cfo.com

Print this article | Return to Article | Return to CFO.com

The Ultimate Test Drive

Why companies are turning to customers for help with design.
Esther Shein, CFO Magazine
August 1, 2007

In 1927, the first cars rolled off the production line at fledgling Swedish automaker Volvo. The inaugural $800 sedan came in two versions: an open-bodied touring model and a "saloon" (that is, covered) model. Guess which one sold? Customers in Sweden, it turns out, were not enthusiastic about the prospect of driving a car with no roof. Buyers of the enclosed-coach version didn't have to worry so much about cold weather. They didn't have to worry about paint, either — the car's frame came wrapped in leather.

Car manufacturing has changed slightly since then. These days, the automobile business is all about options — fuel injection or turbocharger, leather or vinyl, clear or tinted, V-6 or V-8. Even so, automakers take a sizable — and expensive — gamble whenever they launch a new model. For every winner, for every Mustang or Mazda 3, there's also a thundering dud — an Edsel, a Vega, a Touareg.

To avoid backfires, some automakers have taken a page from the PC handbook and are beginning to enlist help from those who know customers best: customers. And they're doing far more than merely convening customer focus groups.

Consider the upcoming launch of Volvo's latest model, the C30. Before the hatchback's U.S. introduction (slated for this fall), Volvo offered a build-your- perfect-C30 tool on its Website. The software program — designed in conjunction with technology consulting firm Trilogy and rolled out this past February — let prospective buyers choose the features they would like to see in the new model. Just as important, it allowed management at Volvo to gauge customer reaction to different pricing schemes for various options — and suss out how many C30s the company should produce for the North American market.

Consumers have responded favorably. Between February and April, the site received more than 10,000 hits, and produced some surprising results. Despite Volvo's conservative, safety-first image, American buyers didn't seem overly interested in options like antiglare rear-view mirrors, front-parking assistance, or blind-spot notification systems. Instead, nearly half of the respondents said they want the two-door Volvo to be sportier.

That's a radical departure from what European customers choose. "The C30 for us is such a different car," says Art Battaglia, product manager of Volvo Cars of North America LLC. "We thought we knew what we needed to do, but we needed some proof."

Seeking out proof for concepts is nothing new, of course. Businesses have been conducting market research for decades. But typically, those assessments have been Monday morning quarterbacking — postmortems conducted long after a product has left the factory. Now, a growing number of companies are soliciting consumer suggestions before launching an item — in some instances, even before a product has hit the drawing board. In fact, some customer relationship management (CRM) advisers believe customer co-design may alter the whole corporate concept of research and development.

Patricia Seybold, CEO of Boston-based consulting firm The Patricia Seybold Group, notes that peer groups and user communities are already beginning to supplement, even supplant, in-house engineers and scientists. "At least 50 percent of a company's innovation," Seybold reckons, "should be coming from customer input and designs."

Increasingly, the Internet will be the source of that input. Threadless.com, which solicits T-shirt art from consumers and lets site visitors vote on the designs they want produced, has become a real success with the MySpace set. Likewise, user rooms aimed at distilling customers' wants and needs are popping up on more-traditional corporate Websites. Kraft Foods Inc., the consumer-products manufacturer, gathers feedback from about 300 targeted customers (predominantly middle-aged women) in a private, online chat group.

The virtual coffee klatch has paid dividends. After group members repeatedly mentioned their difficulties with portion control, Kraft developed 100-Calorie Packs, a smaller snack bag.

Sales of the packs weren't puny, topping $100 million in their first nine months on the market. Rebecca Wettemann, vice president of research at Wellesley, Massachusetts-based technology advisory firm Nucleus Research, believes businesses will come to rely more on this kind of virtual collaboration with shoppers. One driving force: the emergence of better Web and text-mining tools, which Wettemann says will make it easier for companies to analyze customer data. Says Wettemann: "It's just starting to become the job of the E-commerce manager to look at how to solicit input on product design and placement."

Got a Whiter Shade of Pale?
Software companies have long used the Internet to gather feedback from a disparate but enthusiastic audience. Now, nontechnology companies are seeing the possibilities as well.

Case in point: when John Fluevog, CEO of the Vancouver-based footwear company that bears his name, used to travel to the company's retail outlets, customers and employees would hand him slips of paper. "They contained drawings of their ideal shoe," recalls Stephen Bailey, marketing director at John Fluevog Shoes and Boots. Invariably, though, "John would lose the paper."


