Hensley

© The Lubrizol Corporation 2006, all rights reserved

Until You Ask the Customer…You’re Just Guessing

Until You Ask the Customer…You’re Just Guessing

Deborah HensleyDeborah HensleyNoveon, Inc.

CDMA – April 19, 2006© The Lubrizol Corporation 2006, all rights reserved


Why should we ask the customer?Mechanics of customer interviewingThe Industry Satisfaction GapExamples of market-driven product developments

Until You Ask the Customer…You’re Just Guessing!

Have you ever wondered how we put a man on the moon before we thought about putting wheels on luggage?

0% 20% 40% 60% 80% 100%

Led to unexpected or surprising info

Led to greater customer satisfaction

Directly impacted products offered to customers

Has been valuable

Yes No

This Program…

Collaboration and Engagement:The Benefits of Customer Interviews

Background: Hewlett-Packard has been a leader in developing and using these customer interview best practices. Over 200 HP practitioners responded to a survey as follows…

Source: Edward McQuarrie, Customer Visits, 1998; HP study was conducted in 1990 by Corporate Marketing Education

96%

90%

88%

76%

Value of Up-Front Definition:Causes of New Product Failures

29%

19%

14%

12%

24%

25%

17%

45%

0% 10% 20% 30% 40% 50%

Inadequate Market Analysis

Product Problems or Defects

Lack of Focused Marketing Effort

Higher Costs than Anticipated

Competitive Strength or Reaction

Poor Timing of Introduction

Technical or Production Problems

All Other Causes

Source: The Conference Board, Adapted by Robert S. Cooper, Winning at New Products, from D. S. Hopkins & E. L. Bailey, “New Product Pressures”

Frequency Factor Was Cited as Reason for Failure

High quality upHigh quality up--front work is critical to understanding customer needs & respondfront work is critical to understanding customer needs & responding to them.ing to them.


New Product RoadmappingBuilding a Better Business Case…

Assess Segment Assess Segment (Multi(Multi--client studies, client studies,

internetinternet……))

Understand SegmentUnderstand Segment(Preliminary interviews, (Preliminary interviews,

industry expertsindustry experts……))

Plan OfferingPlan Offering(New Product (New Product RoadmappingRoadmapping))

Build Business CaseBuild Business Case(Justify heavy spending (Justify heavy spending typical of development)typical of development)

Product Product DevelopDevelop--

mentment

New Product Roadmapping Overview- Combines customer interviews with competitive benchmarking- Forms basis of strong business case for product development- Provides “roadmap” of next 1-3 Noveon product introductions

Customer Interviews- 8-12 Interviews of customers & prospects by 2-man Noveon team- Captures relative importance of top 10 desired properties- Captures current level of dissatisfaction for each property

Competitive Benchmarking- Noveon tests its polymers vs customers’ favorites- Noveon tests the customers’ desired properties- Noveon uses customers’ preferred test procedures


8-Step ProcessNew Product Roadmapping

1. Set scope of product develop. project1. Set scope of product develop. project

2. Develop customer survey2. Develop customer survey1st Team Meeting1st Team Meeting

3. Gather customer data using survey3. Gather customer data using surveyCustomer InterviewsCustomer Interviews

5. Gather competitive data from 5. Gather competitive data from labworklabwork

LabStudies

LabStudies

4. Plan side4. Plan side--byby--side competitive lab studyside competitive lab study2nd Team Meeting

2nd Team Meeting

6. Analyze customer & competitive data6. Analyze customer & competitive data

7. Develop a roadmap for product dev.7. Develop a roadmap for product dev.

8. Create a plan to develop products8. Create a plan to develop products3rd Team Meeting3rd Team Meeting

Customer Interviews

Similarities to a Focus GroupSimilarities to a Focus GroupQuestions prepared prior to sessionPhone call & confirmation note used to set upStrong moderator skills requiredSignificant probing employedModerator does not have primary note-taking responsibilityRigorous post-session debriefing used

Contrasts to a Focus GroupContrasts to a Focus GroupYou often have a prior relationship with participantsParticipants are usually in competition with each otherSmaller groups (typically 8-10 for focus groups)Session conducted at customer’s site No one-way mirrors, audio-taping or video-taping

The Industrial Analogue to the Focus GroupThe Industrial Analogue to the Focus Group……

Who Should Conduct Customer Interviews?

