A Step-by-Step Plan to Improve CMO-COO Collaboration

You can’t serve customers if this relationship is dysfunctional.

Source: hbr.org

1. Develop a shared vocabulary and shared metrics.

2. Build a structure for collaboration.

3. Work together on a few customer journeys that matter.

4. See the customer journey all the way through.

5. Use Service Blueprinting!

When Do Regulators Become More Important than Customers?

A question for Uber, Airbnb, Weibo, and others.

Source: hbr.org

When Can Service Benefit from Customer Participation? The Role of Participation Readiness


BeibeiDongBy Beibei Dong

As customers, we are increasingly participating in service production and delivery. We can be collaborating with service providers, for example by designing medical treatment plan with doctors. We are self-serving ourselves by using a grocery self-checkout or assembling IKEA furniture. With the proliferation of self-service technologies, customer participation has become an important tool for firms to improve productivity. In some extreme cases, self-service technologies may be the only available delivery option. As Time magazine suggested in a 2008 article, ending of customer service is one of the ten ideas that are changing the world. At the same time, customer responses toward participation seem less universally favorable than what firms had hoped for. Irritated customers often share tips online how to get connected to a human when forced to use firms’ automated phone systems or vent their frustration on social media. It is evident that before outsourcing services to customers, managers need to understand when customer participation is beneficial and when it is not.

In our recent research, “Effect of Customer Participation on Service Outcomes: the Moderating Role of Participation Readiness” (by Beibei Dong, K. Sivakumar, Kenneth Evans, and Shaoming Zou) forthcoming at Journal of Service Research, we examine how customer participation readiness influences the relationship between Customer Participation and service outcomes. We measure participation readiness along three dimensions:

  1. customer’s perceived ability (“whether I can do it”),
  2. perceived benefits of participation (“whether I get something in return for my participation”), and
  3. role identification (“whether I think it is my role to do it”).

Our findings from two experiments show that the effect of customer participation on service quality and satisfaction is stronger for high-readiness customers, those who scored high across the 3 dimensions, than for low-readiness customers. More specifically, for high-readiness customers, customer participation in general has a positive effect on service outcomes. In contrast, for low-readiness customers, the effect is insignificant and may even turn negative.

For example, when a customer believes she is more capable of setting up the Internet, perceives great benefits of doing it herself, and identifies with this self-serving role; setting up Internet will increase her satisfaction and perceived service quality. However for a customer who is not ready for such tasks, increasing his participation level may backfire and even decrease his satisfaction.

Further, we find the effects of customer participation for low-readiness customers may vary across different service contexts. For complex tasks such as Internet setup that cover a wider range of readiness gaps, increasing customer participation beyond a particular threshold could decrease customer satisfaction. For tasks that are less burdensome such as tour design, the effects for low readiness customers are less extreme. Customer satisfaction increases with participation at lower levels, but after customer participation crosses a threshold, satisfaction levels off. This suggests that even for customers with low readiness, customer participation is not completely undesirable. Customers can accept it or even perceive some of its benefits, but only to a certain level of participation. The bottom line is that customer participation is not uniformly beneficial or harmful. It is considerably influenced by participation readiness.

The diminished effect of customer participation at high participation levels may be manifested as a tapering-off effect for high-readiness customers and a negative effect for low-readiness customers.  Therefore, companies should be cautious when forcing customers to be in high-participation situations as the only service delivery option. Further, the negative effect of customer participation at high levels may not appear in all service contexts. It may depend on the complexity of the service and the distribution of customer readiness in a population. Firms may need to do more fine-grained segmentation analysis to determine the exact impact of customer participation in their respective service contexts. If increasing customer participation is the chosen strategy, firms should be more selective by targeting their service to customers with high readiness. If low-readiness customers must be part of the customer mix, firms should give more attention to increasing these customers’ readiness for customer participation.

_________________

Beibei Dong is an Assistant Professor of Marketing at Lehigh University. She also holds the Thomas J. Campbell ’80 Professorship. She is currently serving on the editorial review board of Journal of Service Research. Her current research focuses on customer cocreation, service failure and recovery, and service quality. Her articles have been published in Journal of Marketing, Journal of the Academy of Marketing Science, Journal of Service Research, and Journal of International Marketing among others. She has received several research grants, including Juran Doctoral Award from the Joseph M. Juran Center for Leadership in Quality at the University of Minnesota. She was an AMA Doctoral Consortium Fellow in 2008.

