantagein productinnovation.Firms
do not need to wait for the time consuming marketing
researchefforts to stay tuned to the changing natureof the
marketand need not rememberthe frequencyof knowledge
acquisition.This is because every interactionwith customers
is a mini marketstudy of customerpreferences.
The customerrelationshipmanagementapproach
Another recent contributionto the understandingof customers from a knowledge perspective is the work done
primarilyby consultantson customerrelationshipmanagement (CRM). The idea originatedfrom the capabilities of
web-related technologies where there has been a great
emphasis on the collection of data from customer'stransactions on the web. More recently this has been extended to

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Vol.
53,No.8
oftheOperational
Research
Society
878 Journal

include all types of transactions.This extendedcollection of

data may include calls to customer support lines where
operators are required to document the interactionsthey
have with customers.
Collection of informationfrom multiple sources is what
consultantshave termed multiple touch points or channels
from which companies can develop databasesthat can be
used to analyse customer preferences.12Because a large
amount of data is collected, technology plays a key role.
CRM therefore relies heavily on information technology
tools, not only to collect informationabout customers but
also to analyseit. The ultimateobjectiveof these effortsis to
reach such an intimateunderstandingof the customerthat
future interactions become personalized. Because people
cannot remember every customer's preferences, most of
the interactionsthat CRM expects are through electronic
media. Agents and databases are then used such that
customers reaching a company'semployees or site can be
recognized and presentedwith a series of alternativesthat
suit their preferences.This use of the technology has often
kept the customerfartheraway from the company.The aim
of these efforts is to learn about the customer and ignore
what the customer knows. These are one-way exchanges
thatdifferfromthe mutuallearningrelationshipsthat can be
forged throughpersonalinteractions.
CRM technology is also allowing real-time capture of
customer data through websites. Although this is valuable
information,sites are unable to captureknowledge that the
customer may have obtained elsewhere. Additionally
company websites cannot capture customer preferences
other than what has been pre-defined through the site.
Although the company can track customer clicks, these
will only reflect the already selected choices made by the
company.It would be difficultto identify futuretrendssince
these sites provideinformationabout currentproductsonly.
This is thereforean inside-outapproachwhile the outside-in
strategycould prove more productiveby having companies
capturethe feelings and desires of customers.
Anotherkey objective for the use of CRM systems is to
segment customerson the basis of their profitabilityto the
company.Unlike othermarketingresearchthat concentrates
Table 1

on customersegmentationbased on demographiccharacteristics, CRM attempts to identify valuable customers who

would then receive special attention.At the same time the
company can discontinueserving unprofitablecustomers.
The customer approachto knowledge managementthat
we propose in this paper differs from customerrelationship
management.CRM's goal is to learn about the customerin
an attempt to customize each interaction. The customer
knowledge managementapproachaims to learn from customers and to understand their knowledge needs. This
approach draws no distinction between the customers
based on their potential profitabilityor cost. Costly customers can be valuable to the company in terms of the
informationthat they can provide. Table 1 specifies differences between CRM and customerknowledgemanagement.
Model background
The model that we propose illustratesa three-stepprocess
that will gatherknowledge duringpersonalinteractionwith
customers. This type of interaction will accomplish two
things with respect to customerknowledge management.It
will help gather knowledge from the customer and help
identify knowledge that the customerneeds and that should
be collected by the firm.Because an interactionis a two way
process, knowledge is gatheredby both parties. The customer gathers knowledge that helps him make a purchase
decision at the same time the firmcollects knowledgethatin
the aggregatecan be referredback to the customeror used
for productdevelopment.
The theoretical background for the model we propose
takes some of its bases from the information seeking
literature.Our model points to the customer as someone
holding knowledge and seeking new information.Dervin13
and Kuhlthau14both point to the process of seeking information as defined by the context of the customer and his
prior knowledge. Dervin identifies the informationseeking
behaviour by users, or customers, as part of individuals
making sense of their world. Dervin uses the situationsgaps-uses model to identify the informationseeking behaviour. This model points to the context (situations)of the