Buy-in by your cross-functional team… Evidence acquired firsthand is much more compellingClarity of purpose… If a sales person leads the effort, it may be confused for a sales callRicher content… Inquiry is more productive with technical experts interacting and probingCustomer willingness… They are often eager to talk to technical experts who speak the same languageBetter accuracy…More than one set of ears to capture the dialogue and interpret the commentary

Provides These

Advantages

TechnicalTechnical--Marketing Marketing TeamTeam

Basic Interviewing Skills

Don't ask customers for solutions Don't talk too much. Probe customer answers.Use visual aids.Paraphrase.Accept criticism gratefully.Don’t be arrogant.Be patient.Avoid peer group pressures.Allow some rambling.

Who Should You Interview?

Visit demanding customers & harsh environments Visit demanding customers & harsh environments that that ““push the envelopepush the envelope””DonDon’’t keep going back to the same t keep going back to the same ““comfortablecomfortable””group of favorite customersgroup of favorite customersThe market leader is not necessarily the The market leader is not necessarily the ““innovatorinnovator””Consider going downstream to talk to your Consider going downstream to talk to your customercustomer’’s customers customerInterview multiple buying influences at each customer Interview multiple buying influences at each customer locationlocation……▪▪ ManagementManagement ▪▪ TechnicalTechnical ▪▪ MarketingMarketing▪▪ ManufacturingManufacturing ▪▪ PurchasingPurchasing ▪▪ Product UsersProduct Users

Five Parts of the Roadmapping Interview

1. Feedback on 10 attributes“How important is this attribute to you?”“How satisfied are you with what you can get today in this attribute?”“What test procedure do you recommend to measure this attribute?”“What test result would make you totally satisfied?”“What test result would you consider to be barely acceptable?”

2. “Did we miss any attributes?”3. More feedback on top 3 attributes

“If we could totally satisfy you in any three, which would you pick?”“What is the primary benefit you would get from this?”“How aggressively should we pursue each of these top three?”

4. “What products should we test against?”5. Anything else we should know before starting?”

These are the most These are the most important questions.important questions.


Product Offering;Market Segment:

Region:

# Property

1Importance(1-10 scale)

2Satisfaction(1-10 scale)

3

Recommended Test Procedure

4Test Result Needed to Make

You "Totally Satisfied"

5"Barely Acceptable" Test

Result1 Dry Film Appearance2 Clarity/Color3 Adhesion4 Wear Resistance5 Recoat & Dry Time6 Fluid Resistance7 COF8 VOC9 Low-Temp Coalescence

10 Gloss/Sheen

Producer

10 = Critical (among a few absolutely essential properties)

5. What test result would you consider to be the "barely acceptable" level?

10 = Totally satisfied (if we were any better on this property, it wouldn't do us any good)

1 = Totally unsatisfied (our performance here is seen as a major deficiency)

Product Tradename & #

5 = Moderately important (most customers look for this property)

2. How satisfied are you with your existing products' performance on this property?

3. What test procedure do you recommend using to measure this property?

7 = Very important (this property is seen as very important by our customers)

4. Using this test, what result would make you "totally satisfied"?

What existing products are you using as a reference?

Thank you for helping us with this survey. We'd like to ask you 5 questions on 10 properties below…

For our lab benchmarking, can you tell us which products come the closest today to meeting your needs?

Any

Oth

ers?

Polymers for CWFsFloor FinishesN. America & Global

1 = Not important at all (does not matter how we do on this property at all)

Comments… What I like and don't like about this product

Noveon New Product Roadmapping Survey--Overview For Customer's Use

1. How important is this property to you?

3 = Not too important (nice property to have, but not too important to customers)

3 = Unsatisfied (our performance here is seen as deficient) 5 = Barely acceptable (barely meeting most customers' expectations) 7 = Good (meeting most customers' expectations)

Attribute Importance vs. Current Satisfaction

SatisfactionSatisfaction

ImportanceImportance

HighHigh

LowLowHighHighLowLow

Important need already Important need already being met (Threshold)being met (Threshold)

Important need not now Important need not now being met (being met (Opportunity!Opportunity!))

