Brands are created by companies, but it’s the end customer who ultimately determines what the brand means to them. So, how do customers come to truly understand a brand and what it stands for?
Service brands are experienced on a personal level, with employees engaging customers during one-to-one social encounters, but many firms fail to include employee-customer interactions in their brand strategies. Because human-delivered services are performances and can vary from employee to employee, firms can find it difficult to create coherent experiences that drive home their brand imagery in a consistent manner from customer to customer.
For several years, I was part of a research team at Arizona State University that explored what brand managers can do to overcome this challenge. Through a series of consumer behavior experiments and a large-scale critical incident study that included dozens of service industries, we tested how customer brand experiences can be made more consistent through the behavior of frontline service employees. That is, we examined how service firms can recruit and train employees to internalize brand imagery in order to authentically bring the brand to life with customers in what we call “branded service encounters.” Continue reading →
This podcast is brought to you by the Center for Services Leadership, a groundbreaking 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: Welcome to the CSL podcast, I’m Darima Fotheringham. Today I’m talking to Dr. Ruth Bolton, Professor of Marketing at the W. P. Carey School of Business at Arizona State University. She is the author of the new book “Service Excellence. Creating Customer Experiences that Build Relationships.” Ruth, thank you so much for joining me today, and congratulations on the new book!
Dr. Ruth Bolton: Thank you. It’s my first book, so I’m very excited.
Darima Fotheringham: It is very exciting! And I really enjoyed reading your book. It covers a lot of ground but it’s not a textbook. It is a very engaging and informative read that you can finish quickly. And it is the type of book that you want to hold on to so that you can go back to it again and again. Can you tell our listeners about what led you to write this book?
Dr. Ruth Bolton: Markets have been changing very rapidly, and I hear from the managers that there are many new opportunities and challenges. However, amidst all this change, managers kept emphasizing the importance of the customer experience. And I was intrigued that this term came from business not from academics. So what was it that managers were seeing that was so important? After thinking about it for some time, I realized that service researchers have a really important perspective to offer on the customer experience. So I decided to write a book about it!
Darima Fotheringham: Great! And it’s very timely. So as you said, customer experience is a really hot topic these days, and in your book, you emphasize a service-centered view of the customer experience. Can you talk about that? Why is this distinction important?
Dr. Ruth Bolton: Well, managers and academics who have been studying services really have a head start and understanding the customer experience. The reason is that, for many years, services research started from the premise that customer experiences are co-created by participants in a network. The participants, of course, are the company, its customers and other partners, such as suppliers. The key idea is that from a co-creation perspective, the goal of each participant is to use the resources and capabilities to support other actors in achieving their goals. So that’s how companies create value for customers.
In a service-centered view, co-creating customer experiences builds profitable relationships. But the emphasis is on innovating, designing and producing experiences that create value for both. So customer participation and engagement become key. Now if you stop and think about it, it explains the emergence of some of the innovative new business models in many industries such as the entertainment industry which is going through tremendous disruption.
Darima Fotheringham: Most companies are fairly up to speed on topics of customer satisfaction, value, loyalty, word-of-mouth, and so forth. I can imagine these are still very important when we talk about the customer experience, but what’s new today?
Dr. Ruth Bolton: Many people are fascinated by the new collaborative services such as Airbnb and Uber. These companies are co-creating with their suppliers, the people who rent out their homes or cars, and with customers, the people who travel. I think that many of us start by thinking that the technology platform, which enables the service, is important. However, the real challenge is how these three partners share information, develop group norms, and work together to achieve their goals. Uber recently recognized the Drivers Association in New York City to facilitate discussions on workplace issues. And if you stop and think about this from a service center perspective, it makes really good business sense.
Darima Fotheringham: Speaking of technology, as you note in your book, technology and new media enable customers and companies to engage in these new ways. Other than Uber, what other interesting and innovative examples can you share about how companies have been able to enhance customer experience using technology?
