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‘Disruption’ has become a highly accepted concept in business and management, an event one can only expect to happen at some point in time, whether in production, marketing, distribution and retail, or in other functions of business. Disruptive innovation, mostly technological and digital, can be helpful in fixing market weaknesses due to lack of progress in methods and processes applied by ‘legacy’ companies; operational inefficiencies; and insufficient competition in a market. A disruptive innovator may also succeed by capturing consumer needs hidden or left ignored by existing complacent competitors. But disruptive innovation is not a magical cure; actually, it tends to be quite a radical form of cure. Innovations of this kind have the potential to destabilise a market, create disorder and confusion, and cause dysfunction if the transformation is spiralling out of control, a matter of real concern to all parties involved.

Disruptive innovations have been introduced in various industries or categories of products and services. It often occurs when a technological company imports a method or a tool developed in the hi-tech community into a specific product or service category, whose agents (e.g., providers, customers) are mostly unaccustomed and unready for. Yet the innovation can hit roots if it meets a large enough group of innovative or tech-orientated consumers who welcome the new solution (e.g., a way of acquiring or using a service). Thereafter, incumbent competitors find themselves obligated to adopt, if capable, similar or comparable methods or tools in their own operations. High-profile examples include: (a) Uber that expanded the concept of taxi-rides and ridesharing; (b) Airbnb that disrupted the field of hospitality and short-term lodging (‘home-sharing’ vs. hotels and guest houses); (c) Netflix that altered the habits of television viewing. Also, companies in a new sector of financial technology (‘fintech’) offer digital tools (mobile app-based) for consumers to manage their banking accounts, budgets and investments, challenging ‘legacy’ banks and financial service providers.

Certain technological innovations turn out, however, to be disruptive across-the-board. For instance, online social media networks and digital marketing methods (reliant on Big Data and analytic techniques) have been influencing dramatically how companies approach customers and interact with them in many product and service categories (beyond technological goods or information and communication technology services). Furthermore, developments in artificial intelligence (AI) and robotics promise to introduce even more significant changes, from manufacturing to marketing and retail, and in the functioning of various products (e.g., smart home appliances and devices, the ‘upcoming’ driverless car).

Much damage may be caused if the innovative alternative solution is incomplete or the planning of its implementation is flawed. Overall, everyone should be prepared for a turbulent period of resistance, adjustment and adaptation that may extend until the ‘new-way-of-doing-things’ is assimilated in the market, or rejected. The story of an episode regarding taxi transportation at the international airport near Tel-Aviv exposes how wrongful introduction of a disruptive innovation in this service domain can lead to blunder and service failure. Mistakes made because of flawed planning in a highly sensitive process of market transformation may turn the disruption into a mess-up instead of improvement of the service.

The management of the Israel Airport Authority (IAA) launched earlier this year (2017) a new bid for taxi service operators to ride passengers into and from Tel-Aviv (Ben-Gurion) International Airport. In the end of May the 10-year permit of the primary taxi company licensed to provide service in terminals at the airport expired; the IAA wanted to open the service to competition in expectation that it will lead to fare reduction and perhaps other improvements (e.g., availability, time keeping of taxi journeys).

  • The competition is concentrated in fact on picking-up passengers from the airport; if prohibited, taxi cars will have to return empty after dropping off their former passengers at the flight departure terminal. A primary taxi company was given the advantage.
  • Note: Shuttle or minibus service providers are allowed in addition to take passengers  to more distant cities like Jerusalem and Haifa.

Only two companies responded and participated in the bid: the incumbent service provider (“Hadar-Lod”) and the mobile app company Gett that mediates taxi service. The veteran taxi company has been riding passengers to and from the airport for 40 years. It has definitely developed proficiency in riding air travellers over the years but there were also misgivings about its practices, linked to its status as mostly an exclusive taxi service for individual passengers (alone, family and friends). A few years ago the Ministry of Transport intervened by publishing and issuing a calculator of recommended fares to help passengers ensure they pay fair prices.

Gett (originally GetTaxi, founded in 2010) is managing a network connecting subscribed taxi drivers with passengers through its mobile app. The company is now operating in over 100 cities in four countries (Israel, United States, United Kingdom, Russia). The location-based app facilitates matching between a passenger and a driver, from service ordering, through journey planning and pricing, and concluding with payment via Gett. Unlike Uber, Gett is working only with professional licensed taxi drivers and is not involved in supporting informal ridesharing journeys by unauthorised drivers (e.g., UberPop). The app of Gett is focused on benefits of convenience of ordering (no street hailing, no phone call), efficiency of matching through the network, and of course promising a lower journey cost.

Still, the company hires its subscribed taxi drivers but is not their employer — they divide the fare income between them to the will of Gett. The company is commending itself on its website for higher pay to drivers, in-app tips and 24/7 live support, motivated by the idea that if Gett treats drivers better, they will reciprocate by treating their riders better. However, the arrangement has repeatedly emerged as a source of friction. Gett has changed its name, removing ‘Taxi’ from the title, to allow for extending its brand into a variety of delivery services (e.g., food, parcels) to domestic and business clients.

  • Taxi cars of member drivers in Gett’s network are marked by a label with its logo on the car’s side. Taxi drivers that belong also to a traditional local taxi company (‘station’) may carry its small flag on top of the taxi. However, in recent months taxi cars can been seen more frequently in Tel-Aviv area carrying only a flag of Gett.

The absence of more traditional taxi companies from the bid could be the first sign of a problem. Those companies may have found it not worthwhile for them to commit to provide regular service at the airport. But as a replacement, Gett is not truly a ‘physical’ taxi company and has unique characteristics. It leaves the operation of taxi service by Gett open to much ambiguity. Drivers subscribed with Gett can ‘double’ by riding passengers either via Gett’s app or with a standard taxi meter installed in the car. Are traditional taxi companies ‘hiding’ behind drivers also associated with Gett? But if Gett had the permit, would it allow drivers in its network to take passengers also without its app? (i.e., leave money on the table from such journeys.) Yet, Gett’s drivers have to choose in advance in what periods they act as standard taxi drivers or as taxi drivers riding passengers on call from Gett’s app. This situation could lead to confusion: under what ‘hat’ are the drivers allowed to get in and out of the airport and at what time are they allowed to choose what type of passenger-customer to ride.

Furthermore, the service could be binding and unfairly restrictive for passengers who are not subscribed customers of Gett, especially when arriving from abroad. There could be several reasons for passengers to find themselves in an inferior position: Passengers may not have a mobile phone that supports software applications; they may not feel comfortable and skilled in using mobile apps; or passengers may not be confident in paying through a mobile app (e.g., prefer to pay taxis in cash). It may be hard to believe but such people do exist in our societies in different walks of life. It is also known that smartphone users are selective in the number and sources of apps they are willing to upload to their devices. It could be futile to try to force consumers to upload a particular app, but it would be especially unfair to require users to upload an app of Gett so they can be driven away from the airport. The IAA should have not allowed from start an outcome in which a company of the type of Gett becomes a single provider of taxi service at the airport, primarily for riding returning residents or visiting tourists (the latter may not even be aware of Gett beforehand). The ‘disruption’ would have actually become a distortion of service, leaving customers either with no substitute or with confusion and frustration.

But something else, awkward enough, happened. The two companies reached an agreement to bid a joint offer in which they committed to lower fares by 31% on average from the current price level. It is unclear who initiated the move, yet it is reasonable that Gett was about to offer a much lower price for taxi rides affordable by its model and platform, and probably the management of the Hadar-Lod taxi company was alerted and in order to secure its stay in business felt compelled to match such an offer or simply join hands with Gett. The drivers belonging to Hadar-Lod thought otherwise and started at the end of May a spontaneous strike. The two bidders tried to reach a new agreement but eventually the veteran company had to retreat. One cannot be certain that drivers with Gett would have co-operated — the new price level may have been affordable for Gett but not necessarily worth the ride for the drivers. Apparently, the recommended official price was already or about to go down 7%, and with the further reduction committed in the bid offer, the taxi fare would drop on average by 38%. One would have to work many more hours to fill the gap. The cut was too deep — it may have worked well for the companies and their management but could never work for the drivers. (Note: An explanation from a taxi driver with Gett helped to describe the situation above.)

  • Having taxis from both companies in service would have provided some remedy with a transportation solution for every type of customer-passenger. But a certain mechanism and a person to supervise would be needed to keep order on the taxi platform. For instance, travellers subscribed with Gett may schedule their ride while in the luggage hall, and there would be Gett taxis waiting ready to pick them up. One would have to make sure there are enough taxi cars available for the other passengers.

That bid is now cancelled. The IAA declared that it would soon publish a new bid, and until its results are known, any licensed taxi driver can arrive and leave the airport with passengers as long as they register with the IAA. Are the official recommended prices still in place? Who will regulate the operation and watch that taxi drivers respect consumer rights of their passengers? Who will supervise in particular the allocation of passengers to authorised taxis at the arrival terminal (i.e., dispatching)? Answers will have to be found on ground. It is no surprise that the new situation has been received with apprehension by consumers-travellers and taxi drivers alike.

Consumers will have to learn from experience or relatives and friends what are acceptable price ranges for rides into and from the airport, and form anew their references for a fair price and the highest (reservation) price they are willing to pay. They may also set a low price level under which the reduced price may be suspected as “too good to be true”. A discounted price by a single driver to attract passengers, which deviates too much from a ‘normal’ price, should alarm the customer-passenger that something could be wrong with the service, or else there is a logical reason for the reduction. For example, the taxi driver may suggest ridesharing a few arriving passengers to a common destination area in Tel-Aviv — some passengers may be happy to accept, but the terms must be stated in advance. It is unclear how long the interim period will last, but the notions about pricing described above may remain valid even afterwards in a new service regime.