Low customer interestLow customer interest

16%

14%

32%

25%

27%

22%

25%

28%

38%

22%

0% 5% 10% 15% 20% 25% 30% 35% 40%

*Importance times Dissatisfaction (100% = Totally Dissatisfied on a Critical Attribute)

Scrub Resistance

Hiding Power

Brushability

Fading Resistance

Stain Resistance

24-Hour Window Stick

Sprayability

Factory Mix Time

Brushmark Leveling

Crayon Removal

Market Satisfaction Gap*Industry Satisfaction Gap*Satisfaction Gap used to measure customer eagerness Satisfaction Gap used to measure customer eagerness for improvement in an attributefor improvement in an attribute

It helps you to pinpoint attributes that are important to It helps you to pinpoint attributes that are important to the customer that are not being satisfiedthe customer that are not being satisfied

Satisfaction Gap = Importance times Satisfaction Gap = Importance times ““DissatisfactionDissatisfaction””SG = (Avg. Importance Rating) x (10 SG = (Avg. Importance Rating) x (10 –– Avg. Satisfaction Rating)Avg. Satisfaction Rating)

Example:Example:Customers rate an attribute as 9 in Importance and 6 in Customers rate an attribute as 9 in Importance and 6 in Satisfaction on averageSatisfaction on average

SG = 9 x (10 SG = 9 x (10 –– 6) = 36%6) = 36%

Ratings > 30% generally indicate high eagernessRatings > 30% generally indicate high eagerness

Measuring the Satisfaction Gap

Current Industry Satisfaction (Most Important on Left)(5 = "Barely Acceptable"; 10 = "Totally Satisfied")

0

5

10

Weathe

ring

Dirt Pic

k-Up

Efflor

esce

nce

Elong

ation

@ Brea

kTin

t Rete

ntion

H2O Abs

orptio

nAlka

li Res

istan

ceTe

nsile

Stres

sEla

stic R

ecov

eryFle

xibilit

y @ -2

0

Satis

fact

ion

with

Cur

rent

Sup

ply

"+1 Sigma"Mean"-1 Sigma"

Importance of Properties to Customers(5 = "Nice-to-Have"; 10 = "Critical" Property)

0

5

10

Weathe

ring

Dirt Pic

k-Up

Efflor

esce

nce

Elong

ation

@ Brea

kTin

t Rete

ntion

H2O Abs

orptio

nAlka

li Res

istan

ceTe

nsile

Stres

sEla

stic R

ecov

eryFle

xibilit

y @ -2

0Impo

rtan

ce o

f Pro

perty

"+1 Sigma"Mean"-1 Sigma"


New Product Roadmapping Output ExampleArchitectural Specialties; Vertical Masonry

Industry Satisfaction Gap (Importance x Dissatisfaction)(100% = Totally Unsatisfied on a "Critical" Property)

22%33%

21% 19%13%

19%12%

20%12% 13%

0%

10%

20%

30%

40%

Weatheri

ngDirt

Pick-Up

Efflores

cence

Elongation @ Brea

kTint R

etentio

nH2O

Absorption

Alkali Resi

stance

Tensile Stre

ssElas

tic Recover

yFlex

ibility @

-20

Satis

fact

ion

Gap

Initial Product Development Target Area

Road Mapping Conclusions

Architectural Specialties:Vertical Masonry

Satisfaction GapDirt Pick-UpWeathering

High Interest in a “Thin Film Coating”Semi-Elastomeric (8 mil DFT)Less elasticity than “true elastomeric”Long-lasting clean, appearanceApplication over higher alkaline materialsCrack bridging performance

Commercial products available in the marketplace

Competitive products

Products from your current product offering and experimental products if you have them

Evaluate the products using the parameters and performance standards revealed in the road mapping

Road Map…then Benchmark

Identify Product Development Objectives

Dirt Pick-Up ResistanceWeathering and Yellowing Resistance

Tint Retention

Efflorescence & Alkali Resistance

Water Resistance

Quick Dry to Prevent Blotching Due to Early Rain

Elongation & Elasticity

Low Film Formation Temperature – 0oC

Binding Power for Fillers & Pigments

Translate Satisfaction Gap to Value Proposition

Noveon Waterborne Carboset®Acrylic and Styrene Acrylic Semi-elastomeric polymers for High Performance Masonry Coatings

