Bing!

Anyone who needs another search engine raise your hands. Come on. Let’s see them. Don’t see many hands in the air? Not surprising.

According to industry data, 65% of people are satisfied with their online search. But as history has proved “satisfaction” is about what happened the last time. As we like to remind folks out there, of the 13 million iPhones active by AT&T to date it’s a solid bet that many are held by someone who was once another brand’s “satisfied” customer.

Data also shows that 42% of consumers’ searches require fine-tuning. And, importantly, 25% of clicks are the back button. All of which is a pretty clear indication that expectations aren’t being met. Loyalty, and meeting consumer expectations, is about what happens the next time. And meeting expectations is what Microsoft’s newly launched “Bing” seems to be all about.

Some of you might think that the quality of search engines has approached parity, but according to the 2009 Customer Loyalty Engagement Index, that’s not true.

If you look at the drivers of loyalty and choice in the category, consumers have frighteningly high expectations about – and equally high levels of discrimination for – facts versus insights. The expectations regarding the speed of the search have changed too. It’s no longer that one searches “Brand Keys” and gets 83 pages in 0.24 seconds. That definition of speed has become table stakes. Consumers now are looking for information they can use. Quickly. It’s a nuance, but a critical one regarding consumer values in the category, according to our research in the category which identifies what it is that actually drives a customer to be loyal and engage with a brand.

The drivers that used to be “Number of Sites Cataloged” has morphed into “Don’t Overwhelm Me, Please.” “Links and Added Value Features” are the least important driver and have the lowest (of very high) expectations, and remain unchanged because consumers always want, well, more.

According to our Customer Loyalty Engagement Index, Google is #1 overall, but when it comes to the 1st most-important driver, Facts vs. Insights—which has the highest of high expectations—the rankings are as follows:

1. MSN
2. AOL
3. Google/Netscape
4. Ask
5. Alta Vista
6. Yahoo

And yes, primacy of product (or in this case, service) is critical, but as “brand” plays an enormous role in loyalty and choice, it’s nice to see that “Bing” has, as they say in the trade, “good bones.”

Microsoft certainly has the financial wherewithal to support the re-launch, although as Ask.com found to their detriment (aka, $57 million spent in 2007 advertising their “algorithm”), if the brand and the message don’t meet the expectations for the category, It’s probably not money well spent, particularly given that Walt Mossberg of The Wall Street Journal reported Ask's share of search is down 28%.

Back in 2005, Bill Gates noted, “The magic moment will come when our search is demonstrably better than Google's.” Microsoft may again be doing what it has always done best: wowing people with what they really want and need from technology. As Arthur Clark noted “any sufficiently advanced technology is indistinguishable from magic.” From the consumer side of the search process, this may just be the trick the audience has been waiting for.



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Rule #6: Frustrated Expectations Always Results In Lower Sales

Two months ago we blogged about a brand that didn’t show up on our Customer Loyalty Engagement Index. It was the Nano, a tiny car manufactured in India with a 0.6-liter, 33 horsepower engine that was supposed to get 50 MPG. The bumpers were to be made of plastic and most of the construction was glue instead of welding. It went on sale in April for July delivery, for the low, low price of only $2,600.00.

Well, the rule about frustrating customer expectations comes through again. It turns out that only 20% of initial orders for the car were for the bare bones, no-frills $2,600 model. Instead, half of the customers booked the top-end model, which costs 40% more but comes with “extras” that do meet customer expectations – like air-conditioning, fabric seats, central locking, air bags, front power windows, and cup holders.

Costs, of course, still matter, particularly in this economy, but as one new owner of the upgraded, more expensive Nano noted, “today, everyone around me travels in an air-conditioned car. My children, too, expected one. It’s a must.” Which just proves the truth of the observation that for most consumer decisions, emotion rules and expectations must be met. If your brand knows what consumers really expect, it will always pay off for them. And once again we find that great truth in the statement that there are things known and unknown and in between is doors of perception and expectation.

But most of the time those are the doors consumers walk through with wallets in hand.



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Who to Call When Delight Turns to Expectation

Categories (and consumers) aren’t static, and so we’ve come to expect changes in the dynamics of what drives categories.

