The Final Frontier: Customer Expectations

Comedian Louis C. K. does this marvelous bit where he berates consumers about how spoiled they are about technology today. How folks have come to take for granted what a mere decade ago would have been called ‘science fiction.’ How, he says, “Everything is amazing right now and nobody’s happy.” Or satisfied.

Mr. C.K. tells the story about someone making a mobile call who pushes the phone’s “call” button and becomes immediately impatient about how long it takes to get connected. Louis screams, “Give it a second, it’s going to space! Can you give it a second to go to space?”

It’s a great example of what has happened to consumer expectations and how consumers really evaluate brands. Over the past 15 years customer expectations have increased by about 24% in virtually all categories. More so in technology areas. Consumers aren’t always able to rationally articulate needs, desires, or real expectations in the category. Nor are they able to assess brand on a purely rational basis. They just aren’t. So assessments like those about tech brands can be misleading or inaccurate.

It’s one of the reasons that we rely on loyalty and engagement assessments rather than satisfaction measures. There’s lots of satisfaction measures out there, but they all suffer from the same limitations: to be reflective of the real marketplace you need to measure the degree of consonance – or alternatively, the gap – between expectations and performance. Satisfaction metrics usually don’t measure expectations the way real loyalty measures do because it’s difficult to translate real, emotional consumer expectations to a 1-to-7 scale. So we do it by fusing emotional and rational aspects of the category via a psychological questionnaire (with a test/re-test reliability of 0.93, used in 35 countries in B2B and B2C categories) that tells us how consumers are going to behave. It’s particularly accurate for technology brands.

Following Louis C.K.’s lead, we decided to take another look at how the major US wireless carriers – the guys who have to send the signals to space – ranked in this year’s Customer Loyalty Engagement Index. Our metrics are from nearly 50,000 actual brand customers, 18 to 65 years of age, drawn from the 9 US census regions. Big numbers and real customers who reflect the general US population. Not some group opinion that can’t be generalized to wireless customers at large. Anyway, here’s what consumers from all over the United States thought about wireless carriers and how they rated for loyalty:

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

The really wonderful thing about loyalty and engagement assessments is that they correlate very, very, very highly with consumer behavior, which is the true marketplace acid test. Or jackacid test, depending upon which metric you pay attention to.

If, for example, you were to correlate our CLEI rankings with churn numbers – the wireless industry’s term for customer disloyalty – you’d find a 0.80 correlation, which is the kind of correlation that usually has social scientists doing victory dances on their desktops.

There was a lot of talk earlier this year about the power of hardware driving wireless carrier loyalty. The iPhone being made available on the Verizon and Sprint networks was supposed to create a massive and long-anticipated “anti-loyalty” paradigm shift, with AT&T folks, unwilling to give up their phones, now free to run to another carrier. What happened? AT&T has continued to outsell Verizon and Sprint. And as of the 3rd Quarter of this year, 99% of their iPhone customers remained loyal to AT&T. Part of the reason they remain #1 on our loyalty list.

And market face validity is always better than scalar opinions. Always. For example, the Better Business Bureau, the only public source for company-specific complaints, recently released their 3-year trend data (that’s their reporting interval) showing that AT&T had the fewest complaints and lowest complaint rate of the top-4 wireless providers, even in the face of Mr. C.K.’s observation that folks continue to presume on technology instead of appreciating the actual miracle it turns out to be.

Author Douglas Adams wrote, “Space is big. You just won't believe how vastly, hugely, mind-bogglingly big it is. I mean, you may think it's a long way down the road to the drug store, but that's just peanuts to space.”

Peanuts to customer expectations too. But brands that are able to better meet – even exceed – growing customer expectations always end up at the top of the list.

Even in categories that really do have to go up to space!

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Don’t Eat Too Much Turkey

Some Thanksgiving observations by Jack Prelutsky, the 1^st Children’s Poet Laureate of the Poetry Foundation:

I ate too much turkey.
I ate too much corn.
I ate too much pudding and pie.
I'm stuffed up with muffins
and much too much stuffin'.
Ate all of the food I did buy.

I piled my plate
and I ate and I ate,
but I wish I had known when to stop.
For I'm so crammed with yams,
sauces, gravies, and jams
that my buttons are starting to pop.