The article Effect of Customer Participation on Service Outcomes: The Moderating Role of Participation Readiness featured in the post was co-authored by Beibei Dong, K. Sivakumar (Lehigh University), Kenneth Evans (Lamar University), and Shaoming Zou (University of Missouri)It is available ahead of print at Journal of Service Research website. Journal of Service Research is the world’s leading service research journal that features articles by service experts from both academia and business world.

Note: All content within this website is the property of Center for Services Leadership. Any use of materials, except for social media sharing, without the prior written consent of Center for Services Leadership is strictly prohibited.

What is your Customer Experience Strategy? Are you a Vanguard, Transformer or Preserver?

Interview with Phil Klaus, the author of a new book “Measuring Customer Experience: How to Develop and Execute the Most profitable Customer Experience Strategies”. This interview concludes a series of CSL posts about Customer Experience Strategy by Phil Klaus:

Podcast Transcript

This podcast was brought to you by the Center for Services Leadership, a ground-breaking research center in the W. P. Carey School of Business at Arizona State University. The Center for Services Leadership provides leading edge research and education in the science of service.

Darima Fotheringham: Today, I’m talking to Dr. Phil Klaus, Professor of Customer Experience and Marketing Strategy and founder of Dr. Phil Klaus and Associates Consulting. Phil Klaus is a frequent keynote speaker at conferences and seminars. He shares his expertise in customer experience strategy and profitability with companies around the world and his award-winning research has appeared in various academic and managerial journals. He is also the author of a new book, Measuring Customer Experience: How to Develop and Execute the Most Profitable Customer Experience Strategies. Thank you so much for talking with us today and congratulations on the new book. The topic could not be more timely.

Dr. Klaus: Thank you so much, Darima, for your kind introduction and for your kind words about my book. And yes, it is timely indeed because customer experience is commonly seen as the next competitive better ground or the new competitive better ground. Let’s not go into much detail on why that might be or why it mustn’t be the case. The fact is it’s on every company’s CEO and board’s agenda. Customer experience is not just a hot topic, it is one of the key topics in terms of strategy development, execution and to its crucial link into profitability and what my book is trying to accomplish is offer companies an easy step by step approach towards measuring and managing the most profitable customer experience programs. It is not just good enough to have a customer experience program. Allow me to elaborate on this, we interviewed over 300 companies in a longitudinal way worldwide in order to find out what kind of practices are out there. Meaning ‘how do you really manage the customer experience?’ and by looking at all the data and the insights they reveal to us, we found three distinguished practices, three patterns, three strategies, three different approaches you can almost say three different customer experience business models.

Darima Fotheringham: You actually shared some of this insight in your blog post that you wrote for our blog. Are you talking about the preservers, transformers and vanguards?

Dr. Klaus: Exactly Darima. This is what I shared with your readers before.

Darima Fotheringham: So for those who haven’t had a chance to read the blog post could you maybe elaborate little more and go into the differences between the three types of strategies?

Dr. Klaus: Absolutely. And by the way for those who didn’t have the opportunity read it up at the CSL Blog and not just read about what I write about it, there are many of my colleagues who deliver cutting edge research and accessible writers to the CSL Leadership Blog so I really encourage you to read that frequently, passionately, evangelistically if you want to.

Going back to the three main practices preservers, transformers and vanguards who are they and what do they do? Let’s start first by the Preservers. Preservers are people, companies and firms who have a customer experience program. However when we dissect in detail what this customer experience program is, it is nothing more than what was before called the customer service, the voice of the customer, the customer centricity whatever it was before it is simply a rebranding exercise. In the UK we have a beautiful saying about this ‘It’s putting lipstick on a pig’. Even if you put lipstick on a pig it is still a pig. What we are trying to say here: these are companies who talk about customer experience but do not practice customer experience. It is not enough to add one or two questions to your customer satisfaction ranking and rebrand a department that had a different name before in order to embrace customer experience.

