Voice of Customers Challenge to Product Managers

VoC challenge to PMFor years I have been puzzled by the fierce resistance of product managers to integrate customers feedback into the products’ design and marketing process. Surely, many use elaborate survey and market focus group studies to validate and refine an original concept, but the use of the feedback to form an original concept is widely sneered upon as a fool’s errand.

Many practitioners are convinced that customers do not know what they want, until they experience a remarkable product they cannot live without. While there is some truth in the belief that customers cannot articulate their latent needs, it doesn’t mean they have nothing to contribute to the process of conceptual design. Product managers, who rely on their own vision, like to quote Henry Ford “If I’d asked my customers what they wanted, they’d have said a faster horse” without realizing that he never uttered those words. Meanwhile the dependence on Divine Intervention, i.e. visions of product managers, results in very high product failure rates and is a luxury fewer companies are willing to gamble on.

There are two basic reasons why customer feedback as source of inspiration is commonly rejected:

  1. Marketing Research proved to be very ineffective in the past in identifying truly original product opportunities. For many product marketers it offered a convenient excuse to throw the proverbial baby out with the bath water. However, the few who have learned that “The job, not the customer, is the fundamental unit of analysis for a marketer who hopes to develop products that customers will buy” – Clayton Christensen, experienced consistent improvement in bringing successful products to markets. In other words, research into the experiences of customers, who use currently existing products, will discover original product opportunities – not the research into product’s features and functions, customer personas and market sizing. The core question is why did customers buy it in the first place, i.e. what do they hope to achieve by using it?

 

  1. The traditional approach to the management of customer feedback is an analysis of what customers say, or how they feel, about your product and/or products offered by your competitors. However, analysis is only the first step of gaining an insight.

 

The terms “Voice of Customer” or “Customer Feedback” in this context do not include structured data compiled from closed ended survey questions. The response to such a question cannot help to discover a latent need, it can only validate one that was previously discovered. This discovery can only be done by a synthesis of previously analyzed open form feedback, such as unstructured commentary or review. As customers share their experience of currently available products, they often use different words and expressions to describe common frustrations or delights. It is not a trivial task to understand the specifics of their frustrations and to interpret this understanding into new product requirements, i.e. synthesis.

 

There are many tools available today to collect, aggregate and analyze customer feedback. The science of this process is well defined and commonly utilized. There are some capable technologies available for detailed analysis of unstructured feedback, even though they are not yet as easily productized and applied. However, the art of synthesis and translation is the domain of creative product practitioners that rely on data instead of vision.

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Which is a better investment – Customer Experience or Brand Management?

Which is a better investment
The advancement of social media during the last ten years gave rise to the power of social customers. That power precipitated fundamental shifts to the marketing paradigm which was developed over 3 decades prior. Surprisingly, only relatively few companies noted the avalanche of research into the financial implications of these shifts and made appropriate changes, while most still debate the impact of customer experience on enterprise valuations.

I documented before the multiple correlations between successful customer experience investments and creation of wealth. Now, new research published in the Harvard Business Review examines trends of brand and customer value components as percentages of overall enterprise valuation. The authors analyzed over 6,000 M&A (Mergers and Acquisitions) activities worldwide between 2003 and 2013 to reveal the dollar valuations of all assets at the time of the acquisitions. During this period, that coincides with the explosion of social customers influence, the market valuation of “brand” assets declined almost 50% while the valuation of “customer” base increased 100%.

What is better investment

The public transparency of customer experience a company delivers became very common during this period. Consumers and business buyers prefer to use such information to make purchase decisions and that erodes the power of brands.

In the past a brand was recognized by a company as the more valuable asset because they served as a proxy for the quality of products or services sold under that brand. In the vast “ocean” of uncertainties of choice (“Life is like a box of chocolates. You never know what you get”), a brand served as a life raft. The loyalty to a brand reduced uncertainties of the market place.

Today, consumers have unlimited access to better tools for reducing shopping uncertainties – the past experiences of socially connected customers.

Companies that understand this shift in marketing paradigm choose to reduce the investment in trademarks and trade names, banners and domains to focus on delivery of superior customer experience instead.

Delivery of Superior Customer Experience (SCE) means delivery of experience that is rated consistently higher than the experience delivered by your direct competitors from the customers point of view (“outside in” perspective). The only meaningful and authentic rating is done by the customers publically and “in the wild”, i.e. not solicited or influenced by a company or its agents.

Such a shift in marketing investment strategy results in a reduction of customers churn, an increase in margin and a lower cost of customer acquisition, i.e. an increase of CUSTOMER VALUE component of the overall enterprise valuation.

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Innovation and Customer Experience

We live in amazing times with endless opportunities to experience and participate in the process of many established industries being re-imagined. However, an innovation is a risky business and most attempts to re-think how things are done conventionally do not produce commercial success.

The single most important reason new products and services frequently fail to find massive commercial success is tInnovation and CX 1he misunderstanding of the core difference between innovation and invention.

Invention is about creating something new, while innovation introduces the concept of “utility” of an idea, process or method. An invention is usually a “thing”, while an innovation is often an application of one or more inventions that causes change in behavior, interactions and experience.

 

These terms are often used interchangeably and that inadvertently causes a shift of focus from experience to technology. That focus is what separates inventors like Dean Kamen from innovators like Elon Mask, Steve Jobs and Jeff Bezos.