Differences between CRM and CKM

Customer relationship
management

Customerknowledge
management

Direction
Medium
Information
Objective

One way
Technology
Data
Identify profitable
customers, customized marketing

Role of the employee

Little if it merely involves

a website catalogue customer
requests in a database

Two way
Personal
Customer experiences
Gather customer ideas,
identify service improvement areas,
new product development
Gather knowledge from
conversations with the customer

Differentiating
factor

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MGarcia
Murillo
andHAnnabi-Customer
knowledge
management
879

customer,informationneeds (gaps) that he faces in orderto

make currentand futuredecisions (uses). Yoon and Nilan's
work, building on Dervin and Kuhlthau, provides some
bases to the model we propose in this paper.15The model
focuses on Yoon andNilan because they providemore detail
with respect to the human interaction that we wish to
convey.

The model
Step 1: knowledgerevealing
When the customer and salesperson come together, they
both bring their knowledge and experiences to the interaction. In this face-to-face encounter the customer seeks to
satisfy a need. The need can be for a productor service. On
some occasions the customerknows well what he intendsto
buy but in other circumstances,the customer may not be
orientedand hopes to find informationat the store.
Although the customer does not expect to be educated
about a particularproduct,since this has not generallybeen
a store practice, he could learn something. On some occasions he may be lucky and find a helpful salespersonthat is
willing to offer some advice. In customer knowledge
managementthe role of the salespersonchanges considerably and, insteadof just providingbasic informationabouta
location or availabilityof a product,he becomes an attentive
listenerwho is tryingto understandthe customer'sneeds. In
additionto informing,the salespersoncan gatherknowledge
from the customerabout:(1) preferenceswith respectto the
productor service, such as colour,size, shape,textures,style
for products and requirementsfor services; (2) competing
products and in particularthe attributesthat are appealing
about them; and even (3) industrytrends such as incoming
products or services. The type of knowledge he/she can
gather can be about reasons for buying a product, such as
functionality, aesthetic considerations, price, time limitations, convenience, entertainment,beliefs, and conspicuous
consumption.Although differentpeople will place different
weights on these reasons, the combination of all of these
factors across multiple customers exposes general trends.
This data can prove to be very valuable to the firm if
capturedand analysed. They can reveal new marketopportunities, services, and productfeatures.
At the initial part of this step, the customer and the
salesperson identify the objective of their interaction.This
is an importantrequirement.Otherwise two-way learning
would be difficult. Yoon and Nilan refer to this primary
exchange as topic defining utterances. In attempting to
identify his/her need, the customer reveals what he/she
knows. The customer'ssharing of what he/she knows can
be characterizedas knowledge revealingin this first step of
the interaction.The customerrevealshis/herpreferencesand
prior knowledge; this is what Yoon and Nilan refer to as
certainty,as opposed to the informationneed, which they

refer to as uncertainty.As humans we relate to the world

based on knowledge that is derived from our experiences.
We attempt to express missing objects or informationin
termsof the outcomeswe wish for and what we know of our
surroundingsand prior experience.'5
Although we refer to knowledge revealingas a step, it is
really a continuousprocess. The customerwill continue to
reveal what he knows throughoutthe course of the interaction in order to reveal his need and evaluate the options.
This is a continuous process and is not limited to initial
exchanges.
Step 2: knowledgesorting
While the customerdisplayswhat he/she knows and his/her
preferences,the salespersonbegins to create a mental map
of user needs. Based on customer needs, the salesperson
will begin to identify the pieces of knowledge that can help
the consumer in his/her particular situation. To help a
customermake a decision, the salespersonsorts knowledge
relevant to that particular individual regarding product
characteristics, functional attributes, information about
common problems, substituteproducts,maintenanceinformation, quality records, competitiveproducts,and options.
The knowledge identified by the salesperson should be
articulatedand presented to the customer not necessarily
as pressurefor a sale but as a genuine effort to assist in the
decision-makingprocess. The customer in turn feels more
comfortablemaking a decision that satisfies his/her needs
and returnsto the store to satisfy futureneeds.
The determiningfactors, in this sorting mechanism, are
the customer's knowledge of the product and firm, the
amount of information the customer needs, the type of
information appropriate to meet the customer's needs, and

