Category Archives: Service Branding and Selling

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Motivating Sales Reps for Innovation Selling in Different Cultures

The commercialization of innovations is the lifeblood for most organizations. However, bringing new products successfully to market can be a complex and difficult challenge, especially if your company operates in a business-to-business (B2B) environment. The sales force is often the dominant sales channel, and it can be a potential bottleneck in the route to market of innovations. That is why it is especially important for B2B firms to direct and guide their sales forces for successful innovation selling.

This task can prove quite difficult, especially since many sales reps have a low initial motivation for innovation selling. This is mainly due to three major reasons:

  • First, new products are often complex and difficult to understand. Therefore, salespeople need to invest a considerable amount of time in order to fully grasp the new products and their additional benefit for the customer.
  • Second, sales reps are often uncertain about the functionality and reliability of new products: Will the new features and technologies work out as promised? In fact, salespeople represent the “first line of customers” for new products, often equipped with profound skepticism towards novel solutions.
  • Third, many salespeople fear jeopardizing good client relationships with new products. They do not want to be held responsible for the latest gadget’s “teething problems” or even serious functional flaws and put their client base at risk.

In our recent article “Motivating Sales Reps for Innovation Selling in Different Cultures” in the Journal of Marketing, we report results on how firms can enhance reps’ innovation commercialization in a broad international context. Specifically, to examine this issue, we collected data from 406 sales reps from an international B2B supplier. These salespeople represent 38 countries on four continents. Consequently, this investigation delivers one of the most far-reaching international studies in sales research.

The study’s results demonstrate that firms should employ specific steering instruments in order to motivate their sales reps for innovation selling. Most importantly however, we find that these sales force steering instruments should closely correspond with reps’ cultural imprint in terms of Hofstede’s four dimensions: power distance, individualism, uncertainty avoidance, and long-term orientation (you may want to take a glimpse at https://geert-hofstede.com/ for more detailed information on Hofstede’s research on cultures).

For instance, we find that the total effect on financial innovation performance surges by more than 350% when firms apply variable compensation for innovation-sales results in highly individualistic (vs. less individualistic) cultures. Moreover, we demonstrate that innovation performance may increases by more than 300% when supervisor appreciation for innovation-sales results is applied in cultures with high power distance (vs. low power distance). Strikingly, we find that the average variation of all steering instruments’ effects across high versus low values for each cultural dimension is greater than 100%. These large percentage numbers illustrate the huge leverage of intercultural sales force steering regarding innovation commercialization.

In the following table we display an overview of our main findings. You might want to challenge your own company’s steering approach: Do your steering instruments actually match with the cultural environment they are applied in?

cultural_environmnet_steering_instrumentsTo enhance your firms’ innovation commercialization through intercultural sales force steering, we recommend three specific actions. Implementing these recommendations may help your company to exploit these large potentials:

  1. Adapt your sales force steering approaches to cultural environments

Many companies around the globe today harmonize their sales force steering in the course of globalization as, for example, when implementing one-size-fits-all approaches derived from corporate strategy. However, this study’s results lead us to warn you against overly meshing sales force steering across countries. Instead, we recommend looking carefully at the markets and cultures you operate in and focus on the most effective steering instruments per cultural context. In doing so, you will be able to most efficiently and effectively motivate your sales reps for innovation selling and see a strong performance. For instance, think about flexible steering approaches and heterogeneous incentive plans that have globally standardized elements but also allow for adaptation to cultural peculiarities.

  1. Develop a more comprehensive approach to sales force steering

Does the following sound familiar to you? Your firm has many autonomous units that are involved in sales force steering challenges. For instance, there is the compensation division that takes care of financial incentive plans, while the benefits division is responsible for non-monetary incentives. Then, there is global HR that schedules on-the-job trainings and finally the sales supervisors, who make use of on-the-job instruments to motivate their salespeople. However, in contrast to this fragmented common practice, we strongly recommend orchestrating these different sales force steering approaches to systematically align and make use of the entire range of steering instruments. We briefly outline in the figure below how such an integrated intercultural sales force steering approach could look like.

sales_force_steering_mix

  1. Segment your sales force according to their cultural imprint to customize your sales force steering approach

Finally, we recommend segmenting sales reps according to their cultural imprint in order to specifically tailor sales force steering instruments to enhance innovation commercialization. Specifically, you might classify the sales force in terms of power distance, individualism, uncertainty avoidance, and long-term orientation. To motivate innovation selling by sales reps from cultures with high power distance (e.g., Brazil, China, India), we recommend to focus on steering measures that involve close interaction with the direct supervisor, such as supervisor appreciation for innovation-sales results. In contrast, for sales reps from individualistic cultures (e.g., Netherlands, United Kingdom, United States), we recommend a focus on steering measures that reward or foster individual attainments, such as education for innovation selling or variable compensation for innovation-sales results. For sales reps from cultures with high long-term orientation (e.g., Slovakia, South Korea, Taiwan) as well as for sales reps from uncertainty-avoidant cultures (e.g., Belgium, Portugal, Romania), we advise focusing on supervisor appreciation for innovation-sales results.

