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Insight: Why Consumer Research Matters to Suppliers

In April's column we looked at the multiple voices within the OEM customer that suppliers have to consider as they build their "voice of the industrial customer" strategy.

In April's column we looked at the multiple voices within the OEM customer that suppliers have to consider as they build their "voice of the industrial customer" strategy. Here we'll take a deeper look at the kinds of systems suppliers need in order to listen to the voice of the "real" customer – the end consumer that buys the car that your components go into.

Automotive suppliers make two common strategic mistakes when planning for the "voice of the customer." First, when it comes to their OEM or Tier 1 customers, they focus too much on purchasing and not enough on all the other audiences. Second, most build no direct relationships with, or knowledge of, the end consumers who buy their products. Consumer research not only helps you design better products, but it also provides bargaining power with your value chain customers because your case on product changes and pricing are far more compelling when backed up by research.

What we're suggesting is that all suppliers need to become involved in some way in consumer research. The level of the research, however, is dependent on the place of the supplier within the value chain. That is, all Tier 1 suppliers who have "gray box" or "black box" design responsibility should have a robust system for end consumer research in each of their key component areas. Unfortunately, an amazingly small percentage of these product-oriented auto suppliers do their own consumer research with product users. This is particularly true of highly diversified suppliers that are in many different product categories. They lack the strategic focus and research resources to build long-term knowledge systems around the needs and expectations of end consumers. An end-consumer product development strategy naturally favors a business strategy of product and component specialization and focus. End consumer research tends to have an "increasing returns" element to it—the more you know and the longer you do it, the more benefit you get from it, and the harder it is for competitors to duplicate your knowledge base.

But end consumer research is not only for the large Tier 1 systems integrators. Component and process-oriented suppliers should also track consumer preferences, even if they don't do direct consumer research. Take the example of a mid-range stamping company in the $100- $200-million sales range that specializes in seat frame structures. They might not be doing the direct research with end consumers (although we would argue that this wouldn't at all be an inappropriate strategy), but they should be asking their customers what they know about shifting consumer preferences in end products (e.g., seating) and what the emerging product implications are for them. They should know what a robust end-consumer research program looks like, and if their customers are not doing this research, that should concern them.

The voice of the end consumer must be built into every stage of the product innovation process. It cannot just be "tacked on" at the prototyping stage. Building systems for consumer research takes time; discipline; new competencies and new partners. Most importantly, it requires the development of a structured "knowledge management system" within the company. Some of the key elements of this system include:

  • A disciplined product innovation process. First and foremost, end consumer input requires an organized and disciplined process for product innovation (see: The Innovation Imperative; The Importance of Innovation and New Product Development). There needs to be a disciplined stage-gate process that addresses end consumer issues at each stage of product development.
  • Product and feature focus. End consumer knowledge is best leveraged when the company has gone through the strategic process of focusing its product portfolio.
  • Systems for consumer segmenting and profiling. The company needs a process and frameworks for segmenting its end consumer base and building detailed profiles of the different segments. The profile data can include a combination of factors, including demographics, psychographics, vehicle uses, attitudes toward technology, etc. This is the part of consumer research where it is very useful to have an outside partner with expertise in consumer profiling and research. (Companies like J.D. Power have built strong niches in this area.) Research firms have both well-developed frameworks for understanding consumer segments (for instance, typical characteristics by generation), as well as long-term databases that track changes over time, often by specific components or type of technology. For any but the largest companies, it does not make sense to try and duplicate this expertise.
  • Competitor benchmarking, from a customer perspective. Most companies have some kind of competitive intelligence function (although again, it is surprising how weak this is in even very large companies), but the problem is that the competitive benchmarking is done from the company's perspective, not the end consumer's perspective. Consumer-focused competitive benchmarking requires means for tracking and measuring the qualitative (and often quirky) comparisons that we consumers make among product features.
  • Systems for consumer engagement. As one colleague noted: "Consumer research is a contact sport"—it requires direct engagement with the consumers themselves. There are many ways to do this, and many opinions about what works and what doesn't. (The well-known product development firm IDEO (www.ideo.com), for instance, disdains focus groups and traditional market research in favor of direct emersion with customers as they use the product.) The point is that your company will need to have its own version of this process that gets you talking directly with consumers. (One safe place to start, by the way, is with your own employees, all of whom own and buy cars.)
  • Processes to translate consumer preferences into product features and design, engineering specifications and manufacturing processes. Information on consumer preferences is useless if you don't have a process to translate it into the "language" of each of your core company functions—design; engineering; and manufacturing. This requires: (1) that the data be understandable to each of these disciplines; (2) that there be a process for making trade-offs between factors such as technological complexity; cost; and performance; and (3) that all of the disciplines are involved in an integrated product development/launch process. Sound familiar? Yes, this is the basic design of the Quality Function Deployment (QFD) process. QFD, unfortunately, was made so complex that most companies avoided it. Yet it is a great basic tool for disciplining the process of converting customer needs into product features and process controls.
  • Communicating your end consumer knowledge to OEM customers. Since suppliers do not sell products directly to consumers (except for the few that are in the direct aftermarket business—which, by the way, is a great environment for product experimentation and innovation), your consumer knowledge doesn't bring you any benefit unless your OEM or Tier 1 customer sees value in it. The functions in the OEM audience that will care the most about your consumer research are Marketing, Design, and Product Planning. You should cultivate long-term relationships with your key contacts and work to integrate (without giving away your intellectual property) your consumer research efforts with theirs. Done well, this will get you access to some of their data and turn the consumer engagement process into a collaborative effort. The most compelling research from the OEM point of view is research that validates both the desired product features and benefits and the economic tradeoffs (e.g., option pricing) people are willing to make to gain those benefits.
  • Tracking field performance. Finally, your company needs a process for post-purchase tracking of consumer experiences. This process has to go beyond responding to warranty complaints—it needs to include qualitative feedback on actual field performance. While product failures and problems are important to understand, it is equally important to understand the nuances of positive experiences—these will often lead you to the next product extension or platform innovation.

Integrating the voice of the end consumer into your product innovation process will probably require changes to your development process. Admittedly, what we're recommending is time-consuming; it requires additional resources; and it slows down the front end of the process. However, over the long term, it significantly reduces the risks of investments in innovation; it builds relationships with your important constituencies; and it helps uncover new opportunities for innovation. 

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