Knowledge Management''

Knowledge Management Customer behavior and involvement in financial products at BCR
Eliza Gheorghe
1. Literature Review
1.1. Introduction Todays economical and organizational communities are facing a continuous change, witnessing the emergence of effective forces that seek to reshape them. We are speaking here about globalization, new technologies, political and economic structures and the new type of customer, the one who has more requirements and expectations, which are changing every day. In this continuous and abundant flow of information, a new discipline has emerged, which became known as Knowledge Management (KM). There is a growing recognition in the business community about the importance of knowledge as a critical resource for organizations. Traditionally, this resource has not been treated with the degree of systematic, deliberate, or explicit effort devoted to managing human, material, and financial resources. But in the coming years, the firm that leaves knowledge to its own devices may be putting itself in severe jeopardy. More and more practitioners and researchers believe that knowledge resources matter more than the conventionally tended resources (material, labor, capital) and must be managed explicitly, not left to fend for itself (Holsapple, C.W., Joshi, K.D. , 2000:235-236) Defining knowledge management is not an easy task and can prove itself to be quite tricky, as the concept of knowledge is itself hard to put in words. However, several authors gave some definitions of what knowledge management is or is considered to be. According to Petter Gottschalk, knowledge management can be defined as a method to simplify and improve the process of sharing, distributing, creating, capturing and understanding knowledge in a company. It is description, organization, sharing and development of knowledge in a firm. It refers to identifying and assessing the collective knowledge in an organization in order to help it compete. Knowledge management is a method for achieving corporate goals by collecting, creating and synthesizing and sharing information, insights, reflections, thoughts and experience. Knowledge management is a 1
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discipline focused on systematic and innovative methods, practices, and tools for managing the generation, acquisition, exchange, protection, distribution, and utilization of knowledge, intellectual capital and intangible assets. Knowledge management aims at helping companies create, share and use knowledge effectively, resulting in fewer errors, less work, more independence, better decisions and improvement as regards to relationship with the customers, services and profitability. The purpose of Knowledge management is to increase responsiveness, as well as innovation. Knowledge must be managed to the organizations benefit. Some economists developed taxonomy for knowledge management that they labeled schools of knowledge management. Each school was proposed as an ideal type. No claims were made that any one school outperforms others. Each represents a particular orientation or perspective. The schools are not mutually exclusive. (Earl, M.J., 2001) This taxonomy is applied to classify a number of approaches to knowledge management. This classification of approaches is based on an overall match to each ideal type in terms of school of knowledge management. Three relevant schools are labeled as: the economic school, the organizational school and the strategic school. The economic school has a focus of income, in which the aim is to exploit knowledge assets. The organizational school has a focus of networks, in which the aim is knowledge pooling. The strategic school has a focus of competitive advantage, in which the aim is to identify, exploit and explore knowledge capabilities. (Gottschalk, P., 2005:2)
1.2. Knowledge Sharing and Organizational Learning The concept of knowledge management can be connected with a related field: organizational learning. Knowledge management represents the initiative of the management to support learning in and by the organization, while organizational learning is viewed as the process through which the knowledge is (re)constructed by the organization. The focus on collective knowledge construction is in line with more recent contributions to the organizational learning research stream ( Ackerman, M. S., Pipek, V., Wulf, V., 2003:89) Perceiving organizational learning and knowledge management as a process of
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(re)constructing organizational knowledge implies a social constructivist approach to knowledge ( Berger, P., Luckmann, T. 1966:196). The social constructivist approach sees the organizational learning as an institutionalizing process through which individual knowledge becomes organizational knowledge. Institutionalization is the process where practice becomes sufficiently regular and continuous to be described as institutional. The attention is not only on the process through which individual or local knowledge is transformed into collective knowledge, but also on the process through which this socially constructed knowledge influences, and is part of, local knowledge. With organizational or collective knowledge, reference is made to knowledge that comes in the form of rules, procedures, strategies, activities, technologies, conditions, paradigms, or frames of references around which organizations are constructed and through which they operate. The most important factor of the organizational knowledge is that it does not disappear and is capable to survive turnovers in individual actors. Some authors describe three phases or moments that can be discerned during the institutionalization of knowledge: externalizing, objectifying, and internalizing (Berger, P., Luckmann, T. 1966:208). Externalizing knowledge occurs when people exchange knowledge. Objectifying knowledge refers to the process through which knowledge becomes an objective reality. The objectified knowledge is used by individuals in the course of the socialization during the internalizing process. In addition to these three processes, which in combination ensure the institutionalization of organizational knowledge, knowledge management focuses on the creation of new knowledge, or knowledge development. The various processes that make up innovation and institutionalization, or knowledge creation and recreation, can be made visual by the use of a knowledge-sharing cycle. The cycle provides a simplified picture of knowledge sharing in organizations and is meant to help analyze the management of knowledge sharing. The knowledge-sharing cycle is based on the social constructivist notion of organizational learning. In order to broaden the scope of knowledge sharing with creative processes, the cycle includes the process of knowledge creation (Ackerman, M.S., Pipek, V., Wulf, V., 2003:30-31).
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It should be noted that the cycle has some similarities with the well known classification of Nonaka and Takeuchi: socialization, externalization, combination, and internalization (Nonaka, I., Takeuchi, H., 1995:308). These forms of knowledge sharing relate to the learning processes of individuals and groups. Learning at the level of the organization only takes place when the collective treats knowledge as being organizational knowledge, that is, when knowledge has become collectively accepted and used. Collectively accepting knowledge is of strategic importance. Organizations that want to use internal knowledge sharing should pay explicit attention to the collective acceptance of shared knowledge (Ackerman, M.S., Pipek, V., Wulf, V., 2003:30-31). 1.3. Types of Knowledge Sharing There are three basic types of knowledge sharing that can be derived from the knowledge-sharing cycle. 1. Knowledge retrieval. The individual learns from the organization, by retrieving existing knowledge; 2. Knowledge exchange. Individuals learn from one another, by exchanging existing knowledge that they possess. 3. Knowledge creation. The purpose of sharing knowledge among individuals is to create new knowledge, by combining existing individual, shared or organizational knowledge. Shared knowledge becomes organizational knowledge during the process known as collective acceptance. This process consists of the often gradually acceptance by the collective of the shared knowledge as being part of the organization, but it is not so much a process of knowledge sharing, as it is one of sedimentation. (For example, a group of technicians might have learned a new way of fixing a machine. This new operational knowledge remains local knowledge until it is accepted by the organization, for example, as expressed in organizational stories, in manuals, and in the training of newcomers). This is a process that usually takes longer that the three knowledge-sharing processes mentioned above (Dixon, N. M, 2000).
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Because of its time-consuming and highly implicit character, collective acceptance was not included initially in the empirical research. Nevertheless, researches have revealed that ignoring the importance of collective acceptance can be a serious obstacle to organizational learning. 1.4. Information Communication Technology Knowledge-sharing processes can be distinguished not only by which learning processes they support but also by how they can be supported by information communication technology (ICT) (Zack, M. H., 1999). It is important to support knowledge retrieval, enabling to transfer knowledge between the organization and the individual. Storing of knowledge is also important and it can be done by reports and databases. Knowledge management started out from the perspective of creating knowledge management database systems or creating expert systems. It is the organization that shares knowledge with the individual. The role of ICT in supporting knowledge exchange between individuals is often said to be the domain of electronic networks. Intranets and Lotus Notes1 tools are the best known and often referred to in this context (Huysman, M., de Wit, D., 2002: 42). The support of networks is also needed for facilitating knowledge creation. Often it is difficult to decide a priori what knowledge should flow between which members, what the outcome or even the purpose of networking would be. In that case, networks resemble more the communities of practices described by researchers like Brown and Duguid (1991) (Ackerman, M.S., Pipek, V., Wulf, V., 2003:33). In some instances, groupware technology and electronic communities can facilitate the process of knowledge creation.
