Tuesday, March 16, 2010

The 6 Levels of Customer Engagement

Posted by Mark Brousseau

Is your company a great innovator? It's a tricky question. If you interrogate your sales team a couple of times a year, then bombard the marketplace with new "solutions" to customer problems, you might assume the answer is yes. After all, you are giving your company's product developers a real workout. But if you're merely practicing the R&D equivalent of what the military calls "spray and pray," you're wasting time and money. (Can you afford either right now?) According to product development guru Dan Adams, the true litmus test is customer engagement.

"Too many companies fail to factor the customer into their innovation efforts," says Dan Adams, the author of New Product Blueprinting: The Handbook for B2B Organic Growth. "Oh, they may half-heartedly solicit customer input—in a 'You do need this product, right?' kind of way—but they don't really listen to it. They don't let customers drive the process. And that's too bad, because if they don't engage customers directly, aggressively, and objectively, they're going to get sluggish results."

Adams cites a massive study, "The Global Innovation 1000," undertaken by Booz Allen Hamilton. Through it, they studied 84 percent of the planet's corporate R&D spending. The researchers identified several distinct innovation strategies, but uncovered one universal factor that led to success: "Companies that directly engage their customers had superior results regardless of innovation strategy."

And not just a little bit superior, notes Adams. A lot superior. Those companies that used direct customer engagement while innovating—vs. indirect customer insight—enjoyed the following financial gains:

1) Profit Growth: Operating income growth rate that was three times higher.

2) Shareholder Return: Total shareholder return that was 65 percent higher.

3) Return on Assets: Return on assets that was two times higher.

So what do you do with this information? For starters, says Adams, if you're in a conversation about your company's innovation and nobody's talking about the customer, realize something might be very wrong.

"To put it in terms of this study, your company might be practicing 'indirect customer insight' instead of 'direct customer engagement,'" he explains. "This is a kind way of saying, 'We've lost track of who our innovation is supposed to help.'"

Adams says he's spent the better part of a decade helping B2B suppliers engage their customers in the innovation process. During this time he's observed six distinct levels of customer engagement during product development:

Level 1: The Conference Roomers: If you're innovating at the lowest level, you decide what customers want around your conference room table. Internal opinions determine the design of your next new product. As you might guess, this isn't very effective.

Level 2: The Expert Askers: At the next level, you poll your sales force, tech service dept., and other internal experts to determine customer needs. This is better than Level 1—because more voices are heard—but still too "internal."

Level 3: The Customer Surveyors: Companies at this level use surveys and polls to ask customers what they want. This begins to shake out internal biases... but doesn't deliver much in the way of deep insight.

Level 4: The Qualitative VOC-ers: If you're at this level, you send out interview teams that meet with customers to learn what they want. This is a quantum leap from VOO (voice of ourselves) to VOC (voice of the customer).

Level 5: The Quantitative VOC-ers: The problem with just qualitative VOC is that people hear what they want to hear. Companies that move beyond it to Level 5 get far more objective customer input. Yes, quantitative feedback drives out assumptions, bias, and wishful thinking.

Level 6: The B2B VOC-ers: Companies at this level really, truly get it. They know that unlike end-consumers, B2B customers are knowledgeable, rational, and interested. B2B-optimized interview methodology fully engages them to take advantage of this reality.

What do you think?

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