Customer feedback driven corporate strategy
In times of recession all organisations need to focus on their customer needs, and everyone is looking to maximise the return they can get from budgets that are under increasing pressure. So is there an opportunity to get a better return from money invested in gathering customer feedback by linking customers to strategy? The answer has to be yes, and one of the areas that we find clients are extremely interested in looking at is utilising feedback, not only for identifying areas of operational improvement, but fundamentally developing a customer driven corporate strategy. One of the approaches to a customer driven corporate strategy that has received high levels of media coverage over recent years has been Blue Ocean, developed by W. Chan Kim and Renee Mauborgne. The overall proposition of Blue Ocean strategy is to move away from a situation where you have to compete directly with your current competitors in current markets with little scope for differentiation (Red Ocean) and identify new markets with no direct competitors (Blue Ocean). Although an attractive proposition for many organisations, in a recession are companies focused on the short term and ensuring they can compete and survive for the next few weeks and months rather than investing in new markets? Perhaps using customer feedback to develop a customer strategy could help maximise the opportunity whilst optimising the return from current investments?
The principle of evaluating your organisation’s performance against competitors is an important one though. In the vast majority of markets today the customer has a choice on which supplier they choose to give their business to. Knowing how a customer evaluates you compared with the alternatives not only allows you to identify short term operational changes, but also identify longer term direction by linking customers to strategy.
In our on-going survey benchmarking organisations on their use of customer measurement, a huge proportion of companies reported that they collected customer feedback on competitor’s performance. The problem then starts with the use of that data with less than 2 in 10 reporting that they develop effective plans for positive change.
At Customer Champions we firmly believe that customers’ primary overall measure for selection of a supplier is a comparison of “value for money” or put another way “to what extent was it worth the money I paid?” This combines the two primary drivers of value which are a) the price / cost of doing business and b) the quality of goods or services received. If you can identify how customers view your performance and that of your competitors against these two primary drivers you will have a strong market positioning statement from which to develop a corporate strategy. This overall programme is called Customer Value Management, which has significant synergy with Blue Ocean strategy in terms of a customer driven corporate strategy.
Blue Ocean strategy has Value Innovation as a key cornerstone of its approach with the need to identify value and the drivers of value as building blocks for identifying market opportunities.
A key tool within Blue Ocean strategy is the Strategy Canvas where performance of key competitors is recorded against key drivers of value. Their resulting profiles show the overall market proposition of each competitor, where they directly compete and where there is differentiation. In the Strategy Canvas example below data has been used from the Skytrax survey of airlines and shows the clear different market positioning between Cathay Pacific, Virgin Atlantic and Ryanair.
Utilising data captured through customer feedback programmes and applying Customer Value Management approaches we have developed a Value Map for the office stationery market. The Value Map shows the market positioning for a number of alternative suppliers. The data is completely fictitious but the principles are sound.
Each company is rated by customers on the Price and Quality and the relative scores for each company are plotted out on the X and Y axis. There are a number of key areas on the map:
- The company that appears furthest into the bottom right hand corner is providing a relatively high quality offering, at a relatively competitive price. That company may not be the current market leader but it will be the organisation with the fastest growing market share. In this example Argos.
- If the scores are equal the company (e.g. WH Smith) would sit on the “fair value line”
- Organisations appearing in the bottom left hand corner are seen as “economy” players offering a relatively lower quality service / product but at an appropriately lower price
- Those appearing in the top right hand corner are considered to be premium players who offer relatively high quality at a corresponding price
- Those appearing in the top left hand corner are in the weakest market position offering relatively poor quality at an uncompetitively high price.
We would recommend that before you plot your own customer feedback data on the value map you ask your own strategy management team to position:
- Where they would like to be on the map
- Where they believe customers see your organisation on the map
- Where they believe your competitors are on the map
As an exercise we often find that there is great uniformity on our clients’ own organisation’s position, but the different views between functions tend to be revealed when plotting competitors. On revealing the true picture the discussion that this then generates is of great value in terms of aligning functions and allowing a sharing and development of strategic viewpoints.
Having identified your own position, according to customer perception, and where you want to be, you can start developing a customer strategy that lays out how you’re going to get there. Further customer feedback on your performance relative to the competition and the utilisation of driver analysis will provide an invaluable input into your corporate strategy.
Corporate Scorecards are a valuable tool in terms of tracking progress along your customer strategy journey. If a customer focused strategy is to be delivered, the organisation’s scorecards must provide the dashboard that indicates if the company is travelling in the right direction, at the right speed. Key metrics within that scorecard must be focused on the customer experience if a customer-focused strategy is to be delivered. Our own benchmarking survey shows that companies have to date experienced relatively little success with linking customer feedback with the organisation’s finances. Therefore this void is going to create friction between the customers’ experience and the strategic goals which inevitably will include financial targets.
As long as an organisation’s customer feedback programme is collecting customer perceptions about both its own performance and that of its competitors, utilising this for input into a customer focussed corporate strategy is not only valuable, it ensures that the impact of investment in this area is maximised.