In the January 6th, 2010 edition of
Forbes, columnist
Adam Hartung sets the whole notion of the value of listening to customers on its head. In fact, he argues that listening to your customers exclusively can be bad for your business.
In "
Listen To Competitors--Not Customers," Hartung writes that "companies that use customer resource management programs…typically turn to their biggest customer for input, because Pareto's law tells them that 20% of their customers produce 80% of their revenue. But there's no reason those biggest customers should be particularly perceptive." In fact, he asserts "customers rarely know what they want, beyond more, better, faster and cheaper." And the big ones "don't look for change."
Instead, he advises that companies pay attention to their competitors, "especially those on the fringe." As a case study, he cites the rapid demise of
Tribune Corp., which was a "powerhouse media company in 2000" and bankrupt by 2009. That company's mistake was that it listened to its big customers (i.e. advertisers), who were only interested in the status quo at a better price, and ignored "fringe" competitors like
eBay and
Craigslist. "Asking customers what they wanted had done nothing to help management anticipate the market shift," explains Hartung. "A close eye on competitors across media would have shown the inevitable change as it approached."
He sums up with this advice:
To succeed you have to obsess about competitors. And not just about traditional ones, but about fringe ones as well. What customers won't tell you, the market will, through competitive activity. The signs were all there for Tribune and other media companies [Ed: Canwest, for example] to see the user shift that was coming long before their newspaper ad revenues fell off a cliff. The emergence of strong offshore IT centers was obvious to anyone who looked. But by focusing on existing customers, especially the large ones, these companies kept themselves blind to the changes that wiped out huge, profitable revenue chunks….
Leaders can move beyond surviving and enter the world of thriving only if they obsess about their competition. Watch the competitors that grow, and watch the competitors that don't grow, and understand why. Look at how customers behave, not at what they say, and see what tests they are undertaking with competitors--especially with fringe competitors with alternative solutions. See what revenues are shifting to other, often emerging, competitors, even if they are very small. If you want to remain viable, your competition will give you more insight than all the strategic customer councils in the world."
I think Hartung is right. What do you think? Has listening to your customers ever been bad for your business? Do you know who your fringe competitors are?