The second one are the Transformers. They are in between our preservers and vanguards. According to Porter being caught in the middle might not always be the right strategy. But what differentiates Transformers from Preservers, they not only know and believe in customer experience they put their money where their mouth is. You see their efforts normally around two main things:

Number 1: Try to listen and understand the customer better. Most of their initiatives are pilot studies or different initiatives in a small scale that try to find out what impact customer experience practices can have and these practices are guided normally by ease, making things easier for the customer to deal with and they also acknowledge and try to work on one of the crucial intersections between customer and the company, which is the employee. And we have a corresponding CSL blog about what we call the forgotten asset, the employee, for customer experience therefore for how your customers behave and ultimately how that influences your company’s profitability.

The third ones are the Vanguards. Vanguards are as close to perfect customer experience practice as we envisioned. Why? Everything revolves around the customer. It is not a division inside the company, customer experience is everywhere. It is only present not only in the way your service employees are trained but with which skills you need, how you hire them, how are you remunerate them, how you advance their career, everything revolves around the customer. Not only that they try to measure customer experience and they know clearly to measure customer experience because it is so complex and let’s get one thing straight customer experience is not simple but what we are trying to do is take this complexity out and offer you simple help into actions and results that leads to profitability. These vanguards, when I am always being asked by executives and colleagues what is the difference? Why do they business differently? The one key phrase that I always use is ‘Preservers and Transformers are always looking at the competitors first; Vanguards are purely competing for their customers’. When you listen to the CEOs and to the employees they never even talk about their competitors because they know when you take good care of your customers you will be doing good business.

Darima Fotheringham: And in your experience having worked with many companies across different industries does this typology apply across the industries or is it industry specific?

Dr. Klaus: Ah that is an excellent question because by how should I say, by default everybody will tell you this of course needs to be context specific because the rules of B2B don’t apply to B2C, the roles of a company in services are not the same as somebody in manufacturing, a company in the US has different preferences than in Japan, a company with 50 employees deals differently than one with 5000. The interesting thing we found out in our research these rules do not apply. Meaning it doesn’t matter where you are, how many employees you have, where your focus is or what you are doing the rules are the same. Meaning looking at our Vanguards we found companies with 50 employees with absolute tailor made services and we also found manufacturing companies of ten thousands in the opposite side of the world. It doesn’t really matter, the rules for customer experience apply to all of them and that’s a great message because it’s a message of, forgive me here, a message of hope you know it is not special, there is something that you can all use and all apply the rules apply to all. Why? Because at the end of the day customer experience is the focus, not your service, not your product it is what your customers are using it for and what they are doing with it that’s important.

Darima Fotheringham: Back when talking about Vanguards you mentioned that compared to the other two types not only they have clearly defined CX strategies but they are also good at measuring and tracking the impact of their CX programs and profitability. So can you give some examples of measurements that are used by Vanguards and just elaborate on that a little more?

Dr. Klaus: Oh yeah. Definitely. Because it is one of the key factors that we pick up in my book because measuring ‘Only what gets measured gets managed’. Peter F. Drucker said that a long time ago and these days it is more true than ever. People think about customer experience and what they traditionally measure is either an intention or an outcome. By intention we mean customer satisfaction. Customer satisfaction, measuring customer satisfaction is a very good thing, don’t get me wrong, however to base your customer experience program purely on customer satisfaction does not work for two reasons. A. You don’t know why people are satisfied or aren’t satisfied and secondly just an intention and how you feel in a moment doesn’t mean you act up on it. So the link between satisfaction and true customer behavior which ultimately drives profitability is not there. Measurements that also work in one way or another, most companies will be familiar with the notion of the net promoter score, the only number you need. The net promoter score in itself has lot of flaws and colleagues of mine in their papers clearly show that this is not a number or measurement you should look at and there are others that can do the job just as well. The good thing about NPS is it changes the mindset of an entire company and there it is good to have it as one of the ingredients. The companies who ever does it perfectly are using measurements like our EXQ. What EXQ does, EXQ stands for Customer Experience Quality, it measures what drives customer behavior. Meaning what are you normally after as a company, you are either after an increase in share of category or share of wallets or you want advocacy, people recommending things like measured in the NPS. But what EXQ does it tells you why people do or do not buy, buy more often and not only more often but more often from you versus your competitors and also tell good things about your company. So if you connect behavior by using XQ with the customer experience you have significantly more insight because all of a sudden all your data that you have from your CRM system or others discussing in detail what people are doing, when they are doing it and how they are doing it all of a sudden make sense. Because the most important question in customer experience is ‘Why do people do what they do?’ and these measurements give you the ‘why’ and with the ‘why’ the ‘how’, ‘when’ and ‘what’ the entire insight becomes more and more sophisticated and pushing forward your drive to profitability.

