What's Driving Your Customers?

Somebody once told me that American cars are great—they do everything but run! Maybe things aren't quite that bad anymore, but there is some truth in that statement. The domestic auto industry failed for a number of reasons, but the main one was that American automobiles didn't reliably get people from point A to point B. At the end of the day, it didn't matter how cleverly designed the world-class advertising programs were, or how innovative the financing was. If the car couldn't reliably transport passengers, what good was it? Clearly the American auto industry missed the most critical opportunity, and paid for it dearly.

In contrast, Japanese auto manufacturers recognized that reliable transportation was the most critical customer opportunity. They relentlessly studied their designs, simplified systems, and made sure that their cars were able to provide the greatest value for each customer dollar. The Japanese companies didn't perfect their designs overnight, but they found a way to manage product defects in the field, many times without the customer ever knowing that something was being repaired. This is an example of how the Japanese manufacturers anticipated their customers' potential needs to achieve a sustainable competitive advantage.

CRM programs are designed to attract new customers, increase customer loyalty, and reclaim lost customers. A well-designed CRM program focuses on providing exactly what the customer wants, when the customer wants it, at the location of the customer's choice, for a price the customer wants to pay. This goal is accomplished by aligning an organization's internal and external business processes with the needs of the customer. But, like the aforementioned American auto manufacturers, many firms don't accurately identify what is most important to a customer. Frequently, management defines what is most important to the customer. Unfortunately, management's list and the customer's actual desires can be quite different. Therefore, an effective CRM program must be based on a solid understanding of what is most important to the customer.

How is this accomplished? A simple approach to creating a well-designed CRM program is implemented in phases to ensure the most complete and accurate measurements of customer perception. The three critical stages of implementation are:

Stage I: Begin by determining critical issues for customers and competitors' customers. A topical guide is used at each interview to assure consistency in the topics covered. The information obtained during this phase provides the necessary data to develop the survey used in Stage II.

Stage II: This phase enables an organization to prioritize issues and attributes found during the initial phase. All customers are surveyed. The results highlight strengths and weaknesses, identify factors that contribute to the customer's perceptions of quality, measure customer priorities, determine perceived performance levels including those of competitors, and provide a baseline measurement, or benchmark, for future comparisons.

Stage III: This phase continually provides an organization with ongoing measurement in two areas—via quantitative surveys and qualitative interviews. Customer feedback is used to identify opportunities in the product design and performance, and the effectiveness of the business strategy.

A traditional approach to establish the key drivers of customer satisfaction, or those attributes that have the most effect on overall customer satisfaction, involves combining market performance with the importance of those particular attributes, as determined by the customers of the organization. When these composite scores are multiplied and sorted in descending order, they provide a ranking of the attributes in terms of their association with overall customer satisfaction. The ranked list gives the organization the information it needs to prioritize improvement efforts.

Consider the example of a telecommunications equipment supplier. In the first stage, the customers determined that the following list represented the critical issues:

1. Price

2. Reliability

3. Ease of Use

4. Customer Service Expertise

5. Availability

6. Maintainability

7. Operating Cost

In the second stage, these four critical issues were identified as the key drivers of customer satisfaction. The prioritized listing of the key drivers and the relative weight of each are shown below:

1. Availability (35%)

2. Price (25%)

3. Customer Service Expertise (20%)

4. Ease of Use (20%)

In the third stage, overall customer satisfaction is periodically measured as a function of these four key drivers, and the business processes are managed and optimized based on customer feedback. This is where the classic closed loop process comes in-the customer feedback is examined, assessed against what is most important to the customer, and then this assessment becomes the basis for corrective action plans. After corrective actions are implemented, the results are evaluated, the efforts tweaked and tuned, and customer satisfaction measured. The process is sustainable.

Effective CRM programs don't have to be rocket science. They do require a simple and practical approach that will identify what the customer needs, and then they need to have a plan on how to execute that plan. When organizations successfully identify the correct attributes of customer satisfaction and the relative importance of each attribute, they will understand their customers better than the customers understand themselves. Firms that have done this well will tell you that this is something that you can take to the bank!

John David Kendrick is a principal with Fujitsu in Sunnyvale, Calif. He currently leads the Lean Optimization Practice for Fujitsu in the United States and has more than 15 years of lean experience in manufacturing, finance, telecommunications, and healthcare.