The Problem Detection Study (PDS) method.

After a long period of cost savings, more and more companies are now focusing on increasing sales and market shares. To manage this change, better knowledge of the market is needed and new information upon which decisions can be made.
Traditional statistics and information which is just ‘nice to know’ is seldom sufficient.

Look beyond customer satisfaction
Satisfaction studies are probably the most common research performed today. Companies want to measure ‘How important are different issues’ and ‘How do we perform in our company?’ when it comes to product quality, deliveries, sales force, service etc. The details vary but basically all customer satisfaction research follows this pattern.

There is no doubt that this type of research produces interesting information. However, at the same time many admit that the satisfaction scoring does not say very much. At least not the first year. What does it mean that the company gets 3.69 on a scale one to five? Graphs can show changes over time but they basically don’t give any real support for decision-making, budget allocation or marketing. We don’t know if an increase to 3.92 the following year means that we can ‘lean back’ or if we need to increase our efforts. More important, it does not tell us what actions should be taken to improve performance or do better business.

Also, we don’t know how the demands of the market change over time. One year a certain satisfaction score can be excellent, the following year the customer demands may have increased making the similar score insufficient.

Look at the restaurant at the Copenhagen Airport after having improved their wine list according to the results of a customer research, the score of the wine list dropped the year after. The customers quickly went accustomed to the improvement and increased expectations. The lesson learned is that the improvements sometimes trigger demand for more.

Customers are not always logical
Competitor comparisons are an important part in most customer surveys. Areas where the company comes out short in comparison often lead to some sort of action. Many times this is a good procedure, but not always.

Customers are not always logical. In some cases they have learned to accept a low service level or they just don’t care. In those cases a company will hardly see any market success by improving these weaknesses. On the other hand we often see how the customers wish improvements in areas where the company already is doing well.

A world leading tooling manufacturer received top grades for its product catalogue in several international customer surveys. Nevertheless, our analysis showed that developing their already outstanding catalogue even more would be one of their best options. The customers seemed to say: ‘Why stop now? You can make it even better!’

According to our experience, customers want companies to improve in areas they are the best, just as often as they want them to strengthen their weak links.

The problem with unnoticeable changes
Another drawback with traditional customer satisfaction studies is that scores seldom change from one year to the next. It usually takes huge improvements or large mistakes to get statistical significant differences. One reason is that the variables you measure often are too wide or too abstract. If a company is service minded in handling a complaint but slow when it comes to refunding, it is not entirely clear how a respondent should score the overall performance. Usually they choose the middle alternative, hiding the true story.

Furthermore, there is a conservative tendency in every grade setting. A top student gets top grades even in times when he is not doing so well, whereas a weaker student has to prove his ability for a long time before the improvement shows in their grades. It’s the same with companies.

Our research revealed, years after a national railway company had removed the plastic foils wrapped around their sandwiches in their restaurants, that travelers still complained about this issue. Customers have a long memory and companies sometimes have to live with past mistakes forever.

The employees at a retail chain with almost 1000 stores received extensive training in customer service. In spite of this, the annual customer survey disclosed small or no differences from one year to another. After having run this study for 3 years they discontinued the research due to insufficient operational value.

Some of our clients even argue that high satisfaction values in research only prove that their customers get too good service in comparison to what they pay.

Early warning is valuable
Don’t think that we are completely against satisfaction studies. They have an important function when it comes to warning management when something is about to go wrong, or to confirm if the company is on the right track.

An international computer company measures changes in customer loyalty quarterly for all their subsidiaries to avoid what they experienced in Japan earlier. For years this subsidiary had built up a negative goodwill among their customers, and as a result the company almost was demolished when a competitor made an aggressive launch.

The weekly customer surveys that most tour operators run on a regular basis instantly point out if the cleaning of a hotel changes or if a tour guide has a bad week.

Studies that give you an early warning can be very valuable. However, don’t assume they will help you improving the company or finding new opportunities.

Finding value added features to your product
After years of moderation, many companies now find a need to raise prices but the willingness to accept price increases is still very low. The remedy to avoid being punished by decreasing market shares is finding ways to add value to your products and services - to give customers something more than the base products.

A world leading metal tool producer identified several critical customer issues. In our research we found that there were almost no problems with or around the products as such. Instead the high ranked problem concerned assembling and changing worn-out products. The wrong dimension or wrong adjustments could cause big losses in down-time. An ambitious consulting and training program for customers turned out to become a great success. The program created loyalty and a new income source. Above all, the acceptance for a premium price strategy on their basic products increased.

Informing about how good your products are is seldom enough for market success. You need to introduce something new, something that makes your offer stand out. This is often referred to as differentiation. Apart from low price or in some cases exquisite design, problem solving is the absolutely best option when it comes to long-term differentiation. This can be either changing the physical features of the products or the things that go with the products. (This often is referred to as hard differentiation.) The other option is ‘loading’ the products with distinctive services such as engineering assistance, technical consultation, training, financing, maintenance etc. (soft differentiation.). Most often you need both.

This is where our market research method comes in. It has the ability to find problem solving solutions that give customers added value.

Our method is called Problem Detection Study (PDS)
The PDS-method was originally developed in the U.S. as a reaction against traditional market research. Traditional methods produce extensive reports with detailed statistics but they seldom identify new business ideas or new ways to improve the customer relations and the ambitious reports often end up unread in the bookshelf. A PDS on the contrary will give you insights that can make your company prosper.