Making changes like adding competition, and especially by involving a disruptive innovation in the service domain, can improve matters. However, the process must be handled with care and watched over to avoid the system from derailing during the transformation. In this case, the IAA could and should have planned and managed the bid and implementation of its plausible outcomes more wisely. At this time, there must be at least one traditional taxi service operator allowed in addition to an innovative service mediated by a company like Gett at the airport, and rules have to be set and respected. Rushing into any drastic and innovative transformation of service will not do good for its chances of success, just invoke confusion and resentment — sufficient time and support must be given for the customers-passengers and taxi drivers to accommodate and adapt to the new service settings at the international airport.

Ron Ventura, Ph.D. (Marketing)

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One of the more difficult and troublesome decisions in brand management arises when entering a product category that is new to the company: Whether to up-start a new brand for the product or to endow it with the identity of an existing brand — that is, extending a company’s established brand from an original product category to a product category of a different type. The first question that would probably pop-up is “how different is the new product?”, acting as a prime criterion to judge whether the parent-brand fits the new product.

Notwithstanding, the choice is not completely ‘black or white’ since intermediate solutions are possible through the intricate hierarchy of brand (naming) architecture. But focusing on the two more distinct strategic branding options above helps to see more clearly the different risk and cost implications of launching a new product brand versus using the name of an existing brand from an original product category. Notably, the manufacturers, retailers and consumers, all perceive risks, albeit from the different perspective of each party given its role.

  • Note: Brand extensions represent the transfer of a brand from one type of product to a different type, to be distinguished from line extensions that pertain to the introduction of variants within the same product category (e.g., flavours, colours).

This is a puzzling marketing and branding problem also from an academic perspective. Multiple studies have attempted in different ways to identify the factors that best explain or account for successful brand extensions. While the stream of research on this topic helpfully points out to major factors, some more commonly agreed upon, a gap remains between the sorts of extensions predicted to succeed according to the studies and the extensions performed by companies that happen to succeed or fail in the markets in reality. A plausible reason for missing the outcomes of actual extensions, as argued by the researchers Milberg, Sinn, and Goodstein (2010), is neglecting the competitive settings in categories that are the target of brand extension (1).

Perhaps one of the most famous examples of a presumptuous brand extension has been the case of Virgin (UK), from music to cola (drink), airline, train transport, and mobile communication (ironically, the origin of the brand as Virgin Music has since been abolished). The success of Virgin’s distant extensions is commonly attributed to the personal character of Richard Branson, the entrepreneur behind the brand: his boldness, initiative, willingness to take risks, and adventurism. These traits seem to have transferred to his business activities and helped to make the extensions more credible and acceptable to consumers.

Another good example relates to Philips (originated in The Netherlands). Starting from lighting (bulbs, now more in LED), the brand extended over the years to personal care (e.g., face shavers for men, hair removal for women), sound and vision (e.g., televisions, DVD and Blue-Ray players, originally in radio sets), PC products, tablets and phones, and more. Still, when looking overall at the different products, systems and devices sharing the Philips brand, they can mostly be linked as members in a broad category of ‘electrics and electronics’, a primary competence of the company. As the company grew with time, launched more types of products whilst advancing with technology, and its Philips brand was perceived as having greater experience and good record in brand extensions, this could facilitate the market acceptance of further extensions to additional products.

  • In the early days of the 1930s to 1950s radio and TV sets relied for operation on vacuum tubes, later moving to electronic circuits with transistors or digital components. Hence, historically there was an apparent physical-technological connection between those products and the brand’s origin in light bulbs, a connection much harder to find now between category extensions, except for the broad category linkage suggested above.

Academic research has examined a range of ‘success factors’ of brand extensions, such as: perceived quality of the parent-brand; fit between the parent-brand and the extension category; degree of difficulty in making an extension (challenge undertaken); parent-brand conviction; parent-brand experience; marketing support; retailer acceptance; perceived risk (for consumers) in adopting the brand extension; consumer innovativeness; consumer knowledge of the parent-brand and category extension; the stage of entry into another category (i.e., as an early or a late entrant). The degree of fit of the parent-brand (and original product) with the extension category is revealed as the most prominent factor contributing to better acceptance and evaluation (e.g., favourability) of the extension in consumer studies.

Aaker and Keller specified in a pioneer article (1990) two requirements for fit: (a) the extension product category is a direct complement or a substitute of the original category; (b) the company, with its people and facilities, is perceived as having the knowledge and capability of manufacturing the product in the extension category. These requirements reflect a similarity between the original and extension product categories that is necessary for successful transfer of a favourable attitude towards the brand to the extension product type (2). A successful transfer of attitude may occur, however, also if the parent-brand has values, purpose or image that seem relevant to the extension product category, even when the technological linkage is less tight or apparent (as the case of Virgin suggests).

  • Aaker and Keller found that fit, based especially on competence, stands out as a contributing factor to higher consumer evaluation (level of difficulty is a secondary factor while perceived quality plays more of a ‘mediating’ role).

Volckner and Sattler (2006) worked to sort out the contributions of ten factors, as retrieved from academic literature, to the success of brand extensions; relations were refined with the aid of expert advice from brand managers and researchers (3). Contribution was assessed in their model in terms of (statistical) significance and relative importance. The researchers found  fit to be the most important factor driving (perceived) brand extension success in their study, followed by marketing support, parent-brand conviction, retail acceptance, and parent-brand experience. The complete model tested for more complex structural relationships represented through mediating and moderating (interacting) factors (e.g., the effect of marketing support on extension success ‘passes’ through fit and retailer acceptance).

For brand extensions to be accepted by consumers and garner a positive attitude, consumers should recognise a connectedness or linkage between the parent-brand and the category extension. The fit between them can be based on attributes of the original and extension types of product or a symbolic association. Keller and Lehmann (2006) conclude in this respect that “consumers need to see the proposed extension as making sense” (emphasis added). They identify product development, applied via brand (and line) extensions, as a primary driver of brand growth, and thereby adding to parent-brand equity. Parent-brands do not tend to be damaged by unsuccessful brand extensions, yet the authors point to circumstances where greater fit may result in a negative effect on the parent-brand, and inversely where joining a new brand name with the parent-brand (as its endorser) may protect the parent-brand from adverse outcomes of extension failure (4).

When assessing the chances of success of a brand extension, it is nevertheless important to consider what brands are already present in the extension category that a company is about to enter. Milberg, Sinn, and Goodstein claim that this factor has not received enough attention in research on brand extensions. In particular, one has to take into account the strength of the parent-brand relative to competing brands incumbent in the target category. As a starting point for entering the extension category, they chose to focus on how well consumers are familiar with the competitor brands vis-à-vis the extending brand.  Milberg and her colleagues proposed that a brand extension can succeed despite a worse fit with the category extension due to an advantage in brand familiarity, and vice versa. Consumer response to brand extensions was tested on two aspects: evaluation (attitude) and perceived risk (5).

First, it should be noted, the researchers confirm the positive effect of better fit on consumer evaluation of the brand extension when no competitors are considered. The better fitting extension is also perceived as significantly less risky than a worse fitting extension. However, Milberg et al. obtain supportive evidence that in a competitive setting, facing less familiar brands can improve the fortune of a worse fitting extension, compared with being introduced in a noncompetitive setting: When the incumbent brands are less familiar relative to the parent-brand, the evaluation of the brand extension is significantly higher (more favourable) and purchasing its product is perceived less risky than if no competition is referred to.

  • A reverse outcome is found in the case of better fit where the competitor brands are more highly familiar: A disadvantage in brand familiarity can dampen the brand extension evaluation and increase the sense of risk in purchasing from the extended brand, compared with a noncompetitive setting.

Two studies performed show how considering differences in brand familiarity can change the picture about the effect of brand extension fit from that often found without accounting for competing brands in the extension category.

When comparing different competitive settings, the research findings provide a more constrained support, but in the direction expected by Milberg and colleagues. The conditions tested entailed a trade-off between (a) a worse fitting brand extension competing with less familiar brands; and (b) a better fitting brand extension competing with more familiar brands. In regard to competitive settings:

The first study showed that the evaluation of a worse fitting extension competing with relatively unfamiliar brands is significantly more favourable than a better fitting extension facing more familiar brands. Furthermore, the product of a worse fitting brand extension is preferred more frequently over its competition than the better fitting extension product is (chosen by 72% vs. 6%, respectively). Also, purchasing a product from the worse fitting brand extension is perceived significantly less risky compared with the better fitting brand. These results indicate that the relative familiarity of the incumbent brands that an extension faces would be more detrimental to its odds of success than how well its fit is.

The second study aimed to generalise the findings to different parent-brands and product extensions. It challenged the brand extensions with somewhat more difficult conditions: it included categories that are all relevant to respondents (students), and so competitor brands in extension categories are also relatively more familiar to them than in the first study. The researchers acknowledge that the findings are less robust with respect to comparisons of the contrasting competitive settings. Evaluation and perceived risk related to the worse fitting brand competing with less familiar brands are equivalent to the better fitting brand extension facing more familiar brands. The gap in choice shares is reduced though in this case it is still statistically significant (45% vs. 15%, respectively). Facing less familiar brands may not improve the response of consumers to the worse fitting brand extension (i.e., not overcoming the effect of fit) but at least it is in a position as good as of the better fitting brand extension competing in a more demanding setting.

  • Perceived risk intervenes in a more complicated relationship as a mediator of the effect of fit on brand extension evaluation, and also in mediating the effect of relative familiarity in competitive settings. Mediation implies, for example, that a worse fitting extension evokes greater risk which is responsible for lowering the brand extension evaluation; consumers may seek more familiar brands to alleviate that risk.

