Collecting and using customer data is the first step in creating products and services that drive improving customers’ desired outcomes. And this is the prerequisite to growing shareholder value.
How do we know that data is so important?
Deming was a globally recognized Quality expert and management consultant whose opinion is usually valid. First, look at Dr. Deming’s quote in the picture at the top of this article to answer this question. Next, look at this picture and text:
It’s generally accepted that 80% of new products miss their sales targets. In my mind, 80% failed in the marketplace because either the product did not help prospects achieve their desired outcomes or the salespeople did an inferior job of communicating how the buyers would benefit. In either case, the people planning and managing the product launches did not understand the prospects’ needs. I am in the middle of reading “Measure What Matters” by John Doerr. (As an aside, this is a very easy read about a system that coordinates everyone in a business’ priorities and desired results.) Here is a quote from a short segment by Jini Kim, co-founder, and CEO of healthcare startup Nuna.
“When we still had no orders in year two, I knew it was time to get an education. What did benefits directors actually care about? What did meaningful innovation look like in the health care market? I put on a suit and crashed some human resources conferences to find out.”
Finally, as the news media likes to say, here is a story that is RIPPED FROM THE HEADLINES! On July 18, 2018, Wall Street Journal published a report about how Saudi Arabian car dealers screwed up their planning for the day Saudi women were finally permitted to drive in the Kingdom. These four paragraphs were taken from the article:
- Many auto showrooms, getting ready for the end of the driving ban on June 24, hired salespeople and rolled out vehicles they thought would appeal to women. They stocked affordable sedans and mini-SUVs, often in bright colors.
- At Audi, “We expected women to begin with small cars with small engines,” said saleswoman Taghreed al-Shomrani in Jeddah. “But they are looking for big cars with big engines.”
- As soon as the Saudi king announced plans to let women drive last September, Sahar Nasief knew what she wanted: a Mustang convertible. “It’s always been my dream car,” said Ms. Nasief, 64, who learned how to drive decades ago as a student in the U.S.
- Maha Taher, a cultural-agency official who has gotten her license, spent a recent evening at Porsche AG’s Riyadh showroom assessing different models. A salesman directed her toward the Macan, an easy-to-drive crossover designed to attract women primarily. She hesitated. “The Macan is too small,” she said. Ms. Taher wants good speakers to blast her music. She wants dark interiors to avoid discoloring seats with the all-black gowns Saudi women typically wear. And she would like an engine that roars.
“I like the noise,” she told the salesman. “VROOM! VROOM!”
What does this have to do with service contracts?
In many companies, most service contracts have not changed much since Al Hahn started teaching and writing about the 3-tier approach in the late 1980s. And if you didn’t learn from Al, you probably learned from someone who did. Meanwhile, our customers have changed in the 30+ years since Al started his educational journey. Here are four significant changes that are affecting our customer’s buying decisions:
- Commoditization of quality – everyone does everything well, although service delivery still varies from company to company
- The abundance of product information – many companies post details about their service contracts on their website and will send you a quote just by clicking a link.
- Amazon sets expectations for everyone – no comments are needed
- Shift from cost to value – customers pay for outcomes from using the equipment, not owning the product, and expect value from each transaction
How Middlesex Consulting designs service contracts using customer data
We do it by collecting lots of data. We talk to service people to learn what seems to work and what doesn’t. We speak to contract sellers and collect anecdotal stories about things prospects like and dislike with the current offerings. We talk to design engineers to discover what is possible about adding remote monitoring, predictive maintenance, etc. With all this data, we create a 20 to 25-question survey to ask various groups of customers during telephone interviews. We like to interview four segments of the customer base:
- People who purchase a contract when a warranty expired
- People who declined a contract when the warranty expired
- People who renewed a contract
- People who did not renew a contract
We ask about satisfaction with the service and support group, rank order possible features of a contract, and rate their satisfaction with their current service arrangement. Also, we ask questions that help us identify a range of prices that customers would be willing to pay if we could meet all their essential needs. By using customer data, profile information from the CRM systems, and interview questions, we can generally identify groups of customers with service needs. Using this data, we recommend several targeted contracts that answer address three key issues:
And then, as they say, the rest is history. If your contracts are based on opinions, and you believe you can generate more revenue by collecting accurate customer data, contact Sam. We can have a complimentary discussion about growing your income. If you like this post, please share it with your friends and associates and subscribe to the blog.