Wednesday, April 30, 2014

How Vehicle Recalls Drive Automotive Brand Loyalty

In the face of a traffic jam of recent auto recalls, it may help automotive manufacturers to also recall their industry has faced times like these before. It turns out that some auto brands come out with less brand-damage than others. But why is that? Why do some auto brands manage to steer through a recall better than others?

Better PR? Better lawyers?  More discounts? More advertising? More, better advertising and discounts? Not insofar as we can tell. All those things turn out to be table-stake moves right out of the “Automotive Manufacturers’ Recall Handbook: What to Do When Cars Go Bad,” with all the companies doing pretty much all the same things at pretty much all the same budget levels. So, all things being pretty much equal, we ask again: Why do some auto brands come out of a recall better than others?

To a large degree, the answer can be found in a marketing model called “The Rule of Six,” which is related directly to consumers’ levels of emotional engagement, and thus loyalty, to a brand. This has been tested, re-tested, applied to B2B and B2C categories, and has been independently validated. It works like this: Brands that possess higher levels of engagement and loyalty before a crisis are six times more likely to be given the benefit of the doubt after some catastrophe transpires. Like a big recall for an automotive brand. There are other “six-times” benefits related to sales and recommendations and shunning of low(er) price offers, but in this instance, we looked at what effects the recent, problematic recalls had on the brand engagement levels of four major brands; Ford, GM, Hyundai, and Toyota. Here’s what we found.

The emotional brand engagement benchmarks – the pre-recall engagement levels ­– are from our Customer Loyalty Engagement Index, where, precisely because of “The Rule of Six,” category rankings correlate very highly with positive consumer behavior toward brands. Pre-recall assessments come from the auto brand’s customers (compared to the Category Ideal, calculated to be 100%), and post-recall assessments were collected from customers who had their cars recalled.

A number of years ago, for reasons we’ve previously discussed in our blogs and column, when it came to engagement and loyalty, GM was parked toward the bottom of the list of brands (about 25) we examined annually. Through lots of problems – including having to be bailed out by the U.S. government, i.e., you, the taxpayer – they managed to drive the brand up the list to find a pretty good spot, currently at the bottom of the top-third of brands, but below the other 3 brands we examined.

The GM brand ended up with the biggest post-recall decline of 10%, because their own customers are, in fact, less engaged and, therefore, less inclined to give GM the benefit of the doubt. Of course, as opposed to the other brands’ recalls, GM’s ignition switch problem has been linked to 13 deaths and the fact that GM knew actually knew about the flaw for at least a decade, although, as “business is business,” it’s likely they had some calculation of what their downside potential liability was likely to be.

That said, on last week’s conference call, GM CEO Mary Barra said so far the bad publicity regarding the recall of 7 million cars and trucks has not had a “meaningful impact” on sales. No, she was not standing too close to the exhaust pipe of a Chevy Malibu at the time. In fairness, it’s worth noting that she also said “. . . Although it is early. . . ,” which is an accurate observation of current conditions. Loyalty and engagement metrics are leading-indicators of consumer behavior – harbingers of what’s down the road for a brand. But customer engagement and loyalty assessments are not the only things down for GM. Last week GM reported net income for the 1st Quarter fell about 85% due to costs directly associated with the recall. And, we’re also guessing, staggering amounts of legal fees.

Earlier last week GM attorneys asked a federal bankruptcy judge to dismiss dozens of lawsuits related to GM’s handling of the defective ignition switches and – wait for it – to bar similar cases in the future. This is related to GM trying to duck litigation based on what’s contained in their post-bankruptcy restructuring agreement. Yes, the bankruptcy bailout you paid for. Oh, and the SEC has opened an investigation too. But that was last week and, legal issues notwithstanding, the bad publicity has clearly has resulted in an erosion of loyalty and engagement for the brand and has created doubt in the minds of those who at one time had GM on their car-buying shopping lists.

And you know what they say about consumers and brand-doubt. When consumers doubt, they don't.

Connect with Robert on LinkedIn.

Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Tuesday, April 22, 2014

When Brands Blunder: Failure IS Apparently An Option

It was Napoleon Bonaparte who advised, “Never interrupt your enemy when he is making a mistake.” That guidance would seem to apply just as much today as it did back then.

True, back then it was uttered in a different context. More “Battle of Austerlitz” than “Battle of the Brands,” but if your “enemy” is a competitive brand, a little inside intelligence about how they’re bungling things can only help you plan a little smarter. Marketing isn’t war, you say? Remember the Cola Wars? OK, in marketing era-time closer to Napoleon’s time, but still! And today, what about Microsoft vs. Google? Or Microsoft vs. Apple? Or Apple vs. Samsung? Or, most recently, Taco Bell vs. McDonald’s?

