Item 3.1 in the Baldrige Criteria asks key questions about how your organization listens to your customers. The following processes, best practices, and problem areas look at critical issues in this part of the Baldrige model.

Your organization needs processes for:

Listening to each key customer group and market segment across the entire customer life cycle, to former and potential customers, and to customers of competitors to obtain actionable information

Following up with customers on product/service quality, customer support, and transactions to acquire immediate and actionable feedback

Determining customer satisfaction, engagement, and dissatisfaction

Using data and information about customer satisfaction, engagement, and dissatisfaction to exceed their expectations and improve loyalty

Obtaining information about your customers’ satisfaction with your organization, products, services, and support relative to their satisfaction with your competitors and other organizations providing similar products and services

Best practices to consider:

Using established processes, the organization knows exactly what each of its customer groups and/or market segments requires and communicates that knowledge throughout the organization.

Listening posts are established for all customer groups and segments with processes for collecting, analyzing, and sharing the information from those posts.

Follow-up with customers typically includes relationship and transaction surveys and frequently involves focus groups, customer advisory panels, and involving customers in internal processes such as strategic planning, new product development, and process improvement.

Organizations go beyond the annual customer satisfaction survey by surveying customers more frequently, using tools like Net Promoter Score to determine engagement and loyalty, and validating survey results through focus groups, customer advisory panels, and other forums.

Common problems areas:

No processes are in place to systematically listen to customers and to analyze and communicate the information from those listening posts.

There is little or no follow-up on interactions with customers, making it difficult to identify opportunities for improvement and to make needed changes.

The methods used to determine customer satisfaction provide little timely and actionable information.

No processes exist to detect when a customer is dissatisfied, capture information about that dissatisfaction, take steps to keep the customer, and fix the process that caused the dissatisfaction.

To read more about the Voice of the Customer, click on these articles:

KEYSTONE: Customer Knowledge

Dangerous Assumptions about Your Customers

Smart Question #3: Who Are Our Customers and What Do They Require?

Be Careful How You Measure Customer Satisfaction

Best Practice in Measuring Customer Satisfaction

Fast Food Customer Focus

The following processes, best practices, and problem areas look at critical issues in this part of the Baldrige model.

Your organization needs processes for:

• Listening to each key customer group and market segment across the entire customer life cycle, to former and potential customers, and to customers of competitors to obtain actionable information
• Following up with customers on product/service quality, customer support, and transactions to acquire immediate and actionable feedback
• Determining customer satisfaction, engagement, and dissatisfaction
• Using data and information about customer satisfaction, engagement, and dissatisfaction to exceed their expectations and improve loyalty
• Obtaining information about your customers’ satisfaction with your organization, products, services, and support relative to their satisfaction with your competitors and other organizations providing similar products and services

Best practices to consider:

• Using established processes, the organization knows exactly what each of its customer groups and/or market segments requires and communicates that knowledge throughout the organization.
• Listening posts are established for all customer groups and segments with processes for collecting, analyzing, and sharing the information from those posts.
• Follow-up with customers typically includes relationship and transaction surveys and frequently involves focus groups, customer advisory panels, and involving customers in internal processes such as strategic planning, new product development, and process improvement.
• Organizations go beyond the annual customer satisfaction survey by surveying customers more frequently, using tools like Net Promoter Score to determine engagement and loyalty, and validating survey results through focus groups, customer advisory panels, and other forums.

Common problems areas:

• No processes are in place to systematically listen to customers and to analyze and communicate the information from those listening posts.
• There is little or no follow-up on interactions with customers, making it difficult to identify opportunities for improvement and to make needed changes.
• The methods used to determine customer satisfaction provide little timely and actionable information.
• No processes exist to detect when a customer is dissatisfied, capture information about that dissatisfaction, take steps to keep the customer, and fix the process that caused the dissatisfaction.

To read more about the Voice of the Customer, click on these articles:

• KEYSTONE: Customer Knowledge
• Dangerous Assumptions about Your Customers
• Smart Question #3: Who Are Our Customers and What Do They Require?
• Be Careful How You Measure Customer Satisfaction
• Best Practice in Measuring Customer Satisfaction
• Fast Food Customer Focus

Pine offers a fresh perspective on what it means to be truly customer-focused with a list that could be a how-to for understanding what your customers require:

• Every customer is his own market. Every customer deserves to get exactly what he wants at a price he’s willing to pay, and companies must make that happen in a way that makes them money.
• Recognize that every customer is multiple markets. Customers want different offerings at different times under different circumstances.
• You must modularize your capabilities. Break your offerings apart into modular elements like LEGO building blocks, and then create a design experience that helps each customer figure out what he wants.
• Don’t overwhelm your customers with choice. “Fundamentally, customers don’t want choice,” says Pine. They just want exactly what they want.”
• Recognize that mass customization is not being everything to everybody; rather, it is doing only and exactly what each individual customer wants and needs.
• Remember your customers’ preferences. Create a database of customer profiles so that, with every interaction, you can lower our customers’ sacrifice—what they have to settle for or buy from you versus what they truly want and need.