A parent-brand can assume an advantage in an extension category even though it encounters brands that are familiar within that category, and may even be considered experts in the field: if the extending brand is leading within its original category and is better known beyond it, this can give it a leverage on the incumbents if those brands are more ‘local’ or specific to the extension category. For example, it would be easier for Nikon leading brand of cameras to extend to binoculars (better fit) where it meets brands like Bushnell and Tasco than extending to scanners (also better fit) where it has to face brands like HP and Epson. In the case of worse fitting extensions, it could be significant for Nikon whether it extends to CD players and competes with Sony and Pioneer or extends to laser pointers and faces Acme and Apollo — in the latter case it may enjoy the kind of leverage that can overcome a worse fit. (Product and brand examples are borrowed from Study 1). Further research may enquire if this would work better for novice consumers than experts. Milberg, Sinn and Goodstein recommend to consider additional characteristics that brands may differ on (e.g., attitude, image, country of origin), suggesting more potential bases of strength.

Entering a new product category for a company is often a difficult challenge, and choosing the more appropriate branding strategy for launching the product can be furthermore delicate and consequential. If the management chooses to make a brand extension, it should consider aspects of relative strength of its parent-brand, such as familiarity, against the incumbent brands of the category it plans to enter in addition to a variety of other characteristics of product types and its brand identity. However, the managers can take advantage as well of intermediate solutions in brand architecture to combine a new brand name with an endorsement of an established brand (e.g., higher-level brand for a product range). Choosing the better branding strategy may be helped by better understanding of the differences and relations (e.g., hierarchy) between product categories as perceived by consumers.

Ron Ventura, Ph.D. (Marketing)

Notes:

1. Consumer Reactions to Brand Extensions in a Competitive Context: Does Fit Still Matter?; Sandra J. Milberg, Francisca Sinn, & Ronald C. Goodstein, 2010; Journal of Consumer Research, 37 (October), pp. 543-553.

2.  Consumer Evaluations of Brand Extensions; David A. Aaker and Kevin L. Keller, 1990; Journal of Marketing, 54 (January), pp. 27-41.

3.  Drivers of Brand Extension Success; Franziska Volckner and Henrik Sattler, 2006; Journal of Marketing, 70 (April), pp. 18-34.

4. Brands and Branding: Research Finding and Future Priorities; Kevin L. Keller and Donald R. Lehmann, 2006; Marketing Science, 25 (6), pp. 740-759.

5. Ibid. 1.

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The digital transformation of customer service in retail banking is changing the depth and form of relationships of banks with their customers. The increasing shift to direct digital self-service channels re-shapes how consumers interact with retail banks. As explained in the first part of this article, the effects of this transformation can be seen and felt at physical bank branches and away from the branches through remote online channels (including web-based service platforms and mobile apps). Furthermore, ‘customer service’ practically entails the customers’ operations of regular account maintenance but also their acquisition of various banking services and financial products (e.g., deposits, loans, equity and bonds). Hence the digital transformation is affecting broadly and simultaneously retail banking service as well as marketing to customers.

The focus of the first part of the article was a review of the ways in which the five main banks in Israel approach the digital transformation in the domain of retail banking, and especially how the banks choose to balance between the digital and human modes of interaction and service in their relations with customers. It considered the observed forms and methods of implementing their approaches and discussed their implications regarding the digital-human balance. Particular attention was awarded nonetheless to the effects that digital channels of interaction may have on the premises of retail bank branches — their organisation, interior design, and functions.

The approach taken by Bank Mizrahi-Tefahot may be seen as surprising to digital advocates because it is ‘going against the stream’, yet it is tapping on some sensitive nerves of  consumers. The advertising campaign of the bank — carrying the title “On the things really important, there is no substitute to humanity” — commits not to sacrifice contact with human bank representatives in the sake of digital self-service. This is a promise of reassurance for many bank customers who still do not feel comfortable and confident with over reliance on supposedly self-sufficient digital channels. But a question remains to address: Does the campaign stand on a solid strategic ground? One would want to know if there is substantive managerial commitment behind the campaign and a plan to execute it.

A declaration of the bank on its latest strategic plan offers an affirmative answer. According to a press release published by Bank Mizrahi-Tefahot in November 2016, the strategic plan for the years  2017-2021 stands on three legs: (a) intensifying the focus on business sectors and expanding activities directed to them; (b) sustaining and solidifying the bank’s stature as a leader in the retail domain; and (c) being a central operator of financial assets in banking (22 Nov. ’16, origin in Hebrew). Regarding the second goal on retail that is of our interest here, the bank specifically qualifies its goal as “providing personal and human service supported by innovative technology”. In this statement the bank emphasises the order of priority between ‘personal and human service’ and technology, whereof the role of the latter is to facilitate and enhance customer service. As explained by Bank Mizrahi-Tefahot, the strategy is on the one hand service-driven and on the other hand aimed at reducing prices by applying a unique and advanced technological platform (i.e., the platform’s purpose is increasing efficiency in operating and delivering customer service).

The strategic statement clarifies that the bank is not about to put its technologies ahead of its customers, how it treats and serves them. It maintains that the role of the digital technologies is to increase efficiencies (e.g., saving time, facilitating processes) and not to replace human service. Bank Mizrahi-Tefahot is not shy on utilising customer-facing digital tools and facilities for interface and information processing, but it does so as a supplement to human service. Already six years ago the bank initiated a ‘hybrid banking’ programme designed to smooth communication between a customer and his or her ‘personal banker’ at the branch via phone, e-mail or SMS services (they called it ‘an ideal combination between personal and digital’). Lately the bank has recognized a need to highlight the connection between ‘personal’ and ‘human’ as contra to the increasing reliance on digital service channels in other banks. The intention declared by the bank to increase its number of branches also asserts that it does not intend to make itself more distant from customers and less physically accessible to them. It is perhaps not a ground-breaking attitude yet it offers stability, credibility, and confidence in bankers to be there in person for the customers.

However, there are still certain aspects the bank can further develop: For instance, applying digital technology is not just about efficiencies and prices, especially when utilised in direct customer-facing services; how customers experience the digital service is highly important (e.g., it should be visually fluent, easy-to-use, effective). Digital self-service should not claim to improve customer service overall by replacing human service, but it can contribute to improved customer service as a whole. The strategy statement is not clear about the experience of customers when applying digital technologies. Bank Mizrahi-Tefahot should also clarify how web-based and mobile app elements of its platform are integrated in its overall view of personal-human and digital customer service (e.g., enabling chats with human bank assistants and not with virtual assistants [chatbots]). Additionally, as suggested in Part 1, the bank can develop its own service model for combining digital self-service stations with human assistance and guidance within a branch.

Let us now take a brief look at the strategy in other Israeli banks:

Bank HaPoalim is seeking to reflect flexibility in its balance between human and digital banking. The bank’s Head of Retail Division said in October 2016: “we are not requiring the customers to choose between human and technological, instead providing them with a right combination between the two” (press release, 26 Oct. ’16, origin in Hebrew). The declared strategy of the bank is offering human, personal and technological banking. However, other expressions used by the bank suggest that the balance is weighed more heavily to the side of technology. For example, the bank uses  ambiguous terminology such as “more advanced and human technology“; its real priority or emphasis is revealed in the impressive expression “digital empowerment of the customers”. The new services the bank is taking special pride in, as presented in the press release, are a ‘virtual branch’ in a mobile app and human guidance in its new ‘Poalim Digital’ branches on how to use an iPad for banking services.

The senior bank executive is not insensitive to consumer concerns about the use of advanced technologies — he recognises that some customers perceive them as threatening, creating an emotional distance, and lacking in personal touch. Yet the bank appears to be pushing too hard to impose technologies that many customers may not be ready for yet, and implicitly pushes its human bankers to the sideline. Bank HaPoalim is trying to strike a difficult balance between the technological (digital) and human factors by attempting to be ‘human as well as personal as well as technological’ altogether.

In Bank Leumi digital banking (‘Leumi Digital’) is put at the centre, as manifest in its website-based platform, information ‘kiosks’ in physical branches, and its mobile app. More recently the bank added its ‘virtual assistant’ chat utility for customers to seek assistance in using the online and mobile account applications. In its strategy statement, Bank Leumi refers to “organizational and technological capabilities, efficient and innovative” (origin in Hebrew). It also commits to upgrading its service model and value propositions as part of a customer-centered culture. However. the bank does not make specific reference to integration between ‘technological’ and ‘human’ in its relations with (domestic) customers. As commented in Part 1, the mix between digital and human modes of service seems to be incomplete, as if working in separate compartments (‘silos’) of service.

The vision of Bank Leumi is accordingly to “lead initiating and innovative banking for the customer”. Overall, the key words most salient in the vision and strategy statements of the bank are technology, efficiency and innovation. There is no specific mentioning of the human factor. Bank Leumi must be credited for its consistent and prolonged support for providing banking services through direct channels that free customers from arriving to the branches. In the late 1990s this bank was a pioneer in Israel in establishing a ‘direct bank’ based on its telephony call centre. Later on a website was added. Whereas the initial entity was cancelled, the foundation was laid out, tried and proven for further development and assimilation in the main service operations of the bank. Advanced digital technologies, as they are better known these days, could come only natural to this bank. The next challenge of Bank Leumi would be to streamline its connections between human and digital modes of interaction and service to customers both in physical and virtual/remote domains. Admittedly, the suggestion made here may be contrary to the leading view at the bank; however, customer service should feel seamless and unified, not  like living in two different worlds of ‘digital banking’ and ‘human banking’.

Bank Discount is actually delivering a very clear message about the place it reserves for ‘humanity’ in its approach to customer service. Its actions on transition to digital banking seem to be more mild compared with the two leading banks. The strategic plan of the bank for 2015-2019 states: “We at Bank Discount have set before our eyes the experience of personal, human and professional service for all our customers. We believe that we should integrate humanity with professionalism, and to that aim we direct our actions every day” (launched in 2014, origin in Hebrew). The words are very positive: the bank is truly seeing the customer at the centre, not the technology, and the way to serve customers better is to do it professionally (possibly the bank’s sought competitive advantage).