During 25 years Thams & Nyås Management AB in Stockholm, Sweden (+ Hong Kong, London and Atlanta, USA), has produced more than 1000 PDS projects and has gained a world leading position in this area. Nobody has run as many studies and nobody has a more profound experience. Studies have been performed in Europe, Australia, Brazil, India, Japan, the U.S. and China – where some of the most brilliant success stories come from, by the way. The list of references is extensive. Most clients are repeat buyers. Companies who normally have a relatively negative attitude towards consultants have been regular PDS clients, e.g. ASSA ABLOY, ABB, Electrolux, H & M, IKEA, Sandvik, Siemens and Securitas.

Easier to complain than to improve
Traditional research basically asks the buyer what they want or need. The presumption is that they will tell you something you don’t already know. They won’t. Because customers are not creative. They can’t tell you how to gain market shares or how to develop next generation concepts. What they can do is tell you their problems. This is what we do in a PDS study.

In traditional research respondents often use tactical answers. What they say and do in real life is often completely different. They often think more of the consequences of their answers than express what they really think. If you ask them what they want, they usually respond by saying lower prices and faster deliveries. In a PDS on the other hand customers are asked to describe their problems and wishes. This leads to honest answers and truthful reflections of their real needs and behavior.

Is Problem Detection a negative approach? Well, the respondents seldom think so. They recognize real life situations and appreciate the honest approach. They understand that the research wants to identify their problems and find the best possible way to solve them – for the benefits of everyone.

In every problem there is an opportunity hiding. But before you can make use of this you have to know exactly where the problems are.

Running a PDS is easy
1. A PDS starts with a qualitative phase, where 25-30 client customers and 10-15 key personnel within the own organization are interviewed in-depth.
2. Based on the interviews, a questionnaire with over 100 problem statements and 40 situation analyses and segmentation questions is produced.
3. The PDS-questionnaire is sent out by post, e-mail or is directly distributed to all or a selected sample of the customers, lost customers and potential customers. The respondents are asked to evaluate how big each problem is to them on a 0-3 scale.
4. Selected key personnel within the own organization are also asked to answer the questions in the questionnaire (the same way they think the customers will answer). These answers are then compared with the market view in a gap-analysis.
5. The result is presented in ranking lists where all problems and opportunities are placed in market priority for each segment. The 50 highest ranked problems are clustered into opportunity areas and are matched with the questions in the situation analyses. Low ranked problems indicate areas where money can be saved.
6. The PDS results are then processed in one or more work-shops with key personnel within the own organization.

These six steps are a short summary of a detailed proposal of 30 points and 10 pages that we usually submit.

The customers formulate the questions
In most other studies, the consultants listens to the client before designing the questionnaire. Often, readymade questions from previous studies are used. In a PDS, the customers are probed to talk about the company, the competitors and the business area as a whole. In this way the respondents are the main designers of the framework of the study – not the client company, the consultants or experts alone.

This leads to a study without constraints and limitations and increases the opportunity to find new relevant business ideas.
In addition, we know from past experience that our client’s management teams seldom know their customers´ needs in detail. On average they can only pinpoint a few of the most important problems of the market. No executive group has been able to point out more than 5 of the 10 highest ranked problems. And we have run this gap-analyses exercise in more than 500 companies. Furthermore; our experience tells us that the higher management level in a company, the less correct answers. The prediction for a CEO to give a correct answer is 3 out of 10, at the most. We have also experienced situations with zero correct answer.

All parts of the business will be covered
Involving customers early in the research process, through pilot interviews, allows the market to define the format of the research. This ensures the quality of the study and makes the research more comprehensive. If a company alone produces the research brief, there is a big risk that the research scope will be too narrow and too focused on products and basic offerings.

In traditional research studies, the client defines what the research should cover. In a PDS the customers themselves will tell you what they want the research to include.
By including all aspects of the business, the research can measure quality issues against new service offerings and display the market priorities.

Concrete, detailed questions induce activity
The language in traditional research studies is often abstract and low substance.

Vague words like information, service, deliveries, salesmen, brochures etc. often create interpretation problems for the respondent, as well as for the analyst, who has to decide on the implications. Good service at the reception of a hotel can mean many things e.g. no waiting at check out, swift room allocation or a friendly attitude.

In a PDS, the questions are formulated in a very detailed, nitty and gritty manner often using the exact words as they were expressed in the in-depth interviews. The PDS focuses on the spoken, day to day language rather than abstract marketing and business expressions.

This makes the PDS questionnaires simpler and more understandable for the respondent. The interpretation of the results will be clearer and the actions taken will easily gain approval in the organization. The concrete and detailed formulation in a PDS automatically leads to activity and a positive attitude to implement changes.

Focus on the most important
A PDS ranks all the problems in the market from the biggest to the smallest in a clear and unquestionable way. This enables the business to switch from a ‘What is the problem?’ - discussion to ‘What are we going to do and how are we going to do it?’ This is a much more productive approach than the activities which a CEO once named The ‘NATO’ syndrome (No Action Talk Only) and which is a consequence in many traditional research studies. Top management will now have a clear view on how to reallocate resources from activities that solve low ranked problems to activities that solve high ranked issues. This will result in the market rewarding you for your efforts.

A major bank ran an ambitious improvement program. When our PDS had identified the customers´ needs, it was evident that 80 percent of the already launched projects referred to low ranked priorities. No improvement was bad in itself. The only weakness was that there were other things that the customers desired more.

Serves its purpose in the whole world
The PDS is perfectly adapted for research studies in several markets at the same time. The extra cost for adding a new country in addition to the first one is small. In-depth interviews are often performed per telephone and questionnaires sent out in company envelopes, including a letter from the company CEO. This usually gives a higher response rate compared to the research institute sending out their own envelopes.

A PDS that includes several countries gives a good overview of which issues are more suitable for head office initiatives and which are better solved by local action.