the time availablefor the interaction.Once the factorshave

been initiallydetermined,the salespersonpresentsthe pieces
of knowledge he has identifiedto the customer.This facilitates the process of creatinglong-termpartnershipwith the
customer.
Yoon and Nilan refer to this exchange between the
customer and the salesperson, as exchange of comments.
The exchange of comments clarifies the customer's needs to
the salesperson. It is through these comments that the
salesperson can capture some of what the customer knows. 15
While traditional retail models stress making a sale,
which in many cases is reinforced with a commission
reward system, in a customer knowledge management
approach, the objective is to provide the necessary information for the customer to make an educated decision. The
exchange of comments with the customer helps the salesperson to better identify his/her needs, and consequently,
better identify the pieces of knowledge that could help him/
her. The customer will be able to judge the relevance and
usefulness of the salesperson's knowledge about the
products that fit his/her particular situation. The customer

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880 Journal
oftheOperational
Research
Society
Vol.53,No.8

will also adjustpreferencesfromreceivingnew information.

Expectationscan also change because new informationis
received and alternativesthat the customerwanted are not
available or have changed. This step is key because it
clarifies customer needs and expectationsof productsand
services.
Step 3: knowledgelevelling
At this point of the interaction,the customerhas obtained
general informationabout the productsand services. Similarly the salesperson has an idea of customer preferences
and needs. Because complete understandingmight not have
been achievedinitiallyand because preferenceschange over
the course of the interaction,this third step in the process
involves reaching an understanding of the needs and
perspectivesof both parties. It is importantfor the salespersonto have a clear idea of customerneeds afterexchange
of knowledgehas takenplace and for the customerto realize
the type of informationthat he requiresto make a decision.
Although this step is necessary to satisfy the user, the
company benefits the most from the initial encounter.This
is because once the customer is aware of the options
availableat the store he will have to adjusthis preferences

to what is actually available. It may be useful then for a

companyto make a distinctionin the company'sknowledge
base betweenactualand modifiedpreferences.In the case of
a store selling carpets,for example, the initial requestmay
have been for somethingmore modem while the store only
hadtraditionaland Indiandesigns. The customerthen settles
for the Indian.This was the second choice, not the preferred
one. At this stage, the exchangewill repeatitself until both
parties are eventually satisfied with the amount, type of
information,and knowledge shared.Notice that the customer usually determinesthe durationof the interactionand
the knowledgethat the salespersoncan give and/oracquire.
At the end of this process knowledgehas been levelled and
ideally the customer will have sufficient understandingof
the product/serviceto make a decision. The salespersonwill
have optimized his/her interactionwith the customer and
gained valuableknowledge (Figure2).
Coding of knowledge
The knowledge that is collected from the interaction
between a customer and a salespersonneeds to be documented so that other personnel can retrieveit. The salespersonneeds to reflecton the knowledgethathe/she hasjust

Customer

stage IKnowledge Revealing

Initialhasic informationof
product
- Prefrenowled

Describing

- Competitorinformwion

Listening
Cl
ing

Stage 2
Knowledg

SortinKnowledge Sorting

Salesperson

Firm information

- Learningprocess
Assimilation of new
knowledge
Changesin preferences

Specifying

A knowledge
ge of product
_

Knowledge sorting to

suit customer needs

- Adjustingknowledge

Sle

Selecting

sharing techniqueto suite

customer

Defining
Clarifying

Stage 3
Knowledge Leveling

Clafying
Bold Italic: what firm is
interested in capturing from
customer
Figure 2

Stages of the model.