Bank Discount is doing whatever is necessary to utilise up-to-date technologies in banking but not as proactively and forcefully as in Bank HaPoalim or Bank Leumi. Its direct banking operations include the TeleBank call centre, a web-based platform and a mobile app for account management; it also offers a personalised information app My Finance (providing market data etc.) and has recently introduced a ‘virtual assistant’ utility. Bank Discount may still be required to be more explicit about its view on the digital front, but foremost it can further clarify its approach to integrating digital and human modes of service and balancing between them.

Bank Benleumi is going along, combining traditional and digital banking facilities and utilities. Unfortunately, however, the bank does not disclose much information about its strategic plans, views or priorities. Hence it is difficult to tell where the bank is heading in implementing digital banking services nor how they would be balanced vis-à-vis human banking modes of interaction and service.

In its profile (Hebrew) Bank Benleumi states that it is “acting to increase its hold in the retail sector” with reference to its acquisitions of two smaller banks (and their branch networks) aimed at particular segments, and completing the merger of an upscale private banking business as a division within the bank. It also lists the general types of banking services and advanced digital channels that are seen as vital to strengthening its hold in the retail sector. As other banks it delivers direct digital banking services through a web-based platform and a mobile app, information ‘kiosks’ and a SMS update service; Bank Benleumi was early to launch a ‘virtual assistant’ utility (named ‘Fibi’ after the ‘mother’ holding company). Yet the bank remains vague about the nature of customer experience one can expect in future at the bank in its branches and in virtual digital domains, and specifically what place a digital-human balance will take in customer relationships.

Banks need to plan and configure carefully how to tie together the different advisory and operational (transactional) services they provide to their customers in human and digital modes of interaction, especially so when performed in the premises of a physical branch. These modes should not be just combined but integrated and complementary. It should be done both cleverly and sensitively.

A digital-reliant branch should prove what advantages it avails customers to patron such a branch as opposed to conducting their operations on the website or a mobile app: for example, it could be more convenient to work on devices and screens at the digital branch, offer value-added functionalities, be easier to find information or to complete successfully the required banking tasks. Nevertheless, a mixed human-digital branch can provide an important additional advantage: a customer who has just finished to search independently for product information on a work-station or watch an instructional video at the branch, can right away turn to one of the professional (human) advisors to clarify remaining issues and perform relevant actions with the help of the banker-advisor. That is an essential implication of a ‘digical’ (digital + physical) approach to retail banking (Baxter and Rigby, 2014).

It is not suggested in any way that branches of the future in every bank should look and function all alike. However, each retail bank can use a core model of a ‘mixed’ digital-and-human branch and adjust its design in every aspect according to a degree of balance its management sees fit and desirable between the digital and human modes of interaction and service, assigning more weight to the digital factor or the human factor. Moreover, a bank may choose its preferred balance in a typical branch, balance the human and digital factors across a few branch formats, and not least co-ordinate between services provided in a branch and away from the branch. Banks will undoubtedly find they have a lot of flexibility and room for creativity in setting the appropriate and differentiated strategy for each of them.

Ron Ventura, Ph.D. (Marketing)

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The digital transformation of retail banking is clearly apparent by now. The way consumers manage their banking accounts (e.g., deposits, savings, investments) and run their finances keeps changing by relying on digital channels and tools to perform more and more account operations.  Most dramatically in recent years, the organisation, design and function of retail bank branches is going through re-conception and change.

Two fundamental dimensions of this transformation may be detected:

(A) Away from a branch: Account operations are shifted to digital channels of direct banking detached from bank branches. That is, banking operations are performed more frequently without requiring customers to visit a branch (e.g., using an online web-based account-management platform or a mobile app), and furthermore without interacting with human bank representatives (e.g.,  talking by phone with a representative at a bank’s call centre).

(B) At a branch: The physical environment of a bank’s retail branch is transforming by re-allocating space, facilities and human versus digital resources at the branch between banking activities. This means distinguishing between banking activities that are performed in self-service by the customers using digital working-stations or ‘kiosks’, and activities that involve human bank professionals. The transformation is affecting the site of a branch all around, within the branch and areas next to it. A salient implication of this process is the elimination of human tellers within a branch; many of the ordinary account operations will be performed with minimal or no interaction with a bank representative within a branch or in adjacent areas. Interaction with human bank professionals will be mostly reserved to consultation and for purchasing more complicated bank services (e.g., loans) or financial products (e.g., investments).

Obviously those changes are not wholly new — customers are familiar with and use various self-service, direct digital channels, as they add-up, for different lengths of time (e.g., ATMs, enhanced digital information kiosks , websites, mobile apps). The current change is in acceleration and extent of utilisation of digital technologies: the frequency in which customers are using them; the degree of customers’ freedom in choosing between digital and human modes of service for any particular activity; the types of services or products that will be diverted to digital platforms (e.g., certain loans will be arranged without meeting a bank advisor in person, perhaps by video conference); and re-shaping the environment and activity in banks’ branches.

The article explores the digital transformation by reference to the five main banks in Israel. It will especially discuss how banks balance between the human and digital factors in serving their customers. Some additional aspects of the transformation will be explained in the course of this review.

To remove any doubt, it must be emphasised that all five banks are engaged in implementing digital self-service platforms and facilities in serving their customers and offering them financial products (in addition to the now ‘classic’ direct banking by call centres). They differ, however, in how they propose and plan to balance between their digital and human channels and modes of service.

The two leading banks in Israel (Bank HaPoalim [‘workers’] and Bank Leumi [‘national’]) seem to take the transition to digital banking the most seriously and most extensively. These banks compete neck and neck for many years, swapping between them the first and second market positions occasionally, yet both are distinctively greater in scale and market dominance than the three other main banks. Both banks appear to follow more closely on the vision of digital banking transformation conveyed last year by Dr. Hedva Ber, Banking Supervisor at the central Bank of Israel, and her projection of how this ‘digital revolution’ should proceed. Nonetheless, these two banks differ on some issues in their approach to implementing the transformation.

Bank HaPoalim is advancing an initiative to establish digital-reliant branches — five branches already exist, two of them in the Tel-Aviv area. Customers utilise tablets (iPads) or larger screens on table-tops to perform their needed operations in self-service in principle; they may ask, however, for assistance from a bank representative in the branch. There are no visible desks for personal meetings with banking advisors for consultation. The branch in northern Tel-Aviv, for example, is one large open space with long white desks in the centre, a large screen on the wall, and a sitting area with personal ‘working stations’ on the left side of the branch. It has a look resembling an Apple store, elegant and flashy. One cannot find in this space the traditional partitions where customers can sit for more private and intimate consultations with banking professional advisors. This digital branch is built on site of the old-model branch.

This is a rather radical move that may precede too early the formation of mixed branches recommended and applied in other countries as the core model. Indeed most of the bank’s branches (more than 260 in total) are still more traditional; the bank plans to reduce the number of its branches and replace some of those traditional branches with new digital ones. Yet by doing so the bank could miss an important stage of preparing the public for the change.

Bank Leumi is going in a somewhat different direction, encouraging its customers to utilise mostly its direct channels that do not involve coming to one of its branches. At the branches, the bank is in major progress to eliminate all its counters of human tellers; customers are referred to enhanced information kiosks (‘Leumi Digital’) that also allow for some account operations, and to ATM machines. These stations are located in a separate interim lobby area before entering the main hall of the branch, which is dedicated only to personal sittings with banking advisors. The bank is working overall to reduce the number of its branches (currently about 250).

The bank is taking a positive move in the right direction, and yet it is not complete because the bank does not truly mix digital with human service resources in the branch. What Bank Leumi is doing is more of a re-arrangement than genuine re-modelling. Indeed it eliminates the function of human tellers, but it does not integrate the digital and human modes of service in a hybrid model and design.

Many bank branches in the country have three ‘service areas’: (a) A couple of ATMs and digital kiosks outside the branch (i.e., on street front); (b) A few ATMs and digital kiosks in a protected lobby area that customers may enter and use also outside working hours of the branch; (c) A main hall of the branch where customers can receive service or consult more privately with bank representatives and professional advisors. Some branches may have a ground floor for assistance usually with the more basic functions and a second floor for consulting on more complex issues. Bank HaPoalim created a new branch version primarily reliant on advanced digital facilities; Bank Leumi eliminated human service for basic teller functions but keeps the digital facilities outside the branch per se — it does not welcome customers using those stations to enter inside the branch.

However, the intention of a new model being developed for bank branches is to entail a combination of digital and human modes of service working next to each other. In a common hall customers can use one of the digital working stations or sit with an advisor on any specific issue more complex and financially significant. A customer may use the digital station while standing or sitting on a couch, read materials on products and perform operations. He or she may also watch instructive videos on a large screen. It should be a much more convenient and pleasant setting than using the information kiosk machine. A bank representative should be available for guidance and assistance with the digital self-service stations. But when more serious consultation becomes necessary the customer can approach one of the expert advisors sitting in partitioned meeting corners. Digital and human channels are thus in immediate access close to each other.

  • Best examples of layout, design and organisation of the new form of bank branches around the world can be found in the website of The Financial Brand: Branch Design (also see their latest Design Showcase from Fall 2016). Give special notice to the mixture of self-service stations and private zones for consultation with bank experts-advisors within the branch.

Banks may build in addition to mixed primary branches also secondary smaller digital branches (e.g., in shopping malls) to provide a convenient, quiet and pleasant place for customers to work on their bank accounts vis-à-vis using a bank’s app on their smartphones. Being similar to the model of the new “Poalim Digital” branches, they are not supposed to come in place of a cross-mode primary branch. Likewise, offering working stations in a lobby, to be used almost any hour, adjacent to the branch is not supposed to be in place of a self-service digital zone within the branch with a human assistant  (formerly a teller) ready to guide if needed. Bank Leumi should not confuse the two types of self-service by digital means. Moreover, the bank must have a digital zone integrated in the overall design of the branch that will be welcoming, visually pleasant, convenient and friendly.

