Applying Grassroots Strategy and pursuing properly structured Voice of the Customer is a great way to grow your business and avoid being stuck in a single segment or worse yet stuck in the wrong segment.

Grassroots Strategy is a powerful conceptual framework, it changes how many of our clients think and leads to exciting new ways for them to conceptualize their businesses. After having worked with our client teams to crack the code in applying key concepts like differentiation, customer value and market segmentation, it often strikes us that the module on Voice of the Customer (VOC) taught towards the end of the workshop could seem a bit mundane.

In truth, the name VOC is a bit of a misnomer.  In the past, we have attempted to change the name of this module to “Voice of the Market” or “Market Insight” but for whatever reason “Voice of The Customer”always seems to come back, despite the fact that we are describing something far larger and more important than an annual survey of existing customers that is sometimes also labelled “VOC.”

Whatever the name, we include VOC in our training because in our experience, one of the major failure modes in applying strategic marketing is lack of market insight. However smart you might be in applying strategic marketing frameworks and developing hypotheses based on past experience, you will likely fail if you do not have the requisite understanding of the market. 

Too many clients stop short of doing the sometimes challenging work to develop an independent and objective view of how customers actually think and why.  This would be like a scientist developing a theory, but never bothering to develop a test to confirm it – no self-respecting journal would publish such shoddy work.  But this shortcut is tragically commonplace in the corporate world where there is always something perceived as more urgent than better market insight.

For that reason, in our workshops, after we have worked with our teams to apply the key concepts of market definition, differentiation, customer value and segmentation to their projects, we typically work with them to develop a detailed VOC plan.  Good plans include: who to talk to, how to approach them (the ‘cover story’), how to structure the actual VOC discussion and how to document and share the results of these discussions.

Often when planning whom to speak with we are asked, “Should we only speak with current customers or do we need to speak with non-customers too?” Early on we were surprised by this question, but unfortunately we hear it far too often. For the record, the answer to this question is an emphatic “Yes!” Talking only to existing customers is certainly easier to arrange.  Talking to non-customers, on the other hand, can be a bit scary.  We may not know the person or persons in the right roles and when we do find them, we may not like what we hear.  But, including non-customers in your VOC plans is absolutely essential because:

• When selling to businesses the critical decision maker is often not your direct customer but your customer’s customer. For example, for a Tier 2 automotive supplier the key direct customers are the tier one suppliers they serve. But, in order to think through product road map and value proposition they will need to understand customer value where it is generated and this may be several steps down the value chain, in this example at the OEM or even End User.  It is essential to incorporate the perspective of these ‘customers’ even if you may never sell to them directly.
• Growing with existing customers is great, but step-change growth in your business is likely to come from the parts of the market that you don’t currently serve. How can we expect to grow the business if we don’t understand the parts of the market where much of the growth could emerge?
• Finally, even if it wasn’t intentional, it is likely that your current customers are all in a specific segment or two. Even if you have not done the hard work of segmentation, your customers have likely self-selected such that your current customers are inthe segments that need your current value proposition(s). If you do not reach out to understand non-customers you will continue to only understand one or two segments of the market. The segments you currently serve by default may not be the right segments for you or at least may not be the segments with the most growth opportunity.

Speaking only with your current customers and not your non-customers may be symptomatic of a bigger issue of being stuck in a segment and possibly stuck in the wrong segment. One of our major clients was a Global Telecom Technology Business. In the early stages of mobile telephony they flourished by helping develop and scale some of the major mobile networks in Europe and the US. When we first came across them, they had offices in two Western European Capitals and maintained relationships with many of the major Western European Telecom companies. Unfortunately, they had very little business in Europe and their gross profit did not even cover their cost of sales. While they had strong businesses in Asia, Africa and South America they were losing money in Europe.

Their European sales activity consisted of an endless cycle of chasing and losing large bids to major Telecom companies who were no longer interested in the company’s superior technology, willingness to solve complex customer problems and willingness to customize. Instead, the major Telecom networks wanted high volumes of standard products and low prices. The sales force blamed their lack of success on the company’s cost structure which did not allow them to compete at the price levels required by this customer set.

When a new management team came in, they insisted on a VOC effort to sort out the European business. The sales force reached out to their current customers and the results of this first pass of VOC confirmed what they had been telling management, their prices were too high and customers were not willing to pay for the company’s superior offerings.

Some in the management team suspected that the problem was that they were talking to the wrong segment and suggested that the regional organization broaden its VOC to include non-customers.  After much kicking and screaming, the European team conducted a broader VOC effort and discovered that while the major players had driven commoditization with their competitive bidding approach, there were several smaller but growing  segments that would pay a premium for the company’s superior technology and support services.  As a result the company began shifting its commercial resources to these growing segments. It seems obvious after the fact but the company had been stuck in the wrong segment – admiring the problem rather than redefining the boundaries to find a different customer segment.

This recalls the old joke that we re-tell in Grassroots Strategy: “about a police officer slowly making his rounds in the wee hours of the morning. He comes upon a disheveled man in a deserted parking lot, crawling around on his hands and knees in the circle of light created by a lone street lamp. The police officer gets out of his squad car, approaches the man, and asks him what he is doing. The man, who has obviously been drinking, responds that he is looking for his car keys. When the officer asks if he lost them near this location, the drunk replies, “No, I dropped them back there near the bar, but the light is better here.””

The point is that this company, and many others we have seen, was only looking where it was easiest and most comfortable, not looking where they are most likely to find their target. We have the following five pointers for how to avoid being stuck in a customer segment or stuck in the wrong customer segment:

• Periodically step out of your current business to rethink your segmentation and your value proposition, purposefully thinking from the customer’s perspective.
• Keep a broad market view beyond only your current customer set. Specifically get into the habit of consistently monitoring an expanded market definition including VOC with non-customers.
• Do objective ‘post-mortem’ analysis on lost customers and deals, as a forcing function to see how current offerings might need to be adjusted (dismissing these as stupid customers who made the wrong decision is a symptom of continuing to look only under the streetlamp).
• Make sure your sales incentives encourage your sales force to develop and penetrate new customers in target segments and not just continue to collect orders from your existing relationships.
• Consider creating a ‘red team’ or some other form of war gaming to better understand why competitors might view the market or segments differently than you do.

Of course a great way to refresh and broaden your understanding of the market is through one of Amphora’s Grassroots Strategy Workshops but our main message here is to make sure not to get stuck in the wrong segment and, when doing VOC to broaden your understanding of the market, make sure to reach beyond your current customer base!

Image by Steve Miller via Flickr.