Darima Fotheringham: And so you discussed the customer experience quality measurement in your book in more detail?

Dr. Klaus: Yes. In lengths to be quite honest and we also have a special offer for the readers of our book because what we do for them thanking them for their support is we will do a free analysis of their company to tell them where they are in their customer experience progress. Of course a lot you can imagine why do people, why do my clients contact me? In 9 out of 10 times it is because something is going wrong. There is either dropping customer satisfaction, pressure from competitors, customer …, don’t reach the sales and revenues that you are looking for, make a long story short something is not going the way it should be. And these companies the first thing when they see that Vanguards outperform by far Preservers and Transformers, ask me how can I become a Vanguard? Well it is not that easy. Not everybody can become a Vanguard and there are also companies out there who don’t want to become a customer experience Vanguard. However the more you move towards in becoming a Vanguard the more profitable you will become, that’s the key message. So now tell me do you know any CEO who will say ‘Oh here is an opportunity in increasing our profitability. Ah, I don’t think we are interested in that?’

Darima Fotheringham: Probably not.

Dr. Klaus: And this is what we always encounter, but how to get there is a different way. The easiest way that we found out are the three things that you need to look at, number 1: Change your philosophy. Everything needs to start and finish with the customer. Of course CEOs and Customer experience professionals listening to this podcast will say ‘Oh yes what else is new?’ Well if it would be that easy then everybody would be a Vanguard. Regrettably you need to have processes, measurements and tools that guide you there. Just saying that you are going to do it doesn’t mean it is going to happen. Remember the famous research published at Harvard business that said: 80% of the CEOs say ‘We deliver a great experience but only 8% of their customers agreed with it. This what we call ‘slight’ gap in perception reflects customer experience reality. You think you know your customers but most companies do not know, because cause again they are missing the big question ‘why do people do what they do?’

Darima Fotheringham: So you also discussed the roles of social media in delivering multi-channel customer experience in one of the blog posts that you wrote for us. You mentioned that social media should be a key component of the overall strategy not just a strategy channel. But often times the C-suite is rarely involved in social media, so that obviously creates a challenge. When should the C-suite in your opinion jump on the band wagon and how to convince them it is time to do that?

Dr. Klaus: Great question. First of all I hope they are not just jumping on the band wagon. But you pretty much hit the nail on the head there. C-suite or the executive jump on the band wagon but if you do customer experience management like the Vanguards will do, the first question you will ask ‘will social media enhance the customer experience?’ and if your customers say ‘Yes’ then you should go for it. If it is just what CEOs, according to our research, see as an obsession with tools and toys then it has nothing to do there. It is not good enough to have a Facebook page and count your likes. I don’t see the conversion rate of that in a return for the investment. But social media can do good things and multi-channel is the future. Today’s customers conduct more and more of their transactions and tell people about it ‘online’. Even more and more move towards mobile. I recently had a conversation with Amazon, who told me some countries 80 % of their business is now done on mobile applications. So there you can see the whole mobile thing is coming up and there are two ways you either embrace, it because if your customers are using it using this technology then you need to cater to it because it is a part of their experiences. But what social media is good for and what Vanguards do with it is a little bit different. They use social media as an engagement platform, meaning they have a two-way communication that allows them to listen to their customers and immediately feedback, number one. Secondly by giving an engagement platform you centralize what people think about you, if you do it seriously. But the skills to engage in a social media conversation are not taught to the researchers that you might have employed 10 or 20 years ago. Communication meaning actively engaging with a customer is a different skill than just listening, trying to learn and design a questionnaire and try to collect data. Today’s researcher have to be a listener and a communicator and in order to communicate you need to speak the language of the customer. But what Vanguards, to come back to them, do better than anybody else, they use social media internally. Let me give you an example. I worked with one company which has global instant messaging system. So whenever a customer contacts whomever in the company with a request, requirement or a complaint and this person has not the perfect access or doesn’t have the perfect solution there, all they have to do is type in the instant messenger globally the keywords and the solutions they are looking for and people around the globe will see that and can immediately feedback what could be the perfect solution for this customer. This is smart, efficient use of a customer experience social media strategy. Use it internally and they also use it for internal learning having case studies telling them what happened, exchanging knowledge even resource allocation. Putting teams together in a virtual environment in order to get the best people is possible, but you need to embrace it internally. When C-suite thinks about social media they think about Facebook, Twitter. They never look at what you can do inside the company. Think about your inside branding by giving all your employees an opportunity to freely share their views, showing room for improvement. We always think about innovation from the outside, let’s include and co-create with the customers, how about co-create and co-produce with the people you have in the company. Use this internal engagement, employee engagement, resource allocation. They are great assets out there and employees are so important. Use them, utilize them but then again you have to create the platform for them. And the best platform as of today are the social media channels. So it works both ways. But the clever ones are using opportunities in both directions. Does that make sense?