Carboset® AE-960 & Carboset® SA-860 offer the complete combination of performance properties:

Clean, long-lasting coatingsConsistent coating appearance and colorApplication flexibilityCrack bridging performanceIn-can stability

Carboset® is a registered trademark of The Lubrizol Corporation

Carboset® AE-960 and Carboset® SA-860Outstanding Dirt Pickup Resistance

Carboset ®SA-860

Carboset ®AE-960

Competitive Polymer

CommercialCoating

Use Satisfaction Gap to Develop Selling Tools

Additional Case Study

Clear Wood Finishes:High performance floor coatings

Surveyed 16 global Surveyed 16 global leadersleadersQueried on 10 propertiesQueried on 10 properties

SatisfactionSatisfactionImportanceImportanceTest ProcedureTest ProcedureDesired test resultsDesired test resultsTop competitorsTop competitors

New Product RoadmappingNew Product Roadmapping

Understanding Customers Emerging NeedsClear Wood Finishes: High performance floor coatings

Higher solids and lower VOC for formulation and polymer usage versatilityLower color development, high gloss capability and better in-can stabilityRapid early hardness development

Industry Satisfaction Gap (Importance x Dissatisfaction)(100% = Totally Unsatisfied on a "Critical" Property)

20% 18%23%

14% 12%22%

8%12% 12%

3%0%

10%

20%

30%

Dry Film

Appearance

Wear Resi

stance

Gloss/Sheen

Adhesion

COF

VOCReco

at & Dry T

imeFluid Resi

stance

Clarity/C

olor

Low-Temp Coale

scence

Satis

fact

ion

Gap

Comparison with Commercial Benchmarks

SANCURE ®OM -945

COMMERCIAL WB OMU - A

COMMERCIAL WB OMU - B

COMMERCIAL CWF - 1

COMMERCIAL CWF - 2

BASED ON COMMERCIAL WB OMUNOVEON WB OMU LEADING COMMERCIAL WB OMU

SANCURE®OM-945

COMMERCIAL WB OMU - A

COMMERCIAL WB OMU - B

COMMERCIAL CWF - 1

COMMERCIAL CWF - 2

BASED ON COMMERCIAL WB OMUNOVEON WB OMU LEADING COMMERCIAL WB OMU

250ExcellentYellow/AmberExcellent(No change in visc.)

31Commercial WB OMU - A

<130ExcellentNo change, Milky White

Excellent(No change in visc.)

45Sancure® OM-945

200PoorLight Yellow/AmberPoor, Visc. Increase33

VOCg/L

Early Hardness Development

Solution Color after 4 wk. in 120°F

Oven

120°F Stability

Solids, wt. %WB OMU Polymers

250ExcellentYellow/AmberExcellent(No change in visc.)

31

<130ExcellentNo change, Milky White

Excellent(No change in visc.)

45Sancure® OM-945

200PoorLight Yellow/AmberPoor, Visc. Increase33

VOCg/L

Early Hardness Development

Solution Color after 4 wk. in 120°F

Oven

120°F Stability

Solids, wt. %WB OMU Polymers

Commercial WB OMU - B

Road Map…then Benchmark

Sancure® is a registered trademark of The Lubrizol Corporation

Translate Satisfaction Gap into Value Proposition

Outstanding durability in a waterborne one-component Ideal for both DIY and Contractor marketsHigher solids ds excellent pigment compatibility –suitable for line-marking paints and specialty enamelLower VOC’s and reduced worker exposureExcellent in-can color stability and non-yellowing

Sancure® OM-945Waterborne Oil-Modified Urethane Dispersion

Sancure® OM-933 Waterborne Oil-Modified Urethane Dispersion

Traditional solids levelQuick drying, early mar and water resistance


Benefits & Expected Results New Product Roadmapping

BenefitsBenefits- Promotes “outside-In” thinking over internal thinking- Quickly focuses team on product development objectives- Avoids project scope creep & second-guessing- Engages customers & prospects at 3 points:

• Initial survey• Feedback on industry survey results• Prototype offering based on customer input

- Builds customer confidence

Expected ResultsExpected Results- Faster time to market- Reduced development costs- Higher hit rate- Faster shelving of unattractive projects

Hensley

Business

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