Lotus Notes is the client side of a clientserver, collaborative application developed and sold by IBM Software Group. IBM describes the software as an "integrated desktop client option for accessing business e-mail, calendars and applications on [an] IBM Lotus Domino server."
Knowledge Management Customer behavior and involvement in financial products at BCR 1.5. Barriers to Knowledge Management
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The purpose of knowledge management is to boost the performance of the organization, improving the creation, sharing and use of all kinds of knowledge that are essential to the performance of the business, by designing and implementing tools, processes, systems, structures and culture. Knowledge management is typically made operational through a series of new projects, processes and activities. The number of people who state that knowledge is becoming the major source of competitive advantage is growing over the years and argue that creating, organizing and using knowledge is what organizations do. The performance of these organizations depends on how effectively they manage these activities compared to their competitors. Today, many firms have launched major programs to manage knowledge better, and it is increasingly common to see titles such as chief knowledge officer and knowledge manager in organizations. Without a doubt, knowledge management has become an important topic (Fahey, L., DeLong, D., W., 2000). But the efforts of many companies to manage knowledge have not achieved their objectives, and there is a growing sense of disenchantment among executives about the practicality of trying to enhance organizational knowledge. Long and Faheys research in more than 50 companies pursuing knowledge management projects revealed that organizational culture is widely held to be the major barrier to creating and leveraging knowledge assets. 1.5.1. Cultural Barriers A major recognized barrier to leveraging intellectual assets is the organizational culture. Some researchers have identified four ways in which culture influences the behaviors central to knowledge creation, sharing and use (Fahey, L., DeLong, D., W., 2000). First, culture and particularly subcultures shapes assumptions about which knowledge is worth managing. Second, culture defines the relationships between individual and organizational knowledge, determining who is expected to control specific knowledge, as well as who must share it and who can hoard it. Third, culture creates the context for
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social interaction that determines how knowledge will be used in particular situations. Fourth, culture shapes the processes by which new knowledge with its accompanying uncertainties is created, legitimated, and distributed in organizations. These four perspectives suggest specific actions managers can take to assess the different aspects of culture most likely to influence knowledge-related behaviors: 1. Culture shapes assumptions about which knowledge is important. Management has to explore how the cultures priorities are likely to support or undermine more effective creation and sharing of knowledge around a particular activity or process. For example, is being billable always more important than some other knowledge-enhancing activity, such as looking for patterns in lost customers? Is going to a skill-building training class a lowerstatus activity than performing daily tasks? Furthermore, management has to identify behaviors that will demonstrate that a particular set of essential knowledge-building activities is critical to the organization. Finally, management must clarify which existing norms and practices may be barriers to the new behaviors needed. 2. Culture mediates the relationships between levels of knowledge. Management must evaluate how the current culture facilitates or undermines the proposed redistribution of knowledge. Management must consider how attitudes towards ownership of knowledge can be changed. Management must, for example, identify what new behaviors leaders must exhibit to communicate a shift from valuing individual to collective knowledge. Management must make explicit which practices need to change to reinforce more collaborative knowledge use. 3. Culture creates a context for social interaction. Management must identify norms and practices that are barriers to discussing sensitive topics. Management must find and evaluate evidence that senior management is perceived as accessible and approachable. Are there elements of the culture that inhibit vertical interactions? Management must find norms and practices in the firm that encourage or discourage a high frequency of interaction and an expectation of collaborative problem solving. 4. Culture shapes creation and adoption of new knowledge. Management must look for important new knowledge that was ignored, discounted, or undiscovered by the organization. How did these examples prove costly to the business? What norms and practices created barriers to adopting, creating, or applying this knowledge? Management
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must seek out examples of new knowledge adopted or created with inputs from the external environment that led to bursts of innovation within the firm, and try to draw lessons from them. Also, research conducted at the Cranfield School of Management in the UK has identified culture as at the top of the list of concerns among organizations regarding knowledge management. Turning a we dont do it like that attitude into who knows how to do it better? demands a sea change in working practices and relationships (Ward, J., Peppard, J., 2002:81). People and cultural issues dominate as both the necessary means and the key inhibitor to sharing and exploiting knowledge. 1.5.2. Error Barriers Some researchers have identified a set of pervasive knowledge management errors (Fahey, L., DeLong, D., W., 2000:136).Their focus is on fundamental errors, that is, errors that if left uncorrected inhibit genuine knowledge from being developed and leveraged. This set of errors was called the 11 deadliest sins of knowledge management: 1. Not developing a working definition of knowledge. Management must make distinctions between data, information and knowledge. 2. Emphasizing knowledge stock to the detriment of knowledge flow. The notion of flow suggests a radically different conception of knowledge. It is in constant flux and change. It is central to day-to-day doing and being. 3. Viewing knowledge as existing predominantly outside the heads of individuals. Knowledge cannot truly originate outside the heads of individuals. 4. Not understanding that a fundamental intermediate purpose of managing knowledge is to create a shared context. If knowledge exists ultimately within individuals, and it is individuals participating simultaneously in multiple group processes that make and execute key decisions, then a fundamental purpose of managing knowledge must be to build some degree of shared context. Shared context means a shared understanding of an organizations external and internal worlds and how these worlds are connected.
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5. Paying little heed to the role and importance of tacit knowledge. A headcentered view recognizes the central role of tacit knowledge in shaping and influencing explicit knowledge. 6. Disentangling knowledge from its uses. Knowledge is about imbuing data and information with decision- and action-relevant meaning. This is the vital role of human intervention. Information about customers becomes knowledge when decision makers determine how to take advantage of the information. In this way, knowledge is inseparable from thinking and acting. 7. Downplaying thinking and reasoning. Knowledge generation and use at the level of individuals and groups is a never-ending work-in-progress. At its core, getting to different states of knowledge development requires some form of thinking and reasoning. 8. Focusing on the past and the present and not the future. If the intent of knowledge is to inform and influence decision-making and actions, then its focus must be on the future. 9. Failing to recognize the importance of experimentation. Experiments are a crucial source of the data and information necessary for the invigoration of knowledge, and in most respects, the creation of new knowledge. Experiments include trying new approaches to analysis, initiating pilot projects, doing things on a trial-and-error basis, and allowing individuals to assume additional tasks and responsibilities. 10. Substituting technological contact for human interface. Although IT is a wonderful facilitator of data and information transmission and distribution, it can never substitute for the rich interactivity, communication, and learning that are inherent in dialogue. 11. Seeking to develop direct measures of knowledge. It seems that an increasing number of organizations seek to measure knowledge directly rather than by its outcomes, activities, and consequences.
