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GM, Howard Johnson Broke Cardinal Rule

Marc Kramer

Pablo Naranjo, who teaches at South America's best business school, Universidad Adolfo Ibanez, and is one of Chile's top marketing experts, was speaking about reasons companies fail. He said failing to listen to clients puts a company at greater risk than a lack of capital does.

To appreciate his assertion, you have to look no further than household names that have failed, or are failing, to understand how important it is to listen to your customers. Here are some examples:

• General Motors: Why is the government bailing out GM (GM Quote), while Toyota (TM Quote), Honda (HMC Quote) and other foreign car companies are successful? Foreign companies heard consumers saying they wanted cars that stretched their dollars and had many places to put their coffee cups.
• Montgomery Ward: Many people forget this titan of retailing, with stores throughout the U.S. and one of the most famous catalogs in the world.
• Commodore Computer: A computer powerhouse in the 1980s that competed against Apple (AAPL Quote) and IBM (IBM Quote), but failed to hear pleas for easy-to-use interfaces and greater memory.
• Howard Johnson: Families used to frequent HoJo's in great numbers. The company had thousands of restaurants that catered to lower- and middle-income customers. When McDonald's (MCD Quote) came on to the scene, this restaurant giant didn't understand the need for "fast and cheap."

How does a company avoid becoming irrelevant? Naranjo has seven recommendations, which include speaking with clients, former clients and individuals/companies that fit a client's company profile.

Survey customers: Hire a third party to survey the company's clients and ask the following questions: What are your biggest concerns? What new products and services do you plan to offer? Are you still targeting the same clients? How is your industry changing? What can our company do for you?

Client competitors: Develop a competitive analysis comparing your clients to their peer group. This will give you insight into what keeps your client up at night. You might find information that will save your client from failure and provide you with insight into new opportunities.

Read industry publications: Read your client's industry publications to find out what is driving its business and industry trends.

User groups: Listen to user groups that are either using your product or service, or competitor offerings. The comments found in user groups are from people who typically are passionate about a product or service.

University research: There are university professors who are conducting research in numerable fields, so they are a good source of information on various industries and how to improve a client's competitive position.

Trade associations: Many trade associations conduct surveys, which provide insights into how buyers think. If a trade association doesn't have a survey, it will usually conduct one for a fee.

Greenfieldonline.com: This is a service that provides pools of individuals that will match practically any client profile. It guarantees a minimum of 500 responses, which is more than sufficient to get a credible amount of data.

How many companies that have a high demand for their products or services go out of business? The only time this happens is maybe right now, when investment capital is hard to come by, but in a normal market, never. Listen to your clients and your chances of failure are next to nil.