Be Careful about listening to your customers - GM, Ford, Merrill Lynch, Harley, etc.

For years we've heard how important it is to listen to you customers.  Many books have been written on the importance of listening to customers and giving them what they want.  Unfortunately, and this ay sound like heresy, listening to customers can be more problematic than helpful.  It's better to use scenario planning, compiling info from a range of resources, than let customers lead your planning.

Look no further than the current problems at GM, Ford and Chrysler.  While they may have done many things poorly, one thing they did slavishly was listen to customers.  Throughout this decade American customers have told them"we want bigger cars, with bigger engines, with more power."  The #1 selling vehicle in the USA for several years was the Ford F Series pick-up, a gas user.  For all 3 manufacturers their large SUVs were not only big sellers, but huge profit producers.  Customers were willing to pay big dollars for the steel, V-8 engines and luxuries that went with 12 miles per gallon in the city.  When asked what they wanted, buyers cried for "more."  So Chrysler relaunched the hemi engine - a high horsepower and gas sucking beast.  When launched, they sold out hemis - even in station wagons!  But this close listening to customers meant the companies were NOT thinking about potential market shifts that could cause customers to shift quickly away from what the Big 3 were making.  $150/barrel oil caught them flat-footed, unprepared, with loads of inventory and weak balance sheets.  A sitting duck for the recession and debt crisis.

We see this phenomenon in many markets.  IBM invented the personal computer, then exited the business 4 years later because their customers - data center managers - had no use for PCs and didn't buy any.  Apple launched the Newton - the first PDA - but dropped it like a hot potato when customers told them they were more interested in enhanced Macintosh computers.  Harley Davidson's 50 year old customer base keeps saying they only want big V-Twin roaring motorcycles - so Harley has ignored the faster growing and more profitable crotch rocket and scooter cycle markets (not to mention quadrunners, waverunners and snowmobiles.)  Harley sales are down over 30% this year.

And we can see emerging trends that point to problem companies who listened too long to customers.  Sony, EMI and other traditional music companies missed the digital/MP3 music wave because their retailers wanted to keep making CDs.  They kept listening to Blockbuster Music until it disappeared.  Major movie studios have missed the move to digital/MP4 film distribution as they keep listening to customers (like Wal-Mart, Target and Best Buy) that want DVDs to sell.  Sam Zell spent hundreds of millions of dollars buying the newspaper-dominated Tribune Company, famously saying how he reads 4 newspapers a day, only to find out that people younger than 30 never read newspapers - and never will.  When projecting future subscriber numbers, and ad sales, he talked to older folks who read newspapers and didn't recognize a major, permanent market shift in the market.  Circuit City catered to their in-store customer, but now is finally waking up to the reality that on-line retailers can kill its profit with lower overhead, less inventory, faster turns and lower cost.  Where once on-line shopping was only for the young, everybody is now going to the lower prices.  And we now have evidence that for people under 35, they see no value in a traditional stock brokerage (read article here) - meaning bad things portend for companies like Merrill Lynch that keep thinking their over-40 customer base with $2million in liquid assets is the group to listen to.  In all these instances, their "core" customers were not telling them where the market was heading, thus letting them drive right off a profit cliff.  Heads up to travel agents (yes, a few still exist) and insurance agents out there!

Your customers Lock-in to your Lock-ins.  They like what you offer.  When you ask them what they want, you'll hear "more, better, faster, cheaper."  Nothing insightful there.  The customers you need to listen to are those who left you - those who never signed on to you - and those using competitors you've conveniently organized out of your "core segment."  They can help you see where markets are headed, and where your Lock-in to old products, services and practices leaves you vulnerable.  Otherwise, like GM, Ford, Lehman Brothers, Bear Sterns, Sears, Circuit City and Best Buy you'll be planning from the past - and when market shifts happen - KA-POW! 

To be successful you have to use scenario planning that keeps you prepared for future markets.  You have to understand not only current competitors, but future competitors.  And you have to anticipate what customers will want in the future, not just what they can tell you about their needs today.  So be careful about listening to your customers, they are very likely to lead you right into the abyss.  Just ask Mr. Waggoner at GM and Mr. Ford, Jr.

Comments

[Zane.safrit@gmail.com]

I'm confused. You'll help me. But I read where you say to NOT listen to your customers because you'll miss the market shift where your customers want something new. That's kind of an infinite loop there isn't it?

Don't listen to your customers because you might miss them buying products you no longer provide, because you're listening to them tell you they want more, but they're not buying what they tell you they want?

Bottomline is GM, FORD, Chrsyler, offered products their customers no longer wanted. The Big Three's problems weren't from 'listening' to customers. Their problem was they didn't care about customers. They were the Big three, these big engine cars made them the most money, and they were going to continue to build and market them, regardless if their customers were telling them in 4 ways: 1) they were buying their competitors products; 2) Sales for their competitors continued to grow; 3) Market share for their competitors continued to grow; 4) sales and market share for the Big Three declined. And as an added bonus, the operating profits for The Big Three were negative.

Bottomline, if you don't notice your customers are no longer buying your products, but instead are buying your competitors' products...your problems are more than hearing loss, regardless of who you're talking to

[J Scott]

The "Big 3", so called are hampered not so much with listening to customers, but allowing the UAW to extort such ridiculous contracts. No company can exist where they're responsible not just for the existing/contributing workforce, but also retirees. A good dose of reality for the UAW and the car companies would have been nice about 30 years ago.
I for one like my SUVs and will buy another one when this one wears out.
These are some interesting ideas, however. My work is focused around methods of innovative thinking, and while I don't agree with the notion of completely ignoring the customer, I see the value in looking elsewhere when planning for the future.