In the early 1990s, while working on the new car designs at Cadillac Motor Car Co., I found that our customers had a different reaction to scratches and wrinkles in the leather than we did. We had thought these were "defects." Customers, however, were wary of "perfect" leather, without "natural markings" and thought it might be fake. Our leather had no scratches or wrinkles, but it did have a plastic coating that covered up the smell of tanning agents. It also removed the supple feel of the leather. Thus, in removing "natural markings" to please customers, we had actually spent extra money displeasing them. A small investment in market research enabled us to turn this situation around and develop standards for leather for Cadillac, contributing to our winning the Malcolm Baldrige National Quality Award.

The key learning point from this example was that a disciplined approach to listening to customers and translating their wants and needs into products and services was the basis for managing the customer relationship.

How do you document what the customer wants and make sure that those desires remain the focus of your customer service efforts?

An engineer and researcher in Fortune 500 companies for more than 25 years and a consultant for 10 years, over the past 20 years, I developed a disciplined process for making sure the products and services that are delivered accurately reflect the wishes of the customers throughout their relationship with the company. I call it the Customer-Driven Improvement Model. Dozens of companies have adopted this process with great success.

Figure 1 illustrates how it works.

Figure 1

Many companies say they are customer-driven, particularly with respect to customer service but do not have a disciplined process such as this one to document how the Voice of the Customer is incorporated into their work and internal metrics.

The process begins with a formal collection of the Voice of the Customer (which may be internal customers, external customers, fellow employees or association members). To do this, we usually conduct one-on-one interviews, rather than hold focus groups. Because the research is qualitative, the number of customers who make a specific request is not very important, but the depth of the research is.

In focus groups, a moderator typically asks the same questions in the same order, and the responses can be dominated by specific individuals. A one-on-one interview should be unique, discussing that particular customer's relationship needs and his or her passions.

This Qualitative Research is used to develop corresponding Internal Predictive Measures. These internal metrics are linked to what customers are looking for from the company. They provide a basis for internally managing service according to the customers' wishes.

Internal metrics
How would you know if your customers' needs were being met, before surveying them to find out what those needs were? Your internal metrics should tell you.

We translate the Voice of the Customer into survey questions that customers like to answer, because the questions are based upon the customers' thoughts and ideas. This produces external data, which is used merely to check on the accuracy of the internal relationship metrics. You should never be surprised by a survey result.

Finally, all of the internal and external data is combined to direct improvement to the places that can have the maximum impact on the customer relationship—in other words, where you achieve the "biggest bang for the buck." (Note: This process is often called Quality Function Deployment or the House of Quality; see the May-June 1988 edition of the Harvard Business Review, reprint No. 88307).

Here's a specific illustration. A movie theater owner hired me to conduct research to learn how customers decided what theater to attend. Customers confronted with a choice of theaters showing the same movie, often select the theater based upon who has the freshest popcorn (that's the Voice of the Customer).

We coached the theater owner to measure how long the popcorn remained in the bin before it was sold (the predictive internal measure). We then surveyed his customers and his competitor's customers to discover the customer preference (an external measure). Finally, we decided to pop popcorn in smaller batches, more often (process improvement).

The result was more popcorn sold, less popcorn thrown away, greater attendance and greater profits! In this case, managing the customer relationship properly not only increased sales and profits but also reduced costs.

The same techniques work well in business-to-business relationships. How many of your internal metrics can be linked directly to customer needs? How many of them result in behaviors by your staff that are counterproductive? For example, if you measure "call volume" at your call center, your customer service agents can wind up making customers feel rushed and dissatisfied while they try to hurry to the next call. The result is dissatisfied customers back in the queue waiting to have their issues dealt with properly.

Check the health of your internal metrics, and make sure they lead to the results you desire with respect to relationship management. It takes a disciplined approach to make sure the "Voice" of your customers is deployed properly in your organization's customer relationships.