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Consumer purchases from Internet retailing websites continue to expand, and their share out of total retail sales increases. Yet there is no real reason to declare the demise of physical, bricks-and-mortar stores and shops any time soon. Online purchases from e-stores (including through apps) indeed pose a stressing challenge to many physical stores, but the latter still hold a solid and dominant majority share of retail sales. Nonetheless, owners of physical stores will have to make changes to their mission and approach to retailing in order to answer effectively and successfully to the challenges from electronic retailing (‘e-tailing’).

The share of sales revenues from online retailing varies across categories (e.g., from groceries to electronics) yet the share overall out of total retailing revenues still floats around 12%-15% on average; there is also important variation between countries. Tensions are high particularly because of the threat from overarching e-tailers such as Amazon and Alibaba who grew their businesses in the virtual online environment. However, retailers do not have to choose to be either in the physical domain or the virtual domain: Many large and even medium bricks-and-mortar retailers are already double-operating through their physical stores and the Internet and mobile channels. Moreover, the master of Western e-tailing Amazon is lurking into the physical world with the establishment of its Amazon Go food stores, its venture into physical bookstores in selected US locations, and notably the acquisition of the food retail chain Whole Foods — what better testimony of the recognition that physical stores are still in need. All these observations should tell us that: (1) The lines between physical and virtual (electronic) retailing are blurred and the domains are not exclusive of each other; (2) It is a matter of linking between the domains where one can operate as an extension of the other (and it does not depend on which is the domain of origin); and (3) The domains are linked primarily by importing technology powered with data into the physical store’s space.

Technology alone, however, is not enough to resolve the challenges facing physical stores. Focusing on technology is like harnessing the carriage before the horses. The true and crucial question is: What will consumers of the coming future be looking for in stores? This is important, because consumers, especially the younger generations born after 1980, still have interest in shopping in bricks-and-mortar stores but they could be looking for something different from past decades, moreover given the digital options available to them now. The answers will have to come through rethinking and modifying the mission and strategy set for physical stores. The direction that seems most compelling for the mission is to shift emphasis from the merchandise offered in a store to the kind of experience offered in the store. The strategy may involve reconsideration and new planning of: (a) the product variety and volume of merchandise made available in the store; (b) interior design and visual merchandising; (c) scope and quality of service; and (d) the technologies applied in the store, all tailored to the convenience and pleasure of the shoppers.

This article will focus primarily on aspects of design of stores, including  interior design and decoration, layout, and visual merchandising (i.e., visual display of products); together with additional sensory elements (e.g., lighting, music, texture, scent) they shape the atmosphere in the store or shop. Yet it should be noted that the four strategy components suggested above are tied and influence each other in creating the kind of experience a retailer desires the customers-shoppers to have while in-store.

Shopping experiences in a store rely essentially on the emotions the store invokes in the consumers-shoppers. Notwithstanding the sensorial and cognitive reactions of shoppers to the interior scene of the store, the positive and pleasant emotions the shoppers feel will most likely be those that motivate them to stay longer and choose more products to purchase (further desired behaviours may include recommendation to friends and posting photos from the store on social media). Prior and close enough to consumption itself, the personal shopping and purchasing experience may invoke a range of positive emotions such as joy, optimism, love (non-romantic), peacefulness, and surprise; of course there also are potential negative emotions that retailers would wish to reduce (e.g., anger, worry, sadness)[*].

The need for shift in emphasis in physical stores is well stated by Lara Marrero, a strategy director with Gensler, a British design firm: “It used to be a place where people bought stuff. Now it is a state where a person experiences a brand and its offerings”. Marrero, who is leading the area of global retail practice at the firm, predicts a future change in mentality of shoppers from ‘grab and go’ to ‘play and stay’ (“Retail 2018: Trends and Predictions”, Retail Focus, 15 December 2017). This predicted shift is still inconsistent with a current retail interpretation of linking the digital and physical domains through schemes of ‘click-and-collect’ online orders at a physical store. Additionally, consumers nowadays conduct more research online on products they are interested in before coming to a store: The question is if a retailer should satisfy with letting the consumer just ask for his or her preferred product at the store or encourage the consumer-shopper to engage and interact more in-store, whether with assistance from human staff or digital utilities, before making a purchase — the push may have to come first from the consumers. Marrero further notes the social function of stores: retail environments become a physical meeting point for consumers to share brand experiences. Retailers will have to allow sufficient space for this in the store.

In order to generate new forms of shopper experiences the setting of a store’s scene also has to change and adapt to the kind of experience one seeks to create. New styles and patterns of in-store design are revealed through photo images of retail design projects, and the stories the images accompany, on websites of design magazines (e.g., VMSD of the US, Retail Focus of the UK). They demonstrate changes in the designing approach to the interior environment of stores and shops.

A striking aspect in numerous design exemplars is the tendency to create more spacious store scenes. It does not necessarily mean that the area of stores is larger but that the store’s layout and furnishing are organised to make it feel more spacious,  for example by making it look lighter and allowing shoppers to move more easily around. Additionally, it implies ‘loading’ the store’s areas which are accessible to customers with less merchandise. First, merchandise would be displayed mostly on fixtures attached to walls around the perimeters of the store, but even then it should not look too crowded (i.e., in appreciation that oftentimes ‘less is more’ for consumers). Second, fewer desks and other display fixtures are positioned across the floor to leave enough room for shoppers to walk around conveniently (and possibly feel more ‘free’). In fashion stores, for instance, this would also apply to  ‘isles’ of demonstrated dressing displays. Third, desks should not be packed with merchandise, and furthermore, at least one desk should be left free from merchandise — leave enough surface for shoppers and sellers to present and look at merchandise and to converse about the options. In some cases, it may allow for the shoppers to socialise and consult among themselves around a desk at the store (e.g., inspired by Apple stores). Opportunities to socialise can be enhanced in larger stores  by allocating space for a coffee & wine bar, for instance, which may serve also sandwiches, patisseries and additional drinks. Stores would be designed to look and feel more pleasant and enjoyable for consumers-shoppers to hang around, contemplate their options and make purchase decisions.

