Voice of customer: Co-creation as a mantra for innovation success

(As published in Indian Management, November Issue, Pages 70-74)

A recent study by Forrester Research presented at the recent CMO+CIO Summit in Mumbai suggested that improving customer experience is a top priority for 71% of Indian businesses. Although most organizations have some sort of market intelligence system for understanding and mapping the minds of customers, no organization earned an “excellent” rating in the customer experience ranking. The survey showed that 9% of organizations fell in the “good” category. 60% of organizations struggle to deliver mediocre customer experience, 28% fell in the “poor” category and 3% fell in the “very poor” category. The survey ranked the quality of the customer experience by assessing three key dimensions: effectiveness, ease, and emotion. The question that arises for Indian businesses is how to design innovative products and services that enhance customer experience?

Companies are under mounting pressure to continuously innovate and introduce new products and services with faster “time-to-market” metrics. Consumers expect the next thing to be the next BIG thing and when the product or service does not meet their expectations, they do not hide their disappointment. Companies are realizing that traditional methods of innovation such as developing new product ideas in-house, conducting focus groups and customer research to determine feasibility and market potential does not always accurately reflect customers’ actual needs and desires. To address this shortfall, firms are increasingly placing customers at the heart of their innovation efforts. Businesses are attempting to connect with their customers and seeking their inputs earlier in the new product development lifecycle.

The importance of incorporating voice of customer has been well documented in the marketing literature at least since the early 1990s.  Traditionally, voice of customer analysis has been on identifying customer needs, structuring these needs, prioritizing them, and finally comparing customer perceptions; that is figuring out how well the organization’s current products and services fulfill customer needs. One exemplar for successful innovation based on customer needs and perceptions is in the arena of rural marketing. Companies took the affordability constraints of rural customers into consideration and began introducing their products in mini sachets. These sachets cost Re 1 or Rs.2 replacing the more expensive standard packages of 50 ml or 100ml. Although sachet marketing started with shampoos such as Sunsilk and Chik, today many products are available for nominal prices varying between Rs. 1 and Rs. 5.  These include products such as instant coffee, tea, Horlicks, a variety of chocolates, snacks, noodles, soaps, and detergents. Although affordability was the initial driving factor for sachet marketing, it addressed several issues beyond affordability such as single use travel pack, economy, convenience and ease in handling.

The extensive use of the internet in the late 1990s early 2000s facilitated customers and manufacturers engaging in active and explicit dialogs, ushering in the next wave of how the voice of customer was heard[i]. This trend continues today where businesses are increasingly moving towards incorporating customer feedback as they are designing the customer experience. While the traditional practice was for the firms to take the lead and ask customers information on what they desired, the roles of firms and customers were flipped. The customers could now initiate the dialog with the firms and co-create the product or service with the producers. Technology such as social media enables consumer feedback to be heard at earlier stages such as idea generation and design, rather than later stages such as product testing. Organizations can now develop new products and services more quickly and cost-effectively, while minimizing the risk that such products and services will underperform or fail.

Firms in some industries such as software and technology have been more successful than others in co-creating with the customers. For example Gmail was in beta testing for five years giving it adequate time to co-create the product with its users. Currently Microsoft is working on a standalone Skype messaging app for India that is optimized for 2G and 3G networks. Taking bandwidth issues in India into consideration, this app allows customers to make video and voice calls on slower networks. Another example is the tag line of Philips advertisement that states “Innovation and You,” involving customer feedback as a tool for innovation, in their marketing efforts.

Despite the advances in technology that enables companies to co-create personalized experiences with customers the non-technology sectors still face some challenges. For example how does Tata Motors or Maruti Suzuki co-create an automobile with customers? A key article by Goffin Varnes, van der Hoven and Koners (2012) highlights these challenges. For example one of the main methods organizations use to understand customer needs are survey questions and focus groups. The challenge of using canned questionnaires is that customers struggle to articulate their needs[ii]. They are not aware of the limitations of the current products, cannot imagine what future possibilities are. Furthermore, they are prompted to think about existing products rather than probing for unresolved issues and unmet needs. Although using focus groups alleviates some of these challenges such as giving participants more flexibility in expressing their views two challenges still remain. Firstly, customer behave differently when in their own environments and when outside their own environments. Secondly, when customers are outside their own environments market researchers miss out on seeing valuable contextual clues that give potential ideas to designers. These authors suggest that using ethnography to understand customer needs enables organizations to tap into unrecognized as well as unarticulated customer needs. For example, these authors refer to Miele, a German household manufacturer who used “listen and watch” teams to observe cleaning practices of parents of children who have allergies. Home visits suggested that parents of children with allergies vacuumed a mattress several times a day to know that it is clean. However, these parents did not complain about the extra time or amount of intense cleaning because they were used to regular intensive cleaning. The “listen and watch” teams recognized this hidden need and developed a vacuum cleaner that indicated if an item being cleaned is dust free. They included a hygiene sensor that turned from red to amber to green as the cleaning progressed. This sensor became a breakthrough feature for people who have allergies to know when a room is free of dust.