1.6. Knowledge and Competitive Advantage
Eliza Gheorghe
Knowledge activities in organizations have increased in significance over the past few years (Davenport, T., Klahr, P., 1998). In fact, knowledge has been proposed as the primary source of wealth creation, and knowledge protection has been suggested as critical to generate and preserve competitive advantage. It can be also noted that the only sustainable competitive advantage a firm has comes from what it collectively knows, how efficiently it uses what it knows, and how readily it acquires new knowledge. One of the few resources that can pass the VRIS test is knowledge. Consequently, several authors have argued for a knowledge-based view (KBV) of the firm as a specialized case of resource based view (Conner, K.R., Prahalad, C.K., 1996). KBV presents firms as social communities with the primary role of integrating the specialist knowledge resident in individuals into goods and services, so that organizational capabilities are the manifestation of this knowledge integration. Knowledge is embedded in multiple entities within the firm, such as the organizational culture, routines, policies, systems, and documents, as well as individuals and teams. Knowledge shapes the firms core competences and therefore determines value creation. Furthermore, tacit knowledge, social knowledge, and complex knowledge are difficult to imitate. Hence, competences based on these types of knowledge cannot be easily duplicated by competitors, and strategies based on these competences are likely to lead to sustainable competitive advantage. A contentious aspect of knowledge is its definitional domain. Researchers have engaged in a passionate debate about what knowledge is and what forms or types of it are available (Collins, H., 1993). Knowledge has been defined as information whose validity is established. Our conceptual development builds on the resource based view (RBV) of the firm, an influential theoretical framework for understanding the creation and sustainability of competitive advantage (Nelson, R.R., 1991:61). In this perspective, firms are conceptualized as bundles of resources. Resources are heterogeneously distributed across firms; resource differences might persist over time. Resources are defined as all assets, capabilities, organizational processes, or firm attributes which are controlled by a firm, and which enable it to conceive of and implement strategies that improve its efficiency and effectiveness. When the resources are valuable, rare, inimitable, and non-substitutable (VRIS), firms can achieve sustainable competitive advantage by implementing strategies
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that leverage their resources in unique ways through test of proof, and as relevant and actionable information based at least partially on experience. While the positivist view (knowledge as justified true belief) is the predominant one in Western culture and a generally accepted assumption in organizational theory, it has been increasingly complemented by authors arguing that knowledge cannot be conceived independently from action (Blackler, F, 1995:1021). These views shift the notion of knowledge as a commodity that people acquire to the study of knowing as something that they do. Knowledge can be defined as familiarity with or understanding of a phenomenon. Knowledge can be contained in subjects such as individuals, groups, and organizations, and in objects such as systems, products, and processes. Knowledge can be viewed as a higher form of information, which is elevated by the specific nature and purpose of the organization to provide an opportunity that the firm can exploit for its advantage. Hence, the challenge for many firms is to identify that knowledge, which is relevant to their goals and strategies. The relationships between knowledge management infrastructure, critical knowledge areas, and various elements leading to sustainable competitive advantage ensure the leading and enhancing sustainable competitive advantage. Identifying Critical Knowledge Areas Critical knowledge areas are specific bodies of knowledge or key resource capabilities that are unique to an enterprise and reside at the core of their business. Given that the most important context for guiding knowledge management is the firms strategy ( Zack, M. H., 1999:197), every strategic position is linked to some set of intellectual resources and capabilities. In order to implement knowledge management processes (e.g., data analysis and information communication) that support a firms strategy, managers need to consider several issues. First, they need to assess what the firm must do to compete and what the firm can actually do (strategic gap). Second, they should establish what the firm must know to compete and what the firm actually knows (knowledge gap). Third, organizations need to recognize what their knowledge management infrastructure needs to be and what it currently is. While the first two issues focus on linking knowledge management efforts to strategic goals, the third point acknowledges that knowledge is a path-dependent resource and that future knowledge configurations will be constrained by previous investments in a knowledge infrastructure. Next we describe in further detail the role of two tangible components of a firms strategy
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its mission and value propositionand that of the existing knowledge management infrastructure in helping organizational members to identify the firms critical knowledge areas. Business mission: The starting point for business strategy is some underlying idea of why the business exists; this is typically comprised in a firms mission, which includes a statement of the companys purpose and overarching goal. Some mission statements, such as that of Skandia, are explicit about the role of knowledge. For example, Skandia creates unique skills around the world that allow us to provide the best financial solutions for our customers and enduring value for our shareholders. We build special relationships, engage the energy of our employees, and transfer knowledge with pride. If a statement of corporate purpose embodies or embraces knowledge, it becomes a knowledge business vision (Earl, M.J., 2001:386). Otherwise, when a business mission, such as that of America Online (To build a global medium as central to peoples lives as the telephone or televisionand even more valuable) is not explicit about knowledge, the question firms need to answer is what is the contribution that knowledge can make to the attainment of the firms purpose?. Because a mission defines the basic functions the firm has decided to perform in society, it provides organizational members with initial strategic guidelines about the knowledge they require. The firms goals and purpose create a roadmap that helps the company to define its core activities and the knowledge creation and knowledge sharing processes that will support those activities. For example, in an in-depth case study at a European Innovation and Technology Center, Cepeda et al. (2004) showed that the preparation of a mission statementone that emphasized the promotion of innovation and research activities among companies in the industryhelped the firm to guide its knowledge management efforts. Given that their mission was the promotion of innovation efforts, organizational members identified knowledge areas such as training and development and industry social networks as critical for their success. Value proposition: A business value proposition is a statement of the fundamental benefits it has chosen to offer in the marketplace; it answers the question: How does the business intend to attract customers? A value proposition communicates to
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employees what the business is trying to do for its customers and, by inference, the requirements of their particular role. It represents the attributes that firms provide, through their products and services, to achieve satisfaction and build loyalty with their targeted customers. The choice of a value proposition is perhaps the most obvious way in which a business attempts to differentiate itself from competition. For example, Microsoft and Harley-Davidson have a product leadership value proposition; they offer one-of-a kind products and services, state-of-the-art features, and innovative solutions that customers often cannot get anywhere else. In contrast, firms such as IBM and Nordstrom have a customer-relationship value proposition, choosing to focus on the quality of their relationships with clients and offering them complete solutions. A third case is that of Wal-Mart and Southwest Airlines, which have an operational-excellence value proposition. These firms opt to excel at attributes such as price, quality, on-time delivery, selection, and availability that their rivals cannot match. To deliver a value proposition, a business needs to make choices about the core activities it intends to perform and the knowledge needed to perform those activities. Furthermore, by comparing the value proposition to the current performance of the company, performance gaps can be detected (Earl, M., J., 2001:426). There could be quality problems, customer service issues, or a deficit in product innovation efforts. Analyzing the gap between the current and the desired value proposition is a way of discovering the critical knowledge needed. From this perspective, knowledge management supports strategy when it enables the firm to implement solutions based on the unique needs of the client. Knowledge management infrastructure: To implement knowledge management successfully, it is important to understand the infrastructure required to support the acquisition, generation, transfer, and storage of tacit and explicit knowledge resources. Knowledge management involves the coordination and integration of multiple knowledgebased activities, structures, systems, processes, and individuals with diverse roles in the organization. These elements are frequently grouped into three categories people, processes, and technologyand constitute what scholars call a knowledge management infrastructure.
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While knowledge management solutions are a rising phenomenon, many firms manage knowledge in an implicit way and have elements of a knowledge infrastructure without calling it so. For example, Volvo has extensive databases and core experts in lifecycle analysis; Sony has training cells on product disassembly and ensures knowledge sharing with designers; BMW design teams have permanent members from the recycling function to ensure lessons from previous experiences be incorporated into product design. The existence of implicit or explicit knowledge management elements (people, processes, and technology) creates awareness about the importance of knowledge and facilitates the identification of critical knowledge areas. Furthermore, an existing knowledge infrastructure affects the identification of critical knowledge areas because knowledge resources are path dependent, which is to say that a firms previous investments and its repertoire of routines (its history) constrain its future behavior (Zack, M. H., 1999:241). Resources are specific to a firm, embedded in their routines or assets, and accumulated over time. Consequently, an existing knowledge infrastructure (people, processes, and technology) may constraint the process of identifying critical knowledge areas. Independent of the firms strategy, the current infrastructure elements might create boundaries and mental models within which managers will evaluate their knowledge needs. In this circumstance, it may appear faster and easier to develop a new strategy that leverages the current knowledge management infrastructure than it would be to create a new knowledge infrastructure to leverage the desired strategy.