For more detailed information and in-depth discussion of our study please refer to the original article published in the Journal of Marketing: http://dx.doi.org/10.1509/jm.14.0398

Sebastian Hohenberg and Christian Homburg (2016) Motivating Sales Reps for Innovation Selling in Different Cultures. Journal of Marketing: March 2016, Vol. 80, No. 2, pp. 101-120.

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picture_chomburgChristian Homburg is Director of the Institute for Market-Oriented Management (IMU) at the University of Mannheim (Germany). His special subjects are sales management, customer relationship management, and market-oriented management. Dr. Homburg has published numerous books and articles at the national as well as the international level. Today, he is member of the editorial boards of 6 scientific journals in the United States and Germany. Furthermore, since April 2011, he operates as the first German area editor for the Journal of Marketing. Prior to his academic career, Dr. Homburg was director of marketing, controlling and strategic planning in an industrial company that operates globally. In addition to his academic position, he is chairman of the scientific advisory committee of Homburg & Partner, an international management consultancy.

picture_shohenbergSebastian Hohenberg is Assistant Professor at the Marketing Department of the University of Mannheim (Germany). He also works as a freelance consultant at Homburg & Partner, an international consultancy agency. During his research and consultancy projects, Dr. Hohenberg focuses on topics in the areas of sales management and innovation management.

Bringing Brands to Life

This post was originally published in 2014.

By Nancy J. Sirianni

Sirianni_NancyBrands 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

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How to Create Brand Advocates and Avoid Brand Terrorists

Customers interact with your firm in more ways than ever before. You recognize that each of these encounters is an opportunity to influence the customer, so you spend time and resources tracking, journey mapping, and capturing their every touchpoint. Yet determining which of these events will pass unnoticed and which will dramatically impact your relationship with that customer is challenging. How can a single encounter turn a once beloved customer into a brand terrorist? What sort of event transforms a low value customer into a brand advocate? Through a series of studies spanning multiple industries (banking, hospitality, B2B/manufacturing), our research team examined more than 5,000 encounters with customers to identify what made some events forgettable and others really critical, or what we call transformational relationship events (TREs).

What we found was that people form two distinct types of expectations regarding any encounter, product and relational. This distinction turns out to be vital, because breaking a relational expectation has a vastly different impact on the customer than breaking a product expectation. Product expectations are what you are probably focusing on right now (e.g. service satisfaction, product quality). They are what the customer expects to get from you in exchange for what they give (money, time) – the core aspects of your exchange. However, people are naturally inclined to form relational expectations in any social encounter (i.e. an interaction with your firm). These expectations are less focused on the transaction and are framed more in terms like friendship, trust, interpersonal sharing, and solidarity. Breaking these relational expectations triggers intense social emotions (betrayal, gratitude) that cause customers to redefine the entire relationship and change its future course. Compared to feeling disappointed (as when your service is simply slow), betrayal sparks a much more visceral reaction (and desire for retaliation, distance, etc.); on the positive side, gratitude is similarly more intense than general satisfaction.

We also found, and what makes this more challenging, is that relational expectations evolve as the customer repeatedly interacts with you. Early on, a customer’s relational expectations range from very negative to very positive because they are uncertain of your intentions. With each positive encounter, they learn more about you, their relational expectations increase and become more narrowly defined. This had two relevant repercussions on the customers we studied. First, customers who were early in their relationship development were more likely to experience dramatic positive change in response to a generous act from the firm versus customers for whom the relationship was more fully developed. Second, although we observed that strong relationships insulated the firm from bad customer responses to product failures, in the face of a relational failure, these same strong relationships amplified the effects (highlighting a potential risk to strong relationships). Thus, large violations (either positive or negative) of relational rather than product expectations sparked dramatic change in the customer’s relationship with the firm, B2B and B2C. Knowing this can help you improve your relationship marketing strategies.