I'm full of tomatoes
and French fried potatoes,
my stomach is swollen and sore.
But there's still some dessert,
so I guess it won't hurt
if I eat just a little bit more.

As we pause at Thanksgiving to offer quiet thanks for the blessings in our own lives, and as you enjoy your own celebrations, we hope that gratitude fills every heart around your table. And all of us at Brand Keys wish you and yours a Thanksgiving filled with all the delights and goodness of the season.

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Bracing for Black Friday

Black Friday starts in 4 days. It was traditionally the start of the holiday shopping period, and even though stores started advertising (and discounting) for the holidays months ago, it’s still being touted as likely to be the “busiest shopping day of the year.” It is, after all, the first day after the last major holiday before Christmas and Chanukah. And people generally have the day off for the long weekend to recuperate from over-indulging and, well, shop. Well, not salespeople perhaps, but consumers.

Anyway as a public service we have some suggestions for consumers looking to maximize their Black Friday shopping efforts:

1) Do your homework. Price checking and promotional aggregators are readily available on the Internet.

2) Check store circulars.

3) Check availability and quantities of “door-buster” items ahead of time.

4) Consider downloading a bar code scanner app for faster price comparisons on location.

5) Dress properly. It can get cold standing around parking lots at 4AM at the end of November.

6) Or 12:01AM at certain eager and/or desperate retailers, so wear comfortable footwear.

7) Sequence your shopping initiatives so that you’ve calculated the shortest routes between stores.

8) Make a list. Brand names and model numbers. Don’t get distracted by non-essential sale items. Keep to the list.

9) Bring snacks to sustain you. No need to have to waste precious shopping time standing in line to pay.

10) At the store see if there are additional discounts for using a store credit card.

11) Before checking out do a last minute look for online discount codes.

12) Don’t do this alone. If you can, get yourself a shopping buddy. It doubles your ability to pluck products from the shelves. Or hold a place on those long checkout lines. Or lines for the bathroom.

One final piece of advice: Don’t Panic! If you can’t find the precise item, or can’t deal with the crazed crowds, just remember that the 28^th is Cyber Monday, and with the exception of #5 and #6 on the list, everything else pretty much applies when you’re sitting at your computer.

Good luck and good hunting!

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Holiday Retail Sales, Part 2: Expectations and Delights

Even in light of the small increase in anticipated consumer spending ($824.00, or 2.9% more than last year), the holidays provide a traditional ‘reason to buy,’ and can be a relief valve for some good old fashioned discretionary spending. That desire is showing up in the products and services consumer have on their shopping lists.

In this year’s Holiday Spending Survey consumers indicated they’d use the full range of retail channels available to them. More shoppers say they’ll go online to shop this holiday season, but that’s been a continuing trend for years now.

Discount Dept. Stores	90%
Traditional Dept. Stores	70%
Online	97%
Specialty Stores	35%
Catalogue	70%

Given that consumers are being careful about money, when it comes to bricks-and-mortar stores, consumers will be looking for higher levels of customer service. Ten percent of shoppers indicated that customer service could be a real retail differentiator and a promotional deal-buster, so retailers need to think about delivering real delight this season – beyond “Free Shipping,” which was last year’s “delight,” and this year’s “expectation.”

What are they buying? Shopper responses were pretty similar to last years’, with a slight downturn in electronics, computers, and phones. Also, it looks as if folks will be staying home for the holidays.

Gift Cards	92%
Clothing & Accessories	70%
Electronics/Computers/Phones	50%
CDs/DVDs/Video Games	40%
Jewelry	18%
Personal Care Products/Services	22%
Food & Wine	20%
Books	10%
Home Décor	10%
Travel	1%

Two-thirds of the consumers surveyed (66%) indicated that they would begin their holiday shopping earlier this year, looking for deals and sales before ‘Black Friday’ or ‘Cyber Monday.’ But sales are underway and we expect that it’s only going to ratchet up.

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Holiday Retail Sales, Part 1: The Economy and Consumer Strategies

Retailers will have to provide even greater value this holiday season if they want their share of the small, projected increase in holiday spending. That’s according to our annual Holiday Spending Survey of 16,000 consumers.

In the face of a much slower economic recovery (70% indicated that the economy is still impacting their holiday spending plans) and a much expanded holiday sales period (this year’s started right after Back-to-School sales ended), on average, consumers indicated that they were intending to spend about $824.00, pretty much matching last year’s increase of about 3%. This paltry increase is likely just anticipating and accounting for cost-of-living increases – even in light of expectations for heavy discounting.