  • Large stores that spread over multiple floors with facades turning outwards to the street may fix the facades with glass sheets, and in order not to block natural daylight from entering into the store they would place desks and mobile hangers or other low shelf fixtures along the windows.

Modissa Fashion Store set for Christmas

In the new-era store not all merchandise the store may offer to sell needs to be displayed in the ‘selling areas’ accessible to shoppers. Retailers may have to retreat from the decades long paradigm that everything on display is the inventory, and vice versa. It is worth considering: First, some merchandise can be displayed as video on screens, and thus also add to the ‘show’ in the store; Second, shoppers can use digital catalogues in the store to find items currently not on display — such items may still be available in stock on premises or they may be ordered within 24 hours. But furthermore, customers may be able to coordinate online or through an app with a store near them to see certain products at a set time; up-to-date analyses of page visits and sales on a retailer’s online store can tell what products are most popular, subsequently guaranteeing that the physical stores keep extra items of them in stock on premises.

Here are references to a few exemplars for illustration of actual store design projects published in design magazines’ websites:

Burberry, London — The flagship store of luxury fashion brand Burberry on Regent Street is highlighted for both the use of space in its design and the employment of digital technology in the store. A large open space atrium (of an older time theatre) occupies the centre of the store (four floors, 3000 sqm), impressive in how Burberry allowed to keep it. The digitally integrated store is commended for its fusion of a ‘digital world’ into its bricks-and-mortar environment: a large high-resolution screen plays video in the atrium, synchronised with a hundred digital screens around the store, some 160 iPads (e.g., for finding items on the catalogue that may not be on display), and RFID tags attached to garments (VMSD, 18 December 2012).

Hogan, Milano — The footwear ’boutique’ store (277 sqm in via Montenapoleone) is designed to reflect the brand, “luxury but accessible”. The store’s mission has been described as follows: “Hogan is a lifestyle brand, championing contemporary culture. The store therefore needed to be dynamic, working hard to adapt from retail space to live event or gallery space”. Characteristic of the store: tilted surfaces for display, lying on top of each other like fallen-down domino bricks; and an animated display of patterns by LED lighting behind frosted glass walls — they both reflect movement, the former just symbolically while the latter more dynamically, to “express the dynamism of the city”. The store of Hogan also fosters social activity around its host bar and customization bar (Retail Focus, 15 February 2018).

Black by Dixon’s, Birmingham (UK) — The technology retail concept aspires to make “the geeky more stylish and exciting”. Digital technology is “dressed” in fashionable design, aiming at the more sophisticated Apple-generation (distinctive in the images are the mannequins “sitting” on desks as props, and colour contrasts on a dark background). (VMSD, 24 May 2011.)

Stella McCartney, Old Bond Street, London — The re-established flagship store resides in an 18th century historic-listed building (four floors, 700 sqm). Products such as dresses and handbags are displayed (sampled) across the store in different halls. The design and lighting give a very loose feeling. Refreshingly, the ground floor features an exhibit of black limestones and “carefully selected rocks” from the family’s estate, a piece of nature in-store (Retail Focus, 14 June 2018).

Admittedly, some of the more distinctive and impressive design exemplars belong to up-scale and luxury stores, but they do give direction and ideas for creating different experiences in retail spaces, even if less lavishly. Furthermore, technology can enrich the store and add a dimension of activity in it. Yet it is part of the whole design plan, not necessarily its central pillar, if at all.

Installing digital technology in a store does not mean importing the Internet and e-store into the physical store. Features of digital technology can be employed in-store in a number of ways, and the use of an online catalogue is just one of them. There is no wisdom for the physical store in trying to mimic Internet websites or compete with them. It should find ways, instead, to implement digital technologies that best suit the store’s space and transform the experience of its visiting shoppers.

Moreover, the store owner should identify those aspects that are lacking in the virtual online store and leverage them in the bricks-and-mortar store (e.g., immediacy, non inter-mediated interaction with products, sensorial stimulations other than visual and audio, feeling fun or relaxed). Thereof, the store should borrow certain technological amenities that can help to link between the domains and make the experience in-store more familiar, convenient, interesting, entertaining or exciting. According to an opinion article in Retail Focus on “The Future of High Street” (Lyndsey Dennis, 25 April 2018): “To draw customers back to brick-and-mortar, [retailers] need to rethink how they use their physical space and store formats. The key is to give customers something they can’t get online, whether that’s information, entertainment, or service“. Advanced technologies such as Virtual reality (VR) and Augmented Reality (AR) are part of the repertoire that are increasingly introduced in high street stores [e.g., AR applied in the fitting rooms of Burberry’s store, triggered by the RFID tags].

Matt Alderton, writing in ArchDaily magazine of architecture and design (25 November 2015), details key technologies and how they are implemented in stores to create new possibilities and leverage shopper experiences. One group of technologies can provide vital data to retailers which in turn can be applied to interact with shoppers and return useful information to them (e.g., beacons, RFID tags, visual lighting communications). The second group includes display technologies that may be enriching with information and entertaining to shoppers: for example, VR and AR, touch screens, and media projected on a surface such as table-top which thus becomes a touch screen. Alderton clearly sees consumer need for physical stores, the question is how consumers would want them: “What the data says is that shoppers want to move forward by going back: Like their forebears who visited Harrods, they crave emporiums that are experiential, not transactional, in nature“. (See also images in this article as they portray new-fashioned designs in space and layout; notably these stores feel less crowded by merchandise, and some show in-store digital displays.)

