Most companies today say they are using voice of the customer (VOC) data to make decisions. But what exactly does that mean? In a 2002 survey by the Confederation of British Industry, with responses from more than 400 companies, the VOC methods mentioned included:

• Surveys, 65 percent
• Ideas meetings, 53 percent
• Service/product testing, 50 percent
• Formal observation, 18 percent

If a company’s goal is to stay ahead of its competition, there are two fatal flaws with this state of affairs:

1. These traditional forms of VOC collection are unreliable even when the purpose is simply to improve what is already offered to customers. Odds of them helping the company push its market boundaries through innovations in products or services are virtually nil.
2. Most companies are not even making good use of these traditional methods. Pushed for details, most managers will describe doing a survey once or twice a year, or say they get customer input only when testing a completely developed prototype. That is far too late in the design process to have a significant impact.

Beyond the Traditional Forms of VOC

There are some hard truths that businesses today are only just starting to grapple with. Most competitors in a particular field have access to the same customers and the same market information. The company that best understands those customers will end up with the biggest business advantage.

Developing this level of understanding demands skills well beyond traditional VOC techniques. Customers usually cannot explain their needs or wishes that would lead to innovative or transformational products and services because:

• They do not know a supplier’s capabilities as well as that supplier does – so it does not occur to them that a supplier may be able to help them solve a problem.
• Customers’ creativity is more likely to be focused on their jobs than on the products or services they use.
• People are better at reacting to specific ideas than coming up with insights on their own.
• When customers are asked if they like a new offering, they may lie. They may not want to hurt anyone’s feelings; or they may just want to avoid an argument.

Simply asking customers what they like or do not like about current products or services will not work. Microsoft fell afoul of this by asking customers to attend a focus group, use their software for a few hours, and answer questions interactively. It went something like this:

Question: Did you like the product?
Answer: Yup!
Question: Any features you do not like or want to add?
Answer: Nope!

Based on these answers, it might appear that Microsoft had a winner right out of the gate. But when Microsoft developers began recording keystrokes and videotaping customers’ experience, they discovered a wide range of negative customer reactions – grimaces, hesitations, etc.

Ethnography: The New Science for Understanding Customers

If simply asking customers what they like will not work, what will? The answer is incorporating close, detailed observation of customer behavior into design work. The epitome of this trend is the emerging field of customer ethnography, where a company finds ways to “live with” selected customers to get an in-depth understanding of their needs and how they use a product or service in real life. Ethnography is a discipline built on the principles of social anthropology, studying people in their native habitat. (Of course, in a business context, that habitat is more likely to be an office, school or home than the jungles of New Guinea.)

At its simplest level, ethnography includes any direct observation of customers with an eye towards identifying things that could make their lives easier. For example, Scott Cook noticed how much time it took his wife to pay the monthly bills and how repetitive it was. This was the birth of his idea for Quicken, the personal finance software, which grew into a billion dollar company. The practice of observing customer behavior has continued, now alive in Intuit’s “Follow Me Home” research program which is designed to gather what is being called ethnographic customer data. Because of that continued emphasis on understanding customers’ lives, Quicken and other Intuit products are consistently rated at the top of easy-to-use software.

The purpose of ethnography is to generate the kind of deep and intuitive understanding of customer needs and frustrations that cannot help but inspire creative insights. A company will select a few customers or potential customers to observe, typically about 10. (While other VOC methods are concerned with information quantity, ethnography focuses on quality.) A team of trained observers is sent to watch the customers. Their goals are to:

• Develop a holistic view of customer needs – look at all the behaviors associated with a particular need, not just a single task, including all the activities that surround a product or service a supplier offers.
• Expose and record “tribal knowledge” – the things that people do automatically, that they do not consciously think about.
• Identify customer frustrations and areas of less-than-optimal efficiency, whether or not it is related to the product or service a supplier offers.

A Case Study in Ethnography

Other than Intuit’s approach, no financial services businesses have made available reports on their use of ethnography, though Bank of America has set up an experimental branch where it can test any number of customer services. But the experience of a retail chain which wanted to improve customer experiences at its stores provides an example that could easily be adapted to banks with branch locations. This case study shows how ethnography complements more traditional forms of VOC.

The retail company team’s goal was to understand how it could redesign its stores to give shoppers a more pleasant experience (one that would correlate into sales, of course). To get started, the team:

• Looked at the current state of store layout and design and asked how that matched up with what the customer “wanted” – as much as they knew at that point, at least.
• Reviewed existing quantitative data. Like most good companies, this retail chain had an abundance of market and consumer segmentation studies, market share studies and business results on hand.

The team used this historical data as a starting point. (Many companies will stop here and not go any further, assuming that this data is true and basing all their decisions on it. In fact, such an assumption is seldom true.) Based on what was learned, the team began working on two different fronts:

1. What Other Companies Were Doing (Benchmarking)

• The team made many trips to competitors’ stores, did subjective evaluations of whether those designs seemed to be working, and looked for design features they could incorporate into their redesign effort.
• Team members traveled far and wide searching for the newest, hottest store design examples and concepts. For example, they found that European retail stores were much more cutting-edge in their fixturing designs.
• The team also looked at designs for other types of stores, hoping to find inspiration.

2. What Customers Wanted (VOC Collection)

• The team recognized that focus groups, surveys and simple interviews would not supply the information it needed. The team went to customers, on their turf, visiting them in their own homes to hear about their issues and concerns.
• The team also conducted “shop-alongs,” going to various retailers with consumers to observe their actions, asking for clarification on why they did what they did and capturing detailed notes on consumer reactions.
• The team turned some staff into “mystery shoppers,” who went to stores to shop for certain things and interact with the sales associates to see how customers are treated and what is offered to them.

Based on the information collected, the team moved into the next design phase – prototyping. Though often used only for new product development, prototyping is critical for all development efforts. This team took its research and ideas and incorporated them into miniature store layouts and designs. For example, to test a completely new design of the music section, they constructed (in open warehouse space) a scaled version of the new fixtures and layout. Then they brought in customers to test out the shopability of the new design. The feedback was immediately implemented into improving the design and establishing a second prototype, which also was tested. The same process was used for each department until the store design was complete.

Conclusion: Getting New Insights

A growing body of case studies shows how ethnography leads to insights that companies simply cannot get any other way. A book about this new discipline, The Art of Innovation by Tom Kelley, profiles IDEO, a firm in Palo Alto, California (USA). The firm has used ethnography to design everything from medical equipment to an office furniture showroom.

One downside of ethnography is that it is time- and labor-intensive. Also, a company needs to guard against designing a product or service based on a just a few customers. The experiences of the few people a business chooses to observe in-depth can be a great source of inspiration and provide the starting point for next-generation products and services. But the more traditional forms of VOC – focus groups, phone interviews, etc. – are still needed to validate findings from an ethnographic study.