But no matter how much consumers spend, the time-honored ‘price-value’ equation retailers have relied on for decades has been transformed by the economy, in-market experience, and consumer expectations into a ‘value-for-dollar’ doctrine. The retail brand, and what it stands for, has become a surrogate for added-value. If retailers really understand consumer expectations and actually know how to address them, they’ll see higher profits. Unfortunately, most don’t.

Retailers are expected to focus on inventory control, discounting, sales, and promotions. But as discounting has become price-of-entry, shoppers are looking for deals before they are looking at brands. Sixty-five percent of shoppers indicated that they’ve already begun looking for sales. Sixty percent indicated they were using on-line shopping and price comparison applications to find them. More than half (56%) indicated that they were going to rely on coupons and customary promotions to save money.

Over the past decade retailers have taught, and consumers have learned, there are always lower prices available someplace. Smart retailers that want a larger piece of a smaller holiday pie will have to leverage their own retail brands and the shopping experience if they expect to receive more this year.

Of course, it’s worth remembering that – other than to retailers – it doesn’t matter how much you spend for the holidays. There’s a Russian proverb that goes, “if you have much, give of your wealth. If you have little, give of your heart,” a sentiment worth keeping in mind, particularly this time of the year.

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X-rated In-flight Services

Yes, “In-flight Services” is the airline category driver for which consumers hold the highest expectations. And no, we’re not talking about Hooters Air, which ceased all operations in April 2008. We’re talking about Ryanair, the Irish low-cost airline headquartered in Dublin.

Michael O’Leary, Ryanair chief, announced this week that he’s looking to offer a pay-per-view pornography service, where X-rated movies can be viewed on passengers’ tablets and smartphones.

We don’t currently measure Ryanair on our Customer Loyalty Engagement Index, so we can’t comment on the percent-contribution readily available pornography makes to airline loyalty and engagement, but our partners in Ireland and the UK are planning to do so in 2012. Measure airlines, we mean.

In the meantime, as you’re planning your travels for the upcoming holidays, here’s how US airlines rank when it comes to delivering against very high customer expectations for in-flight service. None, by the way, even come close to meeting the category Ideal.

1. Southwest
2. Continental
3. American Airlines
4. Delta/Jet Blue
5. United
6. US Airways

While meeting or exceeding expectations is always a good way to build engagement and loyalty, O’Leary has been known to make some really strange proposals looking to boost profits – if not loyalty. Last month he proposed removing all but one toilet on every plane to make room for extra seats. In the past he’s suggested pay toilets on planes. The new thematic suggestion came as the Irish airline's share price increased by 5% and it upgraded its full-year profit by 10%.

A study was done in the UK identifying certain sounds on airlines that heighten passenger anxiety. Engine sounds, air conditioning and loudspeakers, wheels on tarmac. Things like that. Nothing has been reported about film sound tracks – G or X-rated. Stay tuned.

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What Happens When You Start Holiday Advertising in September?

Maybe it was the warm weather that kept consumers from buying parkas last month, but what about the snowstorm?

Or maybe it was the snowstorms that kept consumers away from retail outlets?

Or maybe it was that October is slow because it comes after back-to-school sales time. Which was followed directly with holiday discounts.

Or maybe it was that retailers started advertising holiday sales 3 months ago and many, i.e., 66%, of consumers started their holiday shopping early. Real early.

Some of the retailers posted sales gains – just under 4% as compared to last year – but many missed analysts’ estimates, including Cosco, Macy’s and Target. Same-store sales are down too at many retailers.

Or maybe they’re saving it for Black Friday and Cyber Monday.

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Only One Shopping Day Left ‘Til Tomorrow

Holiday season bargain-hunters shouldn’t be counting on that traditional post-turkey coma this Thanksgiving. Macy’s and Target recently announced that they’d be kicking-off “Black Friday” at a red-eyed12:01 AM this year. As Tiny Tim might have said (had he been a holiday shopper), “God help us, everyone.”

