You Can Run, But You’re Gonna Pay

In an effort to match Verizon but (AT&T has been quick to point out) in no way related to a potential loss of iPhone exclusivity, AT&T has nearly doubled its penalty for early contract termination.

The bad news is that starting June 1st, AT&T iPhone customers face a $325 termination fee (up from $175). The better news is that the company is actually lowering the early cancellation fee for contracts on non-smartphones by $25 to $150, the theory being that if you spend less on a device, your termination fee should be less and if you spend more your fee should be higher.

Somewhere in there is some phone company logic, but there’s always been a difference between logic and common sense, so don’t wrack your brains about it. The FCC has recently taken an interested in all four major carriers' Early Termination Fees, concerned that consumers aren't given the right amount of information prior to signing up for service, phones, or both.

Currently Verizon is the king of the early termination fee hill with a $350 penalty for smartphones. Sprint and T-Mobile split the difference at $200 for all phones, which pretty much matches up to our Customer Loyalty Engagement Index rankings for the smartphone category driver, “Competitive and Easy to Understand Calling Plans” that also has the 2nd highest levels of expectation for the category’s drivers. So while customers may not like it, they are paying attention to these value aspects of the category.

Until the FCC makes some decision regarding early termination fees, customers should take solace in the old saying that applies to all types of phones: goodbye shouldn’t be painful unless you're never going to say hello again.

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The Tooth, the Whole Tooth, and Nothing But the Tooth

Proving that the optimism of CPG brands is like a tube of toothpaste – it’s never quite gone, the Colgate-Palmolive Company has borrowed some dental technology, partnered with dentists and research scientists, and has launched a professional range of products called “Pro Clinical.”

The new line, inspired by professional dental cleaning, includes a range of whitening toothpaste formulated with silica crystals that remove and prevent stains, a daily cleaning paste with silica buffers that polish just like a dentist, and renewal toothpaste that is formulated with the highest amount of fluoride allowed without a prescription.

The introduction comes at a good time for Colgate. According to our Customer Loyalty Engagement Index, which correlates very highly with sales, Colgate, who has ranked 3rd for a number of years can now capitalize on two critical trends in the dental care category: consumers looking for more options as regards tooth whitening and aesthetics and a greater desire for preventative care products.

The Brand Keys 2010 rankings in the category look like this:

1. Tom's of Maine
2. Crest
3. Colgate
4. Arm & Hammer
5. Listerine
6. Ultra Brite
7. Aim
8. Sensodyne
9. Aquafresh

Another thing when it comes to dental care is that consumers want more convenient appointments with their dentists, so the new at-home Colgate product line may help to alleviate that problem too. But it’s probably good to remember that no matter which brand you use, you don’t have to brush your teeth – just the ones you want to keep.

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The Most Valuable Franchise In Sports: Loyalty

Journalist, Mike Royko, once observed that “hating the New York Yankees is as American as pizza pie, unwed mothers, and cheating on your income tax.” At the time he was complaining about the 22 World Series championships they had won. (They’ve since won 5 more).

So it’s hard to argue with Yankee fans because they feel the team is so valuable to them. But now, according to Forbes, the New York Yankees is the most valuable brand in sports, adjudged to be worth $1.6 billion, with a brand name value of $328 million.

While that valuation may have agitated baseball fans of other teams and surprised some marketers, it merely confirms the findings of this year’s Brand Keys Sports Loyalty Engagement Index where, once again for the 18th year in row, the New York Yankees show up in the top-5 for the most-loyal fans in baseball. This year, this is how the teams ranked:

1. Boston Red Sox
2. New York Yankees
3. Philadelphia Phillies
4. Anaheim Angels/Los Angeles Dodgers
5. Minnesota Twins/Milwaukee Brewers/Houston Astros

The Sports Loyalty Engagement Index gives an apples-to-apples comparison of the intensity with which fans support their home teams, with insights that ID areas that need strategic reinforcement. Managed correctly by a team, increased loyalty is always accompanied with increased broadcast viewership, merchandise purchases, sponsorships, and ticket revenues. Oh, and yes, happier fans. Everybody loves a winner, but win/loss ratios alone do not entirely govern fan loyalty, even if you’ve got 27 World Series Championships.