Two of the smaller main banks (Bank Discount and Bank Benleumi [‘international’]) maintain at large the traditional branch format and offer in parallel a variety of digital channels with their facilities (e.g., information  kiosks) and applications (e.g., website, mobile app). They do not make yet any clear or particular stand on the balance they see fit between the digital and human modes of service. Hence, while they make sure to be up-to-date on the technological front of digital direct banking services, there is no apparent major move beyond that which would reflect a more strategic approach to a desirable human-digital balance.

But then there is Bank Mizrahi-Tefahot that has chosen to take a more distinct approach to the digital-human balance by assigning greater weight to the human factor — more precisely, committing not to sacrifice human interaction in favour of digital channels. The bank may have thus found an important dimension to differentiate its brand from the competing banks.

The bank is aiming to solidify its position as the third largest bank in Israel, climbing one position up by pushing back Bank Discount. Bank Mizrahi-Tefahot currently operates about 150 branches, and contrary to the leading banks it plans to increase this number towards 200 branches. In September 2016 the bank launched an advertising campaign, emphasising human touch, with a tagline (translated from Hebrew):

  • “On the things really important, there is no substitute to humanity.”

It purports to persuade prospect banking customers (as well as its own current customers), who still seek and prefer human interaction, that at this bank customers will continue to be able to find a human representative to talk to. Billboard ad posters, displayed until recently, proposed that the bank will cater to consumers’ concerns as they complain to their banks as follows (exemplar statements translated from Hebrew):

  • “Is it no longer possible to talk with a human in this bank?”
  • “Enough with apps, give me a human” [to talk to] — the ad “answers” that if you want to talk to a human, call a specific number.
  • “You closed the branch on [X] street. Is only the ATM left now? What is happening with you?” (the original Hebrew phrase plays on dual meaning in using the word ‘closed’)

The bank implicitly commits to maintain human reference for customers on banking issues that matter more or less. Indeed the bank does not fall behind in offering a variety of digital facilities, applications and tools for customers to manage their accounts. Yet the bank steps forward to assure customers that addressing a human representative at the bank will not be sacrificed in favour of the digital direct channels. For instance, the bank offers customers the possibility to talk by phone not only with a human representative at the call centre but also with one’s personal banker (account manager) or advisor at the branch where the account is held, reached through a direct (seamless) phone extension.

Without undermining their commitment for human reference, Bank Mizrahi-Tefahot may still modify the way it delivers certain services (e.g., teller-type) with human assistance at a branch. A new model may involve a zone equipped with digital self-service stations but supported with stronger human presence or qualifications of bank assistants for customers than what may be offered in other banks. The human resources dedicated to fulfill these positions and the tasks assigned to them should be planned anew.

Of course promises have to be tested in the reality of customer service at the bank. The bank has to prove it can deliver on its commitment to make human representatives available to customers when necessary. A critical reason banking customers turn to direct digital channels is being dissatisfied with either the long time customers feel they have to wait to reach a human representative or the level of assistance they get (e.g., professional, efficient, courteous). Nevertheless, there always remain the more complex and significant issues in which customers may need more serious consultation and human guidance in making a decision and completing a procedure (and sometimes being able to negotiate terms), help they cannot receive adequately through a self-service digital channel. Trust in customer-bank relationships is also dependent on that.

With regard to the advertising campaign of Bank Mizrahi-Tefahot, an imminent question arises: Is the message delivered in this campaign backed by a more profound vision and strategic plan? In other words, one would want to know that the campaign stands on solid ground and is not only a marketing communication idea hanging-in-the-air. A second part of this article, soon to come, will address this question, and will also examine what strategic position and attitude take the other four banks on balancing between digital and human resources and modes of service.

Ron Ventura, Ph.D. (Marketing)

 

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Every once in a while air passengers are bound to suffer from disruptions to their travel plans because of strikes in airlines due to work disputes, primarily with their pilots. Disruptions mean they may get as bad as complete cancellation of planned and paid-for flights whereof passengers are left stranded in their home airport or in some foreign country (strikes mostly affect international flights). The painful outcome of those disputes and strikes is that everybody ends up bruised to some extent — the airlines and their management, employees, and obviously the passengers-customers — whether in the short-term or long-term, monetarily and non-monetarily.

The highest-profile strike of recent times relates most apparently to the German major airline Lufthansa. It is actually a dispute lingering since 2014, causing repeated waves of strikes by its pilots. But this blog article will focus more closely on another dispute and chain of strikes at the Israeli airline El Al because it has brought the airline too close to the brink of business collapse.  Incidentally, as in Lufthansa, this dispute is also going on-and-off since 2014.

Of course there have been strikes in other airlines (e.g., Air France, Korean Air, China Airlines [Taiwan]) but the disruptions at Lufthansa seem to surpass them all in scale. Most strikes, as in the cases listed above, are triggered by the pilots, and that is crucial because the whole operation of an airline depends on them, giving them a lot of power over the management and owners of the respective company. Moreover, the lives of so many people (passengers) are in the hands of the pilots, relying on their professional skills and resourcefulness. The hot public debate surrounding those strikes is usually whether the pilots are abusing that power or are they making justified claims towards their employers.

There are, nevertheless, other types of strikes, as in the case, for example, of British Airways where the latest dispute was called by cabin crew members, specifically those hired after 2010 in apparently worse terms than for their more veteran colleagues. The ensuing strike was particularly disturbing because it was declared on last Christmas and the following days running to New Year (a continued strike occurred in January 2017). But the strikes by pilots tend to differ from strikes by other airline employees in impact on the regular flight schedule and implications of the demands made.

  • Unfortunately for some passengers in Britain, that holidays strike at British Airways coincided with other sanctions by airport workers of a Swiss contractor. The article will refer later on to other sources of disruption to air travel versus strikes originated within the airlines.

The primary demand of the pilots of Lufthansa is for a pay rise at an annual average rate of 3.7% to be paid retroactively to 5,400 pilots over a period of five years since 2012. The pilots’ union claimed that their compensation has eroded with inflation due to a wage freeze, causing them “a significant loss of purchasing power”. Lufthansa offered a rise of 4.4% from now on to be paid in two installments and another one-off payment. Drastic disruptions to the airline’s flight schedule occurred most recently in November 2016 as no agreement was reached by that time.

On a single day starting the latest ‘wave’ on 23rd November Lufthansa had to cancel according to media reports around 900 flights, affecting about 100,000 passengers. That leg of the strike extended for four days, causing overall cancellation of nearly 2,800 flights, affecting 350,000 passengers. The strike resumed on 28th November for two more days, forcing the cancellation of 1,700 flights with around 180,000 passengers in total affected. It was planned to start with short-haul flights and then expand to include also long-haul ones. (Note: Only flights under the banner of Lufthansa were implicated, excluding  Brussels Airlines, Austrian Airlines and Swiss Airlines also owned by the  group). [Sources: The Guardian 23rd Nov.; Reuters 28th Nov. 2016.]

It is hard to put an exact figure on the financial damages from those strikes. Reports suggest that the airline’s cost accrued from each striking day runs in millions of euros; total cost to Lufthansa since 2014 is estimated at €500m. It is hoped the dispute is now coming to a close following arbitration; the airline agreed to a four-stage wage increase of 8.7% plus a one-off payment, awaiting final approval and confirmation.

The pilots in El Al have demands for pay rise and improvement of working conditions. The dispute over working conditions may tell even better how deep and bitter is the conflict between the pilots and the company’s management and owners. Two issues are most striking. First, the pilots complain of an unreasonable workload because the airline is adding too many flights to its schedule, including to new destinations, and which they cannot sustain — the pilots argue they risk arriving to flights too tired and unfit to perform them. The second issue concerns the terms of employment of pilots ages 65-67: Retirement age in Israel for men is currently 67 but recent global regulation (2014) determines that pilots of age 65 and above cannot fly passenger aircrafts. The last strike over the dispute as a whole took place in mid-November 2016. An initial agreement was almost signed when the second issue triggered an additional strike in the past month. To resolve the age gap El Al suggested the senior pilots will work as instructors and examiners and in other managerial jobs but their income will be reduced considerably. The pilots did not agree to this condition. Last week a draft agreement was signed that will hopefully put an end to the dispute and the annoying disruptions of flights — but no one yet is ready to assure passengers of no more surprises.

El Al’s passengers had to suffer from flight delays and cancellations during several strikes. Although there were not too many cancellations that El Al had to announce (certainly not anywhere near as many as for Lufthansa), the ‘surprise’ nature of disruption of normal schedule was hard to tolerate and resolve — pilots would simply inform El Al at the last minute that they are sick and cannot attend their flights. El Al would then struggle to find replacing pilots from within and outside the company, leading in the ‘fortunate’ cases to delays of up to 12 hours in flight departures and in worse cases to flight cancellations. This mode of action by the pilots threatens to destroy customer confidence in the service provider as disruption comes completely with no warning and no preparation — the passenger arrives to the gate for his or her flight, yet the pilot does not. El Al tried to hire other airlines to execute the flights in jeopardy, a reasonable reaction that angered pilots even more (they argued it was more of a routine by management to deliver flights added to the already-busy schedule). All this wrangling was fought on the back of passengers.

The pilots and the airline’s leadership were so embroiled in their dispute, publicly attacking each other with all sorts of allegations, that they may have not been able to see anymore how this conflict appears especially to customers, nor how it affects them. Of course each side apologised and claimed they cared dearly about the customers, but it became increasingly difficult to believe them. Some of the details that were revealed were rather bizarre and difficult to accept. For instance, the allegation that pilots are extending long-haul flights by up to an hour to exceed 12 hours (e.g., to North America) to gain a bonus. Or, the pilots’ requirement that they would return from long-haul flights in Business Class and be paid as if they carried out the return flight to Israel. These claims made it harder to support the pilots’ struggle.

