Evolving customer satisfaction through brand authenticity

Does the experience ring true?

Editor’s note: Jeff Hall is president of Second To None Inc., an Ann Arbor, Mich., mystery shopping firm. David Robbins is the firm’s vice president of client services. Kerry Colligan is the firm’s integrated marketing manager.

You know what’s great about customer satisfaction management (CSM)? It gives brand managers something in their know-thy-customer toolbox. Using CSM to build a clearer understanding of the customer-brand interaction makes sense. Strong CSM programs do this fairly well. Weak initiatives usually consistently do not.

The marketing research industry has spent years in healthy debate over the myriad valid reasons why CSM is often an insufficient and at times misguided customer experience management tool (see related articles 20091003 and 20091007). To be clear, the purpose of this article is not to present yet another in-depth critique of CSM. Rather, it is simply built on the recognition that CSM often falls short by ignoring the dynamic process that creates the entirety of customer experience.

Customer perceptions are not created in a vacuum. They’re co-created by media, word of mouth, marketing, vast operational elements and other sources originating both inside and outside the organization (Brown, 2003). Since the organization participates in this process, its actions are critical. The intended and unintended activities a brand undertakes to shape and influence the experience necessarily impacts perception. It is this critical element that customer satisfaction measurement is unable to capture. Managers are often left wondering how their actions have impacted the customer experience and guessing what specific steps should be taken next.

Further, customer perception is often treated as reality. This isn’t the fault of CSM - managers must recognize this limitation - though often they do not. The focus on perceived experiences alone (without a holistic understanding of the customer experience) encourages decision-making that can often miss the mark.

We need not look any further than our own personal experiences to know that this is true. Think of a situation when your perception of an experience was inconsistent with another person’s. The fact that people can have vastly different individual interpretations of the same experience highlights the frequent disconnect that can occur between perception and actual experiences. There’s more going on than your personal perception. Each person’s interpretation of the experience reflects a perceived experience, while the actual experience usually lies somewhere in between.

Actual elements

Rather than manage to customer perception or continue to struggle with only half the tools needed, the authors recommend measuring and managing the actual elements of the customer experience with the same care as customer perception. Developing a clear understanding of the actual experience mitigates the risk that customer perceptions are inaccurate. Or biased. The actual experience allows organizations to understand how well their specific operational standards, and execution thereof, relate to customer perception. Without it, customers are much more likely to defect, as misguided strategies and tactics are implemented in naïve attempts to win them over.

One way to develop that understanding is through a mystery shopping program, which can bring the customer-level perspective to the process. This is helpful because organizations generally see the customer experience in complex procedural ways, while customers tend to view their experiences in much less detailed terms. Time restrictions aside, customers are generally unable or unwilling to provide accurate and reliable operational feedback. But assuming the program assesses the right measures, mystery shopping can provide detail that effectively coincides with and measures the implementation of organizational procedures.

In addition, as noted above, customer perceptions are often incorrect or biased. Recognizing that some bias exists in all measures, mystery shopping can reduce that bias by removing the emotional incentive to “enjoy” the experience. Further, proper statistical analysis of mystery shopping data leads to raw and adjusted findings that provide insight into any bias that does exist.

Largely consistent

Authentic experiences are created when an organization consistently and intentionally meets or exceeds its brand promise and does so in a manner largely consistent with customer perceptions. A commonly accepted definition of CSM is represented by the y-axis (vertical) in Figure 1 - the degree to which a brand performs in a manner that is consistent with its customers’ expectations (i.e., brand promise/brand perception).

Just as important is the degree to which an organization’s actual performance or implementation is consistent with its brand promise - represented by the x-axis (horizontal) in Figure 1 (i.e., brand promise/brand implementation). Alignment across both the horizontal and vertical axes is what leads to authenticity.

The varied histories of brands demonstrate time and again that authentic brands are much more likely to show strong and sustainable financial performance. And this is not by chance. It is because at their very foundation lie clear strategic and operational initiatives designed to deliver authentic brand experiences. A few examples of brands that have been exceptional at this include Whole Foods, Best Buy, Southwest Airlines, Walmart, and Lexus. (Case studies on Best Buy and Walmart follow.)

