3.2 Estimating the Customer Survey Score

The customer survey score drives demand for your product in a segment. Your demand in any given month is your score divided by the sum of the scores. For example, if your product’s score in April is 20, and your competitors’ scores are 27, 19, 21, and 3, then your product’s April demand is:

20/(20+27+19+21+3) = 22%

Assuming you had enough inventory to meet demand, you would receive 22% of segment sales for April.

What generates the score itself? Marketers speak of “the 4 P’s” – price, product, promotion and place. Price and product are found in the buying criteria. Together they present a price-value relationship. Your promotion budget builds “awareness,” the number of customers who know about your product before shopping. Your sales budget (place) builds “accessibility,” the ease with which customers can work with you after they begin shopping. To the 4 P’s we can add two additional elements– credit terms and availability. Credit terms are expressed by your accounts receivable policy. Availability addresses inventory shortages.

To estimate the customer survey score, begin with the buying criteria available in the Courier’s Segment Analysis reports. For example, suppose the buying criteria are:

• Age, 2 years– importance: 47%
• Price, $20.00-$30.00– importance: 23%
• Ideal Position, performance 5.0 size 15.0– importance: 21%
• MTBF, 14,000-19,000– importance: 9%

A perfect score of 100 requires that the product have an age of 2.0 years, a price of $20.00, positioning at the ideal spot (5.0 and 15.0), and an MTBF of 19,000 hours.

Observe that the segment weighs the criteria at: Age 47%, Price 23%, Positioning 21%, and MTBF 9%. You can convert these percentages into points. Price is worth 23 points. The perfect Round 0 price of $20.00 gets 23 points, but at the opposite end of the price range, a price of $30.00 would get only one point. Therefore, you can use the figures that describe the buying criteria to estimate a base score for a product.

However, the base score can fall because of poor awareness (promotion), accessibility (place), or the credit terms you extend to your customers.

3.2.1 Accounts Receivable

A company’s accounts receivable policy sets the amount of time customers have to pay for their purchases. At 90 days there is no reduction to the base score. At 60 days the score is reduced 0.7%. At 30 days the score is reduced 7%. Offering no credit terms (0 days) reduces the score by 40% (see 4.4.5 Credit Policy).

3.2.2 Awareness

Awareness is built over time by the product’s promotion budget. Promotion budgets are put towards advertising and public relations campaigns.

Suppose your product has not been promoted for many years while a competitor has aggressively promoted its product. Your awareness is 0%, their awareness is 100%. If you and your competitor’s products are otherwise identical, your product’s survey score will be half the score of the competitor’s.

A product with 0% awareness loses half its base score. At 50% awareness, it loses 25% of its base score. At 100% awareness it keeps its entire base score. Mathematically this expresses itself as:

[(1+awareness)/2] * base score

A product with 0% awareness does not have 0% demand. Consider a world where all products had 0% awareness. Customers need products. They would search until they found products that met their criteria. But in this world, suppose a mediocre product had 100% awareness. It would have a significant advantage against similar products. Awareness, then, affects the competitive rivalry. It reduces search costs for customers, and increases costs for vendors.

3.2.3 Accessibility

Accessibility is built over time by the product’s sales budget. Sales budgets are put towards salespeople and distribution systems.

For estimating the impact upon the customer survey score, accessibility works like awareness. However, the processes for building awareness and accessibility are quite different: Awareness is concerned with “before the sale;” accessibility is concerned with “during and after the sale.”

A product with 0% accessibility loses half its base score. At 50% accessibility, it loses 25% of its base score. At 100% accessibility it keeps its entire base score. Mathematically this expresses itself as:

[(1+ accessibility)/2] * base score

Like awareness, 0% accessibility does not imply zero sales. The arguments parallel those presented for awareness. Accessibility affects the competitive rivalry. It reduces acquisition costs for customers, and increases costs for vendors.

See 4.2 Marketing for more information on awareness and accessibility.