 

Innovation and CX 2

 

The romance of novelty (invention) blinds many entrepreneurs to the fact that markets have relatively low capacity to absorb (adapt to) radical change. Consumers – your potential customers – are too busy occupied by the complexities of jobs they are trying to perform. There are not in the market for products or services, but for the desired outcomes these products promise to deliver. Therefore, unless the use of your product or service can dramatically simplify that “job”, they are not likely to “hire” (purchase) it in large numbers regardless how “new”, “improved”, “exciting”, and “innovative” your marketing describes it.

The domain of innovation is not defined by the best features, specifications or market segmentation, but by consistent simplification of the target customers’ experience.

Innovators should think less about market segments and more about the jobs customers want to do. The job, not the customer, is the fundamental unit of analysis for an innovator who hopes to develop products that customers will buy” Clayton Christensen (text in italics is added by me).

 

When I needed to re-publish a website for my wife’s business I was referred to Wix.com as the best website builder software provider. Initially, I loved its innovative design functionality until I had to actually publish the site at which point the software was not very helpful and the customer support non-existent.

After a few days of frustration I became a very grateful customer of GoDaddy.com that has substantially less creative website building software, but got me up and running within 2 days.

The examples of iPhone and Tesla show that discovery and reduction of complexities and frictions your target customers experience on their path to desired outcomes, is the shortest and surest road to innovation and creation of new markets.

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The secret to high rate of customers retention

Customer retentionIt took me a few years to realize that happiness is based on one’s ability to manage expectations. We experience happiness when our expectations are exceeded. We may experience content and satisfaction when our expectations are met, or nearly met.  A disappointment is not an experience most people like to reiterate. Regardless of our age, gender, education or social status we all have expectations. Nobody ever enters into any business or social transaction without having an expectation of outcome.

Expectations are formed by multitude of our own experiences, experiences of people we know and by marketing messaging. A price of transaction or fleeing nature of social interaction may reduce an importance of meeting our expectations, but the repeat experience of being disappointed will most definitely change our willingness to try once again. Even when you buy on a whim a $0.25 lollypop packaged in orange colored wrap at a gas station, you will be disappointed if you experience a strawberry flavor in your mouth. This experience may not make you very unhappy, and may not cause you to drive a few extra miles next time you need gas – the first time that happen. However, it may start to erode your trust in the establishment and to question its ability to deliver quality customer experience. Here are some examples:

  • My sailing friend mentioned to me a few times about great experiences he had at the Dirty Cello I purchased tickets for the next one only to be bored by pompous “community” messages and the opening act that have lasted for over an hour, before the performance we paid for started. I noticed a few customers living in disgust.
  • After watching Ford Fusion commercials about their terrific fuel economy I went to a considerable effort to secure one for my last trip rental. While it is certainly a nice car, the fuel economy is nowhere near commercial’s claims. There is no doubt my next car will not be a Ford.

From a company’s perspective it is imperative to have a clear understanding of its “best” customers’ expectations. I placed the word best in quotes because there are multiple ways to differentiate your customer base. One company may consider their most profitable customers “best” and optimize its products and processes to meet or exceed expectations of these customers without sacrificing profit margins. Another company may see those who’s feedback indicate the best fit, between their expectations and the experience the company delivers, to be their “best” customers. Such company may decide to optimize their products and processes to leverage their “best” customers’ enthusiasm to increase its market share and its share of their valet.

The point is – you cannot expect to retain your customers if you fail to deliver what the customers expect.

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Cheap Gas, Electric Cars and Customer Experience

Cheap gasEven if you sell a commodity, customer experience often outweighs price considerations. Just because the term Customer Experience Management (CEM) is  relatively new to corporate vocabulary, the power of “experience” is not lost on marketing professionals. The world of marketing is drastically changing, moving away from the hype of novelty and awareness-building through branding and advertising, towards  the creation of loyalty through great customer experiences.

 

As oil prices impact every element of the world economy, and markets expect the depressed levels to last for at least a decade, the future of alternative energy technologies being questioned. The sales of electric and hybrid cars  are dipping, seemingly in concert with oil prices, and auto industry analysts are trying to assess whether or not cheap gas will kill the demand for such vehicles.

It is important to remember that even at the near-record high of gas price, customer retention of hybrid vehicles was only 35%. Specifically Prius owners’ loyalty in 2012 was only 25%.

“Only 30.9% of hybrid drivers traded in for another gas-electric model in the third quarter of 2011, when gas prices were stable. But as prices at the pump surged in the final three months of that year, so did hybrid car repurchases, leading to a 40.1% loyalty rate.”

It is easy to see correlations between gas prices and sales of electric vehicles, but perhaps it is a mistake to take these as the causation.

It is true that sales of electric cars from Nissan (Leaf) are 20% down this year and gas-electric hybrid Chevy Volt’s are down 50%. However, the demand for Tesla Model S is stronger than ever and sales are up 35% during the first quarter of 2015.

Mining online reviews posted by customers, who have purchased these cars, reveal a much stronger correlation between customer experience and retention/loyalty than the correlation between sales of electric cars and price of gas. As the novelty of electric/hybrid cars and the social cache of environmentalism fade, the underwhelming customer experience these vehicles delivered to their owners, compels customers to return back to familiar, fossil fuel vehicles. That will continue until the electric cars sold provide better customer experience than conventional ones at the same or better price. The energy, that drives these cars, may be alternative, but it is not a substitute for the delivery of superior customer experience.

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