The pilots were not doing too well in gaining the support of the consumer public. They have let their grudge with the employer to be targeted at passengers. For example, during a flight in last November from a European city to Tel-Aviv they refrained from talking to the passengers and giving them customary updates about flight progress, weather conditions and other information. The captain indeed gave a welcome message at the beginning of the flight but not at half-time or towards the end of the journey as in the normal conduct of rapport on El Al’s flights. Before landing there was only a standard recorded message. It has to be understood that the Israeli public holds the pilots at high esteem and credits them with making El Al one of the safest airlines globally. Hearing the voice of the captain or first officer giving their messages to passengers is an important part of the relationship — it goes beyond the information conveyed in carrying a voice of authority, reassuring and friendly. At the end of the flight, while passengers disembarked, the pilots also remained seated in their cockpit cabin, another irregular conduct. It is a sad mistake, just like a statement made on TV by the union’s representative in the last strike that El Al’s pilots “could not find the motivation” to attend their flights, an agitating statement and a poor display of disrespect.

However, the owners and senior management of El Al should not feel comfortable and content either about their performance.  It seems they were not listening close enough to warnings from pilots for months about the course of the company. El Al’s leadership has chosen an aggressive strategy of expansion at all cost in an effort to hold on in an open competition on airway routes. This expansion included addition of destinations, increasing the frequency of flights, and the launch of a low-cost subsidiary (“Up”). El Al is trying to do something it simply cannot — it cannot become Lufthansa and it cannot beat airlines like Ryanair or EasyJet. The airline’s leadership must re-consider  the range and number of its destinations with respect to its resources.

The alternative cost of the expansion is negligence of the quality of service on board its flights — over recent years the airline omitted benefits to passengers in Economy/Tourist Class such as drinks served (including personal servings of wine or beer), free Israeli newspapers on flights home, and failing to upgrade their entertainment systems on airplanes in medium-range flights (3+ hours). Creating tourist sub-classes nowadays from standard to premium may start to correct the existing deficiencies. El Al must re-instate a realistic focus on quality of service and regain a competitive advantage on assets it can support — service onboard in addition to security and safety.

Flight disruptions may result from events other than a strike at the airline: take for example terrorist attacks or threats, strikes of airport workers, and phenomena of nature such as heavy snow or the event of volcanic ash clouds created by the eruption in Iceland in 2010. Yet, on these occasions an airline can justifiably claim to be upset by a “superior force” not in its control. It does not have that kind of protection when the disruption originates within its organization. Travel customers purchase their flight tickets from the airline and hence they least expect the airline to be the source of disruption. Besides the legal terms, there is a contract of the airline’s brand with its customers to be consistent and reliable in serving them and providing them value for their money. That is also the essence of keeping a brand’s promise.

Passengers endure different types of cost due to a flight disruption, foremost in the case of outright cancellation: financial losses (e.g., flight fare itself if cancelled, continued flights missed, ground services in the destination country such as lodging and transportation, and business-related damages when applicable), inconvenience of making new travel arrangements or cancellations, and the anguish of going through the ordeal. In some cases being stranded in a foreign country may cause greater costs than if being still in the home country. Beyond the bad experience of dealing with the disruption itself, one should not underestimate additional less direct costs: (a) putting off the excitement of anticipation before leaving on a vacation or for a special event, causing deep disappointment and frustration; (b) spoiling the enjoyment of a trip at its end on return home, causing anger and sadness (happy or unhappy memories of an experience are affected by its peak-moment, up or down, and its ending).

The disruptions in El Al because of the pilots’ strikes may have not been as severe as in other large airlines, particularly in Lufthansa, but the dispute threatened to have  much more severe consequences for the airline:

  • First, because something basic in the trust and confidence of Israeli consumers in El Al, which is essential for its survival, was in critical danger of being broken.
  • Second, El Al does not have the financial backing of a company like Lufthansa and probably other “big players” and cannot tolerate the same level of losses and damages to its brand stature.
  • Third, El Al allowed the dispute to build-up with increasing animosity and disruptions until it was very close to a tipping-point of collapse — pilots in charge of divisions of its aircraft fleet have officially resigned and the final trigger would have been resignation of El Al’s chief pilot. Was it necessary to threaten to fire the last fatal bullet?

The Israeli public still perceives El Al as its national airline although it is now in private ownership.  All stakeholders within the organization should bear that responsibility and share the interest to act carefully and cleverly to maintain that position. It is highly important for preserving the loyalty of their core target segment of Israeli consumers, but no less vital, remaining a preferred airline for Jews around the world. This strength, and further measures of improved business focus, can also increase its attractiveness to any tourists visiting Israel for flying El Al.

Ron Ventura, Ph.D. (Marketing)

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Tremors continue to shake ground in the field of television viewing since the start of this decade,  especially with respect to how televised content is consumed. It is possible to say that the concept of television is being transformed. The move of Netflix away from rental of DVDs, delivered by mail, towards online streaming, seems to have signaled the start of this transformation which is affecting the consumers and the media industry together. Netflix is of course not doing it alone, changing how televised video content is made available to consumers — other digital services include Hulu, Amazon Prime, and YouTube, as better known examples. Many consumers, most of all Millennials, are attracted to having better control and discretion of what, how and when they watch video programming content of the kind we are used to associate with TV.

Two primary shifts in TV viewing need to be considered: (1) watching less TV programmes in real-time; but more important and characteristic of the changes in the past decade: (2) watching less TV on the screen of a TV set in favour of screens of personal computers, tablets and smartphones. The first shift is not so new — watching a programme not at the time of its scheduled broadcast can be traced to at least thirty-five years ago thanks to the VCR (Video Cassette Recorder); later on came the DVD, but most DVD sets used by households were non-recorders.

The popularity of watching TV content in shifted-time has increased somewhat more with the introduction of new devices and services, namely Digital Video Recorder (DVR) and Video-on-Demand (VOD). The VOD service has actually created new options for viewers to access a special video library and watch programmes or films that are not available on broadcast channels (not available at all or not at that period).

The second shift noted is more closely associated with the Internet availability of video content, including TV programmes, that is not dependent on traditional broadcasters (networks, but also cable and satellite TV services). Whether the application for watching the content is web-based or a mobile app is less crucial to our matter. Streaming potentially breaks the tie between the televised content and the physical TV set (but that is an option, not a necessity). It is not surprising that new-age digital media companies that offer video content by streaming have been followed by the TV networks worldwide that now allow consumers to view their programmes online (viewing may be free or by paid subscription).

As we look into greater details of various possibilities of viewing televised content, we may find that defining TV viewing is not clear-cut. For instance, if one is streaming the content of a programme (e.g., a comedy episode) ordered from Netflix to a laptop that is connected to a TV set (or streaming directly to a Smart TV), is he or she watching TV? Apparently, 79% of US streamers primarily stream the video content to their TV sets! (CSG International, Insights Blog, 8 Sept. 2016). Vice versa, if one is watching a programme (e.g., evening news) at the time of its broadcast but on a laptop by live streaming, is he or she not watching TV? It can be confusing. Consumers stream TV content of the type of TV series episodes (e.g., comedy, drama, crime), documentaries, news editions, as well as cinema films. The key to achieve greater coherence and consistency may be to define ‘TV’ by the kind of its programming content, not by the technology of devices or distribution platforms (BARB’s Annual Viewing Report: UK’s Viewing Habits, April 2016, pp. 6-7, also see pp. 8-9).

Many consumers, mostly the younger ones (under 35), are turning away from fixed timetable TV programming. They are more selective in regard to the programmes they wish to watch at the time convenient to them. The choice of more savvy TV viewers is getting more in a form of cherry-picking. They may receive recommendations what programmes to watch from friends who have similar tastes or from the online content provider based on their stated preferences and past viewing behaviour (possibly adding what similar-in-kind programmes others are viewing). Consumers may choose to watch, for example, legacy TV series or programmes of a particular genre, as well as new selections of TV-type programmes produced independently by video content providers such as Netflix, exclusive to their subscribers.

For consumers who have less leisure time it may also become a matter of efficiency in allocating their limited TV viewing time to the programmes they really want to watch, thus not being constrained by the programmes scheduled for those hours. People watch only a small portion of the channels available to them in their TV cable or satellite packages, and are less comfortable with their inflexible programming plans. TV viewers wander to other channels such as a VOD service of their regular provider or by streaming from online video content providers.

When looking at ‘traditional TV viewing’, which includes live TV (aka real-time or linear) and adjunct time-shifted services like DVR and VOD(†), the number of weekly hours US young persons ages 18-24 spend watching TV has decreased across all quarters from a level of 23-26 hours in 2011 to a level of 15-18 hours in 2015, and further to 14-16 hours in 2016 (excluding Q4). In addition, when comparing between age groups, it can be seen that the 12-17 years (teenagers) and 18-24 years age groups are most similar to each other in the number of their TV watching hour(decreasing between Q1/2011 and  Q3/2016) and are now even closer to each other than five years ago. There is a decline in number of weekly TV watching hours also in the 25-34 age group, and though more modest a decline, also among those ages 35-49, but there is no discernible trend in age group 35-64 and even a small increase among seniors 65 years old and above (based on data from Nielsen, visualised by MarketingCharts.com). Note that the band of weekly hours mounts as the age rises. Another chart summarises those differences more sharply: the number of hours spent watching TV per week decreased in the younger age groups (12-17 & 18-24) by 37%-40% in five years, 28% still in age group 25-34, and only ~11% among ages 35-49 (weekly hours increased 7% among 65+).

