Turning VOC into a Strategic Weapon in an Economic Crisis

Welcome to the Voice of the Customer (VOC) column, where I will be discussing new ways to collect, analyze and deploy the Voice of the Customer (VOC) for improved profitability and market share gains. The focus of this Voice of the Customer column will be on making your Voice of the Customer more actionable for smarter cost reductions and targeted revenue growth.

I’ll be talking about the importance of a market focus to be sure you are listening to the right customers, why customer satisfaction is the wrong metric to use for improving business performance, why you need to shift from using the Voice of the Customer (VOC) to using the Voice of the Market (VOM), and how to use VOM to identify value performance gaps that you can address through customers, products and services and process improvements. But first, let’s talk about why Voice of the Customer and the Voice of the Market are important strategic weapons in an economic downturn.

Six Sigma Marketing

We’re all painfully aware of the fact that our nation’s economy is in dire straits and that every business in the country is tightening its belt in order to survive. Business managers are exercising remarkable creativity in the effort to hold down costs while keeping as many employees on their payrolls as possible, even if that means reduced working hours or reductions in pay. Many organizations have already "Leaned themselves out," or have applied the tools of Six Sigma to improve quality while reducing costs.

The challenges I hear most frequently now are, 1) "How do I continue to make my business operations more efficient without diminishing our capacity to create and deliver value to my customer?" and 2) "What can we do now that will help my company emerge ahead of the pack when the business environment finally turns around?"

The answer to both these customer management questions hinges upon the effective collection, analysis and deployment of your organization’s voice of the customer. By way of introduction, I’ll address four general issues that you’ll need to consider in applying a megaphone to your voice of the customer.

VOC Issue # 1: Which Customer Should You Be Listening To?

The first rule of business is that not every customer is created equal! Some customers are more profitable than others. Some customers are more strategically important to the growth of your business than other customers. As a business in a dynamic competitive environment, you are better able to compete among some customer groups than other customer groups. Does your voice of the customer measurement system account for those customer distinctions?

Let’s face it: An economic crisis is not the time to try to be all things for all customers. In times like these, it’s more important than ever to focus your attention and investments on those customers who will provide a significant ROI. And make no mistake about it: Voice of the customer is an essential investment that can provide a substantial return if you focus on the right customer.

Achieving Customer-focus Requires a Fact-based, Data-driven Approach

This is not the time to indulge hidden individual agendas from your management team. Some of the market segments you currently serve are larger than others. Some are growing, while others are in decline. Your ability to compete in some segments will be better than in others. Analyzing the attractiveness of the customer segments you serve, and your ability to compete in those customer segments, will focus your voice of the customer investment on the customer segments that will provide the greatest return.

Finally, you can’t afford to limit your focus to the voice of your current customer. Growing market share is a function of two things: keeping the customers you already have and acquiring new customers, typically by taking them away from your competitors. This means that you’ll need to shift from a focus on the voice of the customer (VOC) to a focus on the voice of the market (VOM). That’s the only way you can know how your products and services stack up to competitive alternatives.

VOC Issue #2: Customer Complaints Are Reactive

What sort of listening posts does your business use to capture voice of the customer or voice of the market? Do you rely largely on customer complaints to drive action and improvements within your organization? Are these inputs representative of your targeted market segments? How do you know?

There are two key elements of effective voice of the customer and voice of the market systems: They must be proactive and the must be quantitative. Customer complaints are reactive, and they usually tell you only about things that are done wrong. Focus groups, mall intercepts and customer interviews can be informative, but the results are typically qualitative and are not fast and accurate barometers of customer satisfaction. In order for customer information to have strategic utility, it must be able to quantify what’s most important to your targeted customer segments, and it must be able to quantify your organization’s competitive performance.

VOC Issue #3: What Customer Metrics Provide the Best KPIs?

On this point the evidence is abundantly clear: the metrics of customer value provide the best leading indicators of market share and of profitability. Value is the basis by which customers in every business sector make their purchase decisions—especially when times are tough and dollars are short. And this is just as true in B2B as it is in B2C. Customers want outstanding quality at a competitive price, and that is the very definition of value.

The most important metric you’ll need is the Market Value Model. Each of the market segments in which you choose to compete will define value differently, and the Market Value Model will tell you how those segments evaluate the trade-off between Quality and Price, what the critical-to-quality factors are for each segment, and how important each one is. That’s the foundation upon which your competitive strategy can be built.

Providing Customer Value and the Customer Loyalty Matrix

A second important metric is the Competitive Value Matrix. This is, essentially, the radar screen that illustrates how your targeted segments view your value offering relative to that of your competitors. That radar screen will show you whether you have a value performance gap, whether that gap can be leveraged (a positive gap) or needs to be fixed (a negative gap), and it will also provide the basis for leveraging or fixing.

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The two other key value metrics include a Customer Loyalty Matrix, and a Competitor Vulnerability Matrix. The Loyalty Matrix provides guidance for increasing customer loyalty, and the Vulnerability Matrix will show you exactly how to target the vulnerabilities of key competitors.

VOC Issue #4: Making Voice of the Customer and Voice of the Market Actionable

This is one of the most pressing challenges of a very challenging time. Most organizations have amassed tremendous amounts of customer data but are at a loss when it comes to taking appropriate action. The tools of Six Sigma Marketing are very effective in making that transition. They include a fact-based, data-driven approach to the development and deployment of value-enhancing strategies and a rubber-meets-the-road approach to the improvement of people, products or services and processes that will create and deliver superior customer value. Six Sigma Marketing uses a modified DMAIC approach to:

• Define the targeted market segments for your company
• Measure (quantify) the Voice of the Market (VOM) to identify the components of value and their relative importance
• Analyze competitive performance gaps
• Improve people, products, and processes to fix or leverage those gaps
• Control customer defects with an ongoing VOC monitoring system

For companies wishing to leverage their voice of the market into effective strategic and operational initiatives, the tools of Six Sigma marketing provide the actionability that will a) prevent cutting the wrong costs from your business operations, and b) position your company to emerge ahead of the pack when the economy does turn around.