Usually the big changes show up in higher-order values, like items that drive brand or product differentiation, and a consumers’ sense that he or she is getting real value (not “price-value” but “value-for-dollar” value). Things like that. So we weren’t surprised to find a new value showed up in our Brand Keys Customer Loyalty Engagement Index in the Wireless Phone Services category.

What was the new value? “Loyalty” points. No really. Points. Consumers used to be delighted to get them, but since they’ve gotten so used to earning points for, well, virtually everything they do or buy, and they now want wireless carriers to put some sort of reward scheme in place to reward consumers for making phone calls.

We can’t comment regarding the likelihood of actually getting points for talking on the phone or if the point scheme would include going on-line, sending emails or playing games or downloading applications (although in the absence of any real brand and/or technological differentiation, “points” generally is the marketing tactic of last resort) but we can tell you how carriers rank in terms of their plans and the sense of value they communicate to customers:

1. Sprint PCS
2. Verizon Wireless
3. AT& T Wireless
4. T-Mobile

By the way, point schemes may be a brand new value in the wireless category, but the highest expectations still have to do with more, clear, uninterrupted calls. And anyway, if you ask the wireless carriers they’ll tell you that they already satisfy customer by giving them discounts and roll-over minutes and savings on long-term contracts and expanded “customer service” and flexibility in changing a current plan. You know, basics.

So we’re not surprised that callers want more, because it sounds as if the carriers would define “delight” not as the fulfillment of what you expect, but the realization of how much you already have.



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What’s In the Cards?

Loyalty and engagement metrics are very good leading-indicators and predictors of consumer behavior. They can predict the success of one brand over another. They can predict whether consumers will behave positively toward one campaign or another. They correlate highly with sales and profitability. They cannot, alas, predict the vagaries of internal planning of brands like credit cards, for example.

Years ago, in an attempt to differentiate what were essentially commodities, or at best, well-known “placeholders,” credit card companies sought to provide “added-value” and discrimination by offering up points of one sort or another, cash-back rewards, frequent-flier miles, annual gifts, and other perks. But there’s a problem with category values that brands can’t own; once one does it the whole pack of cards follows. What was once “delight” becomes “expectation.”

The credit card companies didn’t, by the way, do all this out of the goodness of their hearts. They charge the companies who use their services and they imposed really punitive fees and penalties on those customers who were late with their payments, and they figure that if they can get a greater “share-of-wallet” from a consumer it’s certainly worth something to them. We’re talking billions of dollars in fee revenue, here!

Loyalty and engagement metrics also identify customer expectations, and when it comes to meeting expectations regarding credit card “extras” we turned to our Brand Keys Customer Loyalty Engagement Index to see how credit card brands are currently ranked on handing out “Rewards and Services:”

1. American Express
2. Discover Card
3. Capital One
4. Visa
5. MasterCard

But because of the current economic crunch, Congress is moving to limit the penalties on riskier borrowers. So to make up for the lost income, the card companies are going after those people who paid their bills on time and who have great credit ratings!
Yes, banks are expected to look at reviving annual fees, curtailing cash-back, instituting shorter grace periods, charging interest immediately upon use, new hidden fees and much, much higher interest rates.

So if you are looking for economic advice, we can offer up two thoughts: you’d better hope that those new regulations are in easy-to-understand language, and if you want 21% risk free, pay off your credit cards now!



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Survival of the Most-Prepared

If recent history has proven anything, it’s that the marketplace – least of all, the consumer – is never static. And most of the time, companies are threatened by everything from minor to very dynamic changes, and usually when they are least prepared to meet them. Those who have predictive loyalty and engagement assessments in place are usually better prepared to survive these threats and make preemptive changes necessary to meet them.

For example, a couple of years ago a list naming the top-10 threats CEOs and CFOs felt their organizations faced, looked like this:

1. Competition
2. Customer Satisfaction
3. Regulatory Environment
4. Information Technology
5. Market Evolution
6. Brand Image
7. Brand Reputation
8. Financial Markets
9. Technology Innovation
10. Human Resources

Today, our updated list looks like this:

1. Competition
2. Customer Loyalty
3. Brand Differentiation
4. Market Evolution
5. Media Integration
6. Regulatory Environment
7. Financial Markets
8. Technology Innovation
9. Information Security

Having predictive measures of the attributes and values that drive loyalty and engagement provide 12 to 18 month lead times for companies to plan for change. Although as W. Edwards Deming, the great productivity consultant pointed out, ”It is not necessary to change. Survival is not mandatory.”