  • Note: The original figures by Nielsen indicate that most traditional TV viewing time is still ‘live’ or linear, accounting for 85%-90% of time, and the rest goes to viewing programmes by DVR or VOD (figures of BARB for the UK indicate a similar ratio).
  • † Clarification: ‘Live’ TV includes of course live programmes or events that are taking place and filmed as they are broadcast or transmitted, but ‘live’ refers here more generally to programmes that are viewed at the time scheduled by a TV company for broadcasting, to be distinguised from programmes watched at a time chosen by a viewer. One possible development is that the concept of VOD will be expanded dramatically.
  • Statistics about streaming usage are still difficult to obtain. Figures brought by MarketingCharts from a less familiar source (‘SSRS’ online and mobile survey company) suggest that the number of hours Millennials spend weekly watching streamed content through various modes increased gradually and almost continuously in 2013-2015, though the overall level is still modest (~1.5 hours in 2013, rising up from 3.3 to  4.5 hours during 2014 until standing on a plateau of 5.5-5.7 hours in 2015).

Research of the British Broadcasters’ Audience Research Board (BARB) notably shows that, other than the TV screen, personal computers (desktop/laptop) and tablets are the  more frequently used for watching TV content on their screens, usually in the evening, while smartphones remain much less popular — smartphones are probably less accepted for TV viewing because their screens are too small to enjoy the images and are not convenient to watch for an extended time. Furthermore, with no evidence showing otherwise, it seems a greater part of time spent viewing not on a TV screen in the UK is still done at home (BARB’s Annual Viewing Report, April 2016, pp. 10-11).

The more traditional TV networks and service providers (cable and satellite) have to acknowledge that the rules of the game in the TV domain have changed: “As both traditional service providers and streaming services alike are looking to engage viewing audiences and hold on to subscribers, catering to the individual needs of each viewer is increasingly paramount” (CSG International: Insights Blog, see their infographic of global content viewing trends). Indeed we can see that TV networks and service providers try to adapt at different levels of extent and pace to changes in the competitive environment and shifts thereof in viewing patterns of consumers. Networks are getting more deeply into the Internet space, availing at least some of their content to viewers by streaming on their websites or through mobile apps, and even greater programming content may be offered to customers by subscription (e.g., BBC iPlayer). Especially in the area of news, we see news websites inserting more video content into their reports, including live coverage. The cable and satellite service providers are working to enhance their channels and VOD libraries to bring content that viewers may be seeking by streaming (e.g., HBO) and thus dissuade customers from churning to other services.

The media industry, most broadly speaking, sees a lot of movement in recent years. It seems that media companies, mainly the larger corporations, are trying to get into each other’s territory — TV (broadcast, streaming), digital media content (Internet & mobile), telecom infrastructure, TV and cinema production, etc. The new business and technology mixtures are created through mergers and acquisitions, accompanied by integration of different functions (horizontal and vertical) that will enable companies greater capabilities along the wider spectrum of the production and transmission of video content to consumers. Notably, there is emphasis on delivery of digital content through various platforms in combined modes (e.g., text, still images, video and audio). Content characteristic of TV programmes is just part of the media ‘basket’ companies are planning to offer their customers. A further implication is that content of different domains in Internet and TV formats will be increasingly blended on the same screen — from news information and education to entertainment and shopping.

In a highly remarkable merger in sight, AT&T is planned to acquire Time Warner for $85 billion. The deal between the parties is already agreed, but approval by the American antitrust authority is still in question (peculiarly, a political matter is also involved because of the bitter dispute between President Trump and CNN owned by Time Warner). This merger would combine the competencies of Time Warner mainly in content (including production and broadcasting) with the telecommunication infrastructure and services of AT&T in Internet and wireless (‘mobile’) communication. It should allow the integrated corporation to reach a wider audience with a richer and greatly varied content on screens of TV sets, personal computers and mobile devices.

Time Warner holds a broad and impressive portfolio of TV channels, production units and digital services for delivering their content. The most famous brand is probably CNN which includes its American and International channels. But Time Warner also owns HBO for TV programmes and Cinemax for cinema films, both available to subscribers by streaming. In fact, Time Warner also owned in the past the AOL Internet company. In 2015 AOL moved hands to Verizon telecom company, and just within months Verizon also acquired the troubled Internet company Yahoo. The expansion of Verizon is yet another example of an integration of telecom infrastructure and services with digital  content capabilities, but it does not have yet a strong TV presence.

  • Time Warner spun off its print arm of magazines in 2014, identified now as the independent company Time Inc.. Some of its better known magazine brands include the Time magazine of current affairs and Fortune magazine of business affairs, but overall the company publishes magazines in various areas of interest (e.g., entertainment, fashion & beauty, photography, home and design, as well as politics, business and technology).

The TV business is reshaping. Frahad Manjoo of the New-York Times (October 2016 [1]) foresees a future of TV “built on lots of bold, possibly speculative experiments”. Advanced digital technology companies (information, Internet & mobile) of the kind of Google, Amazon, Facebook and Netflix may readily disrupt efforts of the large telecom and “old-guard” media companies. When TV viewing habits also are fluctuating and reforming, business decisions involve much “educated guessing”.  In another article, Barnes and Steel [2] consider repercussions of the AT&T-Time Warner deal on other media and telecom companies. While some of those companies declare their objection and intent to fight the merger, they may follow a similar trail.  The cases of four companies are reviewed:

  1. The Walt Disney Company insists on its market position as a predator and not as a prey to technology companies. Its current objective is to bring more premium TV channels directly to consumers by streaming; that may entail the purchase of desired brands (e.g., Pixar, Marvel, ESPN).
  2. Comcast, a telecom company (cable [TV] and broadband), is also the owner of TV networks or channels  (e.g., NBC and MSNBC), as well as film and TV studios. It may not sit idle and may try to take over another telecom company to complement its coverage (e.g., extending to wireless).
  3. 21st Century Fox (cable TV, films) is claiming to have no plans of expansion and entering into new areas. It previously failed to acquire Time Warner (2014). But the recent AT&T-Time Warner deal may change their plans. (The Murdoch family is currently aiming to take full control of UK-based Sky satellite TV).
  4. CBS and Viacom engage together in TV broadcasting, a cable TV service, and TV and cinema productions. The controlling owner (Redstone family) may now be encouraged to unite the sister companies (once again) into a single corporation.

We should not rush to assume that watching TV programmes on a TV set or watching programmes in real-time are about to end anytime soon. Traditional live TV viewing and digital video viewing are complementary, possibly preferred on different devices at different times and in differing circumstances (eMarketer, 14 March 2016).

There may be personal but also social benefits or incentives to watching programmes or films in the ‘old-fashioned’ way. First, enjoyment and visual comfort, particularly for certain types of video content, are expected to be greater when viewed on a large screen (37” and above). Second, there is real value in watching a programme such as an episode of a popular TV series at the same time with others so that one can share impressions and discuss it with acquaintances the next day or right after the show. A similar argument can be made for watching live a sports contest, on top of the thrill of watching the event as it unfolds. Third, there is still pleasure and enjoyment in watching TV together with family or friends on a large TV set at one’s home (and in some cases in a pub or bar).

The new technological developments in distributing and displaying video content in high quality, offer opportunities for consumers to improve and enrich in several ways their experience of viewing TV programing and other types of video content. Consumers would be given more freedom of choice and flexibility to watch TV as they truly like. Companies in the wide spectrum of media, telecom and Internet may also find new business possibilities to enhance their services to customers, including in particular TV-like content. But it will take more time to see how the TV domain shapes-up.

Ron Ventura, Ph.D. (Marketing)

Notes:

In New-York Times (International Edition), 26 October 2016:

[1]  “A Risky Bid With the TV Industry Up for Grabs”, Farhad Manjoo,

[2] “A Chilly Reaction to AT&T Deal”, Brooks Barnes and Emily Steel

 

 

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It is usually not a pleasant feeling to be alone in a scary place or event — think of being stuck in a dark elevator or being involved in a car accident. People commonly seek to be with someone for comfort and company. But the companion does not always have to be another person. A research by Dunn and Hoegg (2014) provides corroboration that the need to share fear matters to humans while the identity of the companion, whether a person or an object, is less critical.  More specifically, sharing fear with a product from an unfamiliar brand may facilitate a quick emotional attachment with that brand without requiring to build a relationship over a lengthy period of time (1).

Fear is evoked by the presence or anticipation of a danger or threat. Feeling fear may be triggered by an unfamiliar event to which one is unsure how to respond (uncertainty) or an unexpected event at a specific moment (surprise); experiencing fear is furthermore likely when the event encountered is both unfamiliar and unexpected. It is important to note, nonetheless, that not every encounter with an unfamiliar or unexpected event necessarily leads to  fear. The Amygdala in the temporal lobe of the brain is the “centre” where fear arises. However, the amygdala like other brain structures is responsible for multiple functions. The amygdala is activated in response to unfamiliarity, unpredictability or ambiguity, but not every instance necessarily means the evocation of fear. For example, tension from facing an unfamiliar problem that one is at loss how to solve may not result in fear. Additionally, fear as well as other states of emotion are the outcome of appraisal of physical feelings (e.g., faster heartbeats, startle, warmth), considering the conditions in which they were triggered; it is a cognitive interpretation of their meaning (“why do I feel that way?”). Activation of other brain structures together with the amygdala may influence whether similar feelings triggered by an unexpected event are interpreted, for instance, as fear, anger, or surprise. The context in which an event occurs can matter a lot for the appraisal of emotions (2).

Dunn and Hoegg emphasise the emotional charge of consumer attachment with a brand versus cognitive underpinnings. Brand attachment has often been conceptualised as the product of a relationship between consumers and the target brand built over time. It should take a longer time to achieve a more solid brand attachment because of cognitive processes for establishing brand connections in memory and stronger favourable brand attitudes. However, this explanation is subject to criticism of missing the important role of emotions in bonding between consumers and a brand which does not necessarily require a long time. By focusing their studies on unfamiliar brands, Dunn and Hoegg intended to show that emotional attachment can emerge much more quickly when the consumers are distressed and are looking for a partner to share their fear with, and that partner or companion can be a brand of a given product.