These are challenging times for bricks-and-mortar stores. New possibilities are emerging for physical stores to grow and thrive, yet they will have to adapt to changed shopping and purchasing patterns of consumers and develop new kinds of experiences that appeal to them. It should be a combined effort, with contribution from interior design of stores and visual merchandising, utilities and amenities based on digital technologies implemented in the store, and the support and assistance by human personnel. The in-store design is especially important in setting the scene — in appearance, comfort and appeal — that will shape shoppers’ experiences. Retailing could evolve as far as into new forms of ‘experiential shopping’.

Ron Ventura, Ph.D. (Marketing)

Reference: [*] Measuring Emotions in the Consumption Experience; Marsha L. Richins, 1997; Journal of Consumer Research, Vol. 24 (September), pp. 127-149.

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When evaluating a restaurant, the quality of food is not like other factors considered — it has a special status. The same goes quite as much for other food establishments like coffee-houses. The customers or patrons may trade-off several factors which include the food, service, venue, price and location, yet food quality usually gets a much greater weight than the other attributes, suggesting that the decision process is practically not fully compensatory. The quality of the food, its taste and how much we enjoy it, is a “pre-condition” to dining at a restaurant. However, the balance with other attributes is important; in some cases, failure on those other attributes can be detrimental to the willingness of consumers to return to a restaurant or a coffee-house.

  • Some coffee-houses effectively function as ‘coffee-restaurant’ establishments by serving meals of a variety of food items suitable for every time of day (from eggs, salads and toasts to soups, pasta, hamburger or chicken-breast schnitzel with supplements).

Suppose that Dina and Mark, a fictional couple, are dining at a restaurant and find the dishes served to them being well-prepared and they enjoy very much the food’s taste. However, they are very unhappy with the sluggish service they get and inappropriate answers of the waiter, and feel the atmosphere in the restaurant is not pleasant (e.g., too dark or too noisy). The experience of Dina and Mark can be greatly hampered by factors other than food. How superior should the food be for our diners to be ready to tolerate bad service or a place they do not feel comfortable to be in for an hour or two?

On the other hand, Dina and Mark would likely expect the food (e.g., a dish like ‘risotto ai funghi’ [with mushrooms]) to uphold to a certain gratifying standard (i.e., that the ingredients are genuine, the texture is right, and the dish is overall tasty). If the food is not perceived good enough and diners do not enjoy it, this takes out the point of considering dining at the restaurant altogether. But if the food is good though not so special or great, yet the patrons Dina and Mark feel the staff truly welcome them, treat them warmly and cater to sensitivities they may have, they could still be happy to dine at such a restaurant again, and again. When the food is already satisfactory, additional facets of the experience such as great service and a pleasing ambience can increase substantially the desirability of a restaurant or coffee-house as a place consumers would  like to patronize. We may be looking at a decision process where at first food is a non-compensatory criterion, yet above a certain perceived threshold the balance customers-patrons strike between food and other attributes of their experience becomes more intricate and complex.

Browsing reviews of restaurants that are shared on TripAdvisor’s traveller website can provide helpful clues on how customers-patrons relate to food and additional factors in their appraisals of their experiences at restaurants. Reviews were sampled of Italian and Asian restaurants in Tel-Aviv and London (members-reviewers may be city locals, national and international travellers — examples are quoted anonymously so that reviewers and the specific restaurants they review are not identified by name).

Reviewers most often open by referring to the food they have had at the restaurant; next they may give their assessment of the service they have received, design and atmosphere, price or value, and location of the restaurant. Thus, a review may start by appraising the food as good / great / delicious, and then stating that the service was good / nice / efficient. Nonetheless, it is not uncommon for diners-reviewers to open with an assessment of the service they have received at the restaurant. There seems to be a greater propensity to open the review with service when it is superb, but also on the contrary when it is terrible. Occasionally a review will refer firstly to the atmosphere in the restaurant, which is formed by aspects such as interior design or décor, lighting, music and overall ambience. Atmosphere will appear first or at least early in the review particularly when it is superior or inferior.

Additionally, we can distinguish between reviews that are composed of a few short argument-like statements about the food, service and other attributes, and reviews that tell a story (i.e., a narrative-like review). There are diners-reviewers who go especially into detail of the dishes or items of food they, and possibly their companions, have ordered, and their opinion of the food. Yet reviewers may also describe how they were treated by the serving staff, particularly when they felt exceptionally welcome and cared for or annoyed and undesired. Reviews that have a narrative give a stronger impression of the course of dinner to the reader who can more easily visualize it.

It seems that when diners-reviewers say the food is ‘good‘, they do not throw it out of hand; they do mean that the food is truly good, fresh and tasty. This appraisal should be interpreted as a base threshold for being satisfied with the food. When the food is more than ‘good’, reviewers explicitly express it with adjectives like ‘great’, ‘delicious’, ‘fabulous’ or ‘amazing’. Conversely, descriptions of the food as ‘average’, ‘OK’, and moreover as ‘mediocre’, are certainly not compliments, more likely suggesting the food was barely satisfactory. Unless there was something else especially good about the experience in that restaurant like its service or venue, the reviewer would probably have little motivation to return.  Consider for example a reviewer who said about an Italian restaurant in Tel-Aviv: “The ONLY redeeming factor is, in my opinion, the ambience, which is really cozy and relaxed. Too bad they don’t serve food to match” (capitals in origin, rating: 2 ‘rings’ out of 5). Similarly, a reviewer of an Asian restaurant in London complimented it for its “friendly and attentive” waiting staff, but concluded: “So there were a lot of positives about this place, but I’m afraid the food just wasn’t good quality. It was very bland and boring” (rating: 2 ‘rings’). On the other hand, a review of an Asian restaurant in Tel-Aviv offers the opposite case wherein the reviewer states “AMAZING food, OUTRAGEOUS service” (title, capitals in origin), and ends with the conclusion “basically terrible service which was definitely the opposite of the wonderful tasty food we were served” — the rating for this restaurant experience: also 2 ‘rings’.