Dr. Ruth Bolton: I’m especially interested in howB2B companies have leveraged data driven insights to innovate and create value with customers. DuPont Pioneer was able to leverage its expertise in biotech to identify new services that help farmers map and plan how best to replace nitrogen in their fields. It lead to a new service channel and a new market that provides insights and solutions for land management. And the latest I read in the news is that folks are using drones to look at very large properties.
In China, Alibaba Group has built rural service centers in hundreds of Chinese villages so that people can search for products online and place orders as well as sell products through its online marketplaces. With an economic slowdown in China in 2015, the rural service centers are an important opportunity for new growth. So I really find the data driven insights fascinating. And an interesting feature about both these examples is that they improve societal wellbeing as well as creating benefits for customers and profits for firms.
Darima Fotheringham: Which is really great! In the chapter “the Building Blocks of the Customer Experience”, you discuss practical and emotional motives of the customers as they engage and develop relationships with companies. I think companies are usually well aware of the practical motives of their customers, but emotional motives are often much harder to identify. Why is it important that service experience is designed around both practical and emotional motives? And does this mostly apply to B2C companies or does it also matter in the B2B world?
Dr. Ruth Bolton: Oh, emotions matter for business customers too. Businesses are composed of human beings, and human beings experience a variety of emotions such as fun, excitement, boredom, and frustration when they interact with companies. The starting point is that the business customer and its supplier are each pursuing their own goals, which may or may not be aligned. And within the business-customers organization, employees have specific roles and identities and they have their own goals.
There’s some really solid research showing that people interact with the company to achieve their goals, and when they do achieve them, they’re happy and feel in control. When they can’t make progress towards achieving their goals, look out for annoyance or even customer rage. Take a simple example, imagine a courier service is late in delivering an important package. The employee receiving the package can’t carry out his responsibilities and then there are ripple effects throughout the organization. Will we see customer rage? Quite possibly!
The effects of emotions can magnify aspects of the customer experience that might otherwise seem like small details. For example, I’ve been participating in research for the global retailer that’s been studying shopper satisfaction with the customer experience. We’ve discovered that people’s feeling of fun and frustration play a big role, no matter whether they are shopping in the store, online, or using a catalog. It’s crucially important to meet shoppers’ goals, say whether they’re browsing, searching, or buying, so that you can satisfy them. Interestingly, despite the fact that there are so many technology-enabled services, people still feel emotions in computer mediated environments.
Darima Fotheringham: I personally found the chapter “Managing Customer Relationships to Achieve Growth and Profitability” packed with great and useful insights. In that chapter, you give an example of IBM, how it successfully used the portfolio approachto managing their customers. Can you talk about that and share what we can learn from this example and this kind of approach?
Dr. Ruth Bolton: Yes, IBM successfully navigated the dot-com crash through better management of its customer portfolio, whereas Sun Microsystems did not. I’m really proud of our work looking at customer portfolios. This was a joint effort with Crina Tarasi and other colleagues at ASU, and it’s won some important awards.
You may have heard people talk about the customer asset and how customers produce cash flow streams over time. However, our research team identified an important issue that’s often overlooked, namely that customers’ cash flows are variable over time and that exposes the company to risk. Just like a stock portfolio, a customer portfolio should be diversified to minimize risk for a desired rate of return, and we were able to identify a number of strategies to reduce risk while maintaining profits.
One way is to manage the mix of customers, which is what IBM did. The general approach is to balance the market segments that your company serves so that its decreases in cash flows over time from one market segment are offset by increases in cash flows from another market segment, so that the average cash flow of the organization remains stable. This insight gives an entirely new perspective on market segmentation strategies. It’s particularly helpful for B2B companies because often they segment their markets by small, medium and large customers who have very different cash flow patterns.
Another approach is to work to increase customer satisfaction with their experiences. It turns out that satisfaction has a double whammy effect, lower cash flow variability and higher cash flow levels. I know it sounds too good to be true, but it’s backed up by solid research by many academics. And surprisingly loyalty programs may not always be the answer. Some loyalty programs lead to more variable cash flows, but not higher average cash flows. So companies need to think about designing loyalty programs to improve the experience or the intangible benefits, for example, membership recognition for consumers rather than offering economic incentives.
