The U.S. economy is finally on an uptick. According to Federal Reserve Chief Ben Bernanke, the economy is set to grow by 3–4 percent in 2011. That’s great news for businesses that have been seeing decreasing or stagnant numbers on their revenue reports for the last couple of years. But now that more growth is possible, it’s time to make sure your company is poised to take advantage of this.
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The best way to shape your company’s economic recovery into the most profitable form possible is to deliver more than your share of customer value. Keep in mind your competition won’t be standing idly by while you innovate and grow during the improving economy. To stay ahead of your competition, you should keep a targeted focus on what sets your company apart in your industry.
There could be any number of marketable differences. Are your scientists smarter? Do you spend more on research and development? 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.
Use a differentiated approach for differentiated products. Most competitors 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.
To avoid this trap, follow these five tips:
Implement your customers’ ideas, not yours. Do you have a new product development process, perhaps with stages and gates? Is the first stage labeled “New Idea?” That’s fine, but here’s the question: Whose ideas are listed in this stage—yours or your customers’?
I’ve trained clients in hundreds of business-to-business (B2B) industries and find that suppliers nearly always begin product development with their ideas rather than their customers’. The result is that they don’t know if they are truly meeting their customers’ needs until they can watch the sales results of their new product.
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 business-to-consumer (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 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.
Perhaps with so many routine customer interactions, it’s assumed much of it must be interviewing. But if you examine the call frequency of your sales and technical service staff, you will likely find that more than 90 percent of face-to-face customer communication is of the “tell-and-sell” variety. Some might protest, “But we get lots of input from our customers on what they want in new products.” The reality, though, is that 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 voice-of-the-customer (VOC) experts poised for action. They parachute into a project, 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 representatives, 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.” Now that’s how to protect today and position for tomorrow. Keep that handful of experts, but let them become trainers and coaches for sales and service reps.
Get quantitative. After you perform great qualitative customer interviews, you’ll have dozens of customer ideas you could work on. Which ideas do you target in your new product design? At this point in the process, it’s time to get quantitative.
You must understand which customer outcomes are most important and least satisfied today. 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 quantitative step if you’ve got extra research and development resources you’re trying to keep busy. But make it 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 OK, 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?
The good news for the B2B supplier is that your customers are smart enough to answer all these questions. Well-designed, customer-centric, side-by-side testing will help you properly price your product and avoid getting blindsided by competitors’ products.
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 product development is at the heart of the problem. The key to taking advantage of the recovering economy is in changing the way your company approaches offering new products. Start now, and you’ll be well on your way to shaping a truly great economic recovery at your company.
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