  • A prospective diner who looks for a restaurant to try for the first time may find the choice task confusing and daunting when reviews of the same restaurant are quite the opposite of each other in their content. Still, it usually does not take too long to realise the ratio of positive to negative reviews given to a restaurant, in addition to the chart of distribution of ratings it received.

Service appears as the second most important factor after food in a restaurant. Patrons want the waiting staff to be friendly and respectful (this of course is a two-way street), be attentive and not letting them feel forgotten, and to be flexible and kind enough to accommodate their personal sensitivities or preferences (e.g., less spicy, nuts-free, replace polenta with rice as supplement). Less pleasant or efficient service will not necessarily make diners-reviewers reject the restaurant if its food is excellent, but they could drop one grade off its rating (e.g., from 5 to 4). Inversely, when the diners-reviewers are happy with the quality and taste of food, then also meeting a warm and helpful waitress — or sitting in comfort in a beautifully designed venue — can make the whole experience so much better. Reviewers repeatedly emphasise when, on top of their pleasure of the food, they are impressed by a waiter or waitress who smiled to them, was friendly, attentive and helpful, and made them feel at home. A reviewer of an Italian restaurant in London explains why it is her favourite: “Quite simply, the food is absolutely gorgeous. Wonderful ingredients and very well cooked. But most of all the welcome that we received and service that we got from everyone is great” (rating: 5).

A particular aspect of service is the length of time a customer has to wait either to be seated at a table or while dining. Many restaurants take table reservations, but not all do. Not taking reservations is legitimate, but it is far less acceptable and even offensive when staff at a restaurant (including coffee-restaurants) run a waiting list at the doorstep and appear pleased with letting prospect customers gather and wait outside as if to show around how popular their establishment is; if you complain they may even hint at you how much they do not really need your patronage. Such past experience may have made a British reviewer visiting an Italian restaurant in Tel-Aviv be thankful when: “The staff were very pleasant and found us a seat on a very busy afternoon without behaving as if they were doing us an enormous favour”. In a different case, at an Asian restaurant in London, a reviewer commented: “Long wait to be seated, despite the place being half empty, as the servers were running around serving tables but not seating people”. Considerate restaurant proprietors may keep seats reserved for people waiting (e.g., next to the bar), and may even offer them a free drink if waiting is extended.

While at the table, diners dislike when waiters appear to forget them behind or somehow miss sight of them (e.g., waiting for menus, for taking order and bringing courses ordered, for the cheque). A reviewer in Tel-Aviv was critical pointedly of servers who “it seems lost interest”, and started chatting with their colleagues or playing on their phones. Waiting staff are expected to stand by, being ready to answer requests or voluntarily enquire if diners need anything. An American reviewer at another Italian restaurant in the city, coming “late one night”, appreciated that “my waitress made an effort to check on me regularly”. At an Italian restaurant in London, a reviewer noted that on arriving early for a meeting, “I was offered a newspaper to read while I waited which I thought a rather nice touch”; overall, he commended the service whereby “the staff proficiently and effortlessly ensured everyone felt special and were looked after”. Seemingly little touches matter!

In restaurants of fine cuisine it seems justified to wait patiently longer for an order (e.g., 20 minutes for a main course) as it could mean that the dish is freshly prepared with care for you in those very moments from start to finish [an advice received from my father]. In many ‘popular’ or casual restaurants, however, it would be much less the expectation, though it could depend on the type of food and how complicated it is perceived to prepare the dish. Furthermore, the sensitivity of customers-patrons to time spent could be subject to the occasion (e.g., meeting and dining leisurely in the evening vs. a pre-theatre dinner or a lunch break).

Reviews tend not to address directly the time until a dish ordered is served but more generally relate to the waiting time at any stage while being at the table. Some relevant references were traced in reviews of Asian restaurants in London: (a) A reviewer noted that “service can be slow” and “a bit hit and miss” (although the food and atmosphere were good); (b) Waiting for food was raised by a reviewer as an issue for concern: the waitresses seemed “understaffed” and having “stressed looking faces”, with the result that “We sat around with no food or drink for over 20 minutes before we could grab a waitresses’ attention” (the food was “fantastic” and the rating given could otherwise be 5 rather than 4 — the reviewer “would defiantly” return); (c) A reviewer who was overall happy with the friendly and efficient service and “freshly cooked and tasty delicious” food particularly remarked that the “food came quickly”.

The aesthetics of interior design of a restaurant or coffee-house can also have an impact on consumers’ attitude towards the place and on their behaviour. The style, materials, colours, surrounding decorations, furnishing, lighting etc. are instrumental in the way the design helps to create a certain atmosphere and mood (e.g., cold or warm; traditional or top-notch modern; quiet, ‘cool’ or energetic).

John Barnett and Anna Burles of ‘JB/AB Design’, a London-based agency specialising in design of coffee shops, offer six instructive guidelines on the ways design on different levels can contribute to brand experience. They start with creating a happening in the coffee shop (‘The shop is a stage’), followed by using appetizing imagery of food (‘customers eat with their eyes’); being authentic and relevant; persuasive visual merchandising; creative ambience; and giving customers good reasons to come and ‘gather around a table’ in  the coffee shop. Their recommendations sound mostly if not all adaptable to more types of food and drink establishments, including restaurants. In setting an authentic design, they advise to ‘say it like you mean it’ all round the shop : “The whole shop is a canvas for imagery and messaging that forms the basis of a conversation with your customers”.