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21

MGarcia
Murillo
andHAnnabi-Customer
knowledge
management
881

acquiredfrom the customer.The dialoguebelow presentsan

illustrationof the knowledge that can be gathered from a
simple conversationwith a customer.Knowledgethat can be
useful for the company is enclosed with a square. From
these conversations,the salespersonwill be able to gather
the type of knowledge that was identified in step 1 of the
model. Ideally these individualswill then input the knowledge that they acquire from their conversationswith customers, into a knowledge base. The knowledge base can
then be searched and manipulated by other employees,

managers on site, as well as corporate users in other

locations (specific details about how to build a knowledge
base areoutside of the scope of this paper).Perhapsthe most
difficultpartof the process is for managementto decide the
type of informationthat they need to collect and codify in
the knowledge base. It needs to determinewhat would be
useful for the company,employees, and customers. In the
dialoguebelow we identifyknowledgethatwe believe could
be relevant.The final selection nonetheless will need to be
determinedby the company itself.

Dialogue
Salesperson: Good evening madam. How are you today?
Customer: Fine thank you.
Salesperson: My name is Tom, is there anything I can help you with?
Customer: I am looking for a rug for my Ifamily room
-*
Functionality and use
Salesperson: Do you have anything particular in mind?
Customer: Hmm, kind of.
Salesperson: How about we start with price? What is the price range you are looking at?
Customer: About|$5000 to $600:01 *
Price range to help guide
sorting by the salesperson
Salesperson: Are there any particular colors you are looking for?
Customer: Well, not really, I want to[have a the
my family that will reflect a few antiques and a painting that I am
planning to put there.
*
Help identify the context of the customer44
Salesperson: Why don't we talk about the pieces you have. What colors are they?
Customer: Before we go on, I would like to know a bit aboutlyour servi

your rugs

and thelorigi
Information

needs

Salesperson: Certainly! We are a family owned store that has branches in 5 different big cities. We have been in business for
about 70 years. We import rugs from Iran, China, Pakistan, and India. We have our agent visit these countries and the
shops
we do business with regularly. We import pieces that are rare as well as common pieces. We offer warranties,
repair, and
maintenance services in case of accidents.
Customer: Are the services reliable? Or are they like those of store X,
*
Information about competitors
which ruined an invaluable Persian rug that my grandfather inherited from his family?
Salesperson: We have professional repair people that will be able to give you an estimate for the repair, as long as they
are
certain they can do it. If they can't, we can send them abroad to some of our partners who are experts in
difficult repairs.
Customer: You know, there are many people who have oriental or Persian rugs that need repair but have no idea where to go
... Oh, this is a nice piece it looks like it is Persian.
Salesperson: You are right it is from Iran.
New knowledge needs the firm should acquire
Customer: Do you know the Lnatureor the history or the design?
Salesperson: Unfortunately Ildo not have that information.

Knowledge important to the customer

that the firm does not have

Customer: I just moved here and I live on the east side of town where there is a large Pakistani community. They would love
the carpets you have. These designs are beautiful!
l

Knoowledge about potential customers

Salesperson: Thank you madam. We try to have a variety of design to meet the different tastes.
Customer: I really like this one. How much is it again?
Salesperson: It is $5,650.

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Vol.53,No.8
Society
Research
oftheOperational
882 Journal

Y letsmy frienddo that.

Customer:Wouldyou allowme to taketherugto my houseandsee if it fits?I mean,can I returnit?|Store
New knowledge about competitor
Salesperson:You could if you bring it back within the week in its original state. I just have to clear it with the manager.
Customer:This will look really nice in the living room. Now I just have to find anotherpainting to go on the next wall.
Kn Knowledge about complementaryproducts & alliances
Salesperson:Actually,IIknow a great antique store that has a very nice collection of Eastern pieces. Their prices are
reasonabletoo. I will get you their card.
Customer:I guess this settles it?
Salesperson:We'll take it out to your car.
Customer:You know,II wish they made rugs that can be taken apartin smaller pieces.J
Productpreferences, product innovation opportunity
Salesperson:Yes, I know.
Customer:No ... seriously.What if they design it in smallerpieces to make it easier to move and fit in differentrooms or
houses?