2. Methodological Approach
In order to understand bank feed-back and customer behavior and involvement in financial services, I decided to ascertain how customers interact with their bank when 14
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purchasing a comprehensive range of financial products. Four generic categories of financial products were identified as representing the main customer needs. The selected product categories were: primary current accounts (if a person has more than one current account, the primary one is considered to be the most used ); general insurance products (house, life, motor insurance); lending or credit products (loans, mortgages); specialist or complex investment products (investments in stocks, pensions etc). In order to facilitate the design of a questionnaire, I decided to arrange three focus discussion groups in Bucharest, Iai and Timioara. The Bucharest group discussion was conducted by me and consisted of males and females aged between 18-29 years old in the middle class socio-economic group (accounting for approximately 5 percent of Romanias population). The Iai group was conducted by a cousin of mine that lives there and consisted entirely of females aged between 30-45 years old in the lower middle class people (accounting for approximately 10 percent of the population) and skilled working class people (representing about 15 percent of the population) socio-economic groups. The Timioara group, conducted by an uncle of mine who works there consisted of middle-class and lower middle class males aged between 48-65 years old. After defining involvement as an unobservable state of motion and having in mind the scope of the research, we used an interview schedule to lead discussion on the four product categories stated above. The schedule was based on Houston and Rothschilds (1976), and Kapferer and Laurents (1985) dimensions of involvement. The main themes were: How much were the participants intrinsically interested in financial products? How significant were the perceived differences between competitors (if any)? Did they purchase financial products to express themselves or to impress friends?
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Knowledge Management Customer behavior and involvement in financial products at BCR regarding the purchase of financial products?
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How confident were they in their capacity to make good decisions
After the discussions ended, it was noticeable that participants viewed the financial products providers as being mainly the same. A lack of interest in financial products could be generally observed and the younger and less affluent participants showed a lower degree of interest and confidence in their personal ability to make good decisions as regards to financial products compared to older and more affluent group members. The fact that financial products are not homogenous was universally accepted and people argued that on the one hand, products based on transactions were essential to the needs of the day-to-day modern life, on the other hand, investment products were designed to sweeten future security concerns. The older, more affluent group believed that some customers, even though a minority, did get intrinsic pleasure from financial products and gave trading on the stock market as an example. The discussion groups revealed that participants agreed to the fact that involvement of the customers was mainly determined by the general nature of the products and the customers profile. If the participants to the discussions showed a general lack of knowledge and understanding for financial products, when it comes to more complicated products, the groups expressed a feeling of uncertainty. A more detailed discussion made it clear that the participants believed that they were not always sure if they made the best choice when purchasing complex financial products. This problem was primarily caused by the intrinsic nature of financial products and was particularly acute with complicated, longterm investment and pension type products. As a consequence, at the point of purchase, the customer could not easily answer to the question as to whether a purchase had been good or not. Discussions revealed the fact that the lack of transparency and to use of specialized terms and jargon were a big issue, which accentuated the problems stated above. On the other hand, internet banking was viewed as a useful tool for transactions, but the general opinion was that the proliferation of financial information on the internet made it difficult to make informed purchase decisions. Considering all of the above, in order to correctly react to clients feed-back, we propose the use of quality and management control. One necessary condition for the
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realization of quality and the creation of value added is quality measurement and control. This is an important function to ensure the fulfillment of given customer requirements. The purpose of the marketing quality control is to determine whether the quality system is performing at optimum levels from an operational point of view. Qualitative and quantitative analysis of the data collected leads to the identification of a number of possible measures in the observed bank. The analysis can also be used to identify those areas of a banks service quality and positioning which are in need of further investigation. Such data collection should emphasize objectivity and measurability. The empirical information and data for the present research comes from the profit and loss statement of the bank and from the results of customer questionnaires. Mail surveys are typically perceived as being more impersonal, providing more anonymity and enabling respondents to answer at a time of their convenience. Because of the large number and the wide geographic area of the population, it was necessary to take a sample from the population. Population is the total collection of elements about which we wish to make some inferences. An element is the subject from which the measurement is being taken; it is the unit of study. To this end, a systematic sample of 300 names was selected at random from the database of the bank, from cities all over Romania. Only the adult persons primarily involved in decisions concerning services quality and selecting of the households current patronized bank were asked to respond to research questions. A total of 122 questionnaires considered as completed, acceptable and usable were returned, which was 40,66 percent of the total number of respondents. The questions were related to bank positioning, customers attitude, perception and preference of their bank and quality of the services provided.
3. The Use of Knowledge Management in BCR

3.1. General Presentation of BCR
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Banca Comercial Romn (Romanian Commercial Bank - BCR) is the largest bank in Romania and it was founded in 1993. The bank has over 650 branches and agencies throughout the country, with outlets in most towns and cities, and owns the largest domestic ATM network with over 1,500 ATMs and 16,000 points-of-sale terminals. BCR also owns banking subsidiaries in Moldova and London, branches in Paris and Frankfurt, and representative offices in Moscow and New York. Since 2006, Erste Bank has been the majority shareholder of Romanian Commercial Bank. As of end of 2009, BCR has assets of over 17 billion (of which more than 2 billion capital) and it is estimated that in 2010 it would have a profit of over 500 million. Rating BB+ (by Standard & Poor's) (November 2009) BBB (by Fitch Ratings) (November 2009)
Shareholders others History 1990 The government establishes Banca Comerciala Romana (BCR) to take over the commercial business of the National Bank of Romania. 1998 BCR commences operations in the Republic of Moldova. 2000 BRC opens a branch in Cyprus. 2001 BCR wholly acquires Anglo-Romanian Bank in London. 2002 BCR opens a representative office in New York. 2004 Anglo-Romanian acquires Banque Franco Roumaine in Paris and Frankfurt Bucharest Bank, and converts them into branches of AngloRomanian. 69.2% Erste Bank der oesterreichischen Sparkassen AG 6% each - five investment companies: SIF1- Banat-Crisana;SIF2- Moldova; SIF3- Transilvania; SIF4- Muntenia; SIF5- Oltenia
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2006 Erste Bank acquires 62% of the shares of BCR. in a privatization. Erste acquired the Romanian government's 37% stake, and the IFC's and the EBRD's stakes of 12.5% each. Erste paid a total price of 3.75 billion for the 490 million shares. This made the acquisition the biggest foreign investment in Romania.
