The Impact of Customer Contact on Loyalty

Numerous studies have demonstrated the links between advertising, brand strength, and financial performance. Without the strong quantifiable results of these studies, organizations would not be likely to invest so much money in advertising. A brand that holds a leadership position in its product or service category delivers superior profitability. This profitability provides an opportunity to extend brand leadership through more advertising and investment of capital in acquisitions, product development, and customer service. But research also shows that brand dominance is greatest for products and services where regularity of contact with salespeople is low. ^[19] This disparity implies that the more regular the contact the consumer has with sales or service staff, the more likely the brand will not be delivered in that service contact.

David Burrows with TDA (The Design Agency) in England says that "40 percent of marketing investment is wasted, as ill-informed or demotivated behavior by staff unwittingly undermines the promotional promise. The result is that 68 percent of those who do buy go away because of how they were treated." ^[20]

Customer Service Can be Your Ongoing Brand Reinforcer

Firsthand experience strongly influences consumers about repurchase decisions. In other words, customers become primed by every experience to create more positive memories of earlier brand experiences. Based on their research, Richard Elliot and Kritsadarat Wattanasuwan at Oxford University in England conclude, "lived experience with a brand, through purchase and usage over the life cycle, will tend to dominate the mediated experience of advertising." ^[21] Reinforcing a brand through every customer touch point, therefore, can provide the repetition necessary to inspire repeat purchasing decisions.

Indeed, the Gallup Organization polled six thousand passengers and discovered that, by a ratio of between three and four to one, employees of airlines are more important than advertising messages in building brand loyalty. Banking customers are ten to twenty times more likely to return if the organization has outstanding employees. And in the telecommunications industry, the loyalty of customers is influenced by employees of the organization at a ratio of between three and five to one, compared to advertising. ^[22]

Loyalty is Behavior that Grows Out of an Ongoing Relationship

Advertising may start the flame of attraction to a brand, but reinforcing service experiences fuel the relationship. Figure 2 shows the relationship between the dynamics of advertising, service interactions, and levels of brand loyalty. ^[23] Brand loyalty starts with awareness of the company and its products. "Let's give them a try," no doubt, is initiated mainly through some type of advertising or word of mouth. This leads to a desire to purchase products or services. Once a purchase has been made, as the chart below indicates, a positive brand reinforcing experience will strengthen the consumer's feeling of engagement. This reduces the requirement that advertising be the only driver of further purchasing behaviors.

Figure 2: Levels of brand loyalty

Many companies have invested millions in CRM (customer relationship management) technology to build customer loyalty. But CRM is merely a tool. The essence of human interaction is fundamental for demonstrating who you are to customers. Nonetheless, hundreds of puzzled organizational leaders are wondering why their heavy investments in CRM software systems, extensive scripting of their staff, and even general customer service skills training have not yielded the smart return on investment they expected. ^[24]

One hundred eighty-five major UK companies that spend a great deal of money on CRM technology were surveyed by Sistrum, CRM specialists that have been researching this technology since 1989. Sistrum found that, despite extensive CRM technology, only 8 percent of these 185 companies dealt effectively with something as simple as responding to urgent e-mail inquiries from potential customers. ^[25]

No doubt, customer and staff loyalty would dramatically improve if organizations instead spent only a small portion of what they annually invest in advertising or CRM systems on cohesively branding their internal cultures and educating their staff on how to deliver branded customer service. The impact of investing in staff training on the bottom line has been demonstrated multiple times. The American Society for Training and Development (ASTD), for example, compared the economic performance of companies that spend at the high end on employee training with those companies that do not invest in their staff. It found that for high investors in employee training,

• shareholder "market to book" value was 20 percent higher

• net sales per employee were 57 percent greater

• gross profits per employee were 37 percent steeper ^[26]

There are bright glimpses of brand-building service, including Nordstrom, Disney, Southwest Airlines, Pret a Manger, and Vodafone. Yet even the good organizations that have worked on branding their customer service do not always deliver. One of our Australian TMI colleagues, Tony Aveling, was in a Disneyland store, shopping for memories to take home with him in what he thought was an "amazing wonderland." He told the clerk helping him, "It must be fabulous working at a place like this." This representative of Disneyland (whether a direct employee or not) looked at him and said, "I hate it"—maybe the truth but remarkably off-brand.

^[19]For example, see John Morrill, "How to Improve Profitability through Advertising," Harvard Business Review 4 (March–April 1970).

^[20]David Burrows and Juliet Williams, "Who Is Killing CRM?" Admap (July 2001).

^[21]These brand experts insist, "In order for the meaning of brands to become fully concrete, the mediated meaning derived from advertising and promotion must be negotiated with the lived experience of purchase and usage." Richard Elliot and Kritsadarat Wattanasuwan, "Brands as Symbolic Resources for the Construction of Identity," International Journal of Advertising 17, no. 2 (1998).

^[22]As reported in the London Sunday Times, May 12, 2002.

^[23]This specific model, typical of models used by brand strategists, is the work of Keith Syron, market research consultant, and is reprinted with his permission.

^[24]The Gallup Organization reports that 60 percent of CRM implementation has fallen significantly short of expectations. See William J. McEwen, "Is CRM All Hype?" Gallup Management Journal (April 22, 2202), http://gmj.gallup.com.

^[25]Sistrum Mystery Shopping research, http://www.hewson.co.uk.

^[26]"State of the Industry," American Society for Training and Development, 1998, http://www.astd.org/astd.