Are You a Loser When It Comes to Your Customers?

Last Updated May 20, 2010 9:17 AM EDT

Does your company amass customer surveys, studies, and sales-call data only to see them languish in file cabinets and on hard drives? If so, you're losing out on winning big, say Kenan-Flagler Business School professor D. Keith Pigues (pictured) and Jerry Alderman in their new book, Winning With Customers. The authors argue that to ensure the success of your own company, you must actively work to boost your customers' profits. I recently spoke with Pigues about the importance of your customers' business, the limits of qualitative research, and why companies often engage in loser-like behavior by failing to capitalize on available customer data. BNET: How do you define "winning"?

Pigues: Winning ultimately boils down to profits and profit growth. When you win, your company grows, new people are hired, and you move up in the organization. Amazing things happen when an organization begins to think first about how it can help its customers make more money. When your customers don't make more money doing business with you versus your competitors, you lose.

BNET: What mistakes do losing companies make?

Pigues: There are several contributing factors, but the single greatest reason they lose is because they don't understand the customer's perspective of how to grow profits. Management teams might debate what customers need using anecdotes from customer visits and input from the sales team, but they don't have a rigorous, quantitative understanding of them. Instead, they make decisions based on opinions and gut feelings. It's amazing that important -- even risky -- decisions are made to invest in new markets, products, services, and sales people without a quantitative understanding of how these investments impact customers' profits.

BNET: Why would a company act so haphazardly?

Pigues: Gathering the necessary information might sound like too much work.

BNET: Is that a valid concern?

Pigues: You can start small with one or just a few customers. And while we don't offer a silver bullet, we have come up with what we call a Customer Value Creation management system -- a structured process that helps you capture your customer's perspective on value. It involves in-depth interviews with them and putting the data into a system to document and preserve what you learn. This process enables you to emerge with a financial metric -- we call it a Differential Value Proposition -- that measures the relative value a customer gets from doing business with you as opposed to with your competitors. Think of it as an improvement over customer satisfaction or customer loyalty programs.

Our process also includes measures that enable you to plan and execute based on your findings. The plans set out specifics including what your company will do to create value for its customers, who will do it, and when. It's a continuous process -- far superior to individual surveys -- that allows for improvement over time.

BNET: I have to admit, it sounds like huge undertaking. How can you decide if your company is ready?

Pigues: There's never an ideal time. Some say that when the economy is going gangbusters, there's no time to slow down and implement a system like this. Others say the time isn't right when the economy slows down and resources are tight. We argue that any time is a good time.