Most managers know that listening to customers makes good business sense. Businesses have much to gain from actively seeking and encouraging customer participation, which we define as getting customers to provide constructive suggestions and share their ideas on how to shape product and service offerings. Yet while the idea that soliciting and listening carefully to customers is old, many companies only pay lip service to it. A senior executive of a global specialty retailer told us: “We spend millions on market research yet fail to take note of what our customers could tell us every day.” Indeed, many organizations systematically fail to let customers participate or are wary of customer input. This is problematic, because the return on participation is higher than many managers think.
A senior manager at a leading social networking company told us that the company didn’t actively seek customer input. “Most of the ideas come from internal product development teams,” he explained. “Once the product is out, engineers track data and extrapolate hypotheses … then the new product is rapidly updated and launched for further testing and data collection.” The manager added: “[We are] all about word of mouth and viral spread of our business platform.” Although neglecting customer participation in favor of word of mouth might be understandable for a company built on customer-to-customer interactions, we heard similar comments from managers elsewhere, including the head of strategy and development of a large global food service company and the marketing manager of a leading online coupon distributor. “Asking customers for feedback is the last thing on our mind,” the coupon marketing manager told us. “We have no clue or no system in place to deal with customer feedback effectively.”
Rather than encouraging customers to share their views about the company and its products with managers, we found that companies tended to focus on encouraging customers to take part in spreading positive word of mouth. There are at least two reasons for this preference. First, many managers consider new customer acquisition to be more critical than customer retention.
1. Y. Liu, “Word-of-Mouth for Movies: Its Dynamics and Impact on Box Office Revenue,” Journal of Marketing 70, no. 3 (July 2006): 74-89; J. Villanueva, S. Yoo and D.M. Hanssens, “The Impact of Marketing-Induced Versus Word-of-Mouth Customer Acquisition on Customer Equity Growth,” Journal of Marketing Research 45, no. 1 (February 2008): 48-59.
2. L.A. Bettencourt, “Customer Voluntary Performance: Customers as Partners in Service Delivery,” Journal of Retailing 73, no. 3 (fall 1997): 383-406.
3. B. Schneider and D.E. Bowen, “Winning the Service Game” (Boston: Harvard Business School Press, 1995).
4. R.P. Bagozzi, “Reflections on Relationship Marketing in Consumer Markets,” Journal of the Academy of Marketing Science 23, no. 4 (fall 1995): 272-277; B. Berman, “How to Delight Your Customers,” California Management Review 48, no. 1 (fall 2005): 129-151; Bettencourt, “Customer Voluntary Performance”; C. B. Bhattacharya and S. Sen, “Consumer-Company Identification: A Framework for Understanding Consumers’ Relationships with Companies,” Journal of Marketing 67, no. 2 (April 2003): 76-88.
5. T.O. Jones and W.E. Sasser, Jr., “Why Satisfied Customers Defect,” Harvard Business Review 73, no. 6 (November-December 1995): 88-100.
6. H.S. Bansal and P.A. Voyer, “Word-of-Mouth Processes Within a Services Purchase Decision Context,” Journal of Service Research 3, no. 2 (November 2000): 166-177.
7. These dimensions were measured through a customer survey that employed well-established and widely used measures in marketing research.
8. In our model, we also calculated the total effect of customer satisfaction on customer spending via the word-of-mouth route and via the participation route. Results suggest that the total effect of satisfaction on spending via participation (.11) is 11 times greater than the total effect of satisfaction on spending via word of mouth (.01).
9. S. Fournier and J. Yao, “A Case for Brand Loyalty,” Harvard Business School case 9-598-023 (Boston: Harvard Business School Publishing, 1998).
10. G.L. Urban, F. Sultan and W.J. Qualls, “Placing Trust at the Center of Your Internet Strategy,” MIT Sloan Management Review 42, no. 1 (fall 2000): 39-48; G.L. Urban, “The Emerging Era of Customer Advocacy,” MIT Sloan Management Review 45, no. 2 (winter 2004): 77-82; A.B. Eisingerich and S.J. Bell, “Customer Education Increases Trust,” MIT Sloan Management Review 50, no. 1 (fall 2008): 10-11.
11. F. Reichheld and R. Markey, “The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World,” revised and expanded edition (Boston: Harvard Business School Press, 2011).