Customer Visits: Building a Better Market Focus

Building a Better Market Focus

Edward F. McQuarrie

• Publisher: Routledge
• Year: 2014
• Print ISBN: 9780765622242
• eBook ISBN: 9781317473473
• Topic: Business
• Subtopic: Business generale
• Index: Business

Visits to customers by a cross-functional team of marketers and engineers play an important role in new product development, entry into new markets, and in exploring customer satisfaction and dissatisfaction. The new edition of this widely used professional resource provides step-by-step instructions for making effective use of this market research technique.Using a wealth of specific examples, Edward F. McQuarrie explains how to set feasible objectives and how to select the right number of the right kind of customers to visit. One of the leading experts in the field, McQuarrie demonstrates how to construct a discussion guide and how to devise good questions, and offers practical advice on how to conduct face-to-face interviews.Extensively updated throughout, this third edition includes three new chapters as well as expanded coverage of the analysis of visit data. It also discusses which industries and product categories are most (and least) suitable to the customer visit technique. The author also covers how the customer visit technique compares to other market research techniques such as focus groups.

Part I

Rationale

1

Why Visit Customers?

There are two answers to this question. The first reason to visit customers is to help instill or maintain a market focus within the firm. The second reason to visit customers is that this may constitute the best or most suitable market research technique available in a specific business situation. The market focus rationale is developed in this chapter; we will return to the market research rationale in chapter 2, and revisit the relationship between customer visits and other specific market research techniques in chapter 14.

Customer Visits and Market Focus

Most businesses are guided by one of the following fundamental orientations. See which one best characterizes your firm:

1. Financially oriented: the business is primarily viewed as a capital asset that produces income for shareholders.

2. Technology-oriented: the core function of the business is to invent new things or come up with better ideas.

3. Quality-oriented: the business is focused on processes—the goal is to do the right thing the first time and every time.

4. Market-oriented: the business exists to create and keep customers. Discovering needs and satisfying these needs is the core function.

None of these orientations is wrong and each contributes a piece of the puzzle so far as business success is concerned. Who would invest in a firm that did not strive to provide shareholder value? Who would wish to compete without recourse to innovation? Who would want to hire a manufacturing manager who did not care about process quality?

What has changed in recent years is the recognition that customers must be placed at the center. When firm resources are limited and market competition is keen, customers provide the guidepost. Only by delivering value to customers can we provide value for shareholders (Cleland and Bruno 1996). Only by focusing on customer needs can we successfully choose among technologies and invest appropriately in processes. A market focus or orientation is not the only thing a business needs, but it is the central thing, the core that anchors the rest.

The idea of a market orientation (synonymous with “market focus” for our purposes) dates back to at least the 1950s (Webster 1988). Here are two formal definitions that reflect current thinking.

Definition 1:Market orientation is a business culture committed to the continuous creation of superior value for customers. (Narver and Slater 1991, 1)

Definition 2:Market orientation is the organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization-wide responsiveness to it. (Kohli and Jaworski 1990, 6)

The two definitions point to some important considerations that have to be taken into account by anyone seeking to move an organization closer to its customers. The first definition emphasizes that a market focus represents a business culture: something reflected in the shared values held by employees, the stated policies of management, and the totality of actions taken by the firm. Today, if your firm is not sufficiently market-focused, then you require a change of culture—no small thing. Since cultural change may be required, you cannot rely on directives or edicts from top management. In fact, it has been shown empirically that the top-down approach to achieving a market focus is not effective (Narver and Slater 1990, 1991). Such edicts provide a beginning and are probably an essential prerequisite for success insofar as they communicate a commitment on the part of top management, but they only lay the foundation. To complete the task you have to change hearts and minds at all levels of the organization. Understanding that focusing on customers is a matter of business culture thus identifies the magnitude of the task facing you and your firm as you attempt to change.

The first definition also reminds you of the central task of all customer visits—to understand what customers value. You cannot prosper as a firm unless you offer something for which customers are willing to pay. Unfortunately, what customers actually value may not be the same as what they say they want. If customer visits were a simple matter of asking customers what they want and then going back and building to that spec, there would be no need for an entire book on the topic! However, discovering what customers really value and matching that to some competence of your firm that allows you to deliver superior value is not so easy. Ultimately, delivering superior value will require understanding your competitors as well as your customers. Here customer visits may play a role, but are unlikely to be sufficient or even central to the formulation of competitive strategy. This serves as a reminder that successfully implementing a market focus will require more than just excellence in customer visits. It is important to keep that fact in mind as you read this book: visits are just one piece of the puzzle.

The second definition of market orientation is useful because it begins to specify some of the activities that characterize a market-focused business. Such a business will be mightily concerned with intelligence: not just facts, not just data, but meaningful information organized into patterns and themes. Most important, as emphasized by “organization-wide,” the gathering of intelligence in such a business will not be delegated to the marketing research department. A key challenge that must be addressed in building a market-focused culture is how to bring about a shared vision of the customer at all levels and across all departments. More strongly, a market-focused business cannot either expect or allow the marketing function to monopolize the activity of gathering market intelligence. In particular, engineers must not rely solely on customer information communicated to them secondhand.