Reviewers-diners talk less frequently of aspects of interior design and description of the space of the venue; broader references are made to atmosphere or ambience. In the case of an Italian restaurant in the Tel-Aviv area with an elegant modern design, three different reviewers noted it has “a very nice décor”, that it is “very spacious and modern”, and the “interior is beautiful, a lot of air”. A reviewer relating to an Italian restaurant in London wrote: “The décor seems a little dated, but there were some fun touches”. This reviewer also addressed music played in creating a pleasing atmosphere (“alternated nicely between Frank Sinatra and Luciano Pavarotti — perfect!”). A reviewer-diner mentioned earlier, who was impressed by the newspaper gesture, also said of that Italian restaurant: “The ambience was extremely relaxed and the décor is comfortable, plush and smart”. An Asian restaurant in Tel-Aviv was described by a reviewer as “pleasant, with very informal atmosphere, soft background music, and industrial/downtown décor”.

Some appraisals of design and atmosphere sound somewhat more reserved though still positive. For example, a reviewer said of a luxury Asian restaurant in London that it is “very dark inside, but somehow it is also very cooling place”. A reviewer in another luxury Asian restaurant was very impressed by a modern-futuristic design yet felt uncomfortable with it: “The place is playing with your perception, slightly disorienting with its colours and stairs and reflecting surfaces”. The reviewers quoted above were largely very happy with the food as well as the service. In just one case observed, a reviewer of an Asian restaurant in Tel-Aviv became very upset with the food and proclaimed “Sorry! But when we decide to go to the restaurant, we wish to have a good meal, NOT ONLY a trendy design” (capitals in origin, rating: 1). In this case the “rather nice designed place” could not compensate for a poor food experience. Customers-patrons welcome inspiring and modern designs, but the design must also feel pleasing to the eye and comfortable — be creative with designs but not be excessive.

A top priority for restaurants, and to a similar degree also for coffee-houses, remains taking the most care of the quality and taste of the food they serve. However, it is essential to also look after additional factors or facets that shape the customer’s experience such as service, design and atmosphere, price or value. The kind of service customers-patrons experience is especially a potential ‘game-changer’. Additionally, consumers may not be coming to a restaurant or coffee-house for its design but if it looks appealing the design and atmostphere can make the stay more comfortable and enoyable, and encourage patrons to stay longer, order more, and return. Food is a central pivot of customer appraisals, yet other facets of the experience can tilt it either way: spoil and even ruin the experience or instead support and enhance it.

Ron Ventura, Ph.D. (Marketing)

 

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Ever so often, in many and different places, people take photos. The immediacy of access to cameras on smartphone devices has made photography a ubiquitous and more casual activity. The awareness and sensitivity of people to visual scenes and materials has increased, and photo images especially play a greater role in our lives. When people take their own photos to capture their experiences, this activity may become an integral part of the experience. It raises therefore an interesting question, how an experience could be subjectively affected by the act of taking photos whilst the experience is happening.

Almost obviously, our tendency to take photos is stronger during touristic experiencesAscona: Promenade on Lago Maggiore away from home while travelling in our own country and furthermore on visits to foreign countries. The experience could take place on holiday in a major city when touring its main streets and famous sites, or on vacation in a holiday resort in nature, going on a trip to the top of mountains, near a lake or along the sea-shore. However, we may take photos during more ordinary experiences such as dining in a restaurant (e.g., photo-taking of appetizing food dishes); in a party or family gathering; while playing (e.g., creative games like Lego); watching parades, sports events or other festivities; and even during a shopping tour. In those experiences we could be more passive observers or more active players, which may influence any additional involvement in photo-taking and its effect on the overall experience.

Kristin Diehl, Gal Zauberman and Alixandra Barasch (2016) investigated in-depth the effect that taking photos by consumers during an experience may have on their enjoyment from the experience: whether it amplifies enjoyment, or instead dampens it, and how the level of enjoyment varies in different conditions. Furthermore, they examined a proposed mechanism where engagement in an experience mediates enjoyment: in positive experiences, when individuals are more intensively engaged or immersed in the experience, it may elevate their enjoyment; thereby, to the extent that taking photos increases engagement, it would also heighten enjoyment. The researchers consider two routes of influence: (a) photo-taking competes with the ‘source’ experience by causing attention shifts, thus reducing engagement and enjoyment from the experience; (b) photo-taking helps in directing and focusing more attention on visual aspects of the ‘source’ experience, leading to increased engagement and consequently heighten enjoyment.

The photos taken may have subsequent benefits to individuals such as in aiding with memory of experienced events at a later time (i.e., serving as memory cues) and in showing photos of their experiences to relatives and friends (i.e., social benefit), but the researchers focus specifically on effect of the act of taking a photo at the time of the experience. Their research entailed nine studies (3 field studies & 6 lab experiments), using a range of methodologies and experience-contexts.

A most typical touristic experience is a city bus tour — consider riding a double-decker bus on an open-air top floor. Diehl and her colleagues organised actual bus tours in Philadelphia for photo takers and non-photo takers. They succeeded in showing in this setting that photo takers enjoyed their touristic experience more than those who did not take photos. They also obtained some evidence that the photo takers may have felt more engaged during the experience though the effect was statistically too weak. (Note: In order to exclude any benefits from using photos after the bus tour all participants were disallowed to take their personal cameras or smartphones with them and the assigned  ‘photo-takers’ were given instead a digital camera with a new memory card, yet they could not keep the card afterwards).

The researchers conducted a second field study, this time in the context of a casual lunch (i.e., it was not suggested the food was especially attractive to photograph). In this study the results were already stronger. Consistent with the bus tour study, photo-takers enjoyed the lunch experience more than those not taking photos, but in addition the photo-takers were found significantly more engaged. The setting was sufficient to support just in part that greater engagement mediates the higher enjoyment felt by those taking photos. (Note: In this study no physical restrictions were imposed — those instructed to take photos could use their own cameras or smartphones).