Darima Fotheringham: Definitely, thank you so much. Now that your book is available, what is your next big project?

Dr. Klaus: What’s the next big project? Future projects are pretty clear. We are looking more and more into how people can convert into from Preservers into Vanguards. How inside the company you can go even farther, into using it. Then we help people right now how to use the famous Big Data in order to enhance the customer experience. I put the emphasis on Big Data because an acquaintance of mine, Harper Reed, who ran the social media campaign for Obama 2012, said to me, there is no Big Data. It’s just data. However, what we can do with the amount of the data we have today is we can answer big questions. And with most of my clients, I can see one big challenge: they have lots and lots of data, but they don’t have the dynamic capability to ask the right questions. Without the right questions, the strategically right questions, like when vanguards ask them, how can we enhance the customer experience for our customers, you won’t have any use for the data. It’s just a big mess of data, but no insight. Data is only relevant, if it gives you insight. In my humble opinion, and in all of our future research and in my upcoming book, the next book that is following up, it’s pretty clear: it’s only interesting if it drives profitability. And the only way to drive profitability is to give customers what they want.

Darima Fotheringham: Thank you so much for talking to us today. We talked about customer experience with Dr. Phil Klaus, Professor of Customer Experience and Marketing Strategy and Founder of Dr. Phil Klaus and Associates Consulting. His new book, Measuring Customer Experience: How to Develop and Execute the Most Profitable Customer Experience Strategies, is available on Amazon and you can also read the blog posts that Dr. Phil Klaus wrote on our blog and we’ll post a link to his book over there as well. Thank you so much for your time.

Dr. Klaus: Thank you so very much, Darima. I really appreciate it and for all of those listening, I really appreciate your time and best of luck with your customer experience journey. No matter where you’re going and where you’re going to be at your stage, if you move to the Vanguard, the world will be a better place.

_______________________

Dtwitterr linkedinPhil Klaus is Professor of Customer Experience and Marketing Strategy and holds multiple visiting professorships around the globe. His multiple award-winning research has appeared in a wide range of academic and managerial journals. Phil is a frequent keynote speaker at public and in-company seminars and conferences around the world. He has an active, international portfolio of Blue-Chip clients, for whom he advises on customer experience strategy and profit enhancement.

See the Experience You Are Giving Customers

By Nancy Stephens

Nancy StephensWhat does it feel like to do business with you?

Customer experience is the new field of competition. In most service industries, all competitors are technically on par. All banks, airlines, universities and other service companies perform the necessary core functions. The quality of the experience they offer is what often drives buyer preference. Thus, it is imperative that managers carefully examine, analyze and understand their services from a customer point of view. A useful tool is service blueprinting.

A service blueprint is a process map that managers draw to visualize each step of the customer’s experience. Unlike most process maps, its primary goal is to:

  • understand the customer experience at each step of the service process, and
  • capture what is needed for the organization to deliver and support this experience.

Everything is linked to and considered from the customer’s point of view. Through this customer-focused lens, it is possible to see things such as:

  • where the customer experiences quality,
  • where the customer experiences difficulty,
  • what parts of the experience may not be necessary, or
  • what things a service provider should add to enhance the experience.

At each customer step, the service blueprint allows you to see the corresponding actions that take place onstage, that customers can see. It also shows actions that are occurring backstage and in support areas, not visible to the customer. Service blueprint maps the entire service and provides a complete view of a service experience.