On the same grounds, the researchers chose a scale of emotional attachment (Thomson, MacInnis and Park, 2005 [3]) as more appropriate over a scale that combines emotional and cognitive aspects of attachment and gives greater weight to cognitive constructs (Park, MacInnis et al., 2010 [4]). The emotional scale comprises three dimensions: (a) Affection (affectionate, friendly, loved, peaceful); (b) Passion (passionate, delighted, captivated); (c) Connection (connected, bonded, attached). Nevertheless, in the later research Park and MacInnis with colleagues offer a broader perspective that accounts for two bases of brand attachment: (i) a connection between self-concept and a brand; and (ii) brand prominence in memory.

While ‘brand prominence’ can be regarded as more cognitive-oriented (accessibility of thoughts and feelings in memory), a ‘brand-self connection’ entails the expansion of one’s concept of self to incorporate others, such as brands, within it — and that involves an emotional element. Park and MacInnis et al. emphasise the brand-self connection as the emotional core of their definition of brand attachment, while brand prominence is a facilitator in actualizing the attachment (analyses substantiate that brand attachment is a better predictor than attitudes of intentions to perform more difficult types of behavior reflecting commitment, and the brand-self connection is more essential for driving this behaviour). The three-dimension scale of emotional brand attachment seems very relevant for the research goals of Dunn and Hoegg, even though it is more restricted from a stand-point of the theoretical roots of brand attachment.

The desire to affiliate with others in scaring and upsetting situations is recognised as a mechanism for coping with negative emotions in those situations. Episodes of armed conflict, terrorist attacks, and natural disasters make people get closer to each other, unite and show solidarity. However, the researchers note that the act of affiliation is essential for coping rather than the affiliation target. That is, the literature on affiliation or attachment relates to interpersonal connections as well as attachment to objects (although objects are viewed as substitutes in absence of other persons [pet animals should also be considered]). We can find support for possible attachment to products and their brands in the human tendency to animate or anthropomorphise objects by assigning them traits of living beings, whether animals or humans. Brands may be animated in order to help consumers relate with them more comfortably, making them appear more vivid to them. It is one of the processes that facilitates the development of consumers’ relationships with their brands in use; consumers connect with brands also through the role brands fulfilled in their personal history, heritage and family traditions, and how brands integrate in their preferred lifestyles (5).

Dunn and Hoegg investigate how consumers connect with a brand on occasions of incidental fear. They make a clear distinction between events that may trigger fear (or other emotions) and fear appeals strategically planned in advertising (e.g., in order to induce a particular desired behaviour). Events that incidentally cause fear would be independent and uncontrolled. Additionally, the intensity and range of emotions felt is expected to differ when consumers actively participate in an event and hence experience it directly in contrast to watching TV ads — in direct consumer experiences, emotional feelings are likely to be more intensive and specific.  In a model for measuring consumption emotions developed and tested by Richins, fear is characterised as a negative and more active (as opposed to receptive) emotion, next to other emotions such as anger, worry, discontent, sadness and shame (6).

  • In their experiments, the researchers try to emulate incidental fear by displaying to participants clips from cinema films or TV series’ episodes, and present evidence that manipulations successfully elicited the intended emotions as dominant in response to each video clip. Yet, it remains somewhat ambiguous how real and direct the experience of watching scenes in a film or a TV programme is perceived and felt with regard to the emotions evoked.

The following are more concrete findings from the studies and their insights:

Emotional brand attachment is generated through perception that the brand shares the fear with the consumer — Study 1 confirms that emotional attachment with an unfamiliar brand is generated when a product (juice) by that brand is present and can be consumed during the fear-inducing experience (more than for emotions of sadness, excitement and happiness). But moreover, it is shown that the emotional attachment is mediated (conditioned) by perception of the consumer that the brand shared the fear with him or her.

Humans precede product brands —  Sharing fear with a brand contributes to stronger emotional brand attachment, but only if they still have a desire generated by fear to affiliate with others. If conversely that desire is satiated by a perception of the consumers that they are already socially affiliated with other people, the effect on brand attachment is muted.

  • Note: Participants in Study 2 were asked to perform a search with words related to feelings of affiliation and social connectedness (e.g., included, accepted, involved) to prime affiliation. Given the statements used to measure (non-)affiliation (e.g., “I feel disconnected from the world around me”), it is a little questionable how effective such a priming condition could be (though the authors show it was sufficient). It might have been more tangible to ask participants to think of people dear to them, family and close friends, and write about them.

Balancing negative and positive emotional effects on attitudes — Based on analyses in Study 2 the researchers also suggest that increased positive effect of emotional brand attachment may counterbalance and override a negative influence of ‘affect transfer’ on attitudes due to fear.

Presence of the brand and attention to it are required yet sufficient — Study 3 demonstrates that neither consumption of the product (juice) nor even touching it (the bottle), both forms of physical interaction, are really needed for feeling affiliated and forming emotional attachment — forced consumption in particular does not contribute to stronger perceived sharing or emotional attachment than merely seeing the product when feeling fear, that is making an eye contact and visually attending to the product in search for a companion. (Unexpectedly, in the case of action and excitement, consuming the drink increases emotional attachment.) Study 4 stresses, nevertheless, that the brand must be present during the emotional event for generating increased emotional attachment — having the brand nearby while experiencing the fear is essential for consumers to feel connected with the brand as their sharing partner (tested with a different product, potato chips).

The research paper suffers from a deficit in practice. That is, marketing managers and professionals might be disappointed to discover that it could be most difficult to have any control of those situations of incidental fear and to act on them to their advantage. In order to have any influence on the consumer a company would be required to anticipate an individual event in advance and to find a way to intervene (i.e., make their product present) without being perceived too intrusive or self-interested — two non-negligible challenges. An additional restriction is posed by the relation of the ‘fear effect’ to brands not previously familiar to the consumers.

Let us consider some potential scenarios where brands might benefit and the difficulties that are likely to arise in implementing it:

Undertaking medical treatments or tests — Some treatments can be alarming and frightening on occasion to different patients. A sense of fear is likely to enter already, and perhaps especially, while waiting. It is a opportunity for introducing the brand-companion in the waiting hall; even more so given that patients are usually not allowed to or prevented from using artifacts during the treatment (mostly no food and drinks). First, a company may have a difficulty to obtain access to places where patients wait for treatment. Second, consumers-patients are likely to bring products with them from home to entertain them (of brands they know). Third, patients often arrive with a family or friend companion, thus satisfying their need for affiliation with another person which dominates affiliation with an object. Still, there is room for ingenuity how to locate the brand close enough to the treatment episode (e.g., shops offering books or toys, especially for children, in the premises of a clinic or hospital).

Trekking or hiking in nature — Some routes, particularly in mountainous areas, can be quite adventurous, not to say dangerous. If a brand could find a way to introduce its product just before the consumer starts the hiking trip, it may benefit from being with him or her if fear arises. One problem is that hikers are advised and even required not to embark alone on more dangerous routes. Another problem is that those trekking or hiking sites often offer local brands, that while not being familiar to the consumers they also are not likely to be available to them at home, and thus the opportunity to develop a relationship based on the early emotional attachment is lost.

Offering legal, financial, insurance, and technical services in events of crisis — In various occasions of accidents, malfunctions, and disasters, people need help to cope with the crisis and the negative emotions it may evoke, particularly fear. A service provider would be expected to counsel the customer in his or her distress, and of course propose a solution (e.g. how to fix one’s home after a fire or an earthquake). Unfortunately,  one cannot make an eye contact with an intangible service. The company has to find creative and practical ways to make itself readily visible and accessible to the consumer when needed by offering instruments and cues for making contact (e.g., an alarm and communication device for the elderly and people with more risky medical conditions).

  • Dunn and Hoegg are aware of the limitation of the findings to unfamiliar brands. They reasonably propose that “because fear leads to a general motivation to affiliate, emotional brand attachment would be enhanced regardless of the familiarity with the brand” (p. 165). It should take further research, however, to substantiate this proposition.

Despite the possible difficulties companies will likely need to deal with, the doors are not completely shut to them to benefit from this phenomenon. But they must come up with creative and non-intursive solutions to make their brands and products present in the right place at the right time. At the very least, marketers should be aware of the potential effect of sharing fear with the consumer and understand how it can work in the brand’s benefit. It is worth remembering, after all, the saying “a friend in need is a friend indeed” whereby in some incidents the friend can be a brand.

Ron Ventura, Ph.D. (Marketing)

Notes:

(1) “The Effect of Fear on Emotional Brand Attachment”; Lea Dunn and JoAndrea Hoegg, 2014; Journal of Consumer Research, 41 (June), pp. 152-168.

(2) “What Is Emotion?: History, Measures and Meanings”; Jerome Kagan, 2007; New Haven and London: Yale University Press. Also see: “The Experience of Emotion”; Lisa Feldman Barrett, Bejta Mesquita, Kevin N. Ochsner, & James J. Gross, 2007; Annual Review of Psychology, 58, pp. 373-403.

(3) “The Ties That Bind: Measuring the Strength of Consumers’ Emotional Attachments to Brands”; Mathew Thomson, Deborah J. MacInnis, & C. Whan Park, 2005; Journal of Consumer Psychology, 15 (1), pp. 77-91.

(4) “Brand Attachment and Brand Attitude Strength: Conceptual and Empirical Differentiation of Two Critical Brand Equity Drivers”; C. Whan Park, Deborah J. MacInnis, Joseph Priester, Andreas B. Eisengerich, & Dawn Iacobucci, 2010; Journal of Marketing, 74 (November), 1-17.

(5) “Consumers and Their Brands: Developing Relationship Theory in Consumer Research”; Susan Fournier, 1998; Journal of Consumer Research, 24 (March), pp. 343-373.

(6) “Measuring Emotions in the Consumption Experience”; Marsha L. Richins, 1997; Journal of Consumer Research, 24 (September), pp. 127-146.

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