Thus there are several ways through which organizations assess customer needs and incorporate the voice of the customer when developing innovations. These include several quantitative and qualitative approaches such as field surveys, qualitative interviews, key informant approach and frameworks that result from them such as “The customer centered innovation map[iii]” “customer journey mapping[iv]” and “Jobs-to-be-done.[v]” To understand whether you are simply hearing the voice of the customer or co-creating with them here are some questions to consider[vi].

1. Is the conversation end point clear or unclear? The end point emerges as a result of a dialog between the firm and the customer in a co-creation framework, whereas in traditional market research the end point is clearly defined.
2. Do the firm and the customer build off of each other’s comments? One idea from a customer triggers ideas that the firm could build upon and vice-versa, where both the firm and customer explore and jointly create new ideas.
3. Is there a willingness to explore the assumptions that underlie the dialog? Both the firm and customer must identify and explore the assumptions such that they are understand their mutual perspectives better.
4. Is the conversation exploratory? This suggests that no topics is off-limits between the firm and the customer. The depth and breadth of the ideas increase enable identifying the best course of action for the firm and customer.
5. Is there an eagerness for new ideas? The most productive dialogs are those that exhibit extreme openness to new ideas regardless of the firm’s capabilities, competition and other factors.
6. Does the customer and firm shape the structure and content of the conversation? Both parties have process checks in place to ensure that the dialog is not a one way conversation but a two-way flow of information.

Co-creating with customers involves high levels of trust between both parties, willingness to place value on each other’s insights, complementarity of skills between the firm and the customer, depth of knowledge and experience, an adventure seeking attitude to enjoy the thrill that comes from exploring these ideas and to create a setting where both parties can have uninterrupted conversations[vii].

Although firms benefit from co-creating with customers they have to figure out when it is optimal to co-create with customers versus when to just listen to the voice of the customer. For example, if it is an incremental tweak to an existing product then firms might not have to engage in extensive co-creation. Thus managers of firms have to determine the products that they are interested in innovating, before determining the best way to incorporate the voice of the customer.  In sum, the toughest part of innovation is determining consumer preference for the value created by the innovation. Co-creation enables firms to determine this value and then provide them to customers. However, co-creation is not a onetime solution. It is a philosophy; a mindset that organizations have to consciously work on to effectively leverage the voice of the customer for designing successful innovations.

Dr. Rangapriya (Priya) Kannan-Narasimhan teaches Strategic Management and New Product Development at the University of San Diego. She has a PhD in Management from UCLA’s Anderson School of Management.

Dr N G Kannan has over 40 years of experience in the industry. He is a retired Director (Marketing) of Indian Oil Corporation Ltd, MD of IBP Ltd, and also retired as Chairman of Lubrizol India ltd, Indian Oil Mauritius Ltd. & Indian Oil Petronas Ltd. 

(We shall cover more on innovation-related issues in our forthcoming issues. If you have a question on innovation, send it to us along with your title and company name to [email protected]. We will also credit you for the questions when we respond to it in our article.)

[i] Prahalad, C.K & Ramaswamy, V. (2000). Co-opting customer competence

[ii] Goffin, K., Varnes, C. J., van der Hoven, C., & Koners, U. (2012). Beyond the voice of the customer: Ethnographic market research. Research-Technology Management, 55(4), 45-54.

[iii] Bettencourt, L. A., & Ulwick, A. W. (2008). The customer-centered innovation map. Harvard Business Review, 86(5), 109.

[iv] Richardson, A. (2010). Using customer journey maps to improve customer experience. HBR Blog Network, posted, 8(05).

[v] Christensen, C.M., Anthony, S.D., Berstell, G., Nitterhouse, D. (2007). Finding the right job for your product, MIT Sloan Management Review, 48, 38-47.

[vi] Jaworski, Bernard J. and Ajay K. Kohli (2006), “Co-Creating the Voice of the Customer,” in Robert F. Lusch and Stephen L. Vargo (eds), Toward a Service-Dominant Logic of Marketing: Dialog, Debate and Directions, M.E. Sharpe, Inc. Armonk: NY.

[vii] Jaworski, Bernard J. and Ajay K. Kohli (2006), “Co-Creating the Voice of the Customer,” in Robert F. Lusch and Stephen L. Vargo (eds), Toward a Service-Dominant Logic of Marketing: Dialog, Debate and Directions, M.E. Sharpe, Inc. Armonk: NY.