July 1998
Knowledge-Based Management
Direct Marketing -- July 1998, pp.58-59.
by Kenneth M. Culpepper
Business is about customers -- meeting needs and strengthening relationships. It's about the process of meeting products and service needs profitably -- defining, projecting, executing and delivering. It's about competition and perpetual improvement. Business is about the abstract and the concrete, embracing the use of the quantitative with the qualitative.
Knowledge is the key to business success. Companies who effectively use integrated business knowledge throughout their operation have a distinct advantage in the marketplace. This advantage begins and endures by integrating marketing with business knowledge from product conception, customer delivery and service, to the corporate level of business.
This hasn't always been the case in business or marketing. Traditionally, some companies became extremely profitable without using business or marketing information. However, today's marketplace is different. It has more competitors, more advertising, more prospects, and more costs than ever; plus the competitors, advertising, prospects, and costs are all very different.
Today's business cannot afford to sit back and counter with just media advertising placement and customer list marketing. Today's business must integrate marketing with all aspects of business to continue building partnering relationships with customers while reducing customer acquisition costs, maximizing growth and maintaining profits.
Additionally, today's customers expect to receive more current value to products and services, and today's products and services offer more current benefits to customers. Marketing is more complicated because of the many options that now exist and are continuing to arrive in the marketplace. Thus, marketing databases should now be at the levels of managing knowledge. They should not just be managing customer and product information, but integrated business knowledge from throughout the entire organization -- knowledged-based management.
So why are many businesses still predominately using just media advertising placement and customer list marketing instead of creating and managing their own marketing knowledgebase? Some of the major reasons may surprise you.
Business Cultures
Business culture can kill integration of business and marketing knowledge quicker than anything else. Some businesses do not have strong top-down communications channels to pull off business and marketing integration, others are unwilling to change some important business processes.
Many corporations are often split into SBUs (Strategic Business Units) which were originally created with the corporation's best interest in mind. The strategy was to empower and equip each SBU with its own finances, management, employees, operations and plans to focus better on what they do. However, with this empowerment also came the accountability to manage their own costs while maximizing growth and maintaining profits.
Some problems to achieving integration in business cultures are:
· competition between departments and SBUs
· internal specialists not willing to work as team
· SBUs and departments not willing to share knowledge
· inefficiencies with Management Information Services (MIS) services
· cannibalism between SBUs
· focus becomes the department or SBU's success, not customer's value
· unwillingness to pool budgets for volume discounts from vendors
Knowledge-Based Management Options
Depending on the business environment, determining the right knowledge-based system for your business can be seemingly confusing and expensive. Confusing because there are several types of systems and options with each systems type.
Systems options include either insourcing or outsourcing the knowledge base. The assessment for your business and marketing integration is defined by business needs, expectations, limitations, knowledge-based point-of-entry and goals.
Systems types include (1) Operations Updates, (2) Vendor Staffing, (3) Data Warehousing, and (4) Open Systems. All are efficient systems types to serve as initial strategies for business and marketing integration. The correct assessment for these options and systems types usually stall more businesses from implementing knowledge-based marketing than any budget allocation. However, the administration of a marketing integration audit by knowledge-based business consultants will give you systematic direction by satisfying short-term needs with a long term view.
Additionally, some MIS Departments resist any help with systems outsourcing because it may appear to them as a loss of control or perception of incompetence. This situation makes a marketing integration audit even more appealing because it will justify the correct systems types and options without the interference of corporate politics.
Data Confidence and Validity
Data confidence and validity are the foundation of knowledged-based management and marketing. Many businesses simply do not have confidence in their current data. Therefore, suggesting to corporate level management that using any internal business information to make major business decisions becomes risky for marketing or any other area of the business.
To remove barriers of concern with validity of business data, someone will to have to formulate a process that proves business data is valid or correctable. This process must research all sources, warehouses, functions, changes, and related uses of business and marketing data. From integrated research and data hygiene samples, business and marketing processes are proposed in a business plan. This process is called Knowledge-Based Maintenance Planning (KMP).
Knowledge-Based Maintenance Planning Case Study
This article's example of KMP is an actual case study of an organization that has sales of approximately $300 million. It has three major transactional system databases and several stand-alone databases that combine to total approximately 3.3 million consumer customers.
In this case, the data validity in question was customer contact and address efficiency. A study of organization-wide data sources/uses and analyses of approximately 25% of the corporate database was conducted. In summary, the analyses indicated that, on average, 39% of organization-wide mailings resulted in wasted postage and marketing piece production dollars.
Planning and Purpose
Out of research, KMP proposed to put the databases into a massive integrated cleanup process which would enable this organization to save an estimated $950,000 from waste avoidance of production and postage in the first full year of implementation. This turned out to be a conservative estimate.
In the first year of implementation, an additional value of $175,000 in revenue was gained from recovering individual customers. The plan also called for periodic cleaning updates of the databases. In this organization's case, the cleaning updates were scheduled to happen every six months, and estimated an additional value of $100,000 with every update.
KMP insured incorporating a single set of scheduled cleaning steps instead of cleaning multiple databases individually. The plan based the entire organization's data maintenance on annual volume discounts and minimums, entitling them to reduced rates.
Additionally, three unanticipated benefits came out of implementing KMP. These three benefits are strong characteristics of the implementation of KMP in any organization: 1) It is usually the first place the wrecking ball comes out and starts tearing down the corporate culture walls, and forces people in the entire organization to work together; 2) It is usually the first time that the entire organization gets a glimpse of the customers being its assets; and 3) From its savings, customer recovery and updates revenue, it is an initial and perpetual funding for a knowledge-based management and marketing system.
Conclusion
This article explains some of the major reasons why many businesses still remove themselves from integrating business and marketing knowledge throughout their organization. Knowledged-based management and marketing is achievable. It is a disciplined process that must have corporate level enforcement, management buy-in, customer focus and strong business planning and measurement processes. List management or knowledge-based
Ken Culpepper is president of Integrated Marketing Solutions, Inc., a
knowledge-base marketing firm that
integrates tactical marketing strategy with management of multiple contacts
of businesses to their customers, prospects and channel customers. IMS incorporates
marketing business planning, long-term corporate ROI strategies, and marries
knowledge-based marketing with e-commerce strategy and systems. IMS has
offices in Atlanta, GA (770) 390-9199 and Nashville, TN (615) 782-0461.
(Web: migmar.com/ims)management?