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.

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!

More on the Brand Community (Chapter 1/5)

Let's look a bit deeper into Muniz and O'Guinn's brand community concept.

Muniz and O'Guinn identify three markers of brand communities:

* Consciousness of kind

* Rituals and traditions

* Moral responsibility

and give some examples of each as they relate to the three brand researched, Saab, Macintosh, and Ford Bronco.

There are two ideas within the "consciousness of kind" marker, legitimacy and oppositional brand loyalty. With legitimacy, there is a ranking of brand users with some brand users feeling that they may be more "legitimate" than other brand users or that some other brand users may not be using the brand for the right reasons. In the case of both Saab and Bronco, Muniz and O'Guinn found that Saab and Bronco users questioned the motivations of some fellow brand users. The assumption was that current mass popularity of both brands may have caused some of their fellow brand users to choose Saab and Bronco, rather than a belief that Saab was very well-designed/manufactured (and should be owned for a long time to bear this out) vs. other automobile brands. Some Bronco fans felt that other Bronco owners had purchased the brand not based on its off-road heritage/performance, but more because the brand had become popular beyond the off-road enthusiasts. This issue of "legitimacy" was not present in Macintosh users.

Oppositional brand loyalty was present in all three brands studied and simply means that it is not enough for brand loyalists to love their brand, but with that loyalty comes a strong opposition to competitive brands. Examples include Mac users with strong dislike of Microsoft and PCs to such an extent that they feel threatened by the larger market segment. Saab users resent the comparison to Sweden's other car company, Volvo, and note that while Volvo may be as safe a car as Saab, Volvo also makes tractors while Saab also develops airplanes. This idea was reinforced on many Saab fan websites. Bronco fans did not assault any one SUV brand but generally chose to discredit the entire 4x4/SUV brands as a group.

Rituals and traditions were also noted in all three brands studied. The two ways this marker takes shape is in celebrating the history of the brand and telling brand stories. All three brands have colorful histories, with Saab's heritage in airplane design and manufacturing being touted quite a bit. All of the technological innovations of Apple and the fact that Bronco has been an off-road brand experience since 1965 were a part of many fan-created websites.

Interestingly, many brand stories may have gotten started from advertising or other marketing communication but this does not matter to brand loyalists. Not only do members of a brand community continue to tell their favorite brand stories, but the researchers witnessed other enthusiasts listening to stories they had already heard, adding the comments, "I really love that story" or "cool story" at the end of the brand storytelling. One interesting insight from the researchers was a fascination with older brand logos that may have been updated but with a reverence to the historical logo, too, even though it was no longer in use.

Moral responsibility is the third marker and strong brand communities have expectations of the brand and members of the brand community in terms of how they conduct themselves. Saab users told stories of stopping to help other Saab motorists who were in need. Some loyal Mac users actually felt betrayed by former Apple users who had moved to PCs, calling someone "a Mac turncoat." A Saab user referred to another Saab user who had left the fold by buying another brand of automobile as having "betrayed the brotherhood." An important aspect of moral responsibility is the recommendation of dealerships, parts suppliers and good sources for technical information other users might need.

One interesting insight from the researchers was a fascination with older brand logos.

Muniz and O'Guinn conclude their paper with an observation that "brand communities are largely imagined communities" that have become social gatherings around commercial ventures. While many critics of our free market system have argued that business commerce has destroyed much of traditional community, Muniz and O'Guinn observed three positive aspects to brand communities:

* Brand communities represent a form of consumer agency by nature of their ability to make brand users congregate.

* Brand communities offer a valuable way for important information to be exchanged by knowledgeable users.

* Brand communities offer social benefits to members in addition to voice and information.

How strong is your brand community? Do you recognize some of these markers? Add a comment here if you'd like.

Thanks for reading! More to come.

Toward the Brand Community (Chapter 1/4)

The subject of brand communities has been very popular in marketing literature over the last few years. The landmark academic white paper that initiated all this discussion was titled, "Brand Community" and first appeared in the Journal of Consumer Research. Albert Muniz, Jr. and Thomas O'Guinn authored that piece in 2001 and I think it may be one of the most important studies I have read in quite a while. Albert Muniz is assistant professor of marketing at DePaul University and Thomas O'Guinn is professor of advertising, business administration and sociology at University of Illinois. Numerous marketing writers have certainly written about the subject since then, but I thought readers might find it interesting to know more about the subject as it was discussed in that original white paper. I will be writing much more about brand communities in future posts.

Muniz and O'Guinn define a brand community as "a specialized, non-geographically bound community, based on a structured set of social relationships among admirers of a brand." In researching the paper, the authors studied three strong brand communities associated with Jeep, Macintosh computers, and Ford's Bronco SUV.