Sharing knowledge
Once this knowledge has been codified, there should be a
mechanism by which all of the employees acquire the
knowledge that each has gathered. This is necessary not
just to make each of them more knowledgeableabout the
productbut as a precautionarymeasurein case of employee
turnover.The sharingshould also reachhigherlevel officials
in the organizationbecausethey could use this knowledgeto
make productrelateddecisions. The sharingthat we intend
here is consistent with the sharing that other scholars in
knowledge managementhave alreadyidentified.

also examples of this type of product.We focus on knowledge-intensiveproductsbecause both the companyand the
customerneed to have a good understandingof the product
before they are able to purchaseor sell it. Although general
informationabout the productcould be used, true customer
knowledgewould involve both generalcharacteristicsof the
product and less obvious elements such as maintenance
options that are not in the manual, common problems and
solutions, and unintendeduses of the product.This type of
knowledge can be generated from interacting with customers. Although no single customerwill know everything,
talking to many of them will lead to a collection of knowledge that the firm could relay to new customers.

Assumptionsof the model

There are several assumptions for the model that we
propose.
Assumption 1. The knowledge exchange takes place
between a customerand a salesperson.
The model relies on the socialization that takes place
between a customerand a salesperson.The reason why this
choice was made is because it is one of the channelsthathas
received the least attention in the literature.Face-to-face
interactionis also one of the basic means of communications and because such a great emphasis has been put on
technology to gather customer knowledge, this aspect has
been largely ignored. The face-to-face interactionthat we
propose does not include telephone calls to customer
support services. The reason why these were excluded is
because people calling for this service include instances of
trouble while the purpose of knowledge gatheringthat we
want should include both positive and negative experiences.
Assumption2. The product/serviceis knowledgeintensive.
We define knowledge intensive products as those that
requirethe customerto do some researchto understandtheir
features,capabilitiesand value. Complex products such as
cars and machineryfall underthis category.Collectiblesare

Assumption3. The interactionwith the customeris limited.

This assumption is based on the fact that the customer
rarely goes back to the same store more than three times
when he is thinking about purchasing a product. The
customer may go to many different stores and gather
informationfrom each of the stores but he/she will visit
one of the stores very few times before he/she makes the
purchase. Because the customer will have limited contact
with the salesperson,the interactionhas to be efficient such
that both the customer and the salesperson can obtain
knowledge. In this case the interactionfocuses mainly on
relevant informationand knowledge. Relevance has to be
determinedin advanceby the organization.

Benefits and outcomes of customer knowledge

The outcome of this process will be of benefit to both the
customer and the firm. From a better understandingof the
customer,the company will have greaterunderstandingof
the true needs and expectations of the customer. This is
because transactionaldata only reflectsthe satisficing(satisficingbehaviouris a relaxedassumptionbasedon the assumption of rationalbehaviourcommonly used in economics. It

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MGarcia-Murillo
andHAnnabi-Customer
knowledge
management
883

