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Listening To The Voice Of The Customer
In the book CoDestiny, it is argued that the most successful business strategies are ones that build upon shared successes. If your strategy creates value for your customers, it opens the potential for your own firm to capture some of that value for its own shareholders.
Unlike strategies that focus on winning a zero-sum game with your business partners, CoDestiny strategies have the potential for sustained contributions. But while the logic of such ‘win-win’ strategies is compelling, identifying their elements and implementing them successful is a challenge.
One of the tools that is critical to successful CoDestiny strategies is developing an effective and continuing flow of messages from the market, gaining insights from participants at every stage of the customer chain about their issues, challenges, priorities, and perspectives.
While not the only element needed for successful strategy development, such customer-based insights are on the short list of critical ingredients. Today, most businesses have implemented some formal programs through which they can listen to their customers, many going by names such as Voice of the Customer (VOC) Program and others involving variants on the theme of customer satisfaction.
Such programs can make a significant contribution to strategy development. In the paragraphs that follow, some insights that have emerged on this topic are provided as guidance for firms looking to either develop such programs or take existing ones to higher levels.
Research and experience suggest that there are three primary goals that can be achieved through a Voice of the Customer initiative. Clarity as to the goals of the program and about the ways in which it can connect to strategy development and implementation provides focus to its design and execution.
The first of the three goals is the most critical in terms of its value and the most challenging in terms of its degree of difficulty. The goal is simple: gain customer inputs into your own strategy development process by learning of their perspectives on the future business environment and on their most pressing needs.
This goal connects to many of the elements of any company’s strategic plan – gaining insights related to product innovation, identifying new services critical to customers, learning about trends at each and every stage of the customer chain, identifying new applications that customers are targeting, etc.
Success in gaining customer insights about the future business environment and new needs can enable a supplier to get ahead of opportunities and strengthen its value proposition in areas of vital importance to its customers. The key here is ensuring that Voice of the Customer interactions are forward looking. (And most approaches fail miserably in that regard, focusing on past performance instead.)
We’ve all had “Duh!” moments in our business experience – instances when an insight dawned upon us that was quite obvious, but had been overlooked. One of my Duh! moments (and I admit to many) occurred in a company I was running some time ago at a senior staff meeting when discussions turned to the major challenges we were facing in keeping up with customer service expectations as our customers rapidly expanded to one new global location after another.
The Duh! moment occurred when a colleague asked “Have we ever asked our customers about their expansion plans?” We started to do so, and the problem never resurfaced. Some customers provided us a very solid five year plan, and none of them were without an answer. We just had to ask.
The lesson here is that thinking about what information you need to be effective in supporting your customers should be among the first questions you ask of them. If you translate all of the themes associated with future plans and the evolving business environment into what insights you need for the decisions your firm is contemplating, the potential for customer contributions is huge.
That doesn’t eliminate the need for some open-ended discussion about opportunities and challenges that you might be overlooking, but the starting point for a future discussion ought to be the arenas in which you need to be prepared to create shared successes along with your customers.
One other important lesson that is critical in gaining insights about the future involves paying attention to the entire customer chain. A firm’s customer chain is the path that leads from its suppliers all the way to the final users of its products. In business markets especially, customer chains can be complex and extend for many stages.
An electrical component manufacturer, for example, sold to integrators who in turn sold to distributors who sold to contractors who handled installations at end customer sites. The perspective about the future can vary at each and every stage of the customer chain, with implications that ripple backwards and forwards.
Effective listening doesn’t stop with direct customers. It’s necessary to listen to all of the customers. And one trick that best practice firms employ is asking customers at each stage of the customer chain what they would like to know about the other stages of the customer chain. Some remarkable insights have been gained by simply asking that question.
The second goal of a solid program to hear messages from customers involves learning what customers believe are the characteristics of a best-in-class supplier, one that has the potential to become the subject of future supplier success stories. Best practice approaches aimed at achieving this objective focus on identifying the metrics that customers will use in evaluating their suppliers, with those insights then translated into internal action plans designed to ensure that targets are met.
At Blue Canyon Partners, our own research has identified three clusters within such metrics are concentrated – ones related to the relationship between the supplier and the customer, ones related to the supplier’s implementation competencies and their ability to meet customer expectations, and ones associated with the supplier’s ability to bring high-value innovations (in service as well as in product) to the customer.
Gaining these insights is a challenge, especially in business markets. There are two characteristics of business markets that make it so. First is the fact that the 80-20 rule almost always holds in business markets – a major share (e.g., 80%) of any suppliers sales are concentrated with a relatively small number (e.g., 20%) of significant customers.
And while the three clusters of important metrics almost always apply, how they should best be implemented can differ significantly from one major customer to the next. A solid program of customer listening must be customized to ensure that insights specific to major customers are gained, and not amalgamated together, as doing so can yield an outcome that is right on average, but missing the mark with each individual customer.
The second characteristic of business markets is that it takes insights from many touch points to gain an effective overall picture of the customer relationship. This is far different from consumer markets, where each individual consumer can give a solid picture of their own perspectives – did I enjoy the sandwich or not?, did I like the movie or not?
In business markets, a supplier’s relationship with a customer is shaped by the collective experiences of many business functions – design, engineering, manufacturing, logistics, sales, customer support, purchasing, finance, etc. Only rarely does any single individual know all of the details relevant to each dimension of the supplier’s relationship with their organization.
It takes a lot of listening to understand the metrics that matter to a major customer organization, but that effort is required if a solid portrait is to be developed and this second goal achieved. But, like the first goal of gaining insights about the opportunities and challenges that lay ahead in the future, achievement of this goal is of enormous value.
The third goal is to identify performance improvement opportunities through which the supplier can remedy deficiencies that are determined as important to the customer. In too many instances, this is the only goal that is addressed by the Voice of the Customer program.
It is important, but ranked third of the three goals in terms of long-term impact. Elements of a customer-listening program oriented towards this goal should focus on both products and services. It should enable a firm to learn what it can do better along all the dimensions of its interactions with customers.
While this third objective inevitably has a backwards-looking characteristic, we have found in our own practice three important ways in which Voice of the Customer initiatives can address this goal without the overall effort degrading into a focus on “past sins”.
The first insight is that topics in this category should only be surfaced after discussions about the future environment and the characteristics of best-in-class suppliers have been completed.
The second is that it is important to distinguish between generic wishes for “better” from situations in which current performance is bad vis-à-vis competitor performance or some other meaningful benchmark.
The third is that it is important to learn whether customers will reward a supplier for improvements in metrics where they say they want “better”.
We have seen countless examples of satisfaction studies which point to areas for improvement in which the sponsors have then invested, with no payoff whatsoever from the gains that resulted from those investments. Avoiding situations in which investments in product or service improvement that aren’t rewarded by customers is as important as is learning of improvement needs that are necessary and that will be recognized and rewarded.
Every firm must eventually select a few targets on which to focus investment and management attention. A successful result of Voice of the Customer programs must be help in narrowing the focus to those programs where improvement will make a difference.
One of the ways in which firms have successfully worked with their customers to narrow the list has involved queries designed to learn what the customer would do differently if a certain change were made to product characteristics or service performance. If the answer is “Nothing”, then the change should be carefully scrutinized. On the other hand, if the customer can explain with clarity how they would be able to make changes that leave them better off, then the change has the potential for value creation and capture contributions to both firms.
Economics rules in ranking the opportunities for investments in product or service improvements; if the impact isn’t real, the investment probably shouldn’t make the short list that commands scarce resources.
Effective programs for gaining customer insight can make a major contribution to a firm’s business success, enabling them to develop and implementing customer-written plans for growth and profitability.
While listening to customers is hard, the payoff can be tremendous. Firms that focus on the future, that work to gain insights about how to be a best-in-class supplier, and that cull out those areas where performance improvement will make a real difference will find that their customers have much to say about the pathway to CoDestiny successes.
Author: George F. Brown, Jr.