Darima Fotheringham: Very interesting! In conclusion, what one advice can you give companies that strive to achieve service excellence?
Dr. Ruth Bolton: I think you’re right that most companies know all about service quality, customer satisfaction, loyalty, and so forth. So my advice is: look forwards not backwards. What does the customer want for the future? Customers have goals they’re trying to accomplish by partnering with you so it’s crucial that companies understand what customers want next. In other words:
Understand and align with customers goals.
Generate trust that you can deliver experiences that satisfy these goals.
Offer products that are relevant to customers’ future needs not what they wanted yesterday.
For more information on the science of service visit the Center for Services Leadership on the web at wpcarey.asu.edu/csl
Ruth N. Bolton is Professor of Marketing at the W.P. Carey School of Business, Arizona State University. She previously served as 2009-11 Executive Director of the Marketing Science Institute. She studies how organizations can improve business performance over time by creating, maintaining and enhancing relationships with customers. Her recent research has focused on high technology, interactive services sold in global business-to-business markets. She has extensive experience with survey research design, as well as the econometric analysis of large-scale, integrative data bases. Her research is typically conducted in partnership with businesses, such as the Marriott Corporation, Hewlett-Packard and Schneider National Inc.
By Seigyoung Auh, Omar Merlo, and Andreas Eisingerich
In 2012, the global fast food chain McDonald’s launched a website in Canada called “Our Food. Your Questions”. The digital platform allowed consumers to ask the company absolutely anything about its food. As the website increased in popularity and customers asked some very tough questions, the company and its products were not always cast in a positive light. However, McDonald’s was seemingly happy to face both the good and the bad.
Even the toughest critics could vent or probe in the public forum. Immediately after the launch of this initiative, the Internet was awash with claims that McDonald’s had just committed an enormous marketing blunder. Surely shouldn’t a company always strive to present itself positively, minimize public scrutiny and criticism, and carefully filter customer-generated content on its digital platforms? The outcome of the initiative suggests otherwise. The yearly target for questions was exceeded by 400% in only 6 months. The company experienced 10 million interactions online with customer engagement exceeding 4 minutes per visit. Perceptions of the quality of the food, as well as brand attitude measures improved. Most importantly, customers were spending more on the brand, evidenced by an increase of 50% in monthly store visits.
Many companies, however, remain wary of transparency initiatives, as found in our research. This is primarily because the benefits of being transparent are still unclear and poorly documented. We aimed to shed light on this issue. Specifically, we investigated whether transparency has desirable outcomes or if success stories, such as that of McDonald’s, are merely isolated anomalies. The kind of transparency that we studied in our research pertains to activities carried out by businesses to ensure that the information it disseminates about its products and services is comprehensive, objective, accessible, and easily understood by customers. We called this type of transparency performance transparency and developed a transparency scale (a parsimonious 4 item scale) using data from the retailing and banking sectors.
What does being transparent entail?
Organizations may implement transparency through effective website design, analysis of customer data, and testing of customers’ understanding of technical language. They may also strive to provide information that is objective; in other words information, which does not either selectively exaggerate the positives or discount the negatives of a firm’s offering. In this sense, transparency refers to truth, honesty, frankness, and candor.
A growing number of online media facilitate the exchange of information and enable customers to share their reviews on purchase websites, blogs, social networking sites, and online communities. In light of this, providing customers with access to third party information (e.g., reviews by others) is a critical element of performance transparency.
Consider Adidas Boost running shoe, which on its website had customer Twitter feeds and feedback, sharing their experience with the Boost running shoe, giving each other advice, and even pointing out when the running shoes are most effective (dry and cold versus hot and humid). Offering access to reviews by others may also be integrated into a business’s brand community building efforts. Porsche, for example, engaged its GTS drivers community by actively encouraging them to share feedback, information, and the most exhilarating driving routes etc. with one another.