Determined to capture those drawings, in 2003 the company launched "Open Source Footwear." An interactive Web page, the tool lets visitors submit footwear designs directly to the company. Since the rollout of the site, Fluevog has received more than 1,000 submissions; 11 have actually been made into shoes. The company also actively seeks consumer suggestions on business decisions ranging from ad campaigns to color choices. "From a company perspective," explains Bailey, "it keeps everyone here focused on the fact that we're all working for our customers."

Working with them, too. This sort of partnering with customers is also becoming more commonplace at larger operations. Pittsfield, Massachusetts-based business-to-business specialist GE Plastics, for instance, teams with corporate customers to electronically create custom colors. In the past, the company's diverse group of clients (which ranges from motorcycle-helmet manufacturers to surgical-stapler makers) submitted a form to request a particular color. David Reis, ColorXpress business leader at GE Plastics, says the paper-based approach was a long, drawn-out affair.

The Web-based system has dramatically shortened turnaround times for custom colors. Moreover, GE has collected these co-created shades over the years, building up a vast online samples library. That catalog features tens of thousands of distinct shades crafted by previous customers — and often requested by current ones. The colors are also added to GE Plastics's manufacturing systems. "So if you're a company and you order resin for production in China," notes Reis, "our plant can pull down all that information on the formula to make that color globally."

The color collaboration seems to be working across the spectrum. "It creates an opportunity for customers to differentiate their products even more," notes Reis. "And it allows us to build stronger ties with those customers."

Motor Trends
Not everyone is enthusiastic about co-created products, however. Skeptics say a company's reputation may take a hit if that business's best ideas come from a band of outsiders. What's more, working with an unknown and Web-savvy populace can lay a company open to loss — even theft — of intellectual property.

Another concern: while most companies make user-group members waive any claims to products, it's possible that patents may become more difficult to obtain or defend on co-created goods or concepts. In fact, it may be only a matter of time before idea-generating customers hook up with fee-seeking attorneys to sue a business for a piece of the profits.

Woody Driggs, global managing CRM lead with consulting firm Accenture, questions whether such consumer/business partnerships actually foster customer loyalty. Driggs says CRM is all about relationships and, by his lights, relationships equal the sum of the experiences. "Those who really focus on giving a quality customer experience," he says, "are going to win in this game of trying to collect insight from their customers."

Making the interaction enjoyable appears to be the key. In Volvo's case, the company's build-your-own-C30 tool was a blast to use — almost addictive for car enthusiasts. And unlike some configure-your-ride features found on other carmakers' Websites, the Volvo tool was fast and easy to navigate. That may explain the large number of responses the company received.

Based on the input, Volvo management has decided to configure the new hatchback a little differently than originally planned. Essentially, the company is taking away bundled-option packages, offering instead an à la carte menu for added features. The survey also showed that Volvo could expect to sell a higher percentage of the sporty version of the C30 in the United States than it has in Europe, where the car has been on sale for six months. "That's nice from a financial perspective," says Battaglia. "But it did surprise us."

Everyone Complains about the Weather
In the expensive universe of new-product launches, surprises are best uncovered before a product goes to market. That's why some experts predict customer co-collaboration will require the ability to crunch through lots of feedback data.

Makers of customer analytics and collaboration software apparently see no shortage of buyers for their programs, that's for sure. Vendor SPSS released its latest version of its Predictive Analytics Platform in May. That came on the heels of the launch of version 6.5 of ClickTracks Analytics's Web metrics program. In December, industry heavyweight SAS shipped Profitability Management, a Web analytics and collaboration tool. A few months earlier, rival Oracle purchased Sigma Dynamics, a maker of real-time predictive analytics tools.

The programs are getting easier to use, too. That's crucial, says Nuclear Research's Wettemann. Simpler tools, she points out, empower managers who deal directly with customers to conduct their own product analysis. "A manager can make decisions on how to offer and bundle items on the Web," says Wettemann, "rather than sending requests to IT to do the number-crunching."

In some instances, companies are giving customers access to CRM tools. The British Broadcasting Co. has set up an online developer community, called Backstage. The site encourages viewers to submit ideas about how the network can improve its programming and the delivery of that programming. Toward that end, the BBC provides content that people can modify, recombine, or otherwise play with. "It enables us to work with early adopters and people at the bleeding edge of technology," explains Matthew Cashmore, a BBC development producer.


Backstage visitors, for example, indicated they wanted more weather information from the network. In response, the BBC devised an online system enabling programmers to access the data directly from the BBC weather center. Backstage has yielded other audience-conceived innovations as well. "We're seeing people taking traffic information and matching our data up with Google maps," says Cashmore. "This is all built by our audience — not us."

One viewer created a "BBC World News Widget" on Backstage, taking news stories from a network feed and putting them on a revolving earth. "That is such a fabulous way of contextualizing where a story is [taking place]," says Cashmore. "To see a story in Africa that pings to the part of Africa that it's about — all of a sudden it makes sense."

The experience has been surprising — and humbling. "Big organizations like to think they know how things should be done," Cashmore says. "But when you make your bare data available and people do something with it, it makes you wonder: 'Why didn't we think of that?'"

Esther Shein writes frequently about business technology.


Where in the World Is that Lead in San Diego?

When designers at Entellium began creating the latest version of the company's sales-management software, they looked long and hard at who would actually be using the program. What they found: the average salesperson is highly competitive, highly educated, and in his or her twenties or thirties. Not surprisingly, they also share a similar hobby. Says Dave Scott, senior vice president of sales and marketing at Seattle-based Entellium: "The consumption rate of video games in that particular demographic is huge."

So Entellium decided to create a customer relationship management (CRM) application that would mimic the look and feel of video games. Even the name of the application, Rave, is geared for the PS3 set. Activity maps in the software, which is aimed at small to midsize businesses, offer visually intuitive ways to manage client data, rather than a more typical grid-based view. Global sales rankings look a lot like player rankings in multiplayer online games. And so-called bragging-rights stats for each salesperson are somewhat similar to the "achievements" displayed for Xbox players.

The approach seems to be paying off. JobMonkey.com, an employment specialist also in Seattle, rolled out Rave in December. Kevin Lutgarten, vice president of the site, says the company had been keeping track of its sales leads with a mix of tools, from Excel spreadsheets to paper files. "It became more and more difficult to track who our good leads were and who had actual sales as opposed to prospects," says Lutgarten.

By contrast, Rave gives pertinent information at the top of the screen. And like many video games, it features a star rating system — only this one shows how hot a sales lead is. With it, says Lutgarten, "you can sort contacts from most to least important."

Unlike rollouts of more-traditional software, Lutgarten says there has been no resistance to using Rave at JobMonkey. His only beef? "It doesn't actually get the sale for me."

Entellium's rumored next product, a lifelike android called The Clincher, may solve that problem. — E.S.


In-flight Insight

If companies are increasingly turning to the Web to gather customer data, they are also turning to analytic software to make sense of that data. A legion of vendors, including Oracle, OutlookSoft, and SAS, offer the predictive programs. Rebecca Wettemann, a vice president at Nuclear Research, says the tools have not only become more robust, but also are easier to use — an enticing combination.

Management at American Airlines has found plenty to like about its predictive software, marketed by vendor SPSS. The airline uses the program to analyze the data from online customer surveys, which cover everything from food preferences to on-board entertainment. Last year alone, American received between 300,000 and 350,000 responses to the online polls. William Mitchell, director of customer research at the airline, says the tool allows American "to take large data sets and write relatively simple syntax or code to create all sorts of tables and output into any category someone wants."

The surveys often reveal the unexpected. For example, managers discovered that customers would rather book a flight directly from the AA Website, thus avoiding paying a fee that other travel-based sites require. Mitchell says the surveys also show that while customers want the hot-fudge sundaes served in first and business class, they are also "surprisingly health conscious," indicating a desire for lower-fat dessert options.

Some of the results don't exactly classify as stunners, however, particularly for anyone who gets on a plane on a regular basis. For one, travelers say they prefer assigned seating. They also want à la carte food items rather than boxed food. And they would be willing to pay a fee if they could confirm an earlier flight rather than showing up at the airport at dawn hoping to get on a standby list.

Nevertheless, Mitchell says the software enables American to analyze the data quickly — key when you're getting upwards of 15,000 responses per survey. And since the application can perform text mining, survey takers are encouraged to offer opinions that go well beyond "Choose one from the following list of 43 options." "We've found people on the Web to be very honest and open," notes Mitchell. "And they have given us very rich feedback." — E.S.




CFO Publishing Corporation 2009. All rights reserved.