Sure, it’s a different battlefield today. With lots of marketers rushing to play with the newest digital thing, with ads looking to tell stories, entertain and create awareness instead of differentiating, engaging, and motivating, it’s become a battleground where sharing and ‘likes’ have become a surrogate for real ROI.
And when that happens, the brand sometimes gets left behind in the rush to rush. When that happens, mistakes happen. Well, more than mistakes. More like blunders. Real blunders.

In a more complex, consumer gate-kept marketplace, with consumers hotwired to their mobile devices, the reality is when it comes to making blunders, brands really can’t survive long enough to make them all themselves. All right, maybe if you’re Blackberry or JC Penney, but not normal brands looking to prosper and grow. So it would be very helpful to have an early-warning system in place. Something that lets brands learn from the mistakes of others. A resource. Something that makes them aware of what others are not doing well.

Happily, we’ve just identified a new resource for just that. It’s called “Brand Blunder,” a very smart and snarky web crawler that scours the brand and marketing worlds to identify those moments when brands wreak havoc on themselves. When they blunder. Really blunder. Want to avoid the mistakes of others, more importantly, learn from the mistakes of others? We recommend you take a moment to investigate this very new, very shrewd brand and marketing resource.

Napoleon also observed, “Victory belongs to the most persevering, and the ones that make the fewest blunders.” Well, OK, not that last part. He probably would have said “faire des erreurs” or “faux pas” anyway. But if nothing else, Brand Blunder can help start your week off feeling smarter and more brand-empowered than many of the blundering brands out there, some of which may actually be your competitors.

Check it out. Because, folks, you just can’t make this stuff up!

Connect with Robert on LinkedIn.

Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Wednesday, April 16, 2014

Starbucks Revives The Unique Selling Proposition

The Unique Selling Proposition, or “USP,” is a marketing proposition that originated in the early 1940’s at the Ted Bates advertising agency, some 20 years before what’s depicted on Mad Men. The USP originator was advertising pioneer, author, and agency VP, Rosser Reeves. USP got picked up by agencies all over the world, and quickly became a pretty ubiquitous concept, although the actual use of the term has faded somewhat into advertising history. The approach, however, is alive and well and currently residing in Starbucks “Barista Promise” ads.

Before discussing the ads, it might be worth it to offer up some background to the concept, given the concept is nearly 75 years old. According to the writings of Mr. Reeves, the USP was supposed to give an ad campaign a little extra jolt. Something that would impel the consumers across the line of indecision to preference and, ultimately to loyalty. Back then “Unique” referred to an inimitable feature of the brand and (back then) that usually referred to a rational aspect or feature of the product or service. “Selling” referred to value. Did the unique thing you were trumpeting make a big enough contribution to what we call “brand engagement” today, so that consumers felt the product better met their expectations? Finally, “Proposition” was the promise that if the consumer went with your brand with the certain unique aspect or claim, i.e., the selling point, that they would receive a specific benefit.

Not a bad theoretical foundation. Actually a pretty good one. Even today where process and production re-engineering has essentially changed the rational, functional aspects of most categories into table-stakes, and where the “jolt” consumers feel comes more fluidly and effortlessly when it is emotionally-based, being able to point to a meaningful point of differentiation can, indeed, end up being the critical factor consumers use to choose you versus the competition.

Mr. Reeves had a couple of caveats to all this: The proposition had to be something the competition could not say or – wait for it – was not currently saying, an important nuance. And, of course, the USP had to be important and engaging enough to engender positive behavior toward the brand, i.e., make money, attract new customers – good stuff like that.

Starbucks has been running full-page newspaper ads and TV ads under the heading “Our Barista Promise: Love your beverage or let us know. We’ll always make it right,” which we have to say is a great example of a USP, particularly one where the competition could do it, but isn’t. Talking about it, we mean. Differentiation can come from a brand talking about something that the competition isn’t. And it doesn’t get any more emotional than loving something, be it your car, or your smartphone, or your beverage. If you can do that in a meaningful and engaging way, you’ll wake something up in consumers and you’ll see consumers behaving more positively toward your brand.

All that said we took a look at the Out-of-Home Coffee category in our Customer Loyalty Engagement Index to see how consumers of these various coffee purveyors rated them as to barista-prep of their beverages, which turned out to be the most-important engagement driver in the category.  By drilling-down into this driver we can see how satisfied consumers of these various coffee providers were with barista-created coffee beverages, measured against their collective category Ideal (100%). Here’s how they measured up:

Dunkin’ Donuts        96%
Starbucks                 95%
Tim Hortons             93%
MacDonald’s            92%
Coffee Bean             91%   

Not as much difference as one would like for a truly differentiating brand positioning statement, but certainly well within the parameters Rosser Reeves set for a “Unique Selling Proposition.” Now all they have to do is make it their own. It was Bette Midler who advised, “Cherish forever what makes you unique, because you’re really a yawn if it goes away.” And we think it’s fair to predict that last thing purveyors of caffeinated beverages want in return for its brand positioning efforts is a yawn.

