Customer Decisions on Benefits
You want to understand the benefits customers require: to fill their major roles; to bring a new supplier into their relationship, and to increase their purchases from one of their current suppliers. You also want to understand why the Company has both lost and gained volume in the market place.
The first place to turn when the Company wishes to determine its product and service innovation needs is to customers. Their purchasing patterns provide unerring feedback on the value propositions of every supplier, including the Company. You may not like all the feedback, but you dare not ignore it. (See Perspective: "Use Subtle Strategy in Tough Markets.") You diagnose the customer buying patterns in role requirements, in negative volatility and in positive volatility to find the benefits customers demand today. Customers express different needs in each of these decisions. You use this information to compare your performance in providing these benefits to the performance of your competition.
To save time and resources, concentrate your analyses on the key customer segments of the Company, those purchasing the top 80% of Company sales volume.
This section of StrategyStreet covers these issues in the following topics:
Capsule: The requirements for each role in a key customer relationship apply to all potential suppliers. Often, though, only a few suppliers can fill the most important roles.
Reasons for Negative Volatility
Capsule: You should pursue several avenues to understand why the Company loses sales volume in the market place. This sales volume is very expensive to recover once lost. The reasons for this Negative Volatility are likely to get worse without attention in your efforts to improve current products and services.
Capsule: Some Negative Volatility may be hidden or invisible to you. In many cases, the causes of hidden volatility inflict more damage than do the causes of visible Negative Volatility. Evaluate the causes for both hidden and visible Negative Volatility.
Reasons for Positive Volatility
Capsule: Your competition will constantly improve their performance, even in your areas of strength. You should understand the reasons for positive volatility in order to be sure that you can protect and develop your strengths of the Company in your future innovations.