  1. Find the ideal window for transforming customers.

A typical loyalty program will provide its best rewards to the most “loyal” customers. However, we find that this might not be money well spent. Instead, our research suggests that generous acts are significantly more impactful early in the customer’s relationship when their expectations are still pliable. This window of opportunity suggests that customers have an onboarding stage where your interactions with them can evoke more gratitude and more thoughts about their role in the relationship (relational sensemaking), dramatically impacting the future trajectory of their relationship with you.

However, we offer a word of caution. In our research, events that were considered “too good to be true” prompted suspicion. Thus, it is key to calibrate relationship marketing initiatives to identify the ideal window in which they exceed the customer’s expectations, but do not go so far as to trigger undesired responses. Further, while research identifies “pleasant surprise” as a desirable outcome of relationship-building efforts, our research suggests that the type of surprise (e.g., product versus relational) is critical to the longevity of its effects. Thus, first impressions can have a lasting impact—so going out of your way on that first encounter or sending a heartfelt thank you early on can be worth the investment.

  1. Change the way you segment your customers.

Like most firms, you are probably segmenting your customers on static descriptors such as demographics, psychographics or firm size. However, TREs produce customers with unique emotional and psychological connections to you who will likely respond to marketing initiatives differently than customers whose relationships evolved incrementally.

By collecting customer feedback over time (even using current satisfaction metrics), you can identify these highly active customers based on the degree of change in their ratings. Marketing strategies that depend on customer implementation (e.g., referral programs, pass-along coupons, user-generated content) may be effectively targeted at customers with dramatic positive changes in their ratings (indicating a recent positive TRE). For flatter trajectories, customers’ potential value could be assessed to identify candidates for a spontaneous experiential reward that could induce a positive TRE. Steep negative trajectories could be a sign of a recent negative TRE that requires careful action to mitigate damage and potential brand terrorism.

  1. Run a new kind of customer health check-up.

You are probably running product and service quality checks regularly with your customer, which are great sources of insight. However, our research suggests that you must also understand how the customer views you from a relationship standpoint. In our study, we offer a metric for capturing these relational expectations that can compliment current metrics used in customer health checkups. The key to these measures is to ensure alignment between the way you view your relationship with a customer and the way they view their relationship with you; misalignments can be the root of negative TREs.

The research paper Transformational Relational Events featured in the post was co-authored by  Colleen M. Harmeling, Florida State University, Robert W. Palmatier, University of Washington, Mark B. Houston, Texas A&M University, Mark J. Arnold, St. Louis University, Stephen A. Samaha, California State University Northridge. It is available on the Journal of Marketing website.

How Valuable Are the Net Promoter Score and Other Customer Feedback Metrics?

customermetric_bigBy Evert de Haan and Peter Verhoef

A large and growing amount of firms rely on Customer Feedback Metrics (CFMs) to monitor the customer base and the performance of the marketing department. Examples of these metrics include Customer Satisfaction (CS) and the Net Promoter Score (NPS). Recently, new customer feedback metrics, such as the Customer Effort Score (CES), are gaining traction with a promise to outperform the existing CFMs.

While the positive relationship between customer satisfaction and firm performance, including revenue and profitability, is well documented in academic literature, most findings are mixed for the NPS. In regards to the new Customer Feedback Metrics, such as the Customer Effort Score, third party empirical proof is relatively nonexistent, keeping managers in the dark about the reliability of these metrics. Despite the lack of academic literature and empirical proof, many firms rely on a single metric, specifically the NPS, as their key performance indicator.

Our research team aimed to shed more light on popular Customer Feedback Metrics by investigating the following issues:

  1.  The extent in which different Customer Feedback Metrics are appropriate to monitor the customer base, and
  2. The effectiveness of using multiple metrics as opposed to using one single metric.

The research performed by our team proved that the NPS is as good as Customer Satisfaction in predicting customer retention. We also found labeling customers as Promoters, Passives, and Detractors works well for many firms. The NPS, combined with information regarding Customer Satisfaction, further improves the ability to monitor the customer base. Using multiple Customer Feedback Metrics is therefore highly recommended.

