Lean Marketing listens to the Voice of the Vital Few 1

One of the first inclinations people have about using Lean in Marketing is the term Voice of Customer.

From Wikipedia: Voice of Customer (VOC) is a term used in business and Information to describe the in-depth process of capturing a customer’s expectations, preferences and aversions. Specifically, the Voice of the Customer is a market research technique that produces a detailed set of customer wants and needs, organized into a hierarchical structure, and then prioritized in terms of relative importance and satisfaction with current alternatives. Voice of the Customer studies typically consist of both qualitative and quantitative research steps. They are generally conducted at the start of any new product, process, or service design initiative in order to better understand the customer’s wants and needs, and as the key input for new product definition, Quality Function Deployment (QFD), and the setting of detailed design specifications.

VOC is a great tool but has limitations that are uniquely pointed out by Dr. Eric Reidenbach in his book, Listening to the Voice of the Market. In the book, he states that too often Voice of Customer has been internalized. For example, we use terms such as an internal customer. That may be fine for IT but for sales and marketing, there is only one customer, and you do not find them inside the organization. He goes on to say that VOC though excellent for customer retention severely limits us in customer acquisition. We must understand and use Voice of Market to increase market share. In my work with Dr. Reidenbach, we created a program 5Cs of Driving Market Share with two of the components being Customer Retention and Customer Acquisition that expand on these concepts.

The Vital Few and useful many is a term coined by Dr. Juran which he later named the Pareto Principle. In today’s marketing efforts, there is a mecca of tools and ways to access our customers. The problem is we typically do not have the time, money or skill to be in all places. For the most part, it is the cost of having the skill and the time to manage all the new tools people are using. It is too simple of an answer to just say, “You have to be there.” The problem is that we cannot market to the useful many. We must market to the vital few.Pareto Principle

Most of you are now saying here comes that target marketing pitch and that is all fine and good, but I need new customers and without reaching out, how will I get them? We all know it is a risky and costly proposition to reach out and acquire new customers. There are many failures along the way. That is why retaining present customers is so important. However, you can distinguish from the useful many and reach out to the vital few; if you choose to do your homework. You can significantly reduce your acquisition cost.

This will be somewhat of a simplified exercise as the tools we use to do this can be relatively simple to elaborate depending on your situation and size of market.

  1. The first step in determining the vital few is to understand your present value proposition for a particular value stream or as other may call it your product/market or service/market. This value proposition should be what attracts your present customer base. This is where the tools of VOC are important. Understanding what makes these customers loyal (which is value, not satisfaction) and the critical to quality (CTQs) components of that value proposition.
  2. We must understand our competitors’ relative value propositions and what drives their loyalty base. This should not be an insurmountable task and typically, your sales and marketing people already have a pretty good idea of this.
  3. Compare the performance gap, much like any other internal improvement effort. I recommend picking your closest competitor, which you know best and do this exercise. This gap which can be measured numerically hopefully is positive, which means you have a stronger value proposition than your competitor.
  4. Do this for several value streams (product/markets or service/markets) and see where you have the largest advantage over your competition.
  5. Look at markets, trends and other pertinent data to determine where the best opportunity for growth is for your strongest value streams relative to the competition which you obtained in step four.
  6. Based on your budget and your capabilities decide which type of customer/prospect offers the best opportunity. The vital few that you can acquire with the CTQs of your present value proposition.

This exercise is not as simple or as intuitive as one thinks. The gap is dynamic and should be monitored. You may find that you do not have the capability to widen the gap with a competitor. Or, your gap may be negative and in your present position, you will not be able to close it. You may find that it will take a complete product/service innovation to do it. However, the advantage that you now have is that to find these answers you will not have to research the useful many but only concentrate on the vital few that are most attracted to your present value proposition.

Related Information:
Follow Pareto not Wanamaker in Customer Retention
Deming was just simply wrong about variation…
Why Should 50% of your marketing should fail