Does transparency pay off?
Our research suggests that transparency has tangible benefits for those organizations that implement it. The benefits mainly arise out of customer-related effects.
First, a company’s transparency efforts tend to act as a signal of goodwill, which can translate into reduced uncertainty and higher customer trust. Customer trust in turn may translate into lower price sensitivity and higher propensity to purchase, and is of course fundamental to the development of valued and lasting relationships. Our research, based on data collected from customers in the airline, hotel, and retail banking industries, confirms a strong link between transparency, reduced price sensitivity, and higher intention to purchase.
Second, when customers are unable to assess a business on a particular dimension (e.g., service quality, reliability, etc.), they may evaluate that dimension less favorably than if the information had been provided to them. For example, in our study we found that customers who read negative customer reviews about a company may feel more assured and confident in their decision-making process and may select that business over one that has no negative feedback. The presence of some negative information tends to make customers feel that the information they have is comprehensive, that any criticisms voiced by other customers has not been filtered, and that their expectations are clear. In other words, when customers see objective information, they tend to feel that they know the whole story and can make an informed decision. In contrast, absence of such information, or overly one-sided information, fails to remove customer uncertainty to the same degree.
Third, contrary to what one might expect, we found that businesses that might be most concerned about being transparent may be the ones that stand to gain the most by signaling efforts in creating quality for their customers. Specifically, we discovered that firms that are viewed as somewhat less capable by consumers benefited even more from being transparent than firms viewed as highly capable. Transparency may thus afford firms with a novel way to differentiate their product offerings and set themselves apart from competition, especially for firms that are perceived to be less competent in delivering high service performance.
Conclusions and Implications
Our research clearly suggests that customers will buy more and spend more when dealing with firms that are transparent. Therefore, companies should consider sharing information with customers that is balanced, objective, easy to access, and easily understood. We would also encourage businesses to rely on their customers as a valuable source of information to aid other potential customers, whether through third-party review sites, open feedback on the company website, or by facilitating customer complaints, etc. Importantly, businesses should not shy away from negative feedback, as it can reduce customer uncertainty and can be a valuable opportunity to establish trust. Managing negative feedback in a public manner can build confidence not only with the customer who voiced the concern, but also potentially with anyone else witnessing how the company handled the situation. Finally, the disclosure of both positive and negative reviews is indicative of a company that cares more about its customers than about its products or services.
Seigyoung Auhis an Associate Professor of Global Marketing at Thunderbird School of Global Management at ASU. Seigyoung’s research interests are in the areas of frontline employee’s customer orientation diversity, fit in climate and its impact on frontline employee attitude and performance, service innovation, service leadership, knowledge sharing/transfer in sales teams, sales team learning and conflict. His work has been published in a number of academic journals including Journal of Retailing, Journal of the Academy of Marketing Science, Journal of Service Research and others. Seigyoung has worked as a marketing scientist before entering academia and has taught in Australia, Canada, and Korea, before joining Thunderbird. Seigyoung has executive education experience with leading global firms such as Samsung Electronics Company and Hyundai Motors. He also served as the co-director for the CEO franchise program in Korea before joining Thunderbird.
Omar Merlo is Assistant Professor in Marketing at Imperial College Business School. He was awarded his Ph.D. in marketing strategy from the University of Melbourne and his research is primarily in strategic marketing, services marketing, and customer relationship management. His research has appeared in numerous leading practitioners and academic journals, such as MIT Sloan Management Review, Journal of Service Research, European Journal of Marketing, Industrial Marketing Management, Journal of Business Research, Marketing Letters, and others. Dr Merlo consults and teaches for numerous organisations around the world both in the private and public sectors.
