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(Part 2 of 2)

Listening To Your Customers Necessary For Significant Feedback

By George F. Brown, Jr.

The second goal of a solid program for hearing 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, yet 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-�-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 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 held 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 implement 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.

George F. Brown, Jr., is co-author with Atlee Valentine Pope of the book, CoDestiny: Overcome Your Growth Challenges by Helping Your Customers Overcome Theirs. He is also the CEO and cofounder of Blue Canyon Partners Inc., a strategy consulting firm working with leading business suppliers on growth strategy.

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