Before getting into these case studies, let’s discuss the dynamics and implications of creating inauthentic brand experiences.

Deficient brand experiences are often characterized by fundamental operational challenges (lower-left quadrant of Figure 1). In advance of attempting to create an authentic brand experience, these fundamental shortcomings must be addressed. For example, a brand that can’t deliver product to stores or adequately staff its retail outlets should focus on survival not authenticity.

Misaligned brand experiences are characterized by organizations whose actions fail to take into account the things that customers care about most, but who “do what they do” exceptionally well (lower-right quadrant of Figure 1). Thus, perception often falls short relative to the brand’s co-created promise. Over time, misaligned brand experiences will lead to declining market share and performance. The focus needs to quickly shift toward a better understanding customer needs, followed by a hard discussion about how best to meet those needs. A key pressure point here is customers’ ongoing exposure to competitive alternatives. How long will they stay with you if you’re not meeting their needs?

Glorified brand experiences are characterized by organizations whose actions fail to measure up to customers’ perceptions (upper left quadrant of Figure 1). Customers will often overlook these shortcomings because they think highly of the brand. Think of glorified brands as borrowing against their equity line of credit. Implementation must improve to better align the actual experience with the brand’s promise. Here too, brands are extremely vulnerable. Their competitive advantage is based on perception rather than reality. Unless barriers to entry are extremely high, expect established or emerging competitors to emphasize and leverage equity shortfalls.

Measuring both

To better understand how authenticity is created and to demonstrate the importance of measuring both brand perception and implementation, consider a prototypical example from a national entertainment retailer.

This retailer operates more than 1,000 locations and is well known for its strong brand equity; customers are generally very satisfied with the overall experience and financial performance correlates on the whole.

The example shown in Table 1 highlights a large disconnect between customer perception (79 percent) and what’s actually occurring at the point-of-sale (49 percent). The “co-created experience” data point in Figure 2 shows an authenticity-based view of the customer experience that is “glorified.” Obviously, any management decisions or actions taken on the basis of either of these isolated data points (79 percent versus 49 percent) would have been risky because of the substantial margin of error associated with only having one piece of the puzzle.

By placing insufficient emphasis on customer perception - in lieu of the information from the audit - the data point moves toward a serious deficiency. Worse yet, placing too much emphasis on customer perception pushes the data point toward the incorrect conclusion that actual performance is aligned with the target. Incorrectly concluding performance is aligned with the target would have resulted in a large number of lost sale opportunities (of net 30 percent) if performance remained constant.

Undeniable success

Both Best Buy and Circuit City operated on the same brand proposition: provide a variety of high-engagement consumer electronics products and associated services to individual and small business consumers. The economic prosperity of the late 1990s afforded both companies undeniable success. Beginning around 2000, a pattern of intentional and consistent customer experiences emerges for Best Buy that is not evident at Circuit City. (An intentional experience is one that is designed by the organization to align with the brand promise, such as price-based value for Walmart or over-the-top customer service for Zappos. They are authentic when the designed experience exceeds expectations on dimensions that matter to customers.) The success of Best Buy and eventual bankruptcy of Circuit City resulted from different approaches to managing the actual and perceived experiences.

In 1989, Best Buy stopped paying sales commission to in-store employees. While controversial, it proved to be a major growth driver, as customers showed a preference for the low-pressure store experience (Boyle, 2006). Circuit City did not make a similar sales commission decision until a 2003 staff reduction prompted the move.

In 2003, Best Buy trailed Circuit City (Figure 3) on customer satisfaction measures (ACSI “Circuit City,” 2009). CEO Brad Anderson put Best Buy on a new growth path with two decisions: 1) a customer centricity initiative that placed the customer at the center of merchandising and other operational decisions; and 2) the purchase of Geek Squad, a consumer electronics support service.