Andreas B. Eisingerich works as associate professor in marketing at Imperial College Business School, Imperial College London. He has published on customer-brand relationships, customer engagement, and service management in the Journal of Consumer Psychology, Journal of Marketing, Journal of Service Research, Journal of Business Research, Harvard Business Review, California Management Review, and MIT Sloan Management Review, among others, and currently services on the editorial review board of the Journal of Service Research.
The article Service Firm Performance Transparency. How, When, and Why Does It Pay Off?, featured in the post, was co-authored by Yeyi Liu (University of Leeds, UK), Andreas B. Eisingerich (Imperial College London, UK), Seigyoung Auh (Thunderbird at ASU), Omar Merlo (Imperial College London, UK) and Hae Eun Helen Chun (Cornell University). It is available ahead of print at Journal of Service Researchwebsite. 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.
EVERY EMPLOYEE, EVERY MINUTE, EVERY DAY…Making memorable moments for our customers…yeah, right!!!
This idea of ‘culture eating strategy for breakfast’ applies to having a consistent customer experience via a consistency in the culture. Our cultures have cycles of virtue and cycles of vicious. Which cycle are you in?
The Virtuous Cycle of service embraces the above headlines along with the attitude that goes with it. We are personable (meaning we are relationship-oriented) and we acknowledge the person on the other line, or on the end of the e-mail, or through a web event as a real person. We call them by name, we say please and thank you, and we verify that we served them the way they would like to be served and expect to be served. We do this internally and externally, creating positive vibes around the customer experience and it’s a part of our culture.
The Vicious Cycle of service is just the opposite. Exceptional service is completed only by super heroes who know how to skirt the systems with heroics, offering an attitude of service externally while often beating people up internally to do so. This cycle may seem like a “hit” initially, but in the long run it’s a “miss” because it burns people out and the culture diminishes into cynicism, a tender underbelly of company-bashing at the water cooler. Employee engagement is inconsistent and so is the customer experience. Employees are working hard at the transactional elements of their jobs, not the relationship or personal nature of doing business with people, and their attitudes show that.
Most of our businesses are somewhere in between, what I call the VICTUOUS cycle. This cycle embodies the fact that even the best cultures have great people who fail once in awhile. In the Victuous cycle of service we are called out on our bad days and we own it and we fix it. Our customers call us out for our attitudes, and we get the chance to build the relationship by providing service recovery.
Creating and sustaining a customer-centered culture is a day-to-day, minute-by-minute process. While many companies focus on maintaining a Virtuous Cycle, there’s no shame in finding peace in the Victuous Cycle. After all, being perfect is impossible and doesn’t speak to the human side of relationships.
Join Steve Church and me at the Services Leadership Institute on April 1st 2015, as we deliver an hour on customer-centered cultures, leadership, and how we can advance our cultures from wherever they are!
As vice president, Global Customer Engagement, Terry Cain manages the strategic planning and execution of Avnet’s global customer engagement, measurement, and experience. Terry’s career began in the warehouse with Avnet over 25 years ago. Growth in technology enabled Terry’s growth in product management and leadership of one of the regional sales organizations, then in corporate shared services, operational excellence, now customer engagement.
Terry studied psychology at Indiana Central College, earned a Lean Green Belt from ASU, Process Master from Hammer and Co.; Master Instructor for Prosci Change Management; and is co-creator of A Culture of Service Excellence taught at Avnet. He serves as guest faculty at the WP Carey School of Business, Eller and Kellogg Schools of Business and is on the faculty of Argyle Customer Care Forum, NG Customer Experience, Consero Customer Care, CX Fusion, Services Leadership Institute and Field Service USA. His board service includes WP Carey Center for Services Leadership Advisory Board and CPLC Parenting Arizona (prior Chairman for two years). Terry is a member of CXPA, plays golf and music and resides in Tempe, Arizona, with his wife, Rebecca, and has one adult son, Jonathan.
We all have, at one time or another, wondered how something actually works – and then finally given up trying to understand it. The feeling that results is anything but satisfying.