Service blueprinting is often compared to customer journey mapping. Both methods highlight the touchpoints customers have with an organization. The main difference is that service blueprinting connects each customer touchpoint with the on-stage, back-stage, support and technology actions performed by the service provider to make the touchpoint happen. For example, a service blueprint will show what actions a bank teller, an unseen loan officer and a bank IT specialist have to take for a customer to make an online loan payment.

Service blueprinting can help you answer questions like: Who performs each of the actions that construct the entire service? Are customers overburdened with too many complicated steps? What employee actions have the most impact on delivering positive customer experience? Are any of critical touchpoints are missing or do not take place at the right time?

For example, one training company manager was shocked when she drew a blueprint of her customer’s experience of visiting the company’s website. She had never realized how confusing and complicated the company website was for prospective customers. She explained:

“First, the customer clicks on ‘income tax’ and gets 8 options. She selects ‘advanced courses’ and a list of 37 courses pops up in no obvious order. She backs out and goes back to “income tax’ where she sees the 8 options again. She compares two of them and clicks on the ‘Master Tax’ link, where she can download a 49-page handbook, which is too long to download or read right now. As you can see in the blueprint, it just goes on. The customer must think, if it’s this difficult to get some simple information, what would it be like if I signed up for a course?” 

The manager realized that if she wanted customers to sign up for courses, she had to make the website clearer and easier to navigate.Visiting a training company website service blueprint

Service blueprinting is also effective for analyzing internal services, where customers are company employees. As an example, the manager of a computer-support department learned through a service blueprint that the first interaction with the technician was the most important moment of truth in computer support service. The technician’s ability to immediately resolve the issue and allow the employee to continue working was the key to positive customer experience. “Employees seem to assume that the technician will have the solution right away. This one moment, at the very beginning of the service process, forms a long-lasting impression of our department,” observed the manager. “The blueprint made us realize that we need to have a database with the most common problems and questions so that our technicians can solve problems right away.”Computer Repaire Service Blueprint

Over the years, the Center for Services Leadership has shared service blueprinting techniques with many Fortune 500 companies. It is always great to see how this powerful technique can illuminate the customer’s experience and allow organizations to analyze and improve it. We are convinced that service blueprinting should be in the toolkit of every service manager. If you are interested to learn more about service blueprinting, you can find more information on our website. You can also learn this versatile technique in our online Service Blueprinting course.

Arizona Diamondbacks CEO Creates Fan-Centric Culture

Center for Services Leadership:

If you attended Compete through Service symposium then you had an opportunity to hear excellent presentations by Bruce Temkin and Derrick Hall about Customer Experience. In this post, Bruce Temkin talks about his interview with Arizona Diamondbacks CEO Derrick Hall and highlights some of the main ideas Derrick Hall shared with the symposium attendees.

Originally posted on Customer Experience Matters:

I recently had the opportunity to hear Derrick Hall, CEO of the Arizona Diamondbacks, speak at the Arizona State University, Center for Services Leadership (CSL) Compete Through Service Symposium. Hall was extremely passionate about customer experience. His goal: “Treat our fans, employees, and players better than any team in sports.”

Hall’s perspective as a senior executive was so refreshing that I scheduled a follow-up interview. The call started with some baseball talk (I confessed to being a passionate member of Red Sox Nation) and included a brief interruption by Tony La Russa, the Diamondbacks’ Chief Baseball Officer. Needless to say, I really enjoyed the conversation.

CircleOfSuccessDiamondbacksHall joined the D-backs in May 2005 as Senior Vice President, Communications, was named president in September 2006 and CEO in January 2009. He proudly points to the core operating framework he adopted called the “Circle of Success.” It describes how the Diamondbacks organization needs to focus on five things:

  • Performance (on the field)
  • Community

View original 667 more words

Should We Focus on Service Quality or Emotions? How to Build Customer-Brand Relationships to Increase Marketing Performance

Portrait_B.NyffeneggerBy Bettina Nyffenegger

Managers often have to decide whether their marketing activities should focus on improved services and functional features or on more emotional content to develop strong customer-brand relationships. That was a challenge that the Head of Marketing of a large European Airline was facing at the time we conducted a research project on brand relationship quality (BRQ), a customer-based indicator of the strength and depth of the person-brand relationship. Should emotions or quality-related, more functional aspects have more weight in the brand’s marketing campaign? How do they affect marketing performance (such as customer’s willingness to pay, word-of-mouth (WOM), consideration set, share-of-wallet, and revenue)? These were some of his questions that we tried to answer in our new research published in the Journal of Service Research (JSR).

