Jaynie L. Smith, a U.S. sales and marketing consult-ant, likes to tell the story of the company that stuck to basics. It believed customers buy from people they know and trust. So its account reps put all their effort into building relationships with clients, through social events, expensive lunches and golf matches at the finest clubs.
Somehow, though, this didn't turn into sales. When the company finally looked into why its customers buy, it discovered clients actually prized quality and reliability most highly - no matter how much they enjoy the 19th hole.
How could a company get so out of touch with its clients? Smith, founder and chief executive of Florida-based Smart Advantage Inc., says this is standard procedure for most companies. She says her most recent book, Relevant Selling, is written for the 90% of businesses that never engage in formal customer research to ensure they're selling what their clients want to buy.
The implications are staggering. When companies simply guess what clients want, they take their leads from a) sales staff (not always known for their sensitivity, nor their commitment to objective data), or b) competitors (a.k.a., the blind leading the blind). Many companies likely could leave the current hard times behind by learning exactly what their customers value, then using those insights to differentiate them-selves. In one step they could move from slugging it out in a commodity market to dominating the most desirable niche in their industry - enjoying the fatter margins market leadership provides.
In an earlier book, Creating Competitive Advantage, Smith outlined how companies can create market elbow room by determining and then touting their unique competitive ad-vantages. But that turned out not to be enough. Her most recent book stems from the realization that after companies review their branding and their differentiators, they don't take the next step to deter-mine which attributes actually matter to customers. In her research, she says, "We found a frightfully large percentage of companies were way off the mark."
Many, for instance, simply assume price is a customer's first concern. Time and again, Smith's research found clients were more concerned about suppliers' financial stability, response time, or "on-time deliveries with accurate fill rates." ("Price" usually ranks in the lowest quintile, below 20%.)
She reports that one company, following her advice, now focuses its value proposition not just on quality, but on fast delivery and a product-testing process that is five times more gruelling than industry standard. The payoff? Smith says this client maintained unit sales when its market contracted 10%. And it pulled off a price increase its rivals didn't dare match.
Smith identifies several reasons why so many companies get this so wrong:
- They use unreliable or biased sources (e.g., out-of date data, or employees' assumptions);
- They try to build on diverse internal perspectives (IT tends to think clients value technology most, while customer support thinks it's service.);
- Companies don't correlate their strategic disciplines with customers' top buying criteria;
- Different customer groups buy for different reasons, an insight companies miss when their sales teams deliver the same message to all;
- Companies underestimate the return on investing in disciplined customer research. ("We have seen revenues increase as much as 117% for companies that became relevant because of their investment in testing potential competitive advantages," Smith insists.)
Determining the true voice of your customer is not as hard as you might expect. Ask your industry association for relevant recent market research. Or ask it to conduct research for you, or even split the expense (member-ship must have some privileges). You can also conduct your own research, reducing costs by partnering with non-competitive industry peers (e.g., a specialty telecom wanting to produce a phone for arthritis sufferers gained funds and credibility by partnering with the Arthritis Society).
Smith also recommends interviewing your customers on a regular basis, not just to learn more about their needs, but to find out more about your competition. Vendors and subcontract-ors may also be useful sources of key information.
Smith says nothing can re-place hiring professional re-searchers to conduct objective surveys of customers' needs and wants. Relevant Selling concludes with a short primer on research, survey methodology, and how to pick a re-search firm. It may not sound as exciting as a golf tournament, but it's likely much more relevant.
- Rick Spence is a writer, consultant and speaker specializing in entrepreneurship. His column appears weekly in the Financial Post. He can be reached at rick@ rickspence.ca
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