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Value Promise versus Value Delivery

Ajit Rao1

AbstractThis article is about the inevitability for organizations to move away from offering ‘commodity’ customer service to an ‘on brand’ customer service. This article focuses on the need for organizations to align the promises that they are making while com-municating the benefits of their brand with their current and potential customers, with the actual delivery of that promise. The benefits of such an alignment will result in stronger brand equity, greater customer centricity, increased levels of loyalty and concrete differentiation in the marketplace. The article begins with a review of the current situation of ‘on brand’ service gauging some of the reasons as to why delivery is not aligned with the promises made by the brand, and showcases some success stories. The article then discusses a tool that provides organizations with the ability to translate the brand promise into service delivery at every customer interaction resulting in authentic and memorable ‘moments-of-truth’ for the customer. This arti-cle is based on the author’s experiences, observations, empirical evidence, and formal and informal discussions with his clients and non-clients.

KeywordsBrand promise, on brand service, alignment, promise–delivery matrix, brand equity

The Business Situation

Worldwide, the understanding of customer satisfaction has been evolving ever since it became popular in the 1970s and 1980s, attributed largely to the gaining prevalence of the various quality movements at that time. In the 1990s, it dawned upon organizations that measuring satisfaction alone did not explain business out-comes well and hence organizations moved to measuring loyalty (in its various avatars). The 2000s saw the entry of the Net Promoter Score (NPS; Reicheld, 2006) which became very popular because of its simplicity. Many organizations use the NPS and several amongst them have experienced that while the NPS is

Value Creation and Customers

Journal of Creating Value 1(1) 91 –100

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Corresponding author:Ajit Rao, 3rd floor, Block B, Sree Rama Deevena, No. 21, Ulsoor Road, Bangalore 560042, IndiaE-mail: ajit.rao@nielsen.com

1 Nielsen, Bengaluru, India.

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simple to measure, it does not necessarily explain business outcomes well nor are the findings of an NPS study easily managed. Since we manage what we measure, it is quite important for organizations to measure the right elements, and by meas-urement we do not simply mean a customer satisfaction index or a NPS score, but ensuring that all that is measured is aligned to the firm’s and brand’s strategy.1 It must be mentioned here that the relationship between customer satisfaction and business outcomes is often not easy to understand (Keiningham, Gupta, Aksoy & Buoye, 2014), because of the large number of imponderables involved. The rela-tionship is far more complex than it is made out to be and often unfolds over a long period of time (Chandra & Rao, 2012).

My belief is that the approach to customer satisfaction, including its measure-ment, is going to change in the near future. I see a number of seemingly unrelated events across the globe. However, when I look at all these events through a certain lens, I see a distinct pattern emerging, that of ‘On Brand Service Delivery’ (Barlow & Stewart, 2004). On brand service delivery is about ensuring that the brand experience is completely aligned to the brand promise. Let us look at some of these discrete events that define this pattern.

1. A study of mobile service brands by Nielsen in Asia, indicates that, those brands which are strong on both brand equity2 and customer satisfaction simultaneously, have 14 points higher market share compared to those mobile service brands that were strong either on brand equity or on customer satisfac-tion (but not both). Interestingly, this same study indicated that while telecom service providers are well differentiated on brand equity, there was very little difference on customer satisfaction. This meant that most telecom service providers offer an undifferentiated customer service or experience.

2. If one reviews customer satisfaction questionnaires (Chandra & Rao, 2012), one would find that in any sector, there are minor differences between the questionnaire of one brand of service provider and another. This indicates that most companies today are offering and measuring ‘com-modity’ customer service. The questionnaires are mostly similar, especially in the factors (themes) and attributes that are covered in the survey.

3. J.D. Power IV, in his book (Denove & Power, 2006) on customer satisfaction, provides an interesting fact about the Toyota Camry. Toyota found that in 2004, about 3 million people walked into their showrooms to buy a car but about half walked out to buy a competitor product. They found that it was not for reasons of product quality. Some bought other brands because of price and some for other reasons. But Toyota found that nearly 15 per cent of customers did not find the sales experience up to the mark. The book quotes ‘after years of gaining market share on the shoulders of product quality, Toyota now real-izes that future growth will depend on providing a sales experience that matches the quality of its vehicles’. Clearly Toyota understands the impor-tance of aligning its service quality to its product/brand quality.

4. An E&Y Asia Pacific Retail Banking study (E&Y Asia Pacific) suggests that the customer satisfaction scores of most banks is going up. Yet, the share of the wallet is decreasing, possibly because most customers are unable to differentiate one bank from another, based on quality of service,

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and hence, customers end up choosing a bank/product based on charges, fees or interest rates.

