Leveraging VOC

I came across an interesting question at the Customer Management IQ site today that should be of interest to any executive or manager responsible for voice of the customer at their organization. The questioner wanted to know how to leverage her VOC, and whether some customer opinions are more imortant than others. Here’s my $.02:

Her question really has several facets: (1) what type of VOC will be most leverageable? (2) How should that VOC be analyzed? (3) Which customers are most important?, and (4) How do you actually leverage that information? I’ll address those issues in that order.

(1) As you know, there are many types of VOC, ranging from the passive and reactive (complaints) to the more proactive but qualitative (interviews, focus groups) to the proactive and quantitative (surveys and panels). Each serves a purpose, but to truly leverage your VOC it should be proactive, purposive, and quantitative. Moreover, if you really want to leverage your customer information, you should extend VOC to become the Voice of the Market (VOM) – which means that you would be surveying not only your own customers but those of key competitors as well.

(2) Your next task will be to transform that survey data into meaningful metrics. By meaningful, I mean that the resulting metrics should (a) be predictive of future business performance, and (b) provide managerial direction. This will require a shift from the metrics of customer satisfaction to the metrics of customer value. There is now lots of evidence (Gale, Reidenbach, Reichheld, and others) that the metrics of customer satisfaction do not correlate well with business performance. Why would you rely upon a metric that is unrelated to your business goals? The metrics of customer value, on the other hand, have proven to be the best leading indicators of market share – leading to both high levels of customer acquisition and customer retention (loyalty).

(3) Now we get to the crux of the matter: the metrics of customer value are both product- and market-specific. People buying a luxury sedan will define value differently from people looking for a sports car. And the business user of a computer will define value differently than will the typical home user. You want to focus your investment in value metrics on those market segments that are most attractive for your business (they’ll provide the greatest ROI) – and you want to use those metrics to understand value within those segments better than anyone else against whom you are competing. There are some great tools available that will help you identify those high-priority segments.

(4) Finally, you want to be able to truly leverage your value metrics into superior business performance. Those value metrics should enable you to identify competitive performance gaps on those factors that are critical to quality from a market perspective (CTQs, in Six Sigma parlance). The nature of those gaps, whether positive or negative, will point you to the specific product (service), people, or process issues that you can improve to achieve or sustain a competitive advantage. You’ll find some great information on the “how to” in one of our most recent books, “Competing for Customers and Winning with Value.”

 

Six Sigma Enthusiasts: Input Needed

Please take a few minutes right now to participate in iSixSigma’s latest survey about Six Sigma and VOC. This survey will explore the Voice of the Customer as it relates to a Six Sigma initiative. To participate, click on the link below:

http://www.isixsigma.com/vocsurvey

All responses will remain absolutely anonymous and confidential. Your information will be reported only in an aggregate fashion so that no one will be able to link your response back to you.

This survey will close soon. Please participate today. Here’s that link

again:

http://www.isixsigma.com/vocsurvey
 

 

There is Only One Customer-The One That Pays the Bill

I get so sick and tired of hearing clients refer to coworkers as “customers”. It usually arises when talking about process improvements. Typically the client says he or she needs to understand how their “customers” define value so that they can change their processes to provide greater value. The “customer” is the coworker that is on the receiving end of the process – not the end user who buys the product or service. This coworker is not the “customer” nor is he or she the “internal customer”.

Splitting hairs? Not really. The idea that there are “internal customers” leads to a seductive attitude that drives much process improvement. The so-called “internal customer” is easy to talk to, understand, lives in a highly controlled environment, is less costly to access and, in short, represents an easy target. It is a concept that has evolved making it easier for lean and six sigma gurus to extoll the need for the voice of the customer (VOC) in driving process improvements. Instead of surveying, or conducting focus groups with real customers, it is now possible to redesign processes and value streams in response to the needs of “internal customers”. The CTQs associated with internal custmers are likely to be significantly different from the CTQs of real customers. Do the resultant improvements actually help the organization’s competitive value proposition or do they simply make another employee’s work easier, reduce the number of employees, or cut costs? Over time people are deluded into thinking that they are using the VOC to drive process improvements when they are actually ignoring it. The organization eventually institutionalizes the wrong notions regarding customers and becomes even more internally focused than ever.

If there is no line of sight between the internal process and the end user, be careful. It is entirely possible that process changes do not improve the organization’s competitive value proposition and may, in fact, do harm to it.