Yes, everyone claims that their home team has the most-loyal fans, but ultimately it’s the bottom line that proves why loyalty is a leading-indicator of positive consumer behavior and profitability. Gross sales of Yankees championship-emblazoned products came to $450 million last year. The new ballpark spurred a 40% growth in sponsorship revenue, and local TV ratings on the YES Network were up 11%, as most baseball teams saw their ratings decline.

Yankee detractors (often Boston Red Sox fans evoking “The Curse”) think that the Yankees have just been lucky. And while that may be part of it, one sure thing is that luck always changes. But when it comes to loyalty, it’s always a sure thing that a brand with loyal fans will win – no matter what field you’re playing on.

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Going with the Emotional Flo

One of the claims we hear most frequently from insurance brands is that it’s a “low involvement” category—which translates, depending on who can over-hear them, from “it’s not emotionally engaging” to “it’s just plain dull.” So, it’s always nice when we get to present another point of view: one that shows a link between what we predicted with our engagement metrics, and the marketplace. Not because we want to embarrass anyone, but because we are researchers, after all, and have a special place in our collective heart for dismantling theories that do not prove out in the world.

Insurance is, in fact, one of the most emotional and high-involvement categories out there. While the process of choosing it may be something that consumers wince over, that is largely because it is seen as one of those “fine print” purchases that strikes terror into the soul of the lay person. That terror is at the crux of the emotion inherent in the category. Buying insurance is buying responsibility. One is buying the privilege of someone else being on the hook for making things right when, as the Nationwide brand once proclaimed in their advertising, “life comes at you fast.” And no one wants to be wrong about that.

The emotional stakes of choosing correctly in this category are a significant contributor to the positive changes seen in the Progressive brand. Ranked 5th in our 2009 Customer Loyalty and Engagement Index, it held the number 2 spot in January of this year—a dramatic year-to-year shift that was mirrored in both the stock price and market success of the brand.

Here are the rankings for Insurance brands for 2010:

Brand 2010 Ranking

1st: Allstate
2nd: Progressive
3rd: Geico
4th: State Farm
5th: Nationwide

So, where did this leap come from? Well, it certainly wasn’t from increased awareness of the brand, as it was already well-known before consumers were calling it their own. One need only do a quick search on You Tube to see not only the number of hits for their commercials, but the spontaneous quotes that accompany the ads—almost always about Flo, the cheery but deceptively sharp spokesperson in Progressive’s ad campaign.

When looking at spokespeople for insurance brands, Dennis Haysbert for Allstate and the gecko for Geico barely edge Flo out, and she is breathing down their necks. More importantly, she showed an increase of nearly 20 points in our study of strongest brand spokespeople for 2010—an indicator that she has tapped into an emotional crevice that many consumers are simply crazy about.

From the setting Progressive has used in the ads—a heavenly place of consumer empowerment where insurance dreams of low prices and high service come true—to Flo herself, an emotional center has been struck, and it holds. Flo, with her retro styling, takes us back in time, while her contemporary “easy peasy” humor telegraphs the future of painless online transactions. Flo comforts us. Just old enough to be trusted and young enough to be uniquely cool, Progressive has embodied the solution to consumer’s fear of being rudderless as they choose the right plan, without going broke. She is neither the stuffy visionary advisor, nor does she take the irreverent swipe some other brands are at those who think of insurance as an important, if dreaded, decision. She is, instead, the embodiment of what is in the cross-hairs of our metrics for the category: an emotionally-comforting person offering us rational benefits. And that’s a high-involvement that clearly consumers understand.

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Here’s to Philosophy Minors!

As innovators and world leaders in loyalty and engagement, we are used to the occasional stock-market wonk who thinks because he can read an S&P 500 he understands the complexity of emotionally-based consumer decision making. These Neanderthals always have one thing in common: they don’t understand what loyalty really is, or how it really works.