For decades, retailers have looked forward to each year’s “Black Friday.” In fact, the name goes back to the time when stores and businesses would use black ink in their ledgers to record sales. The day after Thanksgiving was a profitable one, and always put them “in the black,” or, in the jargon of the 21^st century, they “turned a profit.” Soon, stores were opening earlier and earlier – first at 6AM, then 4AM, then the very day after Thanksgiving. Retailers felt that an early start would give them the jump on their competition. In fact, last year, Kmart, Wal-Mart, and Sears actually opened on Thanksgiving.

But as we’ve noted before, consumers are coloring outside the holiday lines when it comes to Christmas shopping. In a recent study conducted by Brand Keys, 66% of the 16,000 consumers surveyed indicated they had already begun their holiday shopping, looking for deals and sales before ‘Black Friday’ or ‘Cyber Monday.’ Truly, time and (yule)tide wait for no man.

An additional woe for brick and mortar retailers comes courtesy of online retail behemoth Amazon, who just announced that they will host a 2011 Black Friday sale. The interesting part, though, is that this sale will run from November 1^st up to and including Black Friday. What a move, especially considering that online retail, in contrast to brick and mortar retail, is a 24/7/365 enterprise. Since this sale will last for 25 days, that’s essentially a 600-hour sale taking place directly before all other holiday sales, with Amazon showing us, yet again, how elastic some brands can be to the consumer’s preferences.

But truthfully, it’s not the slashed prices or, necessarily, pushing back Black Friday that will pull consumers in this holiday season. According to 2011 Brand Keys research, Merchandise Range drives loyalty for discount and online retailers, and Store Reputation drives the loyalty for department stores. We know that cutthroat pricing and ho-ho-ho (hum) deals can’t compete with the value provided by retailers who truly understand consumer priorities.

So as an early holiday treat, feast your eyes on the retail brands that got the consumer priorities right in 2011, according to our Customer Loyalty Engagement Index:

Online Retailers:

1. Amazon.com
2. Ebay.com
3. Overstock.com

Discount Retailers:

1. Walmart
2. Kmart
3. Target

Department Stores:

1. Kohl’s
2. Dillard’s
3. Macy’s

Oscar Wilde once said, “Man knows the price of everything but the value of nothing.” We say “A good retailer knows that price isn’t everything but value is all things.” Retailers who understand this are the ones whose cash registers will jingle all the way, both in season and out.

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Category Placeholder Disloyalty

There’s been a lot of chatter about how the economy has shifted consumers’ preferences away from “brands” to what people are classifying as cheaper “brands.” Indeed, there is lot of talk about “brand disloyalty” these days. And yes, tighter budgets – particularly over longer periods of time – usually result in consumers being more careful about with their money.

The difficulty in attributing these shifts in consumer behavior to “brands” is not so much an inaccurate reporting of behavior, it’s that the use of the term “brand” is inaccurate. These shifts aren’t really away from “brands,” not, at least if you define a “brand” as follows:

A brand is a name, term, symbol, or combination thereof that identifies goods and services so strongly imbued with values and articulated and emotional meaning as to be easily differentiated by the public from the competition.

It’s the underlined part that provides the exactness of the characterization of a real brand. The reality is that most product and services – no matter what their level of awareness – aren’t actually “brands” anymore. Most used to be, but likely that was back in the last century. What were once brands quietly morphed into what might more accurately be described as “Category Placeholders.”

Category Placeholders is a more accurate designation for products and services that have high levels of awareness in the categories in which they compete, but whose values are so basic, so rooted in primacy of product or service, and so absent of meaning that they are not meaningfully differentiated from their competition in the minds of the consumer – aka, the “public.” Thus, they are comparable.

And today comparable products or services that have nothing other than their awareness to trade on usually find they have to trade on price. And yes, in tougher economic times people do look for more-economic alternatives. But the market reality is that consumers still won’t pay less for something that doesn’t deliver some tangible, and minimally acceptable, delivery against the category promise. It isn’t just about price, it’s about value for dollar.

No, the reality is “brands” – real brands – are surrogates for value. In a soft economy, with more readily available online price and coupon aggregators, and in the absence of real brand values, people will always go to look for the deal. But what you are seeing isn’t disloyalty to a brand. It’s disloyalty to category placeholders that have been passing as differentiated brands.

This economy serves to remind us all of the unchanging reality of any market place, up or down: price always stands alone when value has left the building. Only true brands can own loyalty. Everything else is just short-term sales.

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