Based on a large-scale survey among the frequent flyers of the Airline and objective performance data from the frequent flyer program, we show that service BRQ involves two components, “Cold” BRQ and “Hot” BRQ. We also find important and relevant distinction between the two in terms of both antecedents and consequences.

–             “Cold” BRQ is based on object-relevant beliefs resulting in satisfaction and trust. It is characterized by a high confidence in and a positive evaluation of the service brand’s performance (i.e., it is tied to the quality of the service).

–             “Hot” BRQ reflects consumers’ feelings and emotional connection to the brand. Longing for the brand, feelings of emotional closeness to the brand, and the intention to stay with the brand through good times and bad are crucial elements of the hot component.

Our results reveal that investments in both hot and cold BRQ have an economic impact by influencing customer behaviors. Thus, service providers should cultivate both the hot and cold BRQ of their customers, but for different reasons.

If the main objective is to grow revenues from the existing customer base (i.e., “internal” growth via a higher willingness to pay and a reduced consideration set size of existing customers), managers may want to focus on building hot BRQ with their customers. On the other hand, if their main objective is to expand the customer base by acquiring new customers (i.e., “external” growth via more intense WOM activities of existing customers), cold BRQ becomes more important.

More specifically, hot BRQ has been shown to have a stronger impact on customers’ willingness to pay. Thus, instead of lowering prices (e.g., when faced with high competition and heavy price cutting), it may pay off for service providers to focus on the emotional value they provide to customers and to build up hot BRQ. As an example, Starbucks customers are willing to pay a relatively high price for their coffee due to the emotional brand experience and connections.

In addition, hot BRQ is also more important for a reduced consideration of competitive brands. Thus, those service providers who can establish strong emotional ties with their customers achieve a sound protection from competitive threats and new competitors.

Cold BRQ better helps to attract new customers through positive WOM. While emotions may play an important role, for example, in viral marketing activities, customers need to be convinced about the quality and reliability of the service in order to recommend the service brand to others.

In addition, our research examined how such hot and cold consumer-service brand relationships can be developed. Our results suggest that to increase hot BRQ in early stages of consumer-brand relationships, managers should focus on enforcing consumer’s perception of the fit between his/her self and the brand’s personality (self-congruence).  To create an emotional connection between new customers and the brand, managers should adopt a customer perspective in defining service brand personality. This means, for example that the design of the service environment, marketing communications, and behavior of frontline personnel have to create brand personality associations that foster similarity of perceptions with the customers.

In later stages of the relationship, managers should gradually develop the brand’s partner quality (i.e., whether the brand/company treats the customer well, shows interest in, and cares for him/her) in order to increase hot BRQ. Partner quality is also crucial for the build-up of cold BRQ – in early and even more in later stages of a consumer service-brand relationship. This illustrates the important role of a brand’s representatives. Caring and empathetic service experiences they create reduce uncertainty and increase confidence in the quality and reliability of the brand.

_________________

Bettina Nyffenegger is an Assistant Professor of Marketing at the Institute of Marketing and Management at the University of Bern in Switzerland. Her main research fields are branding, relationship marketing, and consumer behavior with articles published in journals such as the Journal of Marketing, Journal of the Academy of Marketing Science, and Journal of Service Research.

The article Service Brand Relationship Quality: Hot or Cold? featured in the post was co-authored by Bettina NyffeneggerHarley KrohmerLucia Malaer (Institute of Marketing and Management, University of Bern, Bern, Switzerland), Wayne D. Hoyer  (McCombs School of Business, The University of Texas at Austin). It is available ahead of print at Journal of Service Research website. Journal of Service Research is the world’s leading service research journal that features articles by service experts from both academia and business world.

Note: All content within this website is the property of Center for Services Leadership. Any use of materials, except for social media sharing, without the prior written consent of Center for Services Leadership is strictly prohibited.