Lab experiments create less realistic experiences since they are only simulated, and the act of taking a photo is also simulated (i.e., a camera icon and a mouse click). However, a controlled experiment can facilitate surfacing the effects of interest while testing for the influence of additional factors. It is acknowledged that the researchers have already shown there is ground to their expected effects on enjoyment in real-life settings.

A lab experiment of simulated bus tours (using videos of tours in Hollywood, California, and London, UK), found support that photo-takers enjoyed their bus tour experiences significantly more, as well as felt significantly more engaged in them, than those not taking photos. Furthermore, there also was support that engagement fully mediates or connects positively between taking photos and enjoyment. Moreover, memory of the greater enjoyment of those taking photos persists as long as a week after the experience. (Note: Remembered enjoyment is to be distinguished from remembered content of the experience).

So, does taking photos indeed work to focus greater attention on what people experience and thus enhances their engagement and increases their enjoyment? The researchers provide important evidence with the help of eye-tracking (field study, museum exhibit) that taking a photo channels more attention to the objects of interest in the experience. In particular, it directs more attention to relevant visual aspects of the experience, that is, to the exhibit artifacts vis-à-vis other objects (e.g., information displays) in the exhibit hall. First, significant effects of greater enjoyment and engagement by photo-takers, and the mediation function of engagement, are replicated. Second, taking photos leads to spending a relatively greater time fixating on the artifacts (as proportion of total duration of fixations) compared to visiting without taking photos. Visitors taking a photo of an artifact fixate for a longer duration on it compared with those who only watch it; no such differences were found for other objects. Third, it is not only the duration of fixations but also the number of fixations dedicated to artifacts that are relatively higher among those taking photos compared to those who do not. (It should be noted, however, that measures were aggregated across ‘exhibit artifacts’ versus ‘other objects’, and not verified for every single artifact being photographed or not.)

Scenes for photography can be very different, some are rich with detail, light and colour (e.g., a lakeside landscape), others being more monotonic or homogenous (e.g., a vase or a person against a dark uniform background). This difference in experience seems to matter little with regard to enjoyment or engagement when taking photos. Comparing between bus tours (Hollywood/London) and pop/rock concerts (performing against a plain and non-changing background), it is found that similarly in those experiences those taking photos enjoy the experience more and feel more engaged than non-photo takers, regardless of the type of experience (full mediation was also supported).

Any indication that participants in the experiment have enjoyed the concert somewhat more than bus tours did not lead to any consistent conclusions; it may be due more to a music concert being more energizing than a city bus tour at least in idea, especially if we take into account also the experience of the music not captured in a photograph. But in real-life concerts of performing artists the viewers more usually today record video clips, not still photographs, by simply raising the smartphone above the head and filming. It is hard to say in these circumstances how much they may lose of the experience at all if they watch it through the screen and how it may affect their attention and enjoyment. Dealing with the smartphone or tablet to check the videos during the performance may distract them somewhat more. Yet, it could be that viewers recording videos on their devices may be disturbing more to other people in the audience than their own enjoyment of the experience.

Expo Milano 2015: Dining Bar (Argentina)

EXPO Milano 2015: For illustration of experience

We may find ourselves in different positions in experiences: Imagine taking a boat cruise on a lake, standing on the deck viewing the landscape around, or watching a parade on a maid road, looking from the side of the road — in these events one is primarily a passive observer. However, one becomes an active participant in the event, for example, of playing a creative game such as building Lego models or possibly visiting a museum exhibit that allows learning by using interactive displays and tools. As Diehl and colleagues suggest, it may have two implications: (a) the ‘active’ experience is in origin more entertaining and enjoyable so there is less to gain by additionally taking photos; (b) engaging in the task of taking photos interferes with participation in the main activity. The researchers applied creative arts-and-crafts projects (e.g., building an Eiffel Tower from wafers and icing): to make conditions comparable, they assigned participants to either actively building the tower model or to passively observing someone else building the same kind of model.

Indeed, taking photos during the experience makes a difference in increasing engagement and enjoyment only for those observing the project and not for those who are actively building the model. Photo takers who actively built the model were also more inclined to report that taking photos during the experience interfered with their project compared to those who only observed and took photos. On the other hand, the latter took more photos (about ten on average) compared with those who tried to build the project and take photos simultaneously (5.5 on average). Reasonably observers were more free to take photos and enjoy it as well. While taking photos did not increase enjoyment of the ‘builders’, there is also no evidence that it decreased it. It could be a little disappointing as we may expect that taking photos as we progress may enhance our sense of pride and satisfaction with our creation taking form — a sort of ‘I Built It Myself’ effect (following an “I Designed It Myself” effect by Franke, Schreier and Kaiser, 2010). Two requirements may be needed: first, that the ‘builder’ is of course successful during his or her task, and second, that by intermittently advancing with the project and stopping for a minute when progress is made to take a photo, it helps to minimise interference or distraction.

This topic brings to mind a particular concern, when the task of photography intervenes in the ‘source’ experience, and potentially disrupts it. Diehl and her colleagues cleverly distinguish between the functional-physical act of taking photos (i.e., operating a camera) and the mental process driving behind it (i.e., planning  the photos). It may be argued in this regard that the impact may be different on people taking photos with a smartphone or tablet device, a compact camera, or a more complex single-lens-reflex (SLR) camera. Also, more dedicated amateur photographers, with greater interest and photographic skills, may approach taking photos during an experience differently from others. This issue unfortunately does not receive an adequate answer in the research.

