Some Thoughts on Understanding Customer Values

1. Some Thoughts on Understanding Customer Values Sam Tomas

2. Customer Quality Features • David Garvin (Managing Quality: The Strategic and Competitive Edge, 1988) described product quality in terms of seven quality features that customers look for: • Performance – primary operating characteristics • Reliability – probability of a malfunction or failure • Conformance – the degree established standards are met • Durability – a measure of product life • Serviceability – ease, speed, courtesy, and competence of repairs • Aesthetics – how a product looks, feels, sounds, smells, tastes… • Perceived Quality – a person’s perception of quality

3. How Do Customers Determine Value? • Theyreview products to identify CTQ (critical to quality) features such as style and technology. • They select those features they feel will provide personal benefits. • They estimate the value of those benefits by comparing them to the price of the product. • They then decide if the features are worth the price? NOTE: A properly designed product will have taken all of these into consideration when developing the product concept.

4. Customer Value Example • Desired Product: Used Automobile • Quality Features: Performance – primary operating characteristics • Reliability – probability of a malfunction or failure • Conformance – the degree established standards are met • Durability – a measure of product life • Serviceability – ease, speed, courtesy, of repairs • Aesthetics – how a product looks, feels, sounds, smells, etc. • Style, technology and performance (STP) • Car mileage – how many miles on the car • Miles per gallon – economy • Other “bells and whistles” • Benefits: Selected quality features • Determine Price: Sales price of the car • Sales tax, insurance, etc. • Operating costs • Tires replacement? • Determine ValueBenefits Selected • Price

5. Identifying Customer Desired Values Is Not Always Easy! • Listening to the VOC (Voice of the Customer) is a starting point, but is that enough? • How will you know when you are satisfying those key customer values? • How do you measure what customers think it received in the way of value? • How do you measure what customers think it cost them? • If companies can answer those questions they’re probably way ahead of they’re competitors.

6. To Complicate Matters, Not All Customer Stated Benefits Are Of Equal Importance! • Customers themselves rate their selected benefits three ways: • Some are: Must have • Must have a car with a GPS navigation system • Some are: Would like to have, if they can afford it • Would like to have a Bose sound system in the car with a 6-disk changer, 12 speakers, and 500 W of audio power but can’t afford the $3,000 cost. • The rest are: Nice to have if they can get them cheap • Don’t much care for a car’s moon roof but I’ll take one if it doesn’t cost much.

7. Should Customer Requested New Products Always be Developed? • Because a customer says he wants a new product doesn’t mean a company should develop it. • The starting point for new product development is new product position analysis which includes: • What the estimated market demand and profitability for the new product is, and at what selling price? • How well the new product fits in with the company’s current products and can be promoted. • How the new product can be differentiated from competitor products?, etc. • If it’s determined that the product won’t be popular with other customers, it should not be developed.

8. How Do You Provide Customer Desired Values?(Where Does Lean Fit In?) • For Garvin’s list of product quality features: • Use Product Design & Development tools mostly to design the values in. • For low prices and reduced lead times: • Design it in for new products. • For existing products, use Lean to eliminate or reduce process wastes and improve process efficiencies. • For quality improvement– minimum defects: • Use Six Sigma’s variability reduction DMAIC process to reduce out-of-specdefects.