Table 1. Customer Feedback Metrics (CFM)

CFM Measurement
CS (Customer Satisfaction) “All in all, how satisfied or unsatisfied are you with [company X]?” (1 = very unsatisfied, 7 = very satisfied).
Top-2-Box CS The proportion of customers of the firm that gave a score of 6 or 7 on the CS question.
Official NPS (Net Promoter Score) “How likely is it that you would recommend [company X] to a friend or colleague?” (0 = very unlikely, 10 = very likely). Respondents who gave a score of 0–6 are “detractors,” those who gave a 7 or 8 are “passives,” and those who gave a 9 or 10 are “promoters.” Subtracting the proportion of promoters by the proportion of detractors provides the Official NPS.
NPS (Net Promoter Score) This is the average untransformed NPS score (0–10 range) provided by the customer.
CES (Customer Effort Score)  “How much effort did you personally have to put forth to handle your request?” (1 = very low effort, 5 = very high effort).

In our research, we surveyed an extended group of customers from 98 firms across 19 different industries. In this survey we measured three different Customer Feedback Metrics, including Customer Satisfaction, the NPS and the Customer Effort Score. Information regarding these three different Customer Feedback Metrics can be found in the above table.

For Customer Satisfaction and the NPS, we used the untransformed scores as well as two popular transformations. The first transformation, the Top-2-Box CS, indicates the proportion of customers providing one of the two highest scores on Customer Satisfaction at a firm level. In other words, the Top-2-Box CS is the proportion of customers who are (very) satisfied. The second transformation is the official transformation for the NPS; grouping customers into Promoters, Passives, and Detractors. Further detail regarding NPS can also be found in the table above.

Two years after the initial survey measuring the Customer Feedback Metrics, we asked the same customers if they were still customers at the surveyed firm. This allowed us to test how accurately different Customer Feedback Metrics can predict actual behavior of customers. Given the historical strong, positive correlation to overall firm performance and firm value, our team looked at customer retention.

The graph below shows the strength of the relationship between the different Customer Feedback Metrics and customer retention, while controlling for firm- and industry heterogeneity, customer demographics and relationship length. Our research found that all Customer Feedback Metrics are significant in predicting customer retention, since all Customer Feedback Metrics perform better than having no Customer Feedback Metric information (i.e. the bar most to the left in the graph).

Transforming Customer Satisfaction and the NPS do significantly improve the predictions. This is indicated by the higher bars of these two Customer Feedback Metrics compared to their untransformed counterparts. The difference between the Top-2-Box CS and the Official NPS is not significant, so these two Customer Feedback Metrics work equally well in predicting customer retention. When looking at the three bars on the right you can see that combing the Top-2-Box CS with one of the other Customer Feedback Metrics leads to even better predictions. The combination of Top-2-Box CS and the Official NPS leads to the best predictions.

Predictive Strength of Customer Feedback Metrics

Predictive Strength of Customer Feedback Metrics

The Customer Effort Score, although statistically significant, is the least predictive Customer Feedback Metric compared to the other predictive measures. This finding contradicts the promises made by the developers of the Customer Effort Score who stated that it would outperform both Customer Satisfaction and NPS. Although this may be the case in some conditions, on a broader level this Customer Feedback Metric performs quite poorly. Therefore, we highly recommend firms and managers not rush to adopt Customer Effort Score, especially as a single metric, until it has been objectively shown that it is a good indicator of future customer behavior and/or firm performance. Customer Effort Score, as an indicator of future customer behavior and/or firm performance, can be proven by independent (scientific) research, or tested by the firm.

In conclusion, we recommend firms to continue using the NPS to track customers and performance, but also include the Top-2-Box CS in the dashboard of metrics. This dashboard enhancement will enable firms to better monitor and predict customer behavior and firm performance. Furthermore, we recommend firms to not only measure these Customer Feedback Metrics, but also link these metrics to customer behavior and firm performance. Doing so will result in a better understanding of the consequences of changes in the Customer Feedback Metrics, and help to make a more educated decision about which Customer Feedback Metrics to include, or exclude, in the dashboard. This approach can better enable firms to financially quantify the impact of marketing initiatives, which ultimately can help improve the position of marketing departments within firms.

The article The Predictive Ability of Different Customer Feedback Metrics for Retention featured in the post was co-authored by Evert de Haan (University of Groningen, The Netherlands), Peter Verhoef (University of Groningen, The Netherlands), and Thorsten Wiesel (Westfälische Wilhelms-Universität Münster, Germany). It is published in the International Journal of Research in Marketing, Volume 32, Issue 2, Pages 195-206.

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foto evert_smallEvert de Haan is a PhD candidate at the Department of Marketing of the University of Groningen, The Netherlands. In September 2015 he will start as a Junior Professor in Marketing at the Department of Marketing of the Goethe University in Frankfurt, Germany. His research interests concern customer feedback metrics, marketing accountability, the effectiveness of (on- and offline) advertising, the customer’s online journey and the role of mobile devices play in this. He has published in the International Journal of Research in Marketing.