3.2. International Activity BCR continues to develop its relationship with foreign correspondent banks, as well as with international financial institutions, rating agencies and export credit agencies (ECA). In view of the growing concern about the international climate and the uncertain economic environment affected by the events occurred in 2001, BCR reconsidered its correspondent banking activity, developing a new approach based on partnership and cooperation (instead of competition). Moreover, BCR saw the implementation of a strict know-your-customer policy (KYC), as well as firm anti-money laundering measures as high priorities. Based on a very careful selection of business partners, close monitoring of their activity and increased flexibility in its customer relationships, BCR was able to anticipate and to efficiently react to market challenges. BCR's activity focused on the consolidation of business relations with strong financial institutions, which would enable favorable and secure business conditions to its customers. All this, together with the advantages deriving from its expertise, technical abilities, network, customer basis and, last but not least, excellent financial results, recommended BCR as the favorite partner of international banks in Romania. Based on mutually beneficial agreements concluded with European and Asian banks (Vneshtorgbank, Russian Federation and Industrial and Commercial Bank of China, respectively), BCR created new opportunities for its customers and extended their business activities with new partners recommended by correspondent banks. 835 correspondent banks and 1550 banks with SWIFT arrangements in place represented as many alternatives proposed by BCR to its customers for conducting their business. 3.3. Quality Vision and Mission
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Knowledge Management Customer behavior and involvement in financial products at BCR Vision:
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With regard to approaching quality under all its aspects, BCR vision has in view making employees aware of sustaining a high level of quality. Mission: BCRs quality mission is to align the bank to the Erste Group Standards by involving all employees in ensuring the bank success on a long-term basis by providing its clients with competitive services and products. BCRs message to: Clients: We are permanently concerned by improving ourselves, by correcting and eliminating errors and nonconformities, intending to reach Excellency and to build a longterm partnership with our customers. Personnel: Continuous adapting of our banking products and services to our customers needs, exact understanding of the information offered by the bank, promise credibility and human touch related to the customer-counselor relationship represent things which clients can perceive and feel. BCRs main directions of action for the period 2010 - 2012, aiming to achieving quality in BCR are as follows: - making its clients loyal to the bank by means of effective handling of BCRs relationship with them, in order to consolidate the banks position within the Romanian banking system;
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- satisfying BCRs clients demands by means of increased orientation towards their needs and expectations and by carrying out all bank processes and activities as few failures as possible; - approaching customers problem solving by means of internal collaboration, in a way in which both parties may benefit. BCRs strategic quality objectives are: - maintaining BCR position in top 3 among the banks in the Romanian banking system - increasing staff performance in selling bank products and services by implementing the service quality standards, by approaching a professional behaviour during the selling process - improving the complaint management process within the bank, emphasizing and benefiting from the feedback role of complaints and intimations. 3.4. Banking Market Short Overview Growth yet vigorous Asset volume grew at a CAGR of 34% over 2006 2009 Total assets to GDP has been about 62% as of end 2009 Retail loans were the growth driver for banking assets in 2009 Financial intermediation well below peer countries Loan penetration around 41% of GDP (as of end 2009) Deposit penetration stood at about 34% of GDP (as of end 2009) Housing loan penetration still very low around 4% (as of end 2009) Good macroeconomic performance in 08, to cool off in 09 GDP growth forecast down (contraction 2%) Gross loan growth to slow down (around 20%) due to base effect, stricter
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Knowledge Management Customer behavior and involvement in financial products at BCR lending and market conditions BCRs strategic market positioning and business outlook BCR leads the market No.1 by total assets (market share 20.3% as of December 09) No.1 by total loans (market share 21.8% as of December 09)
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No.1 by total deposits (market share 20.8% as of December 09); BCR holds the largest retail deposit base (31.9% market share for term deposits) Lending market shares impacted by prudent policy, in line with other big players Orientation towards secured retail loans BCR market position to benefit from new Central Bank rules on retail lending, which have ended exotic currency lending BCR only granting retails loans in RON and EUR Dominant presence in municipality segment supporting RON loan portfolio and consistent SMEs customer base Strong development of BCR subsidiaries Leading position in asset management (33.8% market share in AUM) To merge with 2 BCR bond funds, creating largest mutual fund (over RON 150m in assets and about 10,000 investors) Consolidation in pension fund management Active mandatory pension fund (>20% of monthly new sign-ups) to further strengthen by taking over other players New savings-based building society offering attractive credit alternative to mortgage loans
3.5. Questionnaire Overview
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Based on the findings from the focus discussion groups a questionnaire was designed. It was then mailed to 300 of BCRs customers all over Romania aged between 18 and 65. The addresses were withdrawn from the banks database. The response rate turned out to be of 122 usable responses, meaning 40,66 %, even if I used pre-stamped, preaddressed return envelopes. The low response rate was a little disappointing, but it was to be expected, as people are very reluctant in giving information about their money and the financial products they use. A consequence of this low response rate was the inevitable question if the sample was representative. Another question that comes into mind is how this low rate reflects the fact that the respondents are not interested in financial affairs or to what extent people show apathy towards the bank. When compared to previous studies made by BCR, it was found that the sample was over-representative of middle age groups (between 35-48 years old) and under-representative of younger customers (between 18 and 29). The sample was also biased towards customers in the higher income groups (i.e. > 3.000 lei/month) These might reflect the fact that older people are generally wealthier and have more experience and are more interested in financial services and products than younger people. The questionnaire, shown in table 3.1., focuses on the selection and purchase of a range of financial products and consists of eight questions and 23 variables. Variables 1-8 focus on involvement in an attempt to ascertain how customers reduce the risk associated with financial products. Specifically, variables 1-4 capture elements of customer deliberation, i.e. shopping around and trying to make comparisons between the alternative product offerings, and variables 5-8 ascertain the importance of talking to somebody and seeking financial advice prior to purchase. Variables 9-12 use switching as a general indication of customer propensity to be involved. Variables 13-16 relate to customer knowledge and understanding of financial products, and variables 17-20 relate to uncertainty at the point of purchase, i.e. the extent to which customers believed that they were in a position to make a good purchase. These variables try to ascertain how do deliberation and talking to somebody prior to purchasing a financial product increase customer confidence at the point of purchase by increasing customer knowledge and consequently, reduce uncertainty. The remaining variables (2123) provided additional insight into the socio-demographic profiles of the respondents.
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Questions 1-5 relate to the four different categories of financial product under examination: primary transaction or current accounts; general insurance based products; lending or credit-based products; and specialized investment based products. Respondents were invited to respond on a five-point Likert Scale2 ranging from Strongly Disagree to Strongly Agree. In addition, three socio-demographic questions (Q68) were included to differentiate customers on the basis of their income, age and education. Because the research is mainly exploratory, I decided to use the cluster analysis3 to examine the data. Cluster analysis facilitates pattern recognition within exploratory studies and is a way of simplifying and portraying the structure in a set of data. The method attempts to maximize the homogeneity of objects (e.g. customers) within the clusters, while simultaneously maximizing the heterogeneity between the clusters. Support for adopting this methodology comes from the important use of a cluster analysis that helps to better understand the buyer behaviors by identifying homogeneous groups of buyers.
Questionnaire items used for cluster variate Table nr. 3.1. Question no. Question Variate no. Financial services attitudes Q1 I tend to deliberate a lot prior to purchasing
2
A Likert scale is a psychometric scale commonly used in questionnaires, and is the most widely used scale in survey research, such that the term is often used interchangeably with rating scale even though the two are not synonymous. When responding to a Likert questionnaire item, respondents specify their level of agreement to a statement. The scale is named after its inventor, psychologist Rensis Likert. 3 Cluster analysis or clustering is the assignment of a set of observations into subsets (called clusters) so that observations in the same cluster are similar in some sense. Clustering is a method of unsupervised learning, and a common technique for statistical data analysis used in many fields.