From a customer perspective, this is basically what happens when customers are confronted with a complex yet necessary service: They have to understand it, because otherwise they cannot make a sound decision. However, understanding is hard and oftentimes frustrating. Services which can be described as “complex yet necessary” are so-called professional services, like financial, insurance, or legal services. Most customers lack the specific knowledge necessary to completely understand these services. For example, they may not know how interest rates might develop or how to interpret laws and regulations.
What happens when customers lack knowledge and therefore have trouble trying to evaluate different service offerings? If customers are mentally exhausted during service encounters, they feel unfairly treated, as it should be the service provider’s job to help them understand the service. Therefore, customers will be less satisfied, less willing to return to the service firm in the future, and less likely to recommend the service.
Usually, one would expect that the more complex the service, the more customers feel mentally exhausted. In our research we uncover that this expectation is true for low to moderate levels of service complexity only. However, if service complexity is especially high customers feel less mentally exhausted. This is because at a certain level of complexity the customer decides “This is too much”, gives up trying to understand, and thus saves mental energy. Given that customers are less mentally exhausted at high levels of complexity – can’t we simply raise complexity further to avoid negative implications for customer satisfaction and loyalty?
The answer is “No, we can’t!” Why not? There are two more problems linked to high complexity:
First, even though customers tend to mentally “switch off” to save some of their mental energy when things get too complex, they do not completely avoid mental exhaustion. They still have to take a decision. Thus, although at high complexity mental exhaustion is lower than at moderate complexity, it is still higher than at low levels of complexity. Second, above and beyond the role of mental exhaustion, high complexity per se also leads customers to be less willing to return and recommend.
How can these negative consequences be avoided? One solution is, of course, to reduce service complexity. For example, while most professional services are highly customized, offering more standardized solutions can simplify decision making for the customer. At the same time, highly savvy customers who do not regard the service as complex, can be offered more customized solutions. Educating customers, for instance in customer seminars or with the help of newsletters, can also reduce complexity for the customers.
However, for many services complexity can hardly be reduced. Another solution therefore is to weaken the consequences of high complexity. Our research shows that adapting the presentation to the customer can mitigate the detrimental effects of high complexity. More specifically, you can help your customers to easily understand a service despite its complexity by paying attention to these steps:
Is my customer overtaxed?
In an interaction with a customer, you should be able to determine whether the customer is mentally overtaxed. Look for signs of fatigue and mental exhaustion like yawning, increased blinking, squirming and fidgeting. Also, get some more information about the customer’s knowledge of the service. Savvy customers are usually not as easily overtaxed as novice customers.
How should I approach my customer?
Based on what you know about the customer, you should adapt your selling approach accordingly. That is, if a customer lacks specific knowledge and will easily be overtaxed, you should help him to more easily understand the service. Use simple language instead of technical terms, illustrative language instead of hard facts, and adjectives instead of numbers. Put differently, if a customer has trouble making sense of a complex service, the solution is not to provide more information, but to provide information in a different way. For instance, when selling an investment product, a sketch showing how capital builds up over time is much easier to understand than verbal explanations.
What type of other information does my customer need?
Oftentimes customers also receive other information, like company brochures or information brochures on certain services. As is the case of personal encounters – this type of information should be adapted to the specific type of customer. You should have available at least two types of information brochures – one version in an easily understandable language, using tangible examples and illustrations for novice customers; a second version using more technical terms, numerical examples, and more detailed technical information for expert customers.
To summarize, highly complex services can easily overtax the customer. Since this results in decreased customer satisfaction and loyalty, service providers should adapt their way of providing information to help the customer understand the service more easily.
Anika Kolberg is Postdoctoral Research Fellow at the Sales & Marketing Department, Ruhr-University of Bochum, Germany. She received her PhD in 2014 from the Ruhr-University of Bochum. Her research interests focus on personal selling in service contexts, stereotyping at the employee-customer interface, as well as behavioral pricing. Her work is forthcoming in the Journal of Service Research and the Journal of the Academy of Marketing Science.
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.
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.
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.
Hall 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: