While we readily admit that companies must carefully listen to their customers to understand their needs and problems, sometimes companies place too much importance on existing customer feedback. Here are three reasons why companies should not treat current customer comments as the word of God:

1. 100 percent customer satisfaction is an impractical, unprofitable business goal. Our research shows that something less than perfect customer satisfaction is the most profitable. The reason is simple. The average customer satisfaction level for any company is about 82 percent—a B grade. Companies that improve this grade to a 90 or 95 percent blow away their competitors. However, the money and effort required to move from a 95 to 100 percent satisfaction level is often enormous, relative to the benefits. So, the next time your company reviews the results of its customer satisfaction study, carefully assess the input and suggestions.
   
   
2. 100 percent customer retention is not realistic. Not all customers are worth keeping. Clearly companies with higher customer retention rates are more profitable. However, in every industry we've looked at, not every customer is so valuable to the company that he or she should be retained. Some customers are so demanding, require so much service, exact the lowest price, and are so distracting that it may be better for a company to let them go. Rather than making blanket goals of absolute customer retention, companies should do a profitability analysis of its customer base. This will determine the characteristics of customers who are unprofitable—the ones the company shouldn't mind losing—and those it wants to hold on to.
   
   
3. Existing customers may not be representative of the overall market. All too often, especially for business-to-business companies, management assesses new product and marketing concepts with existing customers only, making critical decisions based on their input. The danger is that existing customer samples are often not representative of the overall market opportunities. In other words, decisions are made with limited information. Existing customers might view a new product as no big deal, but a different target group in a different vertical industry segment might think it's very appealing. Basing decisions too on just existing customer feedback is all too common and all too shortsighted

This may seem counter to some of our earlier articles where we urged companies to become totally customer-centric, but it's not. Customer-centrism means the customer—not the product, service, or brand—guides marketing and business decisions. Our point here is that current and prospective customers should guide, not dictate, decisions. Businesses should balance customer needs and interests with what they can do to meet those needs and interests at a profit.

Remember, the customer is human, not holy.

It's no news that the majority of Americans are unhappy with the public education system. But a new Copernicus study shows that a few remain confident in public schools, and they differ in many demographic and attitudinal ways from the majority.

Among a recent sample of American adults, 22% had great confidence in public schools. These adults tend to be less educated, more religious, happier with life, somewhat more self-absorbed, and more homophobic than those lacking confidence in the school system.

We looked at key demographic and attitudinal differences between the majority of adults who do not have great confidence in the U.S. educational system and the smaller minority of those who do.

The confident minority also believes that the government spends enough on education but not enough on health care and that their children's standard of living will be better than theirs, all of which is the opposite of what the more skeptical majority believes.

Those confident in the school system also tend to have lower rates of full time employment (47% vs. 60%) and marriage (42% vs. 52%) than those worried about schools.

On the issue of whether homosexuals should be allowed to teach in public schools, adults with confidence in the educational system said that homosexuals should not be allowed as they are "a potentially dangerous influence on kids," while adults lacking confidence in public schools said they should be able to teach, "as long as they keep their views private in the classroom."

Here are a few of the discriminating traits we found between the two groups:

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In announcing Hewlett-Packard's $25 billion dollar merger with Compaq, Carly Fiorina, H-P's chairwoman and CEO, stated that the Compaq brand would go away. "H-P will be the surviving brand" after the two companies are merged.

This decision has created quite a stir in the marketing and advertising world, but we believe Ms. Fiorina made a smart decision.

Merging companies often use both brand names for a period of time because of the perceived "equity" of the brand in the marketplace. ExxonMobil and AOL Time Warner are two recent examples. However, Compaq's brand has been waning for some time now.

Compaq CEO Mike Capellas has changed the company's strategy three times in the last two years, ane never developed a clear brand positioning. Nor did his predecessor Eckard Pfeiffer. Rather, Compaq's strategy for several years has been to promote lots of good products, matching competitors' pricing and promising technology as good as the likes of IBM and Apple. Offering good products at comparable prices, however, is nothing unique—it has never given buyers a reason to choose Compaq over other computer brands, especially since pc's and servers are largely viewed as commodities.

A recent study by Copernicus and Market Facts, "The Commoditization of Brands and Its Implications for Marketers," found that none of the 51 product and service categories studied are becoming more differentiated over time and 90 percent are declining in differentiation. As a result, buyers are increasingly buying on price. The personal computer category is no exception. Personal computers scored right in the middle of the study, which means that customers don't entirely buy on price alone; the brand name still has some perceived value to the buyer, but not much.

So H-P's decision to focus around the stronger of the two brands is wise. Fiorina says the combined H-P will spend as much on advertising as H-P and Compaq had spent independently, which amounts to approximately $310 million annually. The next critical move will be for H-P to enhance its positioning to gives buyers a clearer reason why they should choose H-P over the competitors. Savvy targeting and positioning is only way to profitably grow H-P, rescuing it from the looming snake pit of an oversupplied and increasingly commoditized category.

Fortune's Rankings of America's Most Admired Computer/Office Equipment Manufacturers

Source: Fortune, "America's Most Admired," February 19, 2001

For more insightful marketing discoveries, visit http://www.copernicusmarketing.com/discover/index.htm

Have a hot discovery for our next release? Contact us at ami.bowen@copernicusmarketing.com

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The Wall Street Journal once said The Economist "should be bound in leather and made required reading." And we couldn't agree more. No other magazine provides the comprehensive international coverage and in-depth analysis (albeit opinionated) of a vast array of issues left untouched by other business and news publications. With no name attached to its articles (other than the occasional guest reporter) readers can't attribute (or blame) an opinion to a political or social philosophy, so they focus more on the issue and the facts at hand.

We enjoy the challenging commentary and highly recommend picking up a copy of The Economist at a news stand near you.

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Even though a company cannot thrive—let alone survive—without customers, the search for business growth for all too many companies stops at the payroll and balance sheet. Relying only on financial analysis to make mission-critical, multi-million dollar decisions moves companies closer to ruin than real growth, as we reveal in our latest white paper.

We illustrate our point drawing from our experiences working with a Fortune 100 business-to-business marketer that bravely ignored the financial analysis that said they should close an ailing business unit, and chose to take an alternative, marketing-driven approach to rebuilding their business, meeting with great success. We conclude with our step-by-step approach to developing a customer-centric strategy. Click here to download the paper or send an e-mail to ami.bowen@copernicusmarketing.com to request a copy.

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