Listening to customers helps a successful manufacturing company to accelerate growth.
A food packaging firm on the west coast (Client) had an enviably strong position in its market. Recognized by its customers as highly innovative, with a product line unique to the US market, they faced little to no competition in their defined – albeit limited – geographic footprint. For customers who desired the type of food packaging Client offered, there were few options. Consequently, existing customer relationships were strong and “sticky.”
Success often comes with challenges. And so it was with this client. Strong market demand and share put intense pressure on operations and they often fell short on fulfilling customer orders. Account teams were pulled into day-to-day transactional matters leaving little time to engage with customers on their changing needs and new product requirements – a critical input to staying innovative. Further, the management team was challenged with accelerating company growth significantly over the oncoming five year period.
Several options were being considered by Client to achieve their operational efficiency and growth goals. Some of these options were:
- Adding a Midwest or East Coast packaging unit to better serve high potential customers in that territory. These customers gave a smaller share and spend to Client for reasons of product delivery and shipping costs and presented a great opportunity. Building local capacity would enable growing share and spend of those customers while freeing up capacity to better service customers on the West Coast.
- Setting up a larger technical team to listen to evolving customer needs with more/better customization options in the existing product line.
- Expanding the existing product line by introducing new and innovative products.
Considerable introspection ensued within the Client organization and a decision was made to conduct Voice of the Customer research. This would enable Client to better understand strength of customer relationships (Loyalty) and what was driving the relationships. In the process providing Client insight into potential return on any investments made to strengthen relationships with specific customer segments. Also important was an understanding of the changing, evolving and emerging customer needs. Overall, the VoC program would provide both, operational and strategic direction to achieving their growth target.
To answer the key business questions and support decisions, Client desired information related to:
- The current market spend and share levels for existing client accounts.
- Future spend and share levels for existing client accounts (especially if status quo was maintained, or alternative growth strategies were pursued).
- The extent to which key accounts or newer, smaller accounts offered the most growth potential.
- Whether the growth potential resided in the loyal, neutral, or vulnerable accounts.
The extent of risk in pursuing any or all of the alternative growth strategies (e.g. not able to sufficiently meet the needs of loyal high-spend/high-share accounts and/or high growth potential accounts).
What We Found
Tasked with the VoC program, the Loyalty Research Center (LRC) team designed and implemented a high level assessment of current customer attitudes towards and perceptions of the client and the resulting behaviors. The results were telling, providing powerful insights to guide short term tactics and long term strategies for growth. While the former would yield immediate revenue, the latter would ensure long term success.
- While the average Loyal customer gave 80% of its packaging spend to Client, there were several instances of low spend/low share Loyal customers, representing a significant opportunity for growth.
- Weaker (Neutral, Vulnerable) customer relationships were often the result of inconsistent performance on meeting demand, product quality and timeliness of product delivery. This was a direct result of production capacity stretched to its limit by high demand.
- All of the Vulnerable customers gave 100% of their packaging spend to Client, representing significant risk if challenges related to supply and technical issues were not resolved. Given the lack of alternatives and uniqueness of the product, these customers were willing to pay more and give a pass to the aforementioned issues. However, these customers were essentially “trapped” and hence at a high risk of decreasing their level of spend and share over the long term.
- Customers perceived a service and support team that was spread too thin, spending most of its time responding to problems and issues (related to the aforementioned production issues) rather than consulting with the customers. This lack of consultation was the crux of unrealized growth potential across much of the customer base.
The research validated that before investing in volume growth and/or customer base expansion, Client needed to focus on delivering more consistent production volume and service/support to the existing customers. While seemingly independent issues, they were all related:
- This investment would quell vulnerability in customer accounts due to production volume, quality consistency, and service/support issues.
- This could be achieved by investing in additional production facilities and service staff.
- If the additional production facility was placed in the Midwest or East Coast, it would not only help with volume challenges, but would also reduce the impact of the freight costs for the more vulnerable customers east of the Mississippi.
- By augmenting the staffing levels in the areas of service and support, the team could spend more time consulting with customers. The consultation would provide leadership with new and/or different product ideas, which could be pooled, explored further, and pursued in the future to maintain the image of being an “innovative” company.