Peter VerhoefPeter C. Verhoef is Professor of Marketing at the Department of Marketing, Faculty of Economics and Business, University of Groningen, The Netherlands. He also holds a visiting position as professor at BI Oslo Norwegian Business School. He obtained his Ph.D. in 2001 at the School of Economics, Erasmus University Rotterdam, The Netherlands. His research interests concern customer management, customer loyalty, multi-channel issues, category management, and buying behavior of organic products. He has extensively published on these topics. His publications have appeared in journals, such as Journal of Marketing, Journal of Marketing Research, Marketing Science, International Journal of Research in Marketing, Harvard Business Review, Marketing Letters, Journal of Consumer Psychology, Journal of the Academy of Marketing Science, and Journal of Retailing. His work has been awarded with the Donald R. Lehmann award for the best dissertation based article in the Journal of Marketing and Journal of Marketing Research in 2003, the Harald M. Maynard Award for the best paper published inJournal of Marketing, and the Sheth Award for long-term impact of the Journal of Marketing in 2013. He is currently an editorial board member of the Journal of Marketing, Journal of Marketing Research, Marketing Science,  Journal of Retailing, Journal of Service Research, Journal of Interactive Marketing, and the International Commerce Review. He functions as an area editor forJournal of Marketing Research and he International Journal of Research in Marketing. He has extensive teaching experience for undergraduate, graduate and Ph.D. students. He is also involved in executive teaching on customer management and is the founder of the Customer Insights Center, University of Groningen. He is department chair of the marketing department.

Many People Holding a Red Welcome Back in the Sky

What You Need to Know About Customer Win-Back

By V. Kumar, Yashoda Bhagwat, and Xi Zhang   

It’s a hypercompetitive market and you are doing everything you can to retain your customers, yet you know that no matter what you do, you will still lose some customers to competitors. The competition to acquire new customers is fierce. How do you maintain your customer base? Our research team at Georgia State University looked at a large national telecommunications firm and found that it can be profitable to go after lost customers and win back their business. While it may seem counter-intuitive to spend time and money on customers who chose to leave, the reality is that you can’t retain every customer and acquiring brand new customers is expensive. Luckily, the game is not over when you lose a customer and you can revitalize your relationship. To successfully win back profitable customers who are worth your effort, you need to think about three things:

  1. who is likely to give you a second shot,
  2. if they do come back, how long they will stay, and
  3. how much they will spend.

You don’t want to waste time and money chasing lost customers who will never come back or will quickly leave again. In some cases your relationship the second time around can actually be even better than the first- but before you go chasing after lost customers you need to know some basic things about the win-back process.

  1. Your relationship the first time around matters!

The win-back process does not completely wipe the slate clean. How lost customers perceive their experience with you before they left is a strong indicator as to whether they will trust you enough to give you a second chance. Our study found that customers who spread positive word of mouth through referrals in their first lifetime were more likely to come back. Customers who complained a lot were less likely to come back. Customers who experienced a service recovery were more likely to come back.

The takeaway: the better their first lifetime relationship with you, the more willing they will be to trust you again.

  1. Why your lost customers left in the first place can give you some important insights into how they will behave.

The study categorizes the reasons why customers defect into three buckets:

  1. for price related reasons,
  2. service related reasons, or
  3. both price and service related reasons.

Why customers left can help predict how likely they are to trust you again. The study found, customers who left for better deals were more likely to come back than customers who left due to poor service. Customers who left for both price and service were the least likely to come back. More importantly, the reason customers left can tell you how committed they will be to your relationship if they do come back. Intuitively it’s easy to think that customers who left for price related reasons will easily jump ship again when a competitor offers a better deal. Surprisingly, the study found that customers who left for price related reasons stayed with the firm longer than customers who left for service related reasons. Customers who left for service related reasons may have been harder to please and retain. However, customers who left for service related reasons also spent more each month than customers who left for price related reasons. Customers who left for both price and service related reasons switched to a competitor the fastest and spent the least each month.

  1. What you offer your lost customers to win them back has a lasting impact.

Of course what you offer your lost customers will impact whether they give you another chance or not, but it also has a lasting impact on how they will behave if they do accept your offer. You need to know not only what is most effective in winning back lost customers, but how it impacts how long they will stay and how much they will spend in their second lifetimes. Our research team conducted a randomized field experiment in which we sent lost customers a limited time price discount, a limited time free service upgrade, and a bundled offer. While the bundled offer was the most successful in reacquiring lost customers, those customers who accepted it also left the firm again the soonest and spent the least compared to customers who were offered either a price discount or service upgrade. Service upgrades were the least effective at winning back customers but the customers who accepted them also stayed the longest and spent the most with the firm.