Connect with Robert on LinkedIn.

Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

Wednesday, April 09, 2014

Most Loyal Fans In Baseball

Last week the cry of “Play Ball” echoed across the nation, and baseball fans cheered. Some just louder than others. Normally, we would have released the results of our 22nd annual Brand Keys Sports Fan Loyalty Index before the first pitch, but because being a fan is such an emotional phenomenon, this year we decided to wait for fans to put just a little distance between opening day buzz and the actual fan loyalty scorecard.

The Brand Keys Sports Fan Loyalty Index provides metrics that correlate very, very highly with viewership and purchase of licensed merchandise, and via interviews with 250 self-declared fans in each team’s SMSA it provides more than just gate-count. The Sports Loyalty Index was designed to help professional sports team management identify precise fan loyalty rankings in their home and national markets and provide insights that identify areas, particularly emotional ones, that need strategic brand coaching.

Current 2014 MLB top-5 loyalty leaders and bottom-5 basement team standings are listed below (Note: #’s in parentheses are team rankings for 2013)

Top-5 Teams – 2014                      2013 Rankings

1. St. Louis Cardinals                             (#4)
2. Philadelphia Phillies                           (#2)
3. Boston Red Sox                                 (#6)
4. Atlanta Braves                                    (#5)
5. San Francisco Giants                         (#3)

Bottom-5 Teams – 2014               2013 Rankings

30. Houston Astros                                 (#30)
29. New York Mets                                  (#26)
28. Seattle Mariners                                (#27)
27. Arizona Diamondbacks                     (#20)
26. Colorado Rockies                              (#21)

The four emotional drivers of fan loyalty include:

Pure Entertainment:
 How well a team does. But more importantly than the win-loss ratios, how exciting is their play? Sure, everybody loves a winner, but it’s important to note that win/loss ratios do not entirely govern fan loyalty. Even winning a World Series doesn’t immediately jump a team to the top of the loyalty list. It can add up to 20% to a team’s loyalty strength and that certainly moves you up the list, but it doesn't load the loyalty bases for a team if you are deficient in the other three areas, which are emotionally-based factors that must be taken into account:

Authenticity: How well they play – as a team. And what support is provided for that? A new stadium is an icon for genuineness and substance being invested in the team. But more often – because it happens more often – a new manager can help lift this driver. It signals a change and when it is seen to affect how the team plays as a team, loyalty levels usually move up. It certainly didn’t hurt the Phillies. But you can’t buy Authenticity. The Yankees (now #6) had the highest payroll in baseball last year, nearly twice that of the Cardinals. Look who’s #1.

Fan Bonding: Are players particularly respected and admired? We recognize that professional baseball players are the best-of-the-best, but if you really have to think about “who might that be on my team?” or “Hmmmm, let me think,” or “Wait! Jeter. Oh, right. Never mind,” your score on the Fan Bonding driver is likely to take a bad hop.

History & Tradition: Is the game and the team part of fans’ and community/family rituals, institutions and beliefs? This is most emotional of values when it comes to Major League Sports, and is the driver that drives fans to angry outbursts when their team is at the bottom of the loyalty roster. It is also often the fan loyalty driver that accounts for nearly all the loyalty that exists for a team. For example, it’s worth noting it’s been 106 years since the Chicago Cubs won a World Series, and 69 years since they won a National League pennant, but they always fall into the top-5 teams when it comes to strength on the History and Tradition driver. It’s good to be strong there, but you need some strength in the other drivers as well. Otherwise, after a while, the team can find itself being called “out” by the folks who are supposed to be fans.

All teams – all brands, for that matter – can benefit from increased loyalty levels as they are leading-indicators of positive consumer behavior (however you define that for the category in which the brand competes), but as baseball is traditionally called America’s “National Pastime,” there’s a real emotional connection for fans. And, as this just the start of the 2014 season, we can offer fans whose teams are not at the top of this year’s list, a nod a and a quote from Hall of Famer, Yogi Berra: “It ain’t over till its over.”

For fans of other sports, 2014 rankings for the NBA will appear just before playoffs later this month, the NHL in time for the Stanley Cup, and the NFL rankings in time for their kickoff in September.

In the meantime, “Go (FILL IN THE NAME OF YOUR TEAM HERE)!”

Connect with Robert on LinkedIn.

Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.