5. Customers who visit Disney Land sometimes have to stand in long queues to buy tickets for a ride. Yet, these customers are not dissatisfied when they walk out of Disney Land because of the delivery of Disney’s promise of a ‘magical experience’. In order for customers to truly experience the ‘magic’, Disney makes a lot of effort to deliver the same at every moment of truth. Consider for example, the hitching posts (Connellan, 2003) in the streets which are cleaned every night so that they look bright and shiny every morning. Imagine, if so much attention is paid to the hitching posts, the kind of detailing that goes elsewhere into the making of the Disney experience truly magical. For example, Cindrella’s castle has bigger stones at the bottom than those at the top. This makes the castle look much bigger than it actually is (Connellan, 2003). All this detailing ensures that the experience and feel is truly ‘magical’, as promised. Disney, it appears, is so obsessed with the detailing that the same customers see different things from the same painting or mural, every time they visit Disney (Connellan, 2003)! Thus making every visit ‘magical’. It is not just about the detailing, it is also about people. The cast (as Disney employees are called) are encouraged to drop whatever they are doing and offer to help, when they see a guest (as Disney calls its customers) in need (Connellan, 2003). If they see guests puzzling over a map, they offer to help. If someone is try-ing to take a group photo, they offer to take a picture so that everyone can be in the picture. It is such delivery of the magical kingdom promise that makes customers go back to Disney Land over and over again! Long queues matter less to them than the magical experience! Disney’s service is ‘On Brand’.

6. The Southwest Airlines brand promise is about fun and low prices (Freiberg & Freiberg, 1998). In order to keep prices low, Southwest Airlines does not provide passengers with meals, does not provide baggage transfers, does not offer reserved seats and is very focused on short hauls and secondary airports. In order to keep their service ‘fun’, they take care to hire employ-ees with a certain attitude. These ‘fun employees’ effectively are able to engage their customers on every flight. The employees crack jokes, do fun things and all these are spontaneous because of the kind of employees that are recruited and the culture that Southwest Airlines nurtures. Southwest Airlines knows that it’s not just about delivering the promise but also about not doing anything that does not relate to the promise!

7. Some organizations are creating a new role in their structure—Head of Customer Experience, distinct from Head of Marketing. Here is a descrip-tion of this role from an online advertisement of one company.

Following an extensive review of the brand, we are about to relaunch our brand with a new positioning. The Head of Customer Experience will play a vital role in ensuring that we place the customer and the insight central to all our business decisions and that all our processes, procedures, and initiatives that touch the customer adhere to the brand positioning. (emphasis added)

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Why Is This Happening?

Over the past several years, managers have been largely preoccupied with improv-ing operational effectiveness resulting in the rise of the quality movement, the six-sigma movement, etc. A natural fallout of these improvement efforts was the overall enhancement in customer satisfaction.

Organizations are also benchmarking themselves with their competitors, not only within their markets but also with companies in other regions. So when a company makes a change in any of its processes other companies quickly follow those best practices. This tendency is resulting in ‘raising the bar’ when it comes to service delivery at customer ‘moments-of-truth’.

Often, the vendors/partners of service providers in any industry are common, for example, network equipment providers in the telecom space, software compa-nies in the banking space or management consultants. These vendors learn from one organization and then transfer that very knowledge to another organization. This results in similar equipment, processes and advice to organizations.

As a result, customer satisfaction of most organizations is going up. However, in the process, there is hardly any differentiation in the services delivered from a company in one sector to another.

Another recent global Nielsen study of mobile service providers and retail banks indicates that the standard deviation of brand equity is much higher than the standard deviation of customer satisfaction. This suggests a high variation in brand equity but low variation in customer satisfaction. The customer satisfaction index was also found to be higher than the brand equity index for each brand. Importantly, this pattern was observed in both the categories (mobile services and retail banks) and in each of the 11 countries in which the study was conducted. The inference is clear—while service providers are able to differentiate them-selves on ‘brand’ in the eyes of the customer, they have not been able to do a good job at differentiating themselves on service delivery. Most service providers in mobile service and retail banking seem to be offering what we are now calling a ‘commodity service’.

This is best explained in the words of Michael Porter in his path-breaking arti-cle in HBR (Porter, 1996).

After a decade of impressive gains in operational effectiveness, many companies are facing diminishing returns. Continuous improvements have been etched on manager’s brains. But its tools unwittingly draw companies toward imitation and homogeneity. Gradually, managers have let operational effectiveness supplant strategy. The result is zero sum competition, static or declining prices, and pressures on cost that compromise companies’ ability to invest in the business for the long term.