After extensive testing, chain-wide results of the customer centricity initiative showed 5.4 percent same-store sales growth versus 3.3 percent for stores not implementing the initiative (Boyle, 2006), resulting in a net earnings per share (EPS) of $1.96 in 2005. At the same time, Circuit City’s net EPS was $0.33.

The Geek Squad marked Best Buy’s entry into in-home, online and in-store services. By building a service that requires listening to customers and collecting information about product preferences, Best Buy created another avenue to customer centricity.

By contrast, Circuit City’s version - the Firedog service - launched in August 2006. Designed to support computers, home theatre and car audio, Firedog came on the heels of record digital and flat-panel TV sales (Gogoi, 2006). Lower sales volume occurred in 2007. To compensate, Circuit City laid off thousands of its higher-paid, experienced staff - ostensibly those best able to provide the customer service Firedog was designed to deliver (O’Donnell, 2008).

There are many reasons for Circuit City’s 2008 bankruptcy, including electronics sales moving online, the credit crunch and increased competitive pressure from Best Buy and Walmart at each end of the electronics market (Kavilanz, 2009). These macro factors mask the long-standing disconnect between the experiences Circuit City provided relative to its promise.

The Best Buy-Circuit City relationship illustrates the importance of a holistic approach because their brand propositions are similar. Best Buy’s success rests in part on alignment between the brand promise and its delivery of it. Similarly, Circuit City failed in part because it was unable to deliver the experience it promised customers.

Strong brand authenticity

Walmart’s early growth as a discount retailer and its more recent market-busting domination comes from price-driven value not exceptional customer satisfaction; Walmart creates strong brand authenticity in spite of low customer satisfaction.

Walmart’s financial success is well-documented: it accounts for 21 percent of all U.S. grocery spending and 7.5 percent of all retail spending (Hudson, 2009) with sales topping $400 billion. Since 1988, Walmart has operated two segments under one roof: groceries and discounted general merchandise. Revenue is divided almost equally, 49 percent from grocery. Since grocery is not particularly lucrative - according to an industry analysis, average net margins are around 1.5 percent (Hoover’s, 2009) - we can attribute a good measure of financial success to retail margins.

Unlike Best Buy, this financial success does not align with customer satisfaction. Traditional customer satisfaction models expect financial growth to be associated with higher scores¹. The ACSI only began measuring Walmart’s grocery segment in 2004. Since then, both grocery and general merchandise customer satisfaction scores have been well below average².

The stability of Walmart’s customer satisfaction scores (Figure 4) demonstrates a keen managerial focus on making price-driven value a reality. It also demonstrates that the core strategy has not changed.

For Walmart, unexceptional customer satisfaction scores and exceptional delivery on the price-driven promise create strong brand authenticity (Figure 5). Customers generally don’t expect the promise of a great in-store experience but do expect a great value. The experience is authentic because it aligns with the brand’s promise.

Levers not visible

The cumulative brand experience is the standard by which customers evaluate products, services and all organizations alike. These experiences are shaped simultaneously by customer expectations and brand promises. This framework is an important addition to traditional CSM, for it gives organizations access to managerial insight and levers not visible through CSM alone. By taking a more holistic approach to customer experience management, organizations can achieve strong and sustainable growth. 

Notes

¹ On average, every 1 percent increase in customer satisfaction is associated with 2.37 percent increase in a firm’s return-on-investment (Anderson, 2000).

² Recently, general-merchandise scores have risen slightly, in part due to the increased importance of price-driven value in a down economy.

References

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American Consumer Satisfaction Index. (2009). Scores by Industry: Specialty Retail Stores. ACSI Web site. Retrieved June 29, 2009, from http://www.theacsi.org/index.php?option=com_content&task=view&id=147&Itemid=155&i=Specialty+Retail+Stores.

American Consumer Satisfaction Index. (2009). Scores by Company: Walmart. ACSI Web site. Retrieved June 29, 2009, from http://www.theacsi.org/index.php?option=com_content&task=view&id=149&Itemid=157&c=Walmart+Stores&i=Department+percent26+Discount+Stores.

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