The researchers test two kinds of suspected interferences that may disrupt or distract photo takers from the main experience they engage in: (1) physical — by assuming one would have to carry and hold a bulky digital SLR camera (represented in the experiment just by a larger camera icon); and (2) functional — by enabling the photographer also to delete unsatisfactory photos right after taking them. The results have shown that with medium-interference (‘holding SLR’) the enjoyment of these photo-takers was in-between those taking photos as above and those not taking photos, not significantly different from either. Yet, with high-interference (‘SLR + deletion’) enjoyment was close and not statistically different from non-photo takers and lower compared with ‘regular’ photo-takers. Corresponding findings were obtained for engagement. Attending to delete photos is the task that appears to truly distract photo takers from the main experience (like checking one’s video during a concert). Holding an SLR camera should not disturb so much dedicated amateur photographers (with some exceptions of extra equipment) but certain operations in taking photos may demand additional attention that could indeed compete with the subject experience.

Nevertheless, the researchers demonstrate in another experiment that the mental process of thinking about taking photos and planning them is more crucial than the functional act of taking the photos. Planning to take photos alone increased enjoyment just as for those actually taking photos, compared with those not involved in any way in taking photos. In other words, planning to taking photos “led to similar levels of enjoyment as actually taking photos”. Reported engagement was similarly heightened when planning to take photos. For more dedicated amateur photographers planning the photos to be taken is a key part of the activity and may not be easy to separate from some functions (e.g., choices of composition, focal object, exposure and speed). Yet the photography-related activity may not be viewed as an interference but as an integral part of the whole experience, a way of living the experience more deeply and vividly.

When the experience is perceived as negative, taking photos would also increase engagement, but in this case it will result in lower enjoyment compared to those not taking photos. The increased engagement means more attention of the photo takers becomes focused on negative aspects of the experience.

The researchers study a specific mechanism of mediation by engagement between taking photos and enjoyment. But many consumers may receive their satisfaction and joy from recording their experience to refresh their memories later through the photos, perhaps more so if they are less interested in photography per se. Moreover, consumers increasingly take photos with the intention of uploading them to social media networks (e.g., Facebook, Instagram) for sharing with their acquaintances, close and far. Diehl and colleagues are not convinced, based on an initial survey, that people anticipate such benefits while taking the photos. Nevertheless, they do not exclude this possibility: they note that “individuals presumably take photos in part because they expect that reviewing those photos in the future will provide them with additional enjoyment” and such forward-looking behaviour may enhance their immediate enjoyment from the experience. In their judgement many consumers do not anticipate such an effect. They do note, however, that many marketers also forbid taking photos on their premises because they seem to believe that taking photos ruins individuals’ experiences.

The research of Diehl, Zauberman and Barasch is interesting and refreshing on a topic not studied often. It shows from different angles how taking photos enhances the enjoyment of consumers in positive experiences through increased engagement (i.e., focus more attention, feeling more deeply immersed in the experience). Taking photos could plausibly be seen as less interfering or disrupting to people the closer they perceive this activity as complementary to the experience itself, and especially so for those more interested in photography. Marketers should be less reluctant to let consumers taking photos since it is more likely to make them enjoy the experience better. Consumers have to learn when is the best timing to turn to taking photos so as to enjoy it the most as part of the whole experience.

Ron Ventura, Ph.D. (Marketing)

Reference:

How Taking Photos Increases Enjoyment of Experiences; Kristin Diehl, Gal Zauberman, and Alixandra Barasch, 2016; Journal of Personality and Social Psychology, 111 (2), pp. 119-140.

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The strength, impact and value of a brand are embodied, fairly concisely, in the concept of ‘brand equity’. However, there are different views on how to express and measure brand equity, whether from a consumer (customer) perspective or a firm perspective. Metrics based on a consumer viewpoint (measured in surveys) raise particular concern as to what actual effects they have in the marketplace. Datta, Ailawadi and van Heerde (2017) have answered to the challenge and investigated how well Consumer-Based metrics of Brand Equity (CBBE) align with Sales-Based estimates of Brand Equity (SBBE). The CBBE metrics were adopted from the model of Brand Asset Valuator (Y&R) whereas SBBE estimates were derived from modelling market data of actual purchases. They also examined the association of CBBE with behavioural response to marketing mix actions [1].

In essence, brand equity expresses an incremental value of a product (or service) that can be attributed to its brand name above and beyond physical (or functional) attributes. Alternately,  brand equity is conceived as the added value of a branded product compared with an identical version of that product if it were unbranded. David Aaker defined four main groups of assets linked to a brand that add to its value: awareness, perceived quality, loyalty, and associations beyond perceived quality. On the grounds of this conceptualization, Aaker subsequently proposed the Brand Equity Ten measures, grouped into five categories: brand loyalty, awareness, perceived quality / leadership, association / differentiation, and market behaviour. Kevin Keller broadened the scope of brand equity wherein greater and more positive knowledge of customers (consumers) about a brand would lead them to respond more favourably to marketing activities of the brand (e.g., pricing, advertising).

The impact of a brand may occur at three levels: customer market, product market and financial market. In accordance, academics have followed three distinct perspectives for measuring brand equity: (a) customer-based — an attraction of consumers to the “non-objective” part of the product offering (e.g., ‘mindset’  as in beliefs and attitudes, brand-specific ‘intercept’ in a choice model); (b) company-based — additional value accrued to the firm from a product because of a brand name versus an equivalent product but non-branded (e.g., discounted cash flow); financial-based — brand’s worth is the price it brings or could bring in the financial market (e.g., materialised via mergers and acquisitions, stock prices)[2]. This classification is not universal:  for example, discounted cash flows are sometimes described as ‘financial’; estimates of brand value derived from a choice-based conjoint model constitute a more implicit reflection of the consumers’ viewpoint. Furthermore, models based on stated-choice (conjoint) or purchase (market share) data may vary greatly in the effects they include whether in interaction with each competing brand or independent from the brand ‘main effect’ (e.g., product attributes, price, other marketing mix variables).