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Knowledge Management Customer behavior and involvement in financial products at BCR My current account V1 My insurance products V2 My credit-based products V3 My investment-based products V4 Q2 It is important to talk to somebody prior to purchasing My current account V5 My insurance products V6 My credit-based products V7 My investment-based products V8 Q3 I frequently consider switching providers in respect of My current account V9 My insurance products V10 My credit-based products V11 My investment-based products V12 Q4 I possess a good knowledge and understanding of My current account V13 My insurance products V14 My credit-based products V15 My investment-based products V16 Q5 I felt unsure when purchasing My current account V17 My insurance products V18 My credit-based products V19 My investment-based products V20 Socio-demographic variables Q6 What is your current (gross) monthly V21 Q7 Q8 household income? Age Level of education V22 V23
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Wards method4 of cluster analysis was used because it is a common technique that is both:
This method involves an agglomerative clustering algorithm. It will start out at the leaves and work its way to the trunk, so to speak. It looks for groups of leaves that it forms into branches, the branches into limbs and eventually into the trunk. Ward's method starts out with n clusters of size 1 and continues until all the observations are included into one cluster.
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Knowledge Management Customer behavior and involvement in financial products at BCR range of clusters; and
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a hierarchical procedure, as it moves in stepwise manner to form an entire an agglomerative method, as clusters are formed from the combination of existing clusters starting with each observation.
To determine how many clusters should be formed, an examination of the agglomeration schedule and the dendrogram5 showed that either a six-cluster solution or a five-cluster solution are the most appropriate. In order to make the best decision, other factors were also taken into account. Firstly, both solutions were compared on the basis of distinctiveness using the Levene statistic6, i.e. testing the homogeneity of variance for each variable among the clusters and the values of the F ration, taken from the ANOVA. The result of this comparison showed that the six-cluster solution was more appropriate, providing more variables that were significantly different at the 0.05 level.
3.6. Research Results This section provides a discussion of the results and relates the main characteristics of each cluster to risk, involvement, and customer confidence when purchasing financial products. Overview of the clusters Table nr. 3.2. Cluster no. 1
5
A 27
B 22.13
C 46-55
D University
E > 4,000 lei
A dendrogram (from Greek dendron "tree", -gramma "drawing") is a tree diagram frequently used to illustrate the arrangement of the clusters produced by hierarchical clustering. 6 In statistics, Levene's test is an inferential statistic used to assess the equality of variances in different samples. Some common statistical procedures assume that variances of the populations from which different samples are drawn are equal. Levene's test assesses this assumption. It tests the null hypothesis that the population variances are equal. If the resulting p-value of Levene's test is less than some critical value (typically 0.05), the obtained differences in sample variances are unlikely to have occurred based on random sampling. Thus, the null hypothesis of equal variances is rejected and it is concluded that there is a difference between the variances in the population.
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Knowledge Management Customer behavior and involvement in financial products at BCR 2 3 4 5 6 20 25 22 12 16 16.39 20.5 18.03 9.83 13.11 36-45 26-35 26-35 26-35 36-45 University University University High School Secondary School Legend: A - No. of people in the cluster B Percentage C Age D Education E - Annual income
Eliza Gheorghe 3,000-4,000 lei >4,000 lei 2,000-3,000 lei 600 1,000 lei 1,000 2,000 lei
Customer involvement was measured based on indicators as deliberation, the need to talk to somebody a priori making a decision and willingness to switch providers. Customer confidence in their ability to distinguish good from bad when purchasing a product was measured in terms of knowledge, understanding and uncertainty. The basic objective of this exploratory research was to examine customer involvement, perceptions of risk and confidence when purchasing a comprehensive range of BCRs financial products. An overview of the clusters can be found in Table 3.3. Cluster one: rational-active customers Cluster one comprised 22.13 percent of the respondent sample and was the biggest cluster in the analysis, with the highest income, more than 4,000 lei per month and represented also the oldest sample from the population, people aged between 46 and 55 years, with professional qualifications. People in this cluster showed a very high level of involvement and had the highest level of deliberation for each one of the financial products discussed. BCRs customers that 27
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were included in this cluster showed an interesting pattern in what concerns the need to talk to someone before purchasing a financial product, as they had an increased need to do so in what regards credits and investment products, but this same need was low when talking about current accounts or insurance products. These customers had a high level in what regards willingness to change their provider. Confidence was also high and customers were very sure on their knowledge and understanding of the four financial products in question. Thus, they strongly disagreed that they felt unsure at the purchasing point. In conclusion, these customers seem to have a dominant rational involvement in the banks financial services. Cluster two: action inert customers Cluster two represented 16.39 percent of the total responses, with people ranging from 36 to 45 years old, a monthly income between 3,000 lei and 4,000 lei, having professional qualifications. The level of involvement for customers in this cluster was moderately high. Although they had the lowest level of deliberation from all the 6 clusters for credits, investments and insurance based products, they considered that is was of great importance to talk to somebody prior to purchasing the financial products discussed. The customers in the second cluster were not willing to switch, having the lowest level of switching behavior for each of the financial products. However, they exhibited a high level of confidence in their knowledge and ability to make good decisions, scoring high in knowledge and understanding and low in uncertainty. All the reflected results (high levels of confidence, low uncertainty avoidance, need to talk to somebody) provide the profile of sophisticated and highly satisfied customers with BCRs financial services. This group of customers can be viewed as one that displays action inertia. Cluster three: emerging profit potential customers
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Cluster three represents 20.5 percent of the sample population, with customers aged between 26 and 35 years old, having a high level of education and a monthly income that exceeds 4,000 lei. Customers in this cluster turned out to have low levels of involvement in what concerns financial products. When purchasing products provided by BCR, they did deliberate to some extent, but the levels of doing so were rather low, especially for investment products. Talking to someone before acquiring a financial product was important to them when talking about investment and credit-based products, but this importance was lower when we refer to current account and insurance products. The group shared high willingness to switch financial providers. In terms of confidence, customers in this group revealed a very low level of knowledge and a high level of uncertainty. The low levels of involvement might explain why the levels of confidence are low. This cluster might reveal a customer segment that is not only intrinsically disinterested in financial products, as evidenced by low levels of involvement and confidence, but also a little fearful and mistrustful of banks, as revealed by fairly low levels of talking and deliberation, and high levels of switching behavior. If this interpretation is correct, these customers present an important strategic challenge for BCR, especially as their age, education and income profile indicates that they have future profit potential. As such they should be targeted with relationship strategies that will increase involvement, confidence and satisfaction. Cluster four: emerging on line customers The fourth cluster comprises 18.03% of the sample, with customers aged 26-35, with university education and a monthly income between 2,000 and 3,000 lei. Respondents in this cluster put a great importance on the deliberation in what concerns insurance, investment and credit based products, but disagreed that deliberation was important when changing a current account. However, customers in this group did not find it necessary to talk to someone when selecting financial products. They exhibited the lowest score in what regards the importance to talk to someone for each of the four
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products. However, in terms of switching behavior, this group has the highest propensity to change providers. This group of customers was also fairly confident. They believed that they possessed a high level of knowledge and understanding of the financial products provided by BCR and did not feel uncertain when purchasing such products. The customers in this cluster appear to be fairly confident in terms of knowledge and certainty, but the three components of the involvement dimension are not as easy to interpret. In fact they appear contradictory insomuch as the customers strongly disagreed with the importance of talking to somebody but expressed agreement with the importance of deliberation and had the highest propensity to switch financial providers. However, there is evidence to suggest that educated, younger customers are more disposed to use online banking and this might be reducing their need to talk to somebody. As the youngest cluster and university educated this group of customers, may, therefore, be revealing an emerging banker-customer profile, which supports the assertions that online banking (used by BCRs clients since 2007) may be empowering customers and eroding inertia.