There are "markers" or essential characteristics of any community and brand communities are no different. They are: "consciousness of kind," rituals/traditions and moral responsibility. These markers must exist in any community, brand community or otherwise.

The most important of these is "consciousness of kind," according to Muniz/O'Guinn, with members feeling a strong connection to others in that particular brand community. Interestingly, the brand relationship is not dyadic (consumer to brand), but triangular (consumer to brand to consumer), forming strong human relationships around the commercial entity.

Rituals and traditions generally revolve around shared brand consumption experiences, according to Muniz/O'Guinn and serve to maintain the culture of the community. One common tradition of a brand community is the celebration of the history of the brand. Another is the sharing of brand stories with others members.

The third characteristic of the brand community is moral responsibility, defined here as "a sense of duty to the community as a whole and to individual members of the community." Moral responsibility achieves two functions for any brand community: integrating/retaining members and ensuring the proper use of the brand.

Another way of looking at these markers is from a time perspective: past, present, future. (This concept is not from the Muniz/O'Guinn paper but my own observation.) "Consciousness of kind" is a present perspective: "I am (here and now) with this group who feels the same way I do about this product or service." The rituals/traditions is obviously a past perspective: "There is a history to this product/service that I relate to and want to be a part of." The third marker, moral responsibility, is all about a future perspective. Responsibility, by definition, is concerned with what you should be doing in the future: "What must I be doing in the days to come if I am to be a responsible member of this community?"

Brand: Past/Present/Future

I will be writing a lot more about brand communities as we go forward. How to recognize or build them, what role the brand organization can play, how marketing can encourage a brand community to form. Most important, however, is to recognize that there is what Muniz and O'Guinn call a "social nature" to brands. And the stronger the particular brand community, the greater the likelihood that the value of the brand will be perceived as strong in its competitive marketplace.

Let me know what brand communities you belong to, why they are important to you and if you can relate to Muniz/O'Guinn's characteristics of brand communities.

Thanks for reading! More to come.

Chapter 1/3

Another study by the CMO (Chief Marketing Officer) Council in 2007-2008 titled, "Losing Loyalty: The Consumer Defection Dilemma," tracked 34 million shoppers and 685 grocery and pharmacy brands at 24,000 retail stores. The news is not good.

In that study, one third of those considered "brand loyal" actually switched to another brand during the study. About half that many again began switching to other brands from time to time, perhaps because of special promotions but, in any event, were no longer completely brand loyal. Combining these two groups, 52% of those thought to be loyal to the brand they were using at the beginning of the study had begun using another brand either exclusively or from time to time.

While this study was among consumer packaged goods brands, we see this trend in virtually every industry. And small business owners may want to think about their own customers as they interpret this secondary research and consider the implications for their own customer base.

Is customer loyalty dead? Not by a long shot. There are still plenty of businesses that have strong customer loyalty.

In fact, Bob Hill recently provided us with PeopleMetric's Annual Customer Engagement Study that named the ten companies that customers are most loyal to. Who are they?

1. Ritz-Carlton

2. Google

3. The Four Seasons

4. Netflix

5. Cartier

6. Armani

7. Newegg.com

8. Wegman's Food Market

9. Coach

10. Costco

Now I have done business with seven of these companies and I can agree that my experiences with them would lay the foundation for loyalty on my part. But that is just one guy talking.

More importantly, Mr. Hill offers some insights into why people are loyal to these organizations/brands. What can small businesses learn from these organizations?

Mr. Hill observed that each of these organizations has something in common with all of the others and that, he maintains, is the crux of the brand loyalty that each of these companies experiences.

First, all ten of these companies treat their employees very well. These companies recognize employee contributions with bonuses and other incentives for those who go above and beyond the norm to demonstrate that they and their companies value customers' business. When employees feel valued, they will most assuredly pass that attitude on to their customers.

How valued do each of your employees feel? Well, that is about how valued some of your customers feel!

Second, when problems arise with either products or service, the companies resolve the issue immediately. There is not time for the customer to even wonder if they will be treated fairly. Or doubt their importance to the organization. Employees in these companies have authority to handle most issues to customers' satisfaction. As part of this, there is a strong "life-time value of the customer" philosophy operating to ensure that little problems do not become big problems for either the company or the customer. In addition, these companies are continually verifying that each encounter with the organization is a positive one for that customer.

How empowered are your employees to handle complex customer problems? If the problem has to go to the owner of the small business to be resolved, it has gone way to far in the customer's opinion.

When your employees feel valued, they will most assuredly pass that attitude on to your customers.

Don't for a second think that just because these organizations are large entities that their job is easier. No, in truth, the larger the organization, the harder it is to garner brand loyalty and customer satisfaction. With the addition of each new employee, any organization increases the risk of a bad customer experience. It is actually much more difficult to achieve the level of customer loyalty these larger companies have attained. Small businesses should find it much, much easier to build customer loyalty. But, do they?