A class of attitudinal (‘mindset’) models of brand equity may encompass a number of aspects and layers: awareness –> perceptions and attitudes about product attributes and functional benefits (+ overall perceived quality), ‘soft’ image associations (e.g., emotions, personality, social benefits) –> attachment or affinity –> loyalty (commitment). Two noteworthy academic studies have built upon the conceptualizations of Aaker and Keller in constructing and testing consumer-based measures:

  • Yoo and Donthu (2001) constructed a three-dimension model of brand equity comprising brand loyalty, brand awareness / associations (combined), and perceived quality (strength of associations was adopted from Keller’s descriptors of brand image). The multidimensional scale (MBE) was tested and validated across multiple product categories and cultural communities [3].
  • Netemeyer and colleagues (2004) demonstrated across products and brands that perceived quality, perceived value (for the cost), and uniqueness of a given brand potentially contribute to willingness to pay a price premium for the brand which in turn acts as a direct antecedent of brand purchase behaviour [4]. Price premium, an aspect of brand loyalty, is a common metric used for assessing brand equity.

Datta, Ailawadi and van Heerde distinguish between two measurement approaches: the consumer-based brand equity (CBBE) approach measures what consumers think and feel about the brand, while the sales-based brand equity (SBBE) approach is based on choice or share of the brand in the marketplace.

The CBBE approach in their research is applied through data on metrics from the Brand Asset Valuator model developed originally by Young and Roubicam (Y&R) advertising agency (the brand research activity is now defined as a separate entity, BAV Group; both Y&R and BAV Group are part of WPP media group). The BAV model includes four dimensions: Relevance to the consumers (e.g., fits in their lifestyles); Esteem of the brand (i.e., how much consumers like the brand and hold it in high regard); Knowledge of the brand (i.e., consumers are aware of and understand what the brand stands for); and  Differentiation from the competition (e.g., uniqueness of the brand)[5].

The SBBE approach is operationalised through modelling of purchase data (weekly scanner data from IRI). The researchers derive estimates of brand value in a market share attraction model (with over 400 brands from 25 categories, though just 290 brands for which BAV data could be obtained were included in subsequent CBBE-SBBE analyses) over a span of ten years (2002-2011). Notably, brand-specific intercepts were estimated for each year; an annual level is sufficient and realistic to account for the pace of change in brand equity over time. The model allowed for variation between brands in the sensitivity to their marketing mix actions (regular prices, promotional prices, advertising spending, distribution {on-shelf availability} and promotional display in stores) — these measures are not taken as part of SBBE values but indicate nonetheless expected manifestation of higher brand equity (impact); after being converted into elasticities, they play a key role in examining the relation of CBBE to behavioural outcomes in the marketplace.


  • Datta et al. seem to include in a SBBE approach estimates derived from (a) actual brand choices and sales data as well as (b) self-reported choices in conjoint studies and surveys. But subjective responses and behavioural responses are not quite equivalent bases. The authors may have aimed reasonably to distinguish ‘choice-based’ measures of brand equity from ‘attitudinal’ measures, but it still does not justify to mix between brands and products consumers say they would choose and those they actually choose to purchase. Conjoint-based estimates are more closely consumer-based.
  • Take for instance a research by Ferjani, Jedidi and Jagpal (2009) who offer a different angle on levels of valuation of brand equity. They derived brand values through a choice-based conjoint model (Hierarchical Bayes estimation at the individual level), regarded as consumer-level valuation. Vis-à-vis the researchers constructed a measure of brand equity from a firm perspective based on expected profits (rather than discounted cash flows), presented as firm-level valuation. Nonetheless, in order to estimate sales volume they ‘imported’ predicted market shares from the conjoint study, thus linking the two levels [6].

 

Not all dimensions of BAV (CBBE) are the same in relation to SBBE: Three of the dimensions of BAV — relevance, esteem, and knowledge — are positively correlated with SBBE (0.35, 0.39, & 0.53), while differentiation is negatively although weakly correlated with SBBE (-0.14). The researchers reasoned in advance that differentiation could have a more nuanced and versatile market effect (a hypothesis confirmed) because differentiation could mean the brand is attractive to only some segments and not others, or that uniqueness may appeal to only some of the consumers (e.g., more open to novelty and distinction).

Datta et al. show that correlations of relevance (0.55) and esteem (0.56) with market shares of the brands are even higher, and the correlation of differentiation with market shares is less negative (-0.08), than their correlations with SBBE (correlations of knowledge are about the same). The SBBE values capture a portion of brand attraction to consumers. Market shares on the other hand factor in additional marketing efforts that dimensions of BAV seem to account for.

Some interesting brand cases can be detected in a mapping of brands in two categories (for 2011): beer and laundry detergents. For example, among beers, Corona is positioned on SBBE much higher than expected given its overall BAV score, which places the brand among those better valued on a consumer basis (only one brand is considerably higher — Budweiser). However, with respect to market share the position of Corona is much less flattering and quite as expected relative to its consumer-based BAV score, even a little lower. This could suggest that too much power is credited to the name and other symbols of Corona, while the backing from marketing efforts to support and sustain it is lacking (i.e., the market share of Corona is vulnerable).  As another example, in the category of laundry detergents, Tide (P&G) is truly at the top on both BAV (CBBE) and market share. Yet, the position of Tide on SBBE relative to BAV score is not exceptional or impressive, being lower than predicted for its consumer-based brand equity. The success of the brand and consumer appreciation for it may not be adequately attributed specifically to the brand in the marketplace but apparently more to other marketing activities in its name (i.e