To read more about being customer-focused, click on these articles:

• Dangerous Assumptions about Your Customers
• Smart Question #3: Who Are Our Customers and What Do They Require?
• Customer Culture as Differentiator
• Kano Satisfaction Model
• A Baldrige View of Customer Experience

These are foundational questions: If you don’t have rock-solid answers for them, everything that follows will be shaky.

The same is true for innovation. The most innovative organizations start at the beginning with a rock-solid understanding of customer wants and needs, organizational capabilities, and transformational trends that could disrupt their markets and give them a competitive advantage.

The transformational potential of innovation is the subject of “On Tracking Transformational Trends” by Scott Anthony (HBR, January 17, 2011). From his experience, he identifies three areas to assess whether a trend is or is not transformation, using the iPod and 3-D television as examples:

• Market fit. The innovation makes is easier and simpler to do what people are already doing. The iPod provides music on the go. The 3-D television prioritizes something that wasn’t that important. “Do people really want to make the effort to watch 3-D television?”

• Performance. “Strategically sacrifices raw performance in the name of simplicity or affordability.” The iPod deliver lower fidelity but greater convenience, but the 3-D television offers no performance compromises.

• Innovation focus. The innovation is not limited to the product or service but includes distinct business model elements. The iPod spawned iTunes and 99-cent songs. The 3-D TV has no corresponding business model innovations.

Anthony concludes by noting that “true transformation rarely comes from out of the blue. The right questions and the right approach can help companies confidently spot the trends that have the biggest potential to shake up their markets, and respond accordingly.”

You can find many of the right questions in the Baldrige Criteria—especially those questions that compel you to start at the beginning.

To read more about innovation, click on these articles:

• Challenge Your Assumptions
• Revolutionary Thinking
• Innovation and Communication
• When Innovation and Planning Collide
• Managing for Innovation
• Baldrige FAQs: The Baldrige Criteria

A lot of organizations will hide behind that “as appropriate” qualifier, arguing that social media has nothing to do with them. According to David Armano (“Six Social Media Trends for 2011,” HBR, December 6, 2010), a global survey indicates that only 29% of companies have a social media policy. That puts 71% well behind the curve.

Everybody uses Google, right? Last year, Facebook had more weekly site traffic than Google. And it’s not like even the most Luddite of companies ignores social media all together: Some surveys report that 95% of companies use LinkedIn for recruiting.

So it’s not just about using social media and Web-based technologies to listen to customers, as the Baldrige question addresses, but how you use them to acquire and keep customers. With that in mind, here are Armano’s six social media trends for 2011:

• It’s the Integration Economy, Stupid. The challenge is to integrate social media into all facets of business from marketing to crisis management and beyond.

• Tablet & Mobile Wars Create Ubiquitous Social Computing. Cheaper, smarter phones and tablets will move technology consumers closer to being connected 24/7, and in more powerful ways.

• Facebook Interrupts Location-Based Networking. Facebook is about to roll out a location-based service that promises to make location-based networking useful to businesses.

• Average Participants Experience Social Media Schizophrenia. Having to maintain too many social profiles will motivate people to seek “a more integrated and simplified social graph,” which opens up opportunities for new integrated platforms.

• Google Doesn’t Beat Them, They Join Them. As Armano points out, Google excels at indexing. “Expect the Googleplex to strike back in 2011,” he writes, “by indexing any and all social data they can get their hands on.”

• Social Functionality Makes Websites Fashionable Again. Your Web site must provide social integration “to be relevant in a socially connected world.”

I’m not expert enough in social media to understand what these trends might mean to most organizations. Any opinions? What is your organization doing with social media?

