Understanding of customer needs evolves naturally through experience, usually by subjective feedback from the sales force. Yet, for various reasons, customer understanding is often imperfect and both strengths and weaknesses in performance can remain undetected. As can be seen from the two case studies, significant issues can come to light in the course of interviewing customers to probe the meaning beneath such catch-all terms as "Quality" and "Service".

Since our fundamental approach is to seek out the critical success factors in every situation, we often advise clients to start a consulting initiative by validating their understanding of exactly what customers are looking for, and the strengths and weaknesses in their own performance vs their competitors'. Subsequent actions on any element of the business can then be taken in the confident knowledge that customers are not put at risk. The following case studies are typical:

Company A

A supplier of bulk raw materials to food manufacturers was losing market share. There was internal disagreement about the reasons: Sales reported customer complaints about quality; Technical proved objectively that their quality was the highest in the industry in a given season. We interviewed existing and potential customers to clarify their needs and how well these were being met. We found:

1. Consistency of Quality was far more important than Quality per se;
2. Quality, however high, which varied beyond specified tolerances from batch to batch gave a severe problem to customers;
3. Company A's production method was designed to optimise Quality at all times;
4. The production method favoured by competitors was designed to achieve a "good enough" result and even out variations;
5. Company A had a competitive advantage in Delivery Response and Reliability which was unexploited because of the consistency issue.
Equipment suppliers had been warning about the inherent risks in Company A's production method for years, but this went against decades of commitment to that process and could not be "heard" without overwhelming objective evidence.

Outcome

1. Funds were diverted from buying the highest grades of material to financing an alteration in the production method.
2. Major customers were involved in refining new specifications.
3. More consistent production enabled greater flexibility in internal Logistics because product could be delivered anywhere from any production site.
4. The company's strengths began to pay off and sales increased.
5. Profit to sales ratio increased through the combined effects of the foregoing.

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Company B

A UK market leader decided to validate internal reports of its performance vs customer CSFs as an initial step in pursuing ambitions to expand to the continent. The company's internally prepared SWOT analysis reported Quality to be one of its key strengths while the main emphasis, driven by sales force feedback from buyers, was focused on reducing Price. Our study revealed that:

1. Quality "to spec" was the industry's most important CSF;
2. No supplier met customers' desired Quality performance;
3. Company B's Quality was rated behind its major competitors;
4. Two customers of the largest competitor were also very dissatisfied with the competitor's performance;
5. Company B was perceived to be very strong on both Price and Delivery, which partially offset misgivings on Quality.

Outcome

1. Already outperforming competitors on both Price and Delivery, the CEO saw a strategic opportunity to capture significant share from competitors by shifting Quality performance from relative weakness to strength.
2. A major Quality improvement programme was initiated.
3. Manufacturing 'short cuts' to allow lower prices (originally instituted at the request of a minority of cost-conscious buyers) were reversed.
4. A firmer line on prices was safely taken; yet prices did not need to increase because a combination of cost effectiveness initiatives and the benefits of better attention to Quality (lower reject level) led to improved profits.
5. One of the two dissatisfied customers of the large competitor was captured and a major customer who had been lost the previous year was regained.
6. The European entry strategy is being implemented from a position of real, rather than imagined, strength. Initial indications are very positive.

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