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Not Your Dad’s Playboy

Playboy, the icon of modern “adult” magazines and the progenitor of the Playboy bunny, is looking at making some critical changes to the magazine. Executives are currently considering cutting the magazine's frequency, or raising prices in order to save the money-losing publication.

Revenue for the flagship magazine fell 16% to $13.5 million, or 22% of total revenue. Following in the footsteps of many other magazines, the company expects to report a significant decline in magazine advertising revenue for the quarter ending next month, and like other print publications, Playboy is struggling to connect with readers and to remain relevant in an increasingly digital world.

Plans are for the monthly Playboy magazine to combine its July and August issues to reduce printing and distribution costs and call it a "double issue." That way the company does not have to reduce the annual subscription price.

So far there’s been no mention of eliminating the centerfold, which is good because according to many readers it is extraordinarily effective in increasing circulations!



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Putting Their Money Where Their Hearts Are

The truth that while mothers only hold their children's hands for a short while, they hold their hearts forever is being backed up in the marketplace. Despite the economy, 9 out of 10 consumers are still planning to celebrate Mother’s Day, and no weak economy is going to shortchange Mom!

According to our annual Mother’s Day Survey, consumers are shopping smarter this year, and cutting back a little on more expensive gifts. Celebrants intend to spend an average of $135.00 this year, down only 4% from last year. Here’s what 1,200 consumers said they’re buying for dear, old Mom (percentages in parentheses indicate changes from 2008).

Cards 97% (+2%)
Flowers 69% (+9%)
Brunch/Lunch/Dinner 57% (+2%)
Gift Cards 55% (unchanged)
Clothing 32% (+3%)
Books 22% (-3%)
Jewelry 18% (-2%)
Electronics 12% (-3%)
Spa Services 10% (-1%)
Candy 5% (unchanged)

The affects of the economic downturn are showing up more in the types of retailers consumers are shopping (percentages in parentheses indicate changes from 2008 too), with Discount and Department Stores being the big beneficiaries.

Discount Stores 40% (+30%)
Department Stores 35% (+10%)
Specialty Stores 35% (unchanged)
On-line Stores 25% (+5%)
Catalog 15% (+5%)

While the 2009 average spend is slightly slimmer than last year, Mother’s Day still involves a broader spectrum of relationships, embracing step-moms, relatives, and friends. Changing family dynamics and the fact that this holiday crosses all ethnic, cultural, and religious boundaries, is the major reason why Mother’s Day has become a universal holiday.

The fact that a mother is a person, who seeing that there are only six pieces of pie for seven people, and promptly announces she never did care for pie, probably doesn’t hurt either!

Happy Mother’s Day!



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Tempest in a Coffee Pot

The coffee wars between Starbucks and McDonald's is coming to a boil this week, as the two chains launch national marketing campaigns.

McDonald's new campaign is trying to build a new brand around its mochas, lattes, and cappuccinos and portrays its McCafé as a fun and affordable option that can make the daily grind more enjoyable. Ultimately it aims to convince people to buy cheaper-than-Starbucks recreational coffee drinks.

The new Starbucks advertising campaign began with a print ad in today’s New York Times, with a tagline – “It’s not just coffee, it's Starbucks,” apparently trying to capture the essence of what makes the company special. It makes the case that it’s a socially responsible company whose coffee is (by association) superior to the competition's.

According to our 2009 Brand Keys Customer Loyalty Engagement Index, Starbucks currently ranks 3rd behind Dunkin’ Donuts and McDonald’s. Dunkin' launched their "You Kin' Do It” campaign in January with a theme playing off President Obama's campaign mantra, "Yes we can," and the "kin'" from Dunkin'. The brand has been advertising heavily on TV and will continue on social media touch points, such as Dunkin' Dave on Twitter.

The coffee-brand confrontation comes at a critical time for all the major companies: Starbucks is struggling to hold on to consumers, their earnings down significantly and the company planning to adjust pricing in some markets, with some more-complicated drinks costing more and some basic drinks costing less. McDonald's, in the meantime, is sure it can persuade people to buy relatively inexpensive, coffee drinks during the current recession. And Dunkin’, whose F/Year 2008 Global system-wide sales were $5.5 billion, continues to approach the market place with their ‘kin-do’ philosophy.



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