 

The Dissatisfaction with Satisfaction

The conventional wisdom says that a satisfied customer is a profitable customer. Reality, as is often the case, denies the conventional wisdom. Here is some unconventional wisdom about satisfaction.

• Satisfaction is a lagging indicator. It is a reactive response to an experience.
• It is synonymous with happy. A satisfied customer is a happy customer. This is an emotion.
• Satisfaction typically focuses only on the organization’s customers and ignores the competitive dynamic that drives changes in market share and top line revenues.
• Satisfaction ignores the interaction of price and quality. It is this interaction that makers value the powerful concept that it is.

All of the above reasons explain why satisfaction has little, if any, linkage to changes in market share. This is why:

• during the 1980s AT&T was losing market share while experiencing some the highest satisfaction scores in their history.
• during the same period, Cadillac was losing market share among its most satisfied customers.
• one of our clients was churning 50% of its satisfied customer base.

Moreover, Fredrick Reichheld, writing in the Harvard Business Review (2003) about the lack of linkage between satisfaction and performance states:

Indeed, in some cases, there is an inverse relationship; at Kmart, for example, a significant increase in the company’s ACSI rating was accompanied by a sharp decrease in sales as it slide into bankruptcy…Our research indicates that satisfaction lacks a consistently demonstrable connection to actual customer behavior and growth. This finding is borne out by the short shrift that investors give to such reports as the American Consumer Satisfaction Index. The ACSI, published quarterly in the Wall Street Journal, reflects the customer satisfaction ratings of some 200 U.S. companies. In general, it is difficult to discern a strong correlation between high customer satisfaction scores and outstanding sales growth. (p. 4)

This lack of linkage makes it even more perplexing why many Six Sigma writers and practitioners hang their hats on customer satisfaction as an objective especially when the stated target is increased value. If value is the objective, then value should be measured, not satisfaction!

Two questions: How many are still using customer satisfaction as a strategic metric and how successful have you been in linking it to market performance (top line revenues, market share or profitability?

For more on this subject go to www.marketvaluesolutions.com.

 

Putting Value into Your Value Proposition

The concept of value is not new. In fact, in 1776 Adam Smith makes use of it in explaining how a market-based economy operates. What is new is our ability to measure value and with that measurement capability comes the added power of being able to manage it. Value is the interaction between the quality of a product or service and the price that the customer has to pay to get that product or service.

Customers buy on the basis of value whether what they are buying is an automobile, cheese, tractors, bank accounts, or any other product or service. One of the strongest buying signals customers use is the value proposition that a brand or organization communicates. Every brand or organization has a competitive value proposition whether it knows it or not. And, often times it’s not the value proposition that the organization desires. The US auto industry has been trying to change its value proposition since the 1970s when American car buyers began to find superior value in Japanese and German cars and continue to do so today. Toyota is threatening to become the number one seller of automobiles in the US. The banking industry has been hemorrhaging customers to other financial services options as customers realized that they could get better value elsewhere. KMART lost the value battle to its arch rival Wal-Mart.

Value is a relentless shaper of competition and industries. Unfortunately, too many organizations turn a blind eye to their value propositions failing to understand that if they are not actively managing their own value proposition, their competition is. That’s because value is relative. Your organization’s value proposition is relative to that of your competitors. And, if they are actively and effectively managing their value proposition, they are also managing yours.

Lean and Six Sigma are two methodologies for shaping an organization’s competitive value proposition. Unfortunately, many organizations have turned these powerful tools inward focusing on cost reduction instead of value creation. But fortunately, this practice appears to be changing. Don Linsenmann, a VP and Corporate Champion of Six Sigma at DuPont delineates four generations of Six Sigma:
• Generation 1: a focus on defect reduction
• Generation 2: a focus on projects that affect the bottom line
• Generation 3: a focus on value
• Generation 4: a focus on the customer experience and enterprise value
I would agree with Mr. Linsenmann. Six Sigma as a customer focused value enhancing tool is still in its infancy. Black belts have told me that to elevate Six Sigma to the next generational level requires an ability to:

1. Clearly identify the CTQs (critical to quality factors) for a specific market segment using a product or service
2. Prioritize the importance of the CTQs to this segment
3. Link these CTQs to specific processes within a value stream
4. Clearly identify and prioritize Six Sigma projects designed to enhance the organization’s competitive value proposition.
Two questions: What is your competitive value proposition (if you know it) and, at what generation of Six Sigma is your organization?