How to Make the Most of the Recovery
Jan 24, 2019
The economy is beginning to improve, but is your company poised to take full advantage? The best way to shape the economic recovery into the most profitable form for your company is to deliver more than your share of customer value.
Specifically, you need to develop differentiated products that provide benefits your customers crave—products they can’t get anywhere else at a comparable cost. Doing so will accelerate your growth in the upturn and insulate you from the worst of the next downturn.
Your competitors won’t be standing idly by while you innovate and grow during the improving economy. To stay ahead of the competition, you should keep a targeted focus on what sets your company apart in your industry. Are your scientists smarter? Do you spend more on R&D? Do you have a longer time horizon? These things can give you an incremental edge, but the best way to deliver substantial new customer value is this: Don’t approach the problem the same way your competitors do.
Most businesses approach product development with a supplier-centric mentality, meaning they develop new products based on what they think their customers need. Instead, suppliers should use a customer-centric view, focusing on what their customers know they need.
Here are five strategies to provide greater customer value:
- Implement your customers’ ideas, not yours. Most companies make the critical mistake of starting with the supplier solution and ending with market needs. But what if they inverted their process by starting with market needs and ending with supplier solutions? Actually, two things would happen. First, because B2B customers are more insightful, rational, and interested than their B2C counterparts, suppliers would learn much more about customer needs than their competitors. Second, they’d prime those B2B customers to buy their new product by engaging them with highly interactive interviews.
- Conduct B2B-optimized interviews. Of all the ways to learn about customer needs—telephone, mail survey, Internet—nothing comes close in effectiveness to face-to-face customer interviews. If the information being sought is new, complex, or ambiguous—as with B2B product design—the advantages of interviews become even greater. So is the customer interview a key fixture in most new product development processes? For many producers, the answer is no.
Most new product discussions are actually customer-reactive meetings, not market-proactive interviews. You’ll know a market-proactive interview when you see it. First, a team targets an attractive market segment. Then it schedules interviews with customers, prospects, and their customers’ customers. Two-or-three-person technical-commercial teams prepare their questions and interviewing roles in advance. During the interviews, these teams use advanced listening, probing, and interviewing skills to plumb incredible depths…and the customers love it.
- Get everyone listening to the voice of the customer. Some large firms keep a small staff of highly trained VOC (voice of the customer) experts poised for action. These folks parachute into a project as dawn streaks the morning sky, interview your customers for you, and hand you a report of “what the customer wants.” This is a flawed model. Most businesses chalk up thousands of face-to-face customer meetings during the course of a year, as sales reps, technical service reps, and others go about their normal duties—so why not train these people to become VOC experts? They’ve already gained the customer’s trust, they know the customer’s language, and there’s no extra travel cost. Best of all, you’ll develop a reputation among customers as “that supplier who really listens to us.”
- Get quantitative. After you perform great qualitative customer interviews, you’ll have dozens and dozens of customer ideas you could work on. But which ideas do you target in your new product design? At this point in the process, it’s time to get quantitative. You need to understand which customer outcomes are most important and least satisfied. The metric I’ve developed for this is called the Market Satisfaction Gap. It tells you precisely which ideas the customer is eager for you to pursue. The Market Satisfaction Gap prevents a fortune from being spent on developing supplier-centric products that will make customers yawn. (Skip this step if you’ve got extra R&D resources you’re trying to keep busy. But make this a priority if you want everyone working on projects that will catapult you out of the recession faster than competitors).
- Research your customers’ alternatives. We often talk about competitive products. That’s okay, but it’s actually healthier to think in terms of customers’ alternatives. For example, if your company makes structural adhesives, alternatives for you might be other adhesives, but they could also be welding or mechanical fasteners. In my experience, suppliers don’t look at customers’ alternatives rigorously or early enough during product development. Proper side-by-side testing requires answers to four key questions:
1. Which attributes should I test?
2. What test procedures should I use?
3. What test result is barely acceptable?
4. What test result leads to total satisfaction?
Research shows that only one in four new products succeeds once a project enters the costly product development stage. I doubt there is any other function within your company where this level of failure and waste is tolerated. Supplier-centric, instead of customer-centric product development is at the heart of the problem. The key to taking advantage of the recovering economy lies in changing the way your organization approaches offering new products. Start now and you’ll be well on your way to shaping a truly great economic recovery for your business.