Why consumer research matters to suppliers

Automotive Design & Production, August, 2005 by John Cleveland

In April's column we looked at the multiple voices within the OEM customer that suppliers have to consider as they build their "voice of the industrial customer" strategy. Here we'll take a deeper look at the kinds of systems suppliers need in order to listen to the voice of the "real" customer--the end consumer that buys the car that your components go into.

Automotive suppliers make two common strategic mistakes when planning for the "voice of the customer." First, when it comes to their OEM or Tier 1 customers, they focus too much on purchasing and not enough on all the other audiences. Second, most build no direct relationships with, or knowledge of, the end consumers who buy their products. Consumer research not only helps you design better products, but it also provides bargaining power with your value chain customers because your case on product changes and pricing are far more compelling when backed up by research.

What we're suggesting is that all suppliers need to become involved in some way in consumer research. The level of the research, however, is dependent on the place of the supplier within the value chain. That is, all Tier 1 suppliers who have "gray box" or "black box" design responsibility should have a robust system for end consumer research in each of their key component areas. Unfortunately, an amazingly small percentage of these product-oriented auto suppliers do their own consumer research with product users. This is particularly true of highly diversified suppliers that are in many different product categories. They lack the strategic focus and research resources to build long-term knowledge systems around the needs and expectations of end consumers. An end-consumer product development strategy naturally favors a business strategy of product and component specialization and focus. End consumer research tends to have an "increasing returns" element to it--the more you know and the longer you do it, the more benefit you get from it, and the harder it is for competitors to duplicate your knowledge base.

But end consumer research is not only for the large Tier 1 systems integrators. Component and process-oriented suppliers should also track consumer preferences, even if they don't do direct consumer research. Take the example of a mid-range stamping company in the $100-$200-million sales range that specializes in seat frame structures. They might not be doing the direct research with end consumers (although we would argue that this wouldn't at all be an inappropriate strategy), but they should be asking their customers what they know about shifting consumer preferences in end products (e.g., seating) and what the emerging product implications are for them. They should know what a robust end-consumer research program looks like, and if their customers are not doing this research, that should concern them.

The voice of the end consumer must be built into every stage of the product innovation process. It cannot just be "tacked on" at the prototyping stage. Building systems for consumer research takes time; discipline; new competencies and new partners. Most importantly, it requires the development of a structured "knowledge management system" within the company. Some of the key elements of this system include:

* A disciplined product innovation process. First and foremost, end consumer input requires an organized and disciplined process for product innovation (see: http://www.autofieldguide.com/columns/1204insight.html; http://www.autofieldguide.com/columns/0105insight.html). There needs to be a disciplined stage-gate process that addresses end consumer issues at each stage of product development.

* Product and feature focus. End consumer knowledge is best leveraged when the company has gone through the strategic process of focusing its product portfolio.

* Systems for consumer segmenting and profiling. The company needs a process and frameworks for segmenting its end consumer base and building detailed profiles of the different segments. The profile data can include a combination of factors, including demographics, psychographics, vehicle uses, attitudes toward technology, etc. This is the part of consumer research where it is very useful to have an outside partner with expertise in consumer profiling and research. (Companies like J.D. Power have built strong niches in this area.) Research firms have both well-developed frameworks for understanding consumer segments (for instance, typical characteristics by generation), as well as long-term databases that track changes over time, often by specific components or type of technology. For any but the largest companies, it does not make sense to try and duplicate this expertise.

* Competitor benchmarking, from a customer perspective. Most companies have some kind of competitive intelligence function (although again, it is surprising how weak this is in even very large companies), but the problem is that the competitive benchmarking is done from the company's perspective, not the end consumer's perspective. Consumer-focused competitive benchmarking requires means for tracking and measuring the qualitative (and often quirky) comparisons that we consumers make among product features.