This remains a radical notion: that you cannot rely exclusively or largely on marketing personnel, much less marketing research personnel, to generate market intelligence. If you do, you fail the test: your business is not going to be market-focused. Your employees, in particular your technical people, are not going to develop a shared commitment to customer satisfaction. The next chapter will explain why marketing cannot carry the burden of intelligence gathering; here it is sufficient to highlight the fact that a market orientation is neither a common nor an obvious way of managing a business and demands real changes in conventional modes of organization.

Finally, please do not confuse “market orientation” with “marketing orientation”—it is customers who have to be placed at the center, not the marketing function. Market focus is not about giving dominance to those employees who hold marketing jobs; it is a matter of finding a way to get everyone to focus on customers. In fact, organizations where sales and marketing staff fence off the customer and insist on controlling all access are among those least likely to succeed in implementing a market orientation as defined here.

Market Focus and Financial Performance

The definitions quoted earlier were produced in the course of work sponsored by the Marketing Science Institute (MSI) beginning in the late 1980s. About that time, MSI declared customer and market focus to be a core research topic based on expressions of interest received from industry sponsors. In addition to conceptual work aimed at clarifying the meaning and measurement of market orientation, a stream of empirical research has investigated the financial implications of succeeding or failing in the effort to become market-focused (Jaworski and Kohli 1993, 1996; Narver and Slater 1990). After all, if market orientation cannot be connected to business profit, and ultimately shareholder value, how important is it, really?

A typical study in this vein might investigate several dozen business units (Strategic Business Units [SBUs]). The investigators would measure the degree of market orientation of each SBU, take standard measures of the financial performance of each business unit (return on investment, operating margin, etc.), and then examine the correlation between the two. A number of such studies have concluded that the more market-focused a business is, the more profitable it tends to be. This result has been obtained in comparisons of SBUS within a single firm and in comparisons across firms. It has also been obtained in studies of both U.S. and international firms.

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Exhibit 1.1

Customer Visits at Leading Firms

Between 1989 and 1991, the Marketing Science Institute sponsored a project to determine whether or not customer visits represented an isolated activity at a few exceptional firms ora more widespread practice among B2B marketers. Forthis project I visited eight firms: four in the electronics industry (IBM, Raychem, Fluke, and Polaroid), two materials suppliers (Milliken and DuPont), and two financial services firms (CIGNA and Metropolitan Life). A total of thirty-three managers and professionals were interviewed.

These interviews provided valuable insight into the motives for visiting customers, the expected rewards, and possible problems. Quotes drawn from these interviews are provided to supplement and make more vivid the conceptual rationale for customer visits. Where appropriate, a job title is given to provide context for the quote.

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Of course, causal conclusions derived from such correlational studies are always open to challenge. One explanation might be that more profitable firms are more able to indulge in the “luxury” of focusing on customers, so that market orientation is an expression rather than a cause of profitability. Nonetheless, a substantial body of evidence indicates that market orientation and financial success go hand in hand. Given this positive association, the primary question becomes one of implementation: How can a business successfully instill and sustain a focus on delivering value to customers? This is where customer visits come to the fore.

Market Focus and Quality

Returning now to the second definition of market orientation given earlier, it is in the area of organization-wide responsiveness that practitioners of Total Quality Management (TQM) have excelled. The procedures associated with TQM provide specific advice about how to mobilize an organization to deliver a quality product. But it is important to understand that a focus on quality that is not simultaneously a focus on the customer will be at best, blind, and at worst, wrongheaded. This fact is often missed. Because some of the outputs of TQM are valued by most customers most of the time (e.g., reduced cost, fewer defects), practitioners of TQM have not always recognized or emphasized that quality cannot be defined by the vendor firm in isolation. Left to its own devices, the vendor firm cannot know what to measure or what should be continuously improved.

Here is a specific example of how a focus on continuous improvement in production processes, absent a focus on what customers value, can lead a firm astray. A chemicals manufacturer analyzed its output of a particular product and found several contaminants that current production procedures failed to remove. Committed to a goal of eliminating virtually all defects (e.g., achieving “six sigma” quality, in the parlance of the trade), the firm vowed to drastically reduce the level of these trace contaminants. By means of a substantial redesign of the production processes, it was able to achieve this goal—whereupon the firm promptly lost two of its largest customers. It turned out that these customers expected to find those “contaminants” in the product and, in fact, relied on their presence to calibrate their own production processes!

The chemical example illustrates what might be called the “Quality Trap,” which comes about when you emphasize perfecting processes rather than satisfying customers. Without practical steps to move the organization closer to the customer’s perspective, the TQM process is vulnerable to becoming a new gloss on an old fallacy: an encouragement to focus on ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Introduction
• Part I. Rationale
• Part II. Procedures
• Part III. Analysis
• Appendix: Checklist for Conducting a Program of Customer Visits
• Bibliography
• Index
• About the Author