So how can you use this information when designing a win-back program? The study conducted a simulation to see what you should offer customers based on the reason they left. Do you want to increase market share and win back as many customers as possible? Then target customers who left for price related reasons with a bundled win-back offer. Do you want to acquire long term customers? Then target customers who left for service related reasons with a service win-back offer. Do you want the customers who will be the most profitable in general? Then target customers who left for price related reasons with a discounted win-back offer.

Customer win-back can be a great last resort strategy. While you should always try to retain your customers you should remember that the ones that got away are not necessarily gone forever. You can win them back and have profitable relationships with them. So in a competitive market where every little bit helps, consider reacquiring your lost customers.

The article Regaining “Lost” Customers: The Predictive Power of First-Lifetime Behavior, the Reason for Defection, and the Nature of the Win-Back Offer, featured in the post, was co-authored by V. Kumar (Georgia State University), Yashoda Bhagwat (Texas Christian University), and Xi (Alan) Zhang (University of Toledo). It is available on the Journal of Marketing website.

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Dr V Kumar PictureV. Kumar (VK), the Regents Professor, Lenny Distinguished Chair & Professor in Marketing, and the Executive Director – Center for Excellence in Brand & Customer Management at Georgia State University. VK is recognized as the Chang Jiang Scholar at HUST; China, Lee Kong Chian Fellow at SMU, Singapore; and has received twelve lifetime achievement awards in various areas of marketing including the 2015 Distinguished Marketing Educator Award from the AMS and the Paul D Converse Award.  VK has received the Sheth Foundation/JM Award, Robert Buzzell Award, Davidson Award, Paul H. Root Award, Don Lehmann Award, Tamer Cavusgil Award, and Gary L Lilien ISMS-MSI Practice Prize Award.  He has published over 200 articles in scholarly journals in marketing as well as book chapters. VK has written over 15 books including Managing Customers for Profit, Customer Relationship Management, Customer Lifetime Value, Marketing Research, Profitable Customer Engagement, Statistical Methods in CRM, and International Marketing Research. VK spends his “free” time visiting business leaders to identify challenging problems to solve. Recently, VK has been chosen as a Legend in Marketing where his work is published in a 10 volume encyclopedia with commentaries from scholars worldwide. Finally, VK is the current Editor-in-Chief of the Journal of Marketing.

Yashoda Bhagwat is currently an Assistant Professor of Marketing at the Neeley School of Business at Texas Christian University. She received her PhD in Marketing from the Robinson College of Business at Georgia State University. Yashoda’s research is primarily motivated by real world business problems and she likes to solve challenging problems for managers using rigorous methodologies. She is particularly interested in better informing marketing strategy by managing customer relationships. She was chosen to attend the 2013 American Marketing Association Sheth Foundation Doctoral Consortium as a doctoral fellow and was a recipient of the 2014 GTA Teaching Excellence Award in recognition of her accomplishments in the classroom. Her work has appeared in the Journal of Marketing and Marketing Science. In her spare time she is a sports enthusiast, foodie, and dog lover.

Xi_Alan_Zhang

Xi (Alan) Zhang is currently an Assistant Professor in Marketing, College of Business and Innovation, the University of Toledo. He received his Ph.D. degree from the J. Mack Robinson College of Business, Georgia State University. His research centers on solving relevant marketing problems by using rigorous methodologies. His dissertation titled “Managing a Profitable Interactive Email Marketing Program: Modeling and Analysis” won the Shankar –Spiegel Best Dissertation Proposal Award in 2013. One of his works won the Best Paper Award in the Digital Marketing Track of the 2015 Summer AMA Marketing Educators’ Conference. His research has appeared in the Journal of Marketing and the Journal of Marketing Research. He is the recipient of the 2015 GTA Teaching Excellence Award in recognition of his outstanding teaching performance. He currently services on the editorial review board of the Journal of Business & Industrial Marketing.

Transparency

Is Transparency Good for Business?

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.

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Seigyoung Auh is 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.

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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 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.

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The Victuous Cycle

Terry CainBy Terry Cain

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.

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To learn more about the Services Leadership Institute visit the Center for Services Leadership website.