Organizational change to accommodate customer

knowledge
Knowledge
Sorting

Coding

Sharing

Firm Knowledge
I
~~~~~~~N

Knowledge
Revealing

*
*
*
*
*
*
*

Cding

Coding /owledge
Leveling

ProductImprovement
CustomerServiceImprovement
CustomerSatisfaction
IncreaseSales
ImproveCustomerRetention
RevealNew CustomerKnowledgeNeeds
FirmAcquisitionof KnowledgeSpecificto Customer

Figure 3

Customerknowledge outcomes.

means that agents will not necessarily reach the most

optimal choice because of high transactionscosts. Instead
they satisfice,or choose an option thatis good enough under
the constraintsthatthey face. See Simon HA (1957). Models
of Man: Social and Rational; Mathematical Essays on
Rational Human Behavior in Society Setting. Wiley: New
York)element of a decision and not the actual preferences.
Listeningto the customerwill revealknowledgethatcustomersbringto thetransaction.Thesepieces become increasingly
valuable when they are collected because they can help
identify trends and patterns about multiple aspects of the
productand the customer.
Because this is a two-way exchange, the interactionwill
also reveal customer knowledge needs that the firm may
not be collecting. While the firm learns from its customers,
customers also benefit from the hunches, insights, and
intuition of other customers,which are relayed to them by
the salesperson. Meeting the customer's needs by taking
the time to listen to him/herand later providingknowledge
will foster the relationship between the customer and
the firm.
The company will acquire knowledge that will assist in
productinnovationand improvements.Since the firm has a
better understandingof the customer's expectations and
needs it will be able to improve customer service and thus
achieve customersatisfactionand retention.Better relationships with the customer lead to increased sales and
the acquisition of new customers. Figure 3 illustratesthe
outcomes from customer knowledge management and
expresses the model as a continuousprocess.

Some of the prevalent attitudes, processes, and reward

systems in sales organizations,such as sales quotas, individualism, and employee resistance to spending time on
coding acquired knowledge are issues that pose problems
to the model we propose. In order to implementpractices
that are conducive to customer knowledge management,
some traditionalprocesses and expectationsneed to change.
Unlike most sales techniques today, the purpose of the
model is not to push for a sale but ratherto build a partnership with the customerby helping him/hermake a decision,
indirectly leading to a sale, and achieve customer loyalty
and retention.
The sales process, which will determinethe characteristics of the interaction with the customers, needs to be
conducive to knowledge sharing. Salespeople should not
feel rushed to make a sale. Practices such as sales quotas
and commissions are harmful to open interaction with
customers. Recognizing that helping the customer is the
first step to making a sale leads to fostering a knowledgesharingatmosphere.Whenthe intentionof the salespersonis
to provide the customerwith the informationhe lacks, the
interactionhelps the customer make an informed decision
and foster customersatisfactionand loyalty.Althoughsalespeople may initially have to spend more time with each
customer,this effortwill be reducedas the informationfrom
several customersis repeated.
Knowledge sharingbetween an employee and a customer
has a much differentpurpose and takes on different characteristicsthan knowledge managementwithin the organization. In some cases, there is not an opportunityfor more
than one interaction.The salesperson will have only one
chance to gatherknowledge and sell the company'sproduct.
This is a concept more clearly understoodby firms that sell
high pricedproductsor services. Underthese circumstances
the salespersonshould be highly trainedso that when given
this uniqueopportunitywith a customer,he will successfully
help the customer.Helping the customer meet a need and
fulfill his informationneeds will foster good relationships
that may eventuallyresult in a sale.
In addition to providing the right attitude towards the
customerand the right techniquesto help the customer,the
salespeople should have appropriatepractices and training
to gatherknowledge from the customer.Salespeopleare not
trainedto gatherdatafromthe customerwith respectto what
the customer knows or might want to know. Companies
need to identify the pieces of knowledge that the customer
can providethat will help the company improveits service.
In addition, companies also need to identify the pieces of
knowledge they lack that would be interesting to the
customer. Salespeople should be trained to listen to and
synthesize what the customer is saying in order to identify
appropriateitems.

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oftheOperational
Vol.53,No.8
884 Journal
Research
Society

Conclusions
Although the customerhas been identifiedas an important
source of knowledge, scholars have devoted little attention
to customer knowledge. Areas related to knowledge
managementsuch as marketingand CRM have concentrated
primarilyon transactionaldata and anthropologicalstudies
that ignored the potential of simple personal interactions.
This paper is an initial attempt at incorporatingcustomer
knowledge. The model establishes the steps that sales
personnel can use when talking to customers. It also
illustrates with an example the type of information that
companies can collect from customers. Some of the information may not be relevantto the firm and occasionally.It
may even entail gathering informationabout competitors
and other related businesses that can be useful to the
customer's decision making. Additionally this model
proposes the sharing of knowledge with company officials
to help in the developmentof future services and products
and with customersas part of the service that the company
provides.
Although knowledge gained from personal interactions
with customers can benefit companies, culture and incentives may have to be changed for the process to be successful. Future studies should compare sellers that use this
process with those that do not and determinethe impact
on customer satisfaction. At a larger scale a comparison
could be made between a firmthatuses this process and one
that does not in terms of the impact on sales, customer
loyalty, and developmentof new products.

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Received June 2001;

accepted February 2002 after two revisions

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