Over the last couple of weeks, I have had a chance to reflect on the value of branding to service businesses. Overall, service brands tend to establish weaker relationships with their customers than product brands. This makes them vulnerable when people have a less-than-positive experience.

Last week at the IAA Think Tank (see my previous post here), Chris Clark, head of marketing, planning and business strategy at HSBC, shared an amusing anecdote to highlight the challenge of marketing a bank, recalling the time that a human resource (HR) manager called him and complained that HSBC’s advertising was creating the wrong expectations among new recruits to the bank’s UK branches. The HR manager told him that the recruits thought they were joining a dynamic, cutting-edge company, but that after a year many left, disillusioned by their actual experience. Chris gave the guy short shrift stating, "Well we have two choices. Either you make the bank a better place to work, or I can create a worse brand."

And therein lies the fundamental problem of any service brand. Expectations created by marketing must be met if customers and staff are to be satisfied. As Chris put it in his presentation – referencing the warning commonly heard in the London underground – service brand marketers need to "mind the gap."

An expectations gap can exist for any product or service but it is more common for people to be dissatisfied with a service brand. Consider the following statistics pulled from a 16-country analysis of BrandZ data:

• Because of the risks associated with the choice, people are more likely to believe it is important to choose the right service brand than the right product brand. On average, 57 percent of people say it’s "very important" to choose the right brand of a service, compared to 42 percent for product brands.

• People are less likely to be satisfied with their choice of service than product brands. On average, only 26 percent of people are totally satisfied versus 40 percent for product brands.

• Fewer people are attitudinally loyal to service brands. On average, 46 percent of category users are Bonded to a service brand (i.e., to any brand in the category), compared to 57 percent for product brands.

So why do these differences exist?

I think there are three main reasons why service brands tend to be weaker than product brands:

1. Service brands rely on systems and processes that are often poorly aligned to serve people’s needs, particularly when things go wrong. Take the example of my recent experience of a credit card being cancelled because of possible fraud. A recent merger had left the systems of my financial company in disarray. When I attempted to get a new card issued, I entered into call-center hell, as I was passed from one unit to another trying to find the right person to help me.
2. Human interaction is intrinsically variable. Face-to-face exchanges with a company employee can create strong emotions – good and bad. Take the example of my colleague in the UK who was denied access to the café at Leamington rail station because, as the ticket collector said, she might take the earlier train to avoid paying the higher fare. My colleague was not only refused access to the platform (because, as the supervisor said, "Those are the rules,"), she was made to feel very uncomfortable in the process. This negative experience helped undermine years of satisfaction with the rail service. With better training, the rail staff might have handled things more tactfully.
3. When things do go wrong, service brand customers often feel under-valued, trapped and resentful. They cannot easily switch to a new provider because of contractual arrangements, the work involved in making the change, or because they will be liable for fees if they do. On average, 13 percent of people report they are not satisfied with service brands compared to only 4 percent for product brands. These people do not necessarily behave any differently in terms of their use of the service, but they may well talk about it differently: service brand customers are 38 percent more likely to recommend against a brand than are product brand users.

Given this context, it is not surprising that service brands tend to be weaker than product brands. A strong service brand must have robust business systems that are aligned to meet customers’ needs and staff that is equipped with the knowledge and the authority to handle issues as they arise. Neither one of these things is accomplished overnight.

But the human element – the factor that can make customer experience of a service brand so variable – can also be used to great advantage by these brands. By effectively handling the human elements of the business, a service brand can set itself apart as something truly special.

Consider the difference between buying coffee and making an insurance claim. The act of buying a jar of coffee is unlikely to be disappointing. It’s a predictable low-stress transaction, likely to be completed satisfactorily at least nine times out of ten. But that jar of coffee has relatively little power to alter the mood of the buyer, to make her smile or laugh, or to impact her day in a meaningful way.

On the other hand, a rewarding human interaction, particularly at a stressful time, such as when one must deal with an insurance company after an accident or a natural disaster, can leave a significant impression on a customer. In the United States, the State Farm insurance company uses their advertising to highlight the power of human contact at such times, by featuring testimonies of customers who finish their stories with the company’s tagline: "Like a good neighbor, State Farm is there."  (To view one of the more humorous executions from this campaign, click here.)

At the end of the day, this points to the difference between customer satisfaction and customer loyalty. A customer may be satisfied with a series of successful transactions but not feel loyal to the brand. Marketing is not just about creating expectations, it is about creating a willingness to forgive and forget when things do go wrong. Good marketing communications can help insulate the brand by reminding customers of the good experiences they’ve had with the brand, and making sure that they understand what the company is trying to do right (even if it does not achieve it all the time).

Are there any service companies which you feel a strong attachment to? If so, which ones and why? Please let us know.

 

This entry was posted on Wednesday, July 2nd, 2008 at 4:23 pm and is filed under Brands. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Print this Page