Cluster five: repeat passive customers Cluster five is the smallest cluster in the sample, accounting for 9.83% of the population, with respondents ageing between 26 and 35 years, high school educated, with the lowest monthly income in the 600-1,000 lei/month range. Customers in this cluster scored a high level for deliberation and need to talk to someone when selecting financial products. Thus, they exhibited a high level of involvement. However, in terms of switching behavior, these customers were generally unwilling to switch providers. Customers in this cluster have the lowest level of confidence, as indicated by the highest level of uncertainty and the low levels of knowledge and understanding. Although these customers recognize the importance of deliberation and talking to somebody, i.e.
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being involved with BCR, it does not mean that they necessarily do. BCR currently focuses its relationship strategies on the most profitable segments of its customer base. As customers in this cluster are the poorest of the six clusters, their lack of actual and potential profitability probably precludes them from having a close involvement with BCR. As such these customers are referred to as repeat passive in so much as they tend to remain with the same provider, primarily because of their low levels of confidence. Cluster six: emerging repeat passive customer The last cluster accounts for 13.11 percent of the total sample population, with respondents aged 36-45, with the lowest level of education and the income level, in the 1,000-2,000 lei range. The analysis revealed the lowest level of involvement and confidence, with a low level of switching behavior. However, this cluster shows a possibility that respondents might evolve into the mature customers. This interpretation assumes that as these customers mature their financial requirements will increase. However, if this increased financial need is not matched by a commensurate increase in the willingness of BCR to become more involved, confidence levels could decline, producing an enforced repeat passive profile not too dissimilar to cluster two. Characteristics of the clusters Table nr. 3.3. Cluster no. 1 2 3 4 5 6 A 27 20 25 22 12 16 B Very High High Low High High Very Low C High Very Low High Very High Low Low D High High Very Low High Low Very Low E Low Low Very High Low Very High Very High
A No. of people in the cluster B - Level of involvement
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Knowledge Management Customer behavior and involvement in financial products at BCR C - Willingness to switch financial providers D - Level of knowledge E Level of uncertainty 3.7. Rebuilding of the Customer Relationship System
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The study presented in this paper has raised awareness that BCR may need to focus more on building profitable, long-term customer relationships to raise margins and reduce risk. Building such relationships begins with customer service, where BCR has made important strides in recent years. To create strong, sustainable relationships, however, BCR may need to cultivate deep knowledge of its customers and build a more customer-centric business model to better deliver a total customer experience. Refocusing on the customer may require fundamental changes to the way BCR operates. The bank analyzed in this paper can consider three fundamental actions to strengthen its customer relationships: 1) Create a customer-relationship business model. A customer-relationship business model should create a single organizational owner for a customer relationship, regardless of that customer's products or their channel preferences. Product-based silos within the organization may not be effective to strengthen customer relationships. In addition, the customer experience may need to be more consistent and connected across multiple channels. 2) Develop and utilize deep customer knowledge. Banks like BCR may have more information about their customers than companies in almost any other industry. However, it appears to be rare for BCR to use this information to deepen their customer relationships. Micro-segmentation can help pinpoint customer preferences and styles. A customer-value metric may enable BCR to identify the customers and segments that deserve the most investment. 3) Create relationship-based services and pricing. BCR can use its formidable pools of data to target customers with relationship-based services and pricing. By using insights into customer needs, BCR can further deepen its relationships by creating valuable service offerings for its customers.
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BCR may need to go beyond the progress that it has made so far in improving customer service and sales to focus on customer retention and the entire customer relationship. The fortunes of BCR in the coming years may increasingly depend on its ability to build strong, lasting customer relationships by enhancing the consumer experience. In the quest for customer knowledge and intimacy, BCR should consider approaches that have been used successfully by companies in other industries, as well as by other financial services firms, to build loyalty and trust by providing an exceptional customer experience. Although unintentional, BCR may have lost focus on the central importance of the customer relationship. The bank has been organized by product lines and channels, which may even compete for the customers attention rather than supporting each other. BCR may know which products have been most successful but fail to realize that its most profitable customer groups are shrinking rather than growing. BCR may need to view each customer based on his or her entire relationship with the institution rather than from the perspective of a single channel or product. Similarly, if a customer researches a product at a branch but then decides to purchase it through the call center or online, the efforts of the branch employee to provide helpful advice and information should not be overlooked simply because the final sale occurred through a different channel. Transforming BCR into a relationship-centric institution may require fundamental changes across the enterprise. In this process, BCR can benefit by considering the innovative approaches that have been employed by companies in other industries, as well as by financial services institutions to enhance the customer experience.
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4. Conclusions and Recommendations

Even though the paper is exploratory, and the sample was not fully representative of BCRs customers, the results have a number of important strategic implications. A somewhat high level of uncertainty, correlated with a low level of knowledge and confidence is observed through out the respondents. Customers revealed a desire to have more information and emphasize the need for increased involvement with financial services providers, by means of deliberation and talking. Unless these issues are addressed, the majority of customers will continue to lack confidence when purchasing financial products. Being cynical one could argue that if a lack of customer confidence is associated with passivity and low switching behavior, BCR has little incentive to address these issues. However, considerations such as the move toward greater consumer empowerment, increases in educational standards and greater use of internet banking, will increase customer expectations. These factors combined with higher levels of competition and the trend towards commoditization of financial markets,
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Knowledge Management Customer behavior and involvement in financial products at BCR closer relationships with its customers.
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strongly suggest that BCR will have to place more emphasis on educating and developing The net result of these strategies could well be a significant increase in the number of action inert customers. However, relationship management strategies are expensive and BCR, like any other joint stock company, needs to see a return on its strategic efforts. Finally, the results also contain some interesting findings, which warrant further research. Inter alia, customer involvement appears to differ according to the type of financial product being purchased and this raises the possibility that BCR can use more complicated products to generate interest and, if required, create closer relationships with its customers. Similarly, the paper has shown that banker-customer involvement and, specifically, perceptions of risk and confidence might be used to segment the customer base. This approach could, therefore, provide an alternative approach to more conventional segmentation based on age, wealth, income, life cycle etc. As presented in the previous section of the paper (chapter 3.7) BCR can consider three fundamental actions to strengthen its customer relationships: create a customerrelationship business model, develop and utilize deep customer knowledge, create relationship-based services and pricing. Create a customer-relationship business model A customer-centric model typically has a single point of ownership for each customer relationship, regardless of the products in the customers portfolio or the channels the customer frequents. Channels cease to align to products, and instead serve as mechanisms through which the relationship owners can reach customers. Another aspect of a customer-relationship business model is clarity and consistency of the customer experience. Since BCRs customers use multiple channels to interact with their bank, the analyzed bank may need to design these channels to provide a consistent and integrated level of service. BCR may implement market specific offers that are not available in all channels, provide a vastly different experience in a call center than a branch or may not provide visibility into customer interactions across all its channels. In addition to clarity and consistency, a relationship model may need to simplify product offerings and develop relational incentives rather than product-based incentives,
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especially in face-to-face customer interactions. In order to get branch associates to sell new products, it might be of big use for them to have confidence that the product will be provisioned and fulfilled successfully, to have a more simplified process and even have some team and individual incentives to encourage sales and customer retention. Develop and utilize deep customer knowledge BCR can strengthen relationships with its customers by developing a deeper understanding of their needs. The bank may need to decide which customers or customer segments are most important and develop an intimate knowledge of its preferences and financial requirements. Further, BCR should attempt to understand the changing needs of its individual customers as they move through the various stages of life. BCR may need to be prepared to shift from a relatively light-touch relationship to a deeper advisory model, as a customer confronts more complex financial decisions later in life. More sophisticated segmentation can take into account factors such as the depth of the relationship, key financial needs, and lifestyle as indicated by their financial profile and buying habits. It can also incorporate such factors as customer profitability, long-term growth prospects, risk of attrition, and credit risk. Customer decision-making habits can also be identified by sophisticated segmentation. The most appropriate level of service, products and pricing to offer to individual customers can be determined by careful customer segmentation, done in means of lifestyle and preferences. Create relationship-based services and pricing As BCR develops deeper customer knowledge, it can use these insights to target its most profitable customers. BCR may also have the opportunity to offer services and pricing that reflect the customers risk profile and profit potential, and to do so more accurately than its competitors. Customers may react differently to this kind of approach, perceiving more value from it than from the general approach that most institutions use. This can lead to a deeper customer relationship. BCR may want to look more creatively at pricing and moving away from a flat-rate, one-size-fits-all approach. As the bank comes to understand its customers more clearly, it
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may want to use these insights in its pricing models. By considering the entire customer relationship, BCR can develop relationship-based pricing models that take into account such factors as customer profitability, depth of the relationship (i.e., the number of other products held and the amount of assets with the institution), transaction history, growth prospects, and risk profile. This information can also be used to decide whether to waive fees and the appropriate level of service to provide. BCR can also use customer knowledge to identify and align with customer segments and preferences. It can identify specific customer groups and create products that will provide more value to them, according to the needs customers in different stages of life or with different preferences have. The product development process could incorporate customer insights through a variety of means, from traditional market research to newer forms such as social networking sites. Success in this area can build on itself, as the bank stands to gain even more knowledge, produce better pricing and offerings, and generate more customer loyalty.
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Bibliography
1. Ackerman, M.S, Pipek, V., Wulf, V. (2003) Beyond Knowledge Management, The MIT Press Cambridge, Massachusetts London 2. Alavi, M., Leidner, D.E. (2001) Knowledge management and knowledge management systems: Conceptual foundations and research issues. MIS Quarterly, 25(1) 3. Berger, P., Luckmann, T. (1966) The Social Construction of Knowledge. London: Penguin 4. Blackler, F. (1995) Knowledge, knowledge work and organizations: An overview and interpretation. Organization Studies, 16(6) 5. Brtianu, C., Vasilache, S., Jianu, I. (2006) Business management. Bucharest, Ed. ASE 6. Brown, J. S., Duguid, P. (1991) Organizational Learning and Communities of Practice: Towards a Unified View of Working, Learning, and Innovation. Organization Science 2 (1) 7. Ctoiu, I. (2008) Marketing, ASE, Lecture notes 8. Collins, H. (1993) - The structure of knowledge. Social Research, 60 9. Conner, K.R., Prahalad, C.K. (1996) - A resource-based theory of the firm: Knowledge versus opportunism. Organization Science, 7(5)
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Knowledge Management Customer behavior and involvement in financial products at BCR California Management Review, 40
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10. Davenport, T., Klahr, P. (1998) Managing customer support knowledge. 11. Deloitte Center for Banking Solutions (2009) Rebuilding the Relationship Bank Delivering a complete customer experience 12. Dixon, N. M. (2000) Common Knowledge. Boston: Harvard Business School Press 13. Earl, M., J. (2001) Knowledge management strategies: Toward a taxonomy. Journal of Management Information Systems, 18(1) 14. Fahey, L., DeLong, D., W. (2000) Diagnosing cultural barriers to knowledge management. The Academy of Management Executive: Ada, 14(4) 15. Frappaolo, K. (2006) Knowledge Management, Capstone Publishing Ltd., Southern Gate Chichester 16. Groff, T., Jones, T. (2003) Introduction to Knowledge Management, Butterworth Heinemann, Burlington 17. Gottschalk, P. (2005) Strategic knowledge management technology, Business & Economics 18. Hamilton, R., Hewer, P., Howcroft, B. (2007) Customer involvement and interaction in retail banking: an examination of risk and confidence in the purchase of financial products. Journal of Services Marketing, Vol. 21, No.7 19. Holsapple, C.W., Joshi, K.D. (2000) An investigation of factors that influence the management of knowledge in organizations. Journal of Strategic Information Systems, 9 20. Houston, M.J., Rothschild, M.L. (1978) Conceptual and methodological perspectives in involvement, in Jain, S.C. (Ed.), Research Frontiers in Marketing. Dialogues and Directions, American Marketing Association, Chicago, IL 21. Huysman, M., de Wit, D. (2002) Knowledge Sharing in Practice, Kluwer Academic Publishers 22. Kapferere, J.N., Laurent, G. (1985) Consumer involvement profile: a new practical approach to consumer involvement, Journal of Advertising Research, Vol. 25, No. 6
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Knowledge Management Customer behavior and involvement in financial products at BCR Information Management Journal, (July)
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23. Montana, J.C. (2000) The legal system and knowledge management. The 24. Nelson, R.R. (1991) Why do firms differ, and how does it matter? Strategic Management Journal, 12 (Special Issue) 25. Nonaka, I., Takeuchi, H. (1995) The Knowledge-Creating Company, New York: Oxford University Press 26. erban, D. (2008) Statistics, ASE, Lecture notes 27. Ward, J., Peppard, J. (2002) Strategic planning for information systems. UK: Wiley 28. Zack, M. H. (1999) Managing Codified Knowledge. Sloan Management Review 40 (4) *** http://www.scribd.com/doc/13057596/Knowledge-Management-in-Banks ***http://www.scribd.com/doc/33584079/Rebuilding-the-Relationship-Deliveringa-complete-customer-experience ***http://www.google.com/books? hl=ro&lr=&id=2iRY4HLtjeIC&oi=fnd&pg=PA295&dq=knowledge+management&ots=K A2h3E2fu1&sig=AXorOrbLVe9DKw4fgqrXK9Ce5PY#v=onepage&q&f=false *** www.bcr.ro *** http://www.jstor.org/pss/3250961 *** http://en.wikipedia.org/wiki/Resource-based_view ***http://en.wikipedia.org/wiki/Banca_Comercial%C4%83_Rom%C3%A2n %C4%83
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Appendix 1
Consolidated Profit and Loss Statement According to IFRS (RON million) 2009 Net interest income 3.040,4 Risk provisions for loans and advances -628,6 Net fee and commission income 915,2 Net trading result 256,8 General Administrative Expenses -1.743,5 Other operating results -91,7 Result from financial assets at fair value -45,8 through profit or loss Result from financial assets available for sale Profit Before Tax Income Tax Profit After Tax Profit from Discontinued Operations net of tax Minority Interests 137,6 1.840,5 -308,9 1.531,6 504,0 -2,9 2008 1.962,9 -164,4 857,5 255,9 -1.768,3 -36,1 -9,3 4,4 1.102,7 -184,5 918,2 15,2 -8,6 Change 54,9% >+100 6.7% 0.3% -1,4% >+100 >+100 >100 66.9% +67.4% 66.8% >100 -66,3%
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Knowledge Management Customer behavior and involvement in financial products at BCR Net Profit for Financial Period Total Operating Profit Total Assets Total Number of Clients Number of Branches 2.032,7 2.468,9 69.080,6 4,534,000 641
Eliza Gheorghe 924,8 1.308,0 63.358,8 3,955,000 562 >100 86,2% 9,0% 14.6% 14%
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