From the June 2006 issue of Entrepreneur

Kiddie Rides USAis pretty much what you'd expect--a manufacturer of quarter-fed children's rides that sit in shopping malls and outside grocery stores around the country. That is, it was--until the owner of a children's hair salon called the Denver company in early 2004.

"They were looking for fun, creative chairs for children to sit in while they get their hair cut," says Damon Carson, 34, president of Kiddie Rides. "[The idea] to mount the ride on a hydraulic lift came about because of this [salon owner's] own genius."

That simple idea has led to a three-year deal for Kiddie Rides USA to produce chairs for an entire chain of salons. Now Carson is actively soliciting more customer feedback to help him find new ways to expand his nearly $2 million company.

Reinier Evers, founder of Trendwatching.com, a Netherlands-based trend-tracking agency, has dubbed the trend of seeking direct customer input "customer-made," which includes companies engaging consumers in everything the company does, from product development to marketing.

"Consumers are more demanding than ever, and the mantra of 'marketing is a conversation' has finally become reality thanks to the online world, where everyone--consumers and companies--engages in conversations about what is good, what is bad and what needs to be done," says Evers.

As evidence, he points to bigger companies getting into the customer feedback game. Last year, Boeing launched its World Design Team, an online group of air travel customers and aviation enthusiasts who participate in interactive sessions, message boards and other information-gathering activities to weigh in on their flying preferences, which could affect future aircraft designs. Recently, category giants like Coors Brewing Co. and Dunkin' Donuts have invited customers to share their brand experiences as part of corporate advertising campaigns.

But haven't we heard about these consumer rules of engagement before (think Wendy the Snapple Lady from campaigns in the '90s)? You bet, says Evers, but the customer-made philosophy is moving from an interesting fringe influence to a mega-trend that all companies need to watch.

That's what Brian Smith is doing. Facing fierce competition from direct insurance writers like Geico and State Farm Insurance, Smith, president of Wilmington, Ohio, insurance brokerage Smith-Feike-Minton Insurance, knew he had to connect with customers who might easily be swayed by the 10 percent discount that direct writers could offer.

"We felt it was a good idea to build our image and our name by using current clients--people who [others] would see on the street. That would be the best testimonial anyone could give, rather than using a phony name or an actor," says Smith, 37. He adds that since many insurance companies keep their customer lists close to the vest, lest competitors try to woo them away, using real-life clients gives the brokerage an added measure of credibility--these customers must be confident in Smith-Feike-Minton if they're willing to be featured in the company's ads. So far, response to the ads has been positive.

Management consultant Robert Gordman, author of The Must-Have Customer: 7 Steps to Winning the Customer You Haven't Got, says companies need to start making customer feedback their priority. "One of the great mistakes companies make is doing research with a random group of consumers and getting random feedback," says Gordman. "If you want to know what's important to your specific business, you need to talk to the people who are loyal to your business to understand why they feel the way they do."

Companies that rely on repeat business or referrals can benefit most from a direct customer connection. Gordman says simple activities like creating a customer council that can be tapped for feedback on new products and advertising campaigns can be extremely valuable. Customer feedback can also be captured at online or in-person checkouts, or by contacting key customers and scheduling a few minutes of their time to ask them specific questions. Sometimes offering a discount or other incentive can make them even more eager to talk.

Still, customer feedback does have its limitations, and Gordman counsels businesses to avoid putting all their eggs in the customer-feedback basket. In his book, he advises businesses to look at all their data--sales, demographic trends and overall market conditions--before making significant changes to a program or product.

"If customers tell you they're not interested in the color or they don't like the price, that's important," he says. But if customers tell you to scrap a product entirely, you need to look at all the factors and do more market research to determine whether or not that's a sound business decision.