Using the Voice of the Customer to Chart a Winning Innovation Roadmap

Strategex

The First in a Series of Four Voice of the Customer Case Studies

submitted by Anthony Bahr, Vice President, VOC Strategic Practice, Strategex
abahr@strategex.com; 312-357-5219

Voice of the Customer (VOC) is the methodology by which a mix of quantitative and qualitative customer feedback is collected, analyzed, and transformed into insights and recommendations which accelerate and sustain profitable growth.

At the core of virtually every VOC program is the Net Promoter Score ® (NPS®). An index ranging from -100 to +100, the NPS measures the willingness of customers to recommend a company to others. Based on their response to the question, “How likely are you to recommend Company X to a friend or a colleague?”, customers are segmented as one of the following:

  • Promoter: A customer that is highly satisfied; they tend to be repeat buyers, allocate a majority of their share of wallet to the company, and actively promote the company’s products or services
  • Passive: A customer that is somewhat satisfied; they would consider lowering their share of wallet if a competitor offered a better value proposition, and while they are unlikely to spread negative word of mouth they are not strong advocates for the company
  • Detractor: A customer that is dissatisfied; they are unlikely to purchase from the company again and could potentially damage the company’s reputation through negative word of mouth

It is paramount for a business to measure and track its NPS on an ongoing basis, because it has been proven time and time again that an increase in customer loyalty predicates an increase in market share. In fact, the ability of the NPS to accurately predict a business’ future growth outlook is why more than two-thirds of Fortune 1000 companies rely on the NPS and the VOC methodology to boost customer loyalty and market share.

Unfortunately, many VOC programs are designed to measure the NPS and little or nothing else. This approach, while rapid and cost effective, is a missed opportunity to engage with your customers and derive deep insights from them as it pertains to any strategic business objective that may be on the agenda.

A well-designed VOC program goes beyond measuring the NPS because the methodology, which is highly scalable and entirely customizable, can be used to answer a variety of complex questions, including the following examples:

  • Is the time right to raise prices? How will customers react to a price increase?
  • What is the quickest and most effective way to organically grow revenue?
  • I’m considering a merger or acquisition. How can I be sure that the target company’s customers will be retained post-close? And, what is the best playbook for kickstarting value creation after the deal closes?
  • Recent attempts to innovate have fallen short. Why? What can be done to develop a more successful innovation platform?

In this first article in a four-part series, we will present a case study that demonstrates how VOC can be used to chart a winning innovation roadmap.

The Challenge

Our client, a global manufacturer of specialized chemistry solutions, was investing heavily in the research and development of new products. However, its customers were not expressing a strong interest in these new offerings. The result was little return on the R&D investment and compressed margins.

The client suspected the reason there was little interest in these new offerings was because their customers themselves were not innovating, thus there was limited demand for a broader portfolio of products.

If this hypothesis turned out to be valid, it would give senior management the confidence they needed to reduce the scope and scale of its R&D program. However, if it turned out the hypothesis was invalid, the VOC methodology would provide an alternative explanation and present opportunities to effectively evolve the client’s approach to innovation.

Strategex partnered with this client to develop a VOC program that was designed to:

  1. Improve market share by measuring customer loyalty via the NPS and identifying opportunities to improve customer loyalty.
  2. Boost customer satisfaction by uncovering opportunities to enhance the customer experience.
  3. Reinforce competitive advantages and shore up competitive weaknesses by benchmarking the company against the competitive set across a variety of key purchase criteria.
  4. Determine if an ongoing innovation program was a worthwhile purist by validating or invalidating the hypothesis that their customers were not interested in a broader portfolio of products.
  5. Develop an approach to innovation that was more likely to succeed by securing a robust understanding of each customers’ internal innovation efforts, outlook for the category, and unmet needs.

The Solution

 To generate the insights needed to answer these questions, Strategex conducted 49 customer interviews across 34 of the client’s top accounts. All of the interviews were conducted over the phone and, on average, the interviews lasted 45 minutes.

The researchers conducting the interviews followed an objective-based discussion guide that was prepared in collaboration with our client.

As interviews were completed, transcripts of each conversation were provided to the client on an ongoing basis. Once all of the data was collected, the results were aggregated, coded, and synthesized. Key themes and recommendations were outlined in a management report, which included an in-depth analysis of the data and customer commentary in total, but also across a variety of segments (region, vertical, etc.).

The Results

The VOC uncovered that:

  • The company had a loyal customer base. It’s NPS was +46 – a score which tends to be indicative of a company that is well-positioned to outperform its category.
  • Lead times were a major weakness and one of the primary barriers to generating customer loyalty. Not only were customers were dissatisfied with lead times, they also perceived competitors as offering much faster lead times.
  • The company’s prices were perceived to be relatively high; however, few customers said that prices were a barrier to repeat purchases since there was near unanimous agreement that the company offered a better overall value proposition than lower-priced competitors.

In respect to the innovation question, the VOC revealed that:

  • The hypothesis was false. Our client’s customers did, in fact, consider themselves to be innovative, and 16 of the 34 accounts interviewed said they considered themselves to be highly innovative.
  • The approach to innovation was out of touch with customer needs. The reason customers expressed little interest in the client’s new products was because they were not relevant to the needs of their respective businesses.
  • There was no shortage of innovation opportunities. Over 200 potential innovation opportunities were identified by simply asking customers about their unmet needs, pain points, and outlook for the categories in which they work.

Armed with these insights, our client responded by increasing its R&D budget rather than cutting it, and by implementing joint innovation programs with key accounts. This ultimately led to the development of new products that were highly relevant and in high demand.

Innovation is just one of many objectives that can be addressed in a VOC. Look for another VOC case study in the October 26th edition of the ACG NYC newsletter. In the meantime, feel free to contact Strategex if you have any questions about the process or the benefits of conducting a VOC for your organization.

Anthony Bahr (abahr@strategex.com) is a Vice President in Strategex’s Voice of the Customer Strategic Practice. Through the VOC process, he provides deep insights into a customer’s level of satisfaction and loyalty, as well as competitive positioning, innovation pathways, pricing optimization, etc. Ultimately, his work enables clients to transform research findings into actionable growth strategies. Anthony holds a BBA from Loyola University Chicago and graduate degrees from the University of Oklahoma and University of Chicago.

Strategex

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