Ideas for Leaders #494

Work with Customers to Understand and Shape their Future Needs

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Key Concept

Understanding future customer needs is a key success factor for competitive advantage. However, an equally important success factor, and one that is often overlooked, is the ability of companies to influence customers on their future needs. Companies that can both understand and shape future customer needs have the greatest chances of future success.

Idea Summary

The best companies are forward-looking. They are not only concerned with what customers want to buy today, but what they will want to buy in the future. A company’s ability to project future customer needs is usually tied to factors such as how much a company knows about its customer and the extent of customer involvement (e.g. customer feedback) in new product development.

Many marketing and innovation researchers have concerned themselves with the ability to understand customer needs. In 2013, Michael Stanko of North Carolina State University and Joseph Bonner of the University of Wisconsin-Eau Claire developed the concept of “projective customer competence,” a competence that not only allows companies to predict future customer needs but also influence those needs. In this study, Stanko and Bonner illustrate how the same market-orientation and customer relationship factors that help companies understand the future can also help them shape that future.

For example, close working relationships with customers — known as ‘relationship embeddedness’ — might help companies catch trends and future needs, but it also enhances a company’s efforts to influence the future. Customers enjoying a close relationship with their suppliers will be more open to suggestions about new priorities and directions. Working closely with the most critical and capable customers in the market, in turn, lays the groundwork to influence the broader marketplace.

Another factor for projective customer competence is ‘knowledge redundancy’ — referring basically to a company’s knowing what the customer knows, notably about the future problems and challenges that the customer anticipates. Knowledge redundancy is also required to influence customer needs, giving companies the background and credibility to encourage customers to rethink their views on the costs and advantages of certain innovations. Ultimately, customers can be encouraged to develop new priorities.

The same dynamic applies to ‘customer interactivity,’ another key success factor for understanding future needs. An environment in which customers are allowed to participate fully is more conducive to a two-way exchange of ideas, including ideas emanating from the company. In addition, as with relationship embeddedness, working with the best customers puts the company in position to influence the greater marketplace. (Note that relationship embeddedness focuses on trusting relationships between customer and company, while customer interactivity focuses on the processes that enable active participation of the customer.) 

Of these three factors, the research showed that relationship embeddedness is the most powerful factor in helping companies understand and shape their future needs.

The outcome of projective customer competence is better financial performance in the long run as well as greater innovation. One caveat discovered by Stanko and Bonner is that knowledge redundancy, while building up projective customer competence, does tend to dampen innovation.

The study was based on a survey of 128 managers from a variety of B2B industries. 

Business Application

Understanding the future needs of your customers is a prerequisite for sustainable success. With the right knowledge about those customers, however, companies can also proactively shape those needs, thus ensuring a better fit with company competencies and strategies.

In a recent article, Johannes Habel of the European School of Management and Technology (ESMT) summarized the management implications of the research by Stanko and Bonner:

  1. Include customers in product development processes. Market reports or a few focus groups are not enough. Customers should be given greater opportunities to participate in the creation of new designs and features.
  2. Build a foundation of trust. Customer participation is effective because of the free flow of ideas between customer and company. This open flow depends on a trusting relationship, which not only encourages customers to share their expectations for the future, but also make them more open to company guidance on those expectations.
  3. Mix it up. This is a warning to avoid the perils of what the researchers call knowledge redundancy. Shared knowledge can help customer and company to agree on the future, but it is not a recipe for innovation. Innovation comes from new perspectives, and this requires companies to look beyond the most obvious or prominent customers, thus avoiding the tunnel vision that results from homogenous thinking.  
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Authors

Institutions

Source

Idea conceived

  • November 2013

Idea posted

  • March 2015

DOI number

10.13007/494

Subject

Real Time Analytics