Please post a comment to what you read. Thanks for checking in.

More to come!

Chapter 1/2

Still need convincing?

In the September 2008 issue of Sales & Marketing Management, consultant Scott Hornstein further discussed this issue of American corporations' cataclysmic problem with customer service. Hornstein wanted to see what real, live customers thought about customer service so he sent out a survey to regular folks who deal with a variety of companies and their brands. Hornstein asked:

1. Of your current experiences, does customer service today meet your expectations? Please respond on a scale from 1 to 10 (with 1 being "absolutely not" to 10 being "deliriously yes")?

Average score: 3.7 (almost 20% of the responses were 1s)

2. How would you rate large corporations' commitment to customer service (on the same 1 to 10 scale)?

Average score: 3.0 (40% of the responses were 1s)

3. In general, what are your expectations of your initial customer service interaction? What do you expect will happen (with 1 being "absolutely nothing" and 10 being "thoroughly delighted")?

Average response: 4.6 (Ah, a glimmer of hope, on their part.)

4. How important is customer service to you when you make a decision to purchase from a company (with 1 being "no difference" and 10 being "nothing is more important")?

Average response: 7.8 (over 30% of the responses were 10s)

Now, Hornstein admits that his sample was not random and that some could fault his methodology. But is anyone surprised with the results? You don't doubt the projectable quality of Mr. Hornstein's findings, do you?

Businesses face a terrible crisis right now and it is far more serious than the economic recession in which we find ourselves. There is a huge recession of customer confidence in businesses' ability to meet their service needs.

Do your own research. Not on your company (yet), but on other brands in the marketplace. People are fed up and they will do anything (including constantly switching brands) not to have to take it anymore. What I hope you also take away from this is that whether you sell products or perform a service, we are all in the service business! In fact, many businesses complain that they find themselves selling commodities where price is the sales-determining factor when great customer service could distinguish them to such an extent as to take them out of a commodities market.

One small ray of hope for the small business owner is that customers seem slightly more dissatisfied with how large corporations deliver customer service than they do with businesses in general. Hey, its a start.

There is a huge recession of customer confidence in businesses' ability to meet their service needs.

As a small business owner, you must recognize that the chances are pretty good that your company may not be delivering stellar customer service, either. In fact, it is rather probable that your company is not, if you just play the odds here. But you can find out for sure and that is what we will talk about soon.

Before we do that, be thinking about all that money you spend in advertising that brings customers to your door only to be mistreated by your organization's customer care because the advertising told them one thing and their customer experience told them another. Talk about a disconnect.

Thanks for reading. More to come!

Chapter 1: The Road Less Traveled When Marketing The Small Business

What's Wrong with Business?

Just for a minute, forget you are a small business owner or business person and think about how satisfied or dissatisfied you are with the majority of companies that you do business with.

What are you coming up with? It is not that much to write home about, is it? And that is a problem for every one of those organizations. You just don't like them that much.

Now, some of the people who are reading this right now may be thinking of organizations that are operated by other readers of this same blog. Scary, huh? Someone is really thinking about why organizations like yours just don't make them feel valued.

Hornstein Associates, a marketing firm in Connecticut, conducts a survey each year and rates how companies respond to inquiries to their Customer Service departments. From the response rate by the organizations solicited, the results can give us some idea of how these businesses (and business in general) are responding to stated inquiries by customers who ask a question of them.

At your next cocktail party, solicit stories about bad customer service: everyone has a nightmare.

It works really simply. Hornstein Associates sends an inquiry to the Customer Service departments of some of the largest and most successful organizations in the world: Financial Times' "World's Most Respected Companies" and to Fortune's "Most Admired Companies" with a question about their customer service. The goal is to see whether the organizations will respond within a 24-hour period, the expectation of most consumers when they contact a company's customer service department. The question is "What is your corporate policy regarding the turnaround time for emails addressed to customer service?" A simple question for an organization who makes customer service a true priority, right?

What Hornstein has found since 2002 is a shocking decline is customer service among organizations that most of the world thinks of as great organizations. The percentage of organizations that responded within a 24-hour period in 2002 was 63%. In 2003 it was 59% and in 2004, it plummeted to 37%. 2005 and 2006 rebounded somewhat and leveled at 42% for both years. Then in 2007, the number dropped to 33%. Last year, we hit an all-time low of 31%, just less than half of the response in 2002.

Is anyone surprised? I doubt it. We have become so accustomed to bad customer service that this sort of thing doesn't surprise us at all. In fact, at your next cocktail party, solicit stories about bad customer service: everyone has a nightmare.

So, what's to be done about how our organizations serve our customers? Something had better change, huh?

Thanks for reading. More to come.