Innovators have to have thick skins, so if someone denigrates our work, we smile and continue to publish our leading-indicator metrics that correlate very highly with consumer behavior and corporate profitability. Independent validations—including one study, vetted by the Advertising Research Foundation, by a corporate valuation firm that takes more than stock price into account when evaluating what a brand is really worth—have shown our rankings correlate with corporate profitability in the 0.83 to 0.901 range. For the benefit of those who are statistically-challenged, this is very, very high, and would likely result in new Beemers all around if stock-market predictors got half that level of accuracy.

Each February Brandweek publishes the results of our annual Customer Loyalty Engagement index, and the attendant press usually drives the ill informed out of the vast emptiness of the World Wide Web. And every year about this time we look back and see who was the most naive and ill informed.

This year that award goes to Douglas M. McIntyre, co-founder and editor, of the blog, 24/7 Wall Street, which purports to provide “insightful analysis and commentary for US and global equity investors.” Mr. MacIntyre suggested that our loyalty awards were “laughable” because he apparently didn’t understand that his opinion was no replacement for consumers’ brand loyalty and, much more importantly, real market behavior.

Had Mr. McIntyre read anything we’ve published beyond this year’s brand rankings, he would have discovered that loyalty – real loyalty – comes with its own set of privileges, which we call the Rule of Six. It states that loyal consumers are six times more likely to buy more products (more often), recommend the brand, invest in the company, rebuff competitive offers, and give the company the benefit of the doubt in uncertain circumstances.

That last rule is something Mr. McIntyre should have embroidered on a pillow for his office, because it was directly applicable to three of the brand rankings he laughed at most. They were Tylenol, AT&T, and Toyota.

Mr. McIntyre apparently felt that Tylenol’s bad press and AT&T’s 3G network problems, and Toyota’s recall issues would override customer loyalty and one can only assume since the blog purports to provide insights for investors - profitability, which of course, turned out NOT to be the case.

These metrics are predictive of market behavior. While it appears that it would have come as a big surprise to Mr. McIntyre, Tylenol dealt with the issues in their usual professional and loyalty-reinforcing manner, although in fairness, we’ll need to see what happens in the marketplace for the brand. AT&T, on the other hand, managed to acquire slightly more customers in the following quarter than competitors, gaining 1.9 million subscribers (a Q1 record, Mr. McIntyre) with revenue up 10.3% from the same time last year.

Had Mr. McIntyre done his homework he would have discovered that Toyota – which customers still assessed highly enough to place them #2 in the automotive category – had been #1 in our rankings for many years – and the recall problems the brand was facing had shown up as a slight decline in the annual ranking. That said, loyalty’s Rule of Six kicked in and the overall effects to the brand were minimal, which meant that the brand was likely to do OK in the marketplace. (Note to Mr. McIntyre and others: we do not position these metrics as a market model, but that said, it’s axiomatic that if consumers behave positively toward a brand, the brand ought to make money!)

So what happened to Toyota and the ranking that Mr. McIntyre found so laughable? It posted a $2.2 billion annual profit, shaking off the effects of the (to quote Mr. McIntyre) “severe problems” the brand encountered. A senior managing director at Toyota was quoted as saying, “the effects of the recall have been smaller than we’d expected.” Brand Keys would suggest that the Rule of Six had a lot to do with that.

As Hamlet reminds us all, there are more things in heaven and earth than are dreamt of in some people’s philosophies. When it comes to loyalty, we hope you will forgive us if we prefer to side with Shakespeare — and actual in-market results — rather than a feeble shout-out from the un-checked blogosphere.

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The iPhone: Calling on Mutli-Dimensional Engagement Metrics to Connect with Consumers

The definition of "engagement" has been slippery to articulate - largely because there are different kinds of engagement, and all are opportunities to be measured for their ability to translate into the one true goal: consumer engagement with the brand.

To examine the impact of the engagement dimensions of media, media platforms, programs, advertising, and ultimately brand, we invite you to join us for a free ARF webcast, "The Consumers' World: Multi-Dimensional Engagement and Why Measuring ALL Aspects of Engagement Matter More Than Ever," this Wednesday, May 12th, 12:00 - 1:00 PM EST. The case study being presented by Brand Keys measures the impact of engagement - in all its forms - in a way that has been proven to be predictive of behavior in the marketplace.

