Customers view responsive brands as caring and trustworthy. They return again and again to the brands that truly meet their needs – especially when their needs are met before they even need them.

Customer experience expert Phil Terry, CEO of Creative Good, preaches this daily. In his new book, Customers Included, he and co-author Mark Hurst offer a comprehensive guide for senior executives on building a better customer experience and strategy – with numerous case studies on what to do (or not to do), and how to create change in any organization that wants to serve the customer better. You can read the introduction and first chapter here.

We asked Phil to share some wisdom around understanding the customer better – and why it’s the most important challenge a company faces.

What happens when companies ignore their customers?

Companies fail – or at least fail to create great services and products.

 What would you say to executives who insist that “Customers don’t know what they want?” How can companies effectively discover customers’ unmet needs – things the customer may not yet even know they want?

Agreed. Now what?

Customers often don’t know what they want – or can’t articulate what’s most important. The job of the company is to figure out a way to understand what customers want even though customers don’t often know themselves.

So what should be done?

customers includedFirst, almost every business should stop running focus groups and surveys (Net Promoter Survey being the exception). As we explain in our book, these methods are notoriously unreliable and vulnerable to manipulation.

Instead, senior executives need to get out from behind their desks and observe real customers.

In addition to getting out in the field, how can companies scalably understand how real people engage with a product? What’s the next best thing?

Getting out into the field should always be a priority.

In addition, however, we do recommend that companies employ the Net Promoter Survey. We have run it hundreds of thousands of times and it’s about the only survey that we like.

Further, I’m a longtime fan of good data analysis. Data, however, only gives you the “what.” To innovate well you need the “why.” That’s why smart companies combine good data with qualitative field research.

I’d also add, of course, that customer reviews and social media of various kinds are also powerful listening and two-way engagement posts.

But, scalable methods of all kinds must always be supplemented by the simple but powerful method of getting out and observing real customers in action. Many times the key insights come from that activity – and it has secondary benefits which I’ll explain below.

Some argue that listening to customers creates stagnancy and complacency in organizations, halting “disruptive” innovation. How do you respond?

I say they are wrong.

Except that they are also right. They are wrong that getting the right insights from the right customers halts innovation. They are right, however, that many times companies use bad research methods and thus bad insights from the wrong people. We go into a detailed Walmart case study in our book where they took bad research (and bad assumptions) and lost billions of dollars in revenue as a result. In this case, listening to customers didn’t halt innovation – rather, it was not really listening well.

The line of thinking – that customers halt innovation – also almost killed Netflix in 2011. This is another detailed case study in our book.

Netflix plunged ahead with a strategy of raising prices and splitting the company between streaming and DVDs that ignored the customer, and it suffered the painful result. They lost 800,00 customers and their stock dropped from around $298 to $54 a year later. So much for innovation without including the customer.

The best and most disruptive innovations have come from an insight into customers – and their unmet needs and pain points. The iPhone is the best recent example of that but there are many.

Final note on Netflix. Reed Hastings, Netflix CEO, could have skipped the whole 2011 fiasco had he included customers.  Instead, he attempted to introduce disruptive innovation without regard for customers: A mistake, he said later, that stemmed from “arrogance based upon past success.”

How can champions of customer involvement gain buy-in throughout their organizations?

Here’s where I’ll explain the secondary benefit of good field research that I mentioned above.

The way to get buy-in is to get the CEO and key decision makers out to observe their own customers. When I started in the customer experience field in the early 1990s, I considered this question to be the most important and least discussed – i.e. how do you actually create the context for customer-inclusive change to happen? I observed in my time at Moody’s Investors Service as well as at Internet startup PlanetAll and later at McKinsey that changing hearts and minds was the most difficult yet most important thing to figure out.

When Mark and I started working together building Creative Good, I discovered that good enthnographic research not only generates the powerful insights that can shape strategy and innovation but it addresses this question too. How? I can say briefly here that if an executive wants to create real change, then first she has to confront the fact that most people don’t want to change. We humans have built-in “confirmation bias” – which means we see what we already believe and ignore everything else.

So how do you change people’s minds? You don’t – you provide the context where they change their own mind.

The most powerful context for that in business is to put senior executives in front of their customers. As long as you are running good observational research (not focus groups, etc.), then the painful and powerful experience of watching your ordinary customers attempt to interact and use your products and services will disabuse you of your commitment to sacred cows and misguided assumptions.

This topic is one of my most popular conference talks. When I talk about this on stage I go into the psychology and walk through several case studies from our 400+ projects. In the book and in my talks, my aim is to help executives understand how to get the insights to develop new strategies and how to change hearts and minds so that they have the political support to actually execute on those new strategies.