Why Customer Participation Matters

These days, many businesses are focused on increasing customers’ positive word of mouth. But emphasizing customer participation may be a more important vehicle for generating valuable repeat business.

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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.



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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).

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