To Survive and Prosper: Know Your Customers

Keith Peterson spends 60 percent of his time on the road, visiting customers and attending nearly 20 trade shows a year. Is Peterson a high-powered salesperson No, he's the owner and president of a small manufacturing company looking to enhance his company's position and future in the marketplace.

Companies such as Peterson's Humane Manufacturing have found themselves facing tough challenges - foreign competition, pricing and delivery pressures, and a declining market share.

Recently, WMEP assembled a group of CEOs of successful small manufacturing firms to find out how they had repositioned their companies to overcome these challenges and thrive. Each company had this in common - the CEOs learned that they needed to stay close to their customers in order to be successful. This included developing systems to continually learn about customer needs and develop solutions to better meet those needs.

This customer knowledge has helped these companies in many aspects of their business - identifying new product and product enhancement ideas, learning how to more effectively promote products and understanding their true competition.

None of these companies had formal research departments. But they did develop simple, low-cost strategies to turn their companies into customer information gathering organizations. Here is one company's story in using every internal resource to gather and utilize information to meet their customers' needs.

Nothing beats first-hand information

When Peterson bought Humane Manufacturingin 1997, he knew he had to make some big changes. The 90-year old company was known as a steel fabricator of cow stanchions and stalls on dairy farms; the company was also making rubber mats for the dairy industry. By 1998, Peterson had sold off the steel division and bought an additional production facility. With the change in products, he knew he needed to bring in new customers and new work.

To do this, he realized that he needed a lot more information about his customers and the market than he currently had. And he needed to let customers know where the company was going.

Although he wasn't excited about it, Peterson began spending a majority of his time on the road, visiting customers. He has found this to be invaluable. Peterson says, "If you only send the sales staff into the field, all the feedback you get is secondhand." When he goes on visits with his sales staff, he lets them do the selling. Peterson's job is to listen to everything else the customer has to say- what they're doing, how they're doing it, and what their problems are. This vital information benefits every aspect of his company - from new product development to how his customer service staff treats his customers to how his products are delivered.

More business!

Peterson also accompanies his sales people on calls to potential customers. "That's very powerful - you find very few CEOs out in the field, meeting\ customers," Peterson says. "Just the fact that the president of Humane is there, 75-80 percent of the time we'll have an order before we walk out of there- just because the CEO cares about the customer."

Don't stop at customers

And he doesn't stop at customers. Peterson gets information from suppliers, and even from competitors. When he attends trade shows he doesn't stay in the Humane booth; he "works the crowd," talking with other exhibitors as well as customers.In fact, he got one new product idea from a competitor comment at a trade show! He even visits his competitors and they give him information. He comments, "It's amazing what they (your competitors) will tell you if you just ask!"

Peterson now believes that the role of the CEO is to be face-to-face with customers. He spends 60 percent of his time with customers - either selling or just visiting, and believes that this is KEY to Humane's success.

Market intelligence is everyone's responsibility

Four years ago Peterson decided to get everyone in the company involved in gathering customer and market intelligence. He started out simply. He had his employees write down on yellow sheets of paper everything the customers told them. He put up mail bins, labeled "Competitors," "Customers," "Suppliers," and "Other" for sorting the sheets, and told his staff that each one of them had to come up with at least one new piece of information a day.

Now this isn't a new idea. Yet how often do initiatives like this fail because there is no follow through But Peterson was determined to make this idea work. "I told them that we were going to meet for one hour every Friday to review the information we'd gathered, and we were going to sit there for the entire hour even if no one had anything to say," he reports with a grin.

Apparently no one wanted to be the one with nothing to say! And now, two years later, such information gathering is second nature to his employees. "Now," Peterson explains, "every time we talk to a customer, we always take a few extra minutes, asking ‘How's the business Anything else we can do for you Anything new happening Anybody else knocking on your door'"

So what does all this information get you

Peterson has numerous examples of how improved customer knowledge has helped Humane become more successful.

New product and product enhancements ideas

When on site with customers, look at how they use your products and competitors' products, see where there are problems, and use this information to guide product development.

For example, one customer was having trouble laying out the pieces of rubber matting for installation. (Humane mats have an interlocking "puzzle" cut that quickly snaps the mat strips together on the floor.) "The customer said, ‘If you guys would send a diagram with the mats, this thing would be idiot-proof,' and I'm thinking, why didn't we think of this" Peterson recalls. "

So now we put a number on every mat and include a diagram that shows how to put them together." The customer just takes the mats off the palette and snaps them together. Humane also includes diagrams with its special cushion mats, which are custom-sized to order, and marks the mats with instructions. "

It's a service we can provide for our customers, and internally we benefit by removing the possibility for error and the resulting warranty or returned goods claim," Peterson says.

Better positioning for more effective selling

Visiting customers helped Humane understand their true competition. Rather than other mat producers, competition for one product was sand and carpeting - which is what customers were using instead of the mats Humane produces. So now they talk about benefits their mats provide that sand and carpeting do not.

More effective promotion

Humane spends a large amount of money on national advertising. The information gathered from customers is used when developing advertising campaigns, to ensure that Humane's advertising conveys the product benefits as the customer defines them.

Additionally, when visiting a major retail dealer, Peterson learned they weren't able to display the mats on the store shelves. The mats often weigh 100 lbs and make it difficult to display effectively. Instead, they're stored out in the yard behind the store, which reduced the visibility of his products. This visit identified the need to develop point-of-purchase promotional information for store shelves, to effectively sell the product.

Increased sales

Peterson accompanies his dealers to trade shows, spending time in their booths and educating them about Humane's products. "We'll even make the sales pitch for them, so they can observe what we do and say. It's a very good training process, and they really welcome the help."

You can't argue with success

Now, five years later, Humane's sales have more than doubled. They have expanded their existing markets and added two new markets-major zoos, such as the San Diego Zoo and Busch Gardens, and thoroughbred horse farms-and have almost doubled sales to the fitness market. Sales in 2002 are up almost 20 percent over 2001. Of course, tapping into customer knowledge is not the only thing that Humane has done to achieve this success. But it's a beencritical component.

But there's no time...

Everyone is pulled in many directions, with days that can't get any busier. But if you asked Peterson if Humane gets a good return on investment from time spent gathering, analyzing and applying customer knowledge, his answer would be a resounding "Yes!" Truly, you can't afford not to know your customers.

"Ask the questions, believe the answers, accumulate the information, and incorporate it into your planning," Peterson says.

© Copyright 2003 by WMEP.org

WMEP provides technical expertise and hands-on implementation assistance to small and midsize manufacturing firms on advanced manufacturing technologies and business practices includinglean manufacturing, ISO, value chain management, and strategic repositioning services for manufacturers and manufacturing facilities located in Wisconsin.