The quote comes from “A post-industrial A to Z digital battledore,” which lists his 26 favorite neologisms (even though most are not newly-invented words). Several thought-provoking definitions relate to meeting customer requirements including:

• C is for Choice: “Digital commerce enables niches” because “given the choice, people will take the choice.”
• F is for the Free Prize: “People often don’t buy the obvious or measured solution to their problem, they buy the extra, the bonus, the feeling and the story.”
• I is for Ideavirus: “Ideas that spread win, and you can architect and arrange and manipulate your ideas to make them more likely to spread.”
• K is for kindle: Not the ebook reader. “The internet responds better to bonfires that are kindled over time, to ideas that spread because the idea itself is the engine, not the hype or the promotion.”
• O is for the Orangutan: “The primate is the best way to think about how people interact with websites. They’re like monkeys in a psychology experiment, looking for the banana. If your website offers a banana, people are going to click on it.”
• R is for remarkable: “In a world without effective, scalable advertising, remarkable products and services are the single best way to succeed.”
• T is for Tribe: “The opportunity for marketers today isn’t to sell more average stuff to more average people. The opportunity is to find and connect and lead tribes of people, taking them somewhere they want to go.”

You can see all 26 neologisms here. To read more about the new marketplace, click on these articles:

• Creating a Unique Customer Experience
• Stakeholder Mapping
• Walk in Your Customer’s Body Armor
• Serving Customers through Shopper Marketing
• Bottom-Line Value of Customer Engagement
• 9 Ways to Get Closer to Customers

In 2009, only one in five Americans was loyal to the same car brand.

In “The Manufacturer’s World Has Changed Forever” (IndustryWeek, July 14, 2010), Robert Bloom provides this contrast in customer loyalty to point out that the purchasing behavior of customers has changed, which is old news to any company that’s managed to keep its head above water the last two years, but his case study is interesting. Italy’s Fiat Auto reported a net loss of nearly two billion euros in 2002 and experts thought it would not survive. In 2008, it reported a trading profit of more than 1.1 billion euros—a three billion euro turnaround in six years.

How did Fiat Auto do it? Bloom lists several key actions:

• Terminated a failing venture with General Motors to gain full decision-making autonomy
• Eliminated an entire floor of executives to reduce costs and bureaucracy
• Cut Fiat’s product development time in half to get products to market quickly
• Reorganized and re-energized its dealer organization to assure sell-through
• Redesigned every Fiat product to create Customer Preference for the Fiat brand and products

According to Bloom, manufacturers can take several steps to compete in today’s global marketplace—and those steps coincide with Baldrige core values (in parentheses):

• Think like today’s buyer, not like yesterday’s seller (customer-driven excellence)
• Get rid of the dead wood—it will drag you to the bottom (focus on results and creating value)
• Anticipate change—it is inevitable and relentless (managing for innovation)
• Act with determination (focus on the future)
• Move with a sense of urgency (agility)
• Inspire your organization to meet your expectations and goals (valuing workforce members)
• Align your organization to consistently create Customer Preference (systems perspective)

Bloom’s list is incomplete. From a Baldrige perspective, world-class manufacturers also value visionary leadership, organizational and personal learning, management by fact, and societal responsibility. By designing, deploying, and refining all of its key processes, manufacturers can embed these core values into their companies and become, or remain, industry leaders.

To read more about Baldrige and business, click on these articles:

• Small Wonder
• The Real Heroes
• The Top Innovative Companies
• How Can You Stay on Top?
• Engaging Customers in a Digital Age
• Developing Critical Capabilities

Instead, Brown suggested two great customer metrics:

• Customer Aggravation Index. Use focus groups to identify the things customers hate, rank them according to severity, and keep track of how you perform on them. It’s a meaningful metric that predicts loyalty and it’s being used by such companies as FedEx, DTE Energy, and Midwest Airlines.
• Matrimonial Index. Rate customer relationships on a scale of 1 to 10 based on how “married” they are to you or to your competitors.

According to Brown, you can consider a number of factors for an index including satisfaction levels, aggravation levels, length of relationships, level of relationships, willingness to give a referral, monetary value and scope of business, connections to the company (friends/associates at your company), and the price of “divorce” (what it would cost for the customer to find a new supplier).

With quality customer satisfaction and loyalty data in hand, the next step is to target your marketing dollars at those customers or potential customers who are going to drive your success. As Brown said, maintain a surface level relationship with undesirable customers, strive for “marriage” with desirable ones, and improve relationships with your best customers.

To view the archived webinar Customer Metrics That Work featuring Mark Graham Brown (free sign-up required), click on the webinar title.

To read more about customer satisfaction and engagement, click on these articles:

• Walk in Your Customer’s Body Armor
• When “Very Satisfied” Is Impossible
• Bottom-Line Value of Customer Engagement
• 9 Ways to Get Closer to Customers
• Customer Loyalty Myths