Personal knowledge banks will be marketing’s oxygen

Back in the 18th century, researchers were wrestling with a fundamental but intractable problem: what is the secret of fire? The prevailing theory said that fire was caused by a special fire element inside flammable substances called phlogiston. But no matter how hard researchers tried, they could never isolate it.

Then one day one a French tax collector by the name of Antoine Lavoisier suggested a reason. Perhaps fire can never be explained solely by looking inside a substance, he argued. Perhaps the secret lies outside, in the atmosphere it interacts with. It’s oxygen in the air that lets things burn, not phlogiston inside them.

Before, the cleverest men using the most exquisite measures and the best tools and techniques couldn’t make progress: they were asking the wrong question and looking for an answer in the wrong place. By asking the right question Lavoisier had opened up the rich new vista of modern chemistry.

Has marketing got its own phlogiston quest? Here’s a candidate: marketers’ love affair with consumer data. Perhaps the secret of real consumer insight – the understanding that ignites the fires of successful commercial interaction – can never be captured 100 per cent by the customer data held by companies. No matter how extensive your database, how much you enrich it by fusing it with other data sources, or how clever your modelling techniques, the biggest insights may lie just beyond your grasp. Outside, in the “atmosphere” – with the customer.

A first inkling of such a Lavoisier moment comes from Gartner. Financial services companies spent $6.2bn (&£3.4bn) on customer relationship management solutions in 2000, but they still “risk missing the point”, it declares. Why? Because while these companies are doing their best to focus on their customers, “your customers are not focused solely on you”. It’s not just that they might not want to have “a relationship” with you. There’s a structural factor at work: customers have many financial (and other) relationships and the data lies beyond the reach of individual companies. In today’s environment, “a relationship strategy alone doesn’t cut it”.

Now some researchers are taking these thoughts even further. Its “company-centric view of the relationship between an organisation and its customers” is CRM’s fatal flaw, declares Richard T Watson, director of the Center for Information Systems Leadership at the University of Georgia College of Business.

Companies struggle to create a “single view” of a customer’s holdings of their products. Yet even if they succeed, this still leaves an “inference gap” – the gap that comes from seeing the customer’s transactions with only your own company while not seeing his interactions with the industry as a whole. It also leaves what Watson calls an “advice gap” generated by the difference between historical and forward-looking information: transaction data is irrelevant for improved understanding if the customer’s circumstances and needs change.

In fact, the only entity really capable of delivering a single customer view (the Holy Grail of CRM) is the customer, because only the customer has a full view of all his/her interactions with all his/her many suppliers. “I am my own database”, declares Watson in the latest issue of Harvard Business Review.

Watson is therefore predicting the rise of a new model. The future lies in “ceding [to consumers] total control over information about their past purchases and product preferences,” he says. The only way companies will ever “harvest the deep knowledge that CRM promises” is by letting consumers own, control and manage their own data, giving access to companies as and when they can add value.

Watson calls this alternative “CMI” (customer managed interactions). Others call it “personal knowledge (or data) banks”. Either way, ownership, control and management of customer data passes from the company to the customer (or an agent working on behalf of the customer), as customers compile “a complete record of all their interactions across companies in each industry” and supplement this data with current preferences and plans for future purchases.

What are the potential uses of personal knowledge banks? They start with simple administration: a single, central and easily accessed source of all the up-to date, accurate data you need to conduct transactions.

Then added value services start kicking in. If you collate all your CDs on your personal knowledge bank and make this data available to music retailers, they can now make “if you liked this, you might like that” recommendations. Because a personal knowledge bank has a complete view of all transactions within a category, vendors can get a much better picture of customer preferences and lifetime value.

The next step is to go beyond historical transactions to future plans. Say you’re planning to buy a car or move house. Signal these intentions via your personal knowledge bank, expressing your willingness to receive proposals from vendors. They benefit in two ways. First, they’re presented with hot prospects almost free of charge. Second, they get access to this information before the consumer actually goes to market.

In such ways, personal knowledge banks have the potential to become the natural interface between consumers and companies for an ever-increasing range of transactions and interactions. The benefits for sellers include a much better view of customer needs, preferences and potential value; the ability to guarantee timely, relevant communication (the Holy Grail of direct marketing); to massively cut go-to-market costs (instead of having to search out customers they’re effectively announcing their interests to you); the ability to track market trends in real time; and access to new ideas for product and service development.

But the price is high: complete consumer control over who has access to what information, when and on what terms – and therefore the need to “earn” or pay for access to this information. As a forthcoming Buyer Centric Commerce Forum discussion paper on the subject notes, historically, marketing has focused on gathering information about consumers (such as market research) and directing information at them (marketing communications). Now, the information economy is tilting us onto a different course: one which places the emphasis on eliciting information from consumers and using this information for them; from companies’ search for customers to consumers’ search for value.

The practical hurdles facing personal knowledge banks are enormous (think privacy, security, ease of use and access, permissions management). So far, only one company – Information Answers, via its “Customer’s Voice” proposition – is developing the architecture and services that enable personal knowledge banks. But long term, predicts Watson, this market will be “even bigger than CRM”. Like the discovery of oxygen, it opens up a completely new way of looking at things.

Alan Mitchell, asmitchell@aol.com