The challenge for most organizations is not to reduce their efforts on operational effectiveness but to do this in a meaningful manner that will allow an organization to truly differentiate itself based on service quality. How can an organization do this?

Every organization exists because it creates some value or benefit for its customers. These values needs to be (a) relevant to the customer; (b) act as a

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differentiator from competition; and (c) should also be sustainable in the long run. This warrants for a clear positioning and is in the realms of strategy.

However, creating the right values is not good enough for success. The organiza-tion needs to deliver these values/benefits to its customers at every touch point, at every interaction that the customer has with the service provider. Simply put, the organization needs to deliver what it promises—effectively and efficiently. Effectively—in the context of ensuring that the customer experiences that the ser-vice provider delivers is in line with all that is promised. Efficiently—in the context of delivering these services quickly, ‘first time right’ and at low cost/no wastage.

The outcomes to an organization that creates the right values and delivers them well cannot be over-emphasized. It translates into high brand equity and therefore profits which in turn results in an increasing base of loyal and bonded customers (Figure 1).

Figure 1. The Promise—Delivery ContinuumSource: Author.

This also means that the organization is not only well-differentiated in the promises it makes, it is also well-differentiated in the way it delivers service.

Whenever a customer satisfaction report on the retail sector is made public, Walmart often finds itself at the bottom of the table (Keiningham et al., 2014) and then all the gurus talk about the actions that Walmart must take to improve cus-tomer satisfaction. On the other hand, Walmart is one of the most profitable retail companies. If one looks at it from Walmart’s point of view, they probably do not care (and thank god for that!). This is because Walmart’s promise is ‘everyday low prices’. They do not promise great service and ‘everyday low prices’ is the reason customers walk into Walmart and the organization delivers this consistently day on day, year on year. They are able to do this because all their systems, processes, people are geared to delivering the lowest price possible. Walmart has made a clear and definite promise and ensures that their promise is delivered effectively and efficiently.

This entire concept seems intuitive and simple, yet implementing this concept remains a challenge. One reason is the organizational structure. Most firms have a marketing head that drives the positioning or strategy and they also have a head of Customer Service that drives service quality or service delivery. These two positions rarely work together; often they compete with each other for resources/budgets and also for the next promotion to CEO/MD. My experience is that marketing often blames customer service for poor service delivery leading to customer churn. Similarly, customer service blames marketing for promising the

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earth to acquire customers, promises that cannot be met. For a brand promise to convert into a differentiated brand delivery there is a need for these two functions—marketing and customer service—to collaborate with each other. The other key reasons for non-delivery of brand promise revolve around benchmarking, common vendor pool and excessive focus on operational effectiveness as discussed earlier.

Having said the above, the most critical reason in my opinion, is the way an organization views the strategic importance of service quality. Janelle Barlow and Paul Stewart (2004) have suggested that organizations can follow four types of service strategies. We have adapted these service strategies without losing their essence and Figure 2 explains the same:

Figure 2. The Four Service Strategies

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Organizations that look at service as a cost or service as a necessity will never end up building great service companies. Those organizations that view service as a competitive edge focus their energies in improving customer satisfaction. However, over time, while these companies do indeed improve customer satisfac-tion, they do so at the cost of poor differentiation compared to competition. One can see this in sectors such as mobile phone services, automobiles, retail chains and consumer banking. Hence despite improving customer satisfaction, these sec-tors end up competing on price and promotions.

Those organizations that view service delivery as an expression of the brand are the ones that will not only improve customer satisfaction but will also be seen as being ‘different’ compared to its competitors. The outcomes are stronger brand equity, higher levels of customer loyalty and brand ambassadors leading to higher profits and growth! How can an organization bring about such alignment?

A Recommended Approach

In order to be able to align the brand promise with the brand delivery one needs a mechanism to be able to do that. The Promise–Delivery Matrix (Chandra & Rao, 2012) is one such mechanism that can help an organization bridge the gap between promise and delivery (Figure 3).

Figure 3. The Promise–Delivery MatrixSource: Author.

In this matrix, the benefits or brand promise is listed on the Y-axis. In the above telecom example, the benefits offered by the service provider to its customers are ‘Always Available’, ‘Convenience’, ‘Speed’, ‘Friendly Employees’ and ‘Entertainment’. On the X-axis, are listed all the points of interaction with the customers. In the above example, the moments of truth are ‘Network’, ‘Activation’, ‘Recharge/Billing’, ‘Call Centre’, ‘Store’ and ‘VAS’.

