Sunday, September 20, 2009

The American Business Train Wreck (Chapter 1/7)

So, where is all this leading? This discussion about customer service, brand loyalty and brand communities? You probably don't want to know. But read on, Brave of Heart.

By the most recent numbers I can find (a US State Department report published in April 2008), our US economy's make-up is 67.8% services, 19.8% good producing, and 12.4% local/state/federal government. That means that over two-thirds of our economy is in the service sector and the ratio of service-producing jobs as compared to goods-producing jobs is more than 3 to 1. Thus, if you leave government out of the equation, what service-producers contribute to the US economy is more than three times what goods-producers contribute. If anyone still has any doubt about the importance of services to our overall economy, think about these numbers. I am not saying that the production of goods in not important to our economy but, clearly, services are more than three times as important to our financial health as a nation, as defined by gross domestic product (GDP).
Over two-thirds of our economy is in the service sector.

We have been reading for decades that the US is quickly evolving into a service economy, with the strongest areas in real estate, banking, insurance and investment. Other significant areas of growth are wholesale and retail sales, transportation, health care, legal services, scientific and management services, education, arts, entertainment recreation, hotels and other accommodations, restaurants, bars and other food/beverage services. Not a lot of surprises here, right? I am sure the large majority of us work in one of these industries.

Nothing wrong with that, right? Weeellllll, maybe.

At a time when America becomes more reliant on services to provide income to its citizens, it seems that the quality of those services in the minds of the Americans who buy these services deteriorates dramatically. Remember the research cited earlier in this book about how bad customer service has gotten? Well, if those statistics were not enough, I have more.

Dr. Claes Fornell, a professor at the University of Michigan's business school, has developed the American Customer Service Satisfaction Index (ACSI) and this index is based on regular interviews with 16,000 customers of some 200 companies in 33 industries. Everything Dr. Fornell has found suggests that customer service continues to decline in America at an alarming rate. In fact, the overall "grade" of American business' ability to provide good service is now 70.7 out of 100. That is down from 74.5 in 1994. Some specific industries look even worse. Hospitals have dropped from 74 to 67 in that time period. Airlines are down from 72 to 67 in terms of satisfaction with their services. The local phone companies are a bit higher having dropped from 79 to 75. Not exactly something to write home about. (Source: Daniel Pedersen, "Why the Service is Missing form America's Service Economy")

To make matters a bit worse, in the same article Dr. Fornell makes the point that poor customer service gives a false impression of our economy. Even if prices do not rise significantly, the huge decline in customer services suggests that inflation may be much worse than our economists would have us believe. If we are getting less but paying the same thing for it, we do have a problem with the devaluation of our dollar, don't we?

So, picture this. We are moving quickly toward an economy that relies more and more on American business being able to deliver valued services to its customers. At the same time, our delivery of all those services is in a terrible state of decline. This is not a train wreck in the making: the train wreck has already happened and the bodies are strewn all over America. You can blame some of it on the recession we are facing but, the truth is, many of those businesses were sick and dying before the recession even began. It just took this recession to topple already unstable organizations. Most were crumbling at a slow rate because, as the figures suggest, we have a customer service crisis in American business right now. That customer service problem erodes brand loyalty and that is what brought them down, not the recession.

Anybody afraid? I am. For this country, for businesses small and large, for what my family gets (or doesn't get) for the dollars we spend on all those services.
This is not a train wreck in the making: the train wreck has already happened and the bodies are strewn all over America.

It is a sad state of affairs, really. If your business is in trouble right now, do some research about your level of customer service. I will bet you that if that research is truly legitimate, you will see a problem. And if you have a problem with customer service, how strong can your brand be?

In Chapter 2, we will examine what can be done in the aftermath of this train wreck. Because there is a lot that can be done. But we need to get started. You can build a strong brand community around your brand but it takes work. Your customers can help you.

Thanks for reading! More to come.

Sunday, September 6, 2009

What does all this mean for small businesses? (Chapter 1/6)

So, what can small businesses take away from this academic white paper? This was not discussed in Muniz and O'Guinn's work, but my perspective on their research is that each brand has a past, a present and a future.

The past is marked by rituals and traditions that have evolved to be part of the brand but that are celebrated in the present. This "past" comes from the brand's history and the stories about the brand that surface from the brand's past. Thus, brand owners would do well to consider their brand's past and determine what in the brand's history will make the brand more relevant to brand users today who might want to become part of the brand's community. And from this brand history, what specific stories detail the brand's importance to current users? Why would current users care about those stories as they use the brand today? Importantly, today's consumers want to feel a part of something bigger than themselves and part of something that is more important than their current problems and challenges.

The "consciousness of kind" marker can be viewed as the brand's present time perspective. In truth, what consciousness of kind says is "there are some of us here and now that are more alike than others of us (who are here and now)." And from this idea, brand communities develop their legitimacy filters and oppositional brand loyalties. The present is all about 1) "those who are as committed (here and now) as we are" and 2) "what brands threaten our 'here and now' because they oppose the brand (and brand community) to which we are committed."

That brings us to the future, right? And what better way for a brand to have meaning in people's lives than through moral responsibility? No one wants to be associated with a brand that has no moral responsibility for the future. I am not saying that every brand must be associated with a popular cause, but it must be thought of as morally responsible if it is to garner a large number of people who seek a strong association with it.

In their book, Creating Customer Evangelists, Jackie Huba and Ben McConnell discuss the importance of organizations being committed to something larger than themselves. They suggest organizations define some cause that allows them to rise above just pursuing profitability and growth. In essence, the most successful brand communities will grow because they are part of some idea much bigger than even their brand.
Moral responsibility says that the brand cares about the future.

Now this idea may seem a bit scary to the average small business because one must wonder how fragmented a marketing communications budget might be if it is trying to do too much. But Huba and McConnell are not talking about affinity programs that were the rage in the late 1980s and have continued to some extent until now: "Buy some of our product and we will donate money to..." No, that is not what the authors recommend. That is superficial and most customers see right through that one and the brand may end up looking worse than before it initiated the affinity program.

Instead, what organizations must do is figure out what problems facing the world is their organization tackling? What does the organization really want to stand for because no one wants to be part of an organization that is merely trying to make more money for its shareholders. The good news is that our world has lots of problems and every organization can help make the world a better place in its own way. Without evident moral responsibility, how can a brand build a community of loyal users? It can't.

Muniz and O'Guinn found two benefits of moral responsibility: integrating/retaining members and assisting in the use of the brand. Depending on the exact nature of each brand, one can see how brand communities are strengthened when there is a clear role of moral responsibility. No one wants to be associated with a brand that does not care. Moral responsibility says that the brand cares about the future.

So, what is your brand's past and how can you leverage that to build a brand community around it? What are the "here and now" aspects of your brand and its user base? Can these help make your brand less vulnerable to your competition? Finally, what moral responsibility does your brand take for the future? Said another way, what does your brand hope for the future?

Thanks for reading. More to come!