Brand Keys will present a case study of the iPhone brand, offering and a close up of multi-dimensional engagement metrics that move from media (TV), to platform (ABC-TV), to program (Modern Family), to message (ad)-offering proof-positive that predictive engagement remains mission-critical for brands that are more eye-to-eye with today's empowered consumers than ever before.

Both ARF Members and Non-Members can register for free though the My ARF portal on the ARF site https://my.thearf.org/default.aspx.

We hope you can join us.

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Moms Win Out Over Economy

According to our annual Brand Keys Mother’s Day survey there’s good news for Mom this year. More than nine of 10 consumers (93%) plan to celebrate the holiday with total spending estimated to reach $15 billion. Jewelry gifts showed the most improvement (+7%) over last year.

Celebrants intend to spend an average of $142.00 this year. That’s 5% more than in 2009. Men, following a long-time pattern, intend to spend more than women, an anticipated average of $168, women $116.

Consumers have been shopping smarter and are still looking for bargains, but gifts this year will likely be a bit more substantial than the past two years. The largest increases in gift categories were seen in Jewelry (+7%) and Spa Services and Clothing (both +4%), gift categories where consumers had cut back in recent years. Here’s what they’re buying this year:

Cards 97% (unchanged from last year)
Flowers 70% (+1%)
Brunch/Lunch/Dinner 58% (+1%)
Gift Cards 55% (unchanged)
Clothing 36% (+4%)
Books 22% (unchanged
Jewelry 25% (+7%)
Electronics 12% (unchanged)
Spa Services 15% (+4%)
Candy 5% (unchanged)

Consumers indicate slightly more in-person visits, again a reflection on their view of the economic upturn.

Phone 47% (-2%)
Personal Visits 35% (+5%)
Cards 13% (unchanged)
On-line 5% (unchanged)

People seem to be feeling better about the economy and the future, and while there are still times consumers are watching their wallets and look to cut back, this year Mother’s Day isn’t one of them.

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The Limits of Loyalty

BP has spent years positioning itself a friend of the environment, an energy company that goes "beyond petroleum,” pledged to find cleaner ways to produce fossil fuels.

You know them. The company with the environmentally friendly green and yellow sunburst logo, a logo that has stood along American highways as an avatar for being the greenest of the gas bands. BP’s brand position and engagement strength has made them #1 on our Customer Engagement Loyalty Index for a number of years now, and that’s a real advantage for any brand.

Besides the coming-back and coming-back of traditional loyalty boilerplate, research shows that loyal customers are six times more likely to give companies the benefit of the doubt in tough circumstances. After all, BP managed to survive past accidents, including a Texas refinery blast and Alaska pipeline spill.

But that paradigm along with BP’s image (estimated to be worth billions of dollars) is being sullied beyond loyalty’s limits. Last week's deadly oilrig explosion, the company's inability to contain the massive 5,000-barrels-of-oil-per-day spill in the Gulf of Mexico, and an expanding oil slick that threatens marshlands and wildlife along the coasts of Louisiana and Mississippi, is producing not only pollution but the biggest oil company public relations challenge since the 1989 Exxon Valdez tanker disaster.

BP is spearheading the cleanup, but the environmental effects notwithstanding, it may be too little too late. A recent update of our Customer Loyalty Engagement Index shows that BP has fallen from 1st place to last, with current brand rankings looking like this:

1. Texaco
2. Sunoco
3. Chevron
4. Mobil
5. Exxon
6. Shell
7. BP

And as loyalty assessments correlate very highly with positive consumer behavior and sales, it should come as no surprise to anyone that BP's stock market value has declined by roughly $25 billion since the accident.

Experts say BP's response so far has been superior to Exxon's treatment of the Valdez crash — hardly a high water mark. And we remind you, as our metrics show time and time again, experts do not a brand make. That power remains where it has always been: with consumers. And, as far as contemporary consumers are concerned, today “reputation” is your brand position minus what you’ve been caught doing.


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