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Every cell in the matrix contains attributes that are specific to a benefit and specific to a moment of truth. For example, in the call centre area, one could have attributes such as, ‘The call centre is open 24 hours a day’ (availability), ‘one can connect to the call center in the first attempt’ (speed), ‘the call centre executive resolved my problem in the first call’ (speed), ‘the call center executive was warm and friendly’ (friendly staff) and so on. The brand promises of the telecom com-pany are now being aligned to the delivery at the call centre and when surveying customers this is what is asked in the research questionnaire as well. All the other cells can be filled up in a similar fashion. In some cases, the cells could be empty, for example network and friendly employees.

The mobile service provider can now measure and manage the alignment of the brand promise with the brand delivery. This will not only enhance the brand equity of the mobile service provider but also differentiate its service from those of its competitors. The mobile service provider also no longer is focused on improving operational excel-lence but has brought back strategy into service delivery.

Since, the telecom company is now measuring how its promises are being deliv-ered; it will also be able to track, across time periods, the impact of each of the benefits/values on brand equity. From the matrix illustration above, the organiza-tion could very well find that the contribution of ‘Entertainment’ is going up over time while the relative impact of ‘Always Available’ is going down or vice versa. In a similar fashion, the service provider can also track the impact of each of the touch points (‘Network’, ‘Activation’, etc.) on brand equity, across time. Besides the impacts, the firm can also track how customers are rating each of these benefits/values and touch points compared with its competition. Using the impact and per-formance information, the organization can define its future direction. This kind of approach can provide clear and insightful information to organizations.

In order for the organization to be able to deliver value in line with the brand promise, the organization will need to make some structural changes or bring in mechanisms that lead to better co-operation between the teams that create the value and the teams that deliver that value (essentially marketing and customer service). In the absence of such cooperation, organizations will continue to meas-ure and manage ‘Commodity Service Quality’ as against ‘On Brand Customer Experience’. The structural or other changes could relate to common KPI’s for marketing and customer service (brand equity, alignment index—for example). It could mean compulsory job rotation—from marketing to customer service and vice versa at senior levels. It could mean that key policies of the company (includ-ing recruitment, training, advertising, investments) are aligned to the brand promise. It could mean high level monthly alignment meetings chaired by the COO or CEO.

Whether organizations like it or not, they will have to move towards an ‘On Brand Customer Experience’. Organizations cannot view service delivery or customer experience independent of the brand and only as improvements in operational excellence; organizations will need to bring strategy back into service delivery by ensuring that the brand promise is delivered at every

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interaction point with the organization. Indeed, the management and measurement of customer satisfaction will no longer be about just plain satisfaction but about relevant satisfaction or satisfaction in the context of truly aligning the experience with the brand promise. In essence—how well the brand promise is internalized into the actual delivery of the service, at every customer interaction or moment of truth. Most organizations today manage customer satisfaction from an inside–out view. Hence, the focus is usually on improving processes, systems, training of people, etc., since the lens of the organization is on the delivery points such as the call centre or the store rather than on the customer’s needs. However, customers do not care if an organization has a call centre or not. Customers do not care whether the firm has 500 stores or 1000 stores. What customers want are benefits like convenience or availability or speed or problem resolution. When the organization looks at customer satisfaction as an ‘On Brand’ customer experience, the lens of the organization is ‘outside–in’. The starting point becomes the customer. The focus of the organization is not just on improving the processes but improving, reinforcing and enhancing the benefits or promises such as convenience or speed that the organization makes to its customer. This approach needless to say makes the organization customer centric and as we all know such an approach has a positive impact on the brand equity and hence loyalty and profits.

To conclude:

1. Organizations need to clearly define what it will promise to its customers. The promise(s) should be relevant to its customers, well-differentiated from competition and sustainable.

2. However, this by itself does not help the organization. The organization needs to deliver these promises at every touch point with the customer—effectively and efficiently. In order to manage this, the firm will need to redefine the way it measures customer satisfaction to ensure that the meas-urement revolves around the alignment of delivery to the promises made. The promise–delivery matrix is a tool that can help organizations build the alignment.

3. The organization needs to communicate the promises it makes to its cus-tomers in a consistent manner. The communication could also include aspects that the service provider will not offer its customers (as in the case of Southwest Airlines).

4. The benefits of such an approach are immense to any organization. It means a customer-centric organization, it means an organization that is not only able to differentiate itself on the promises it makes but also on its experience or service delivery and therefore it means stronger brand equity leading to loyalty and profits.

Notes 1. For emphasis, some key words and sentences have been italicized by the author. 2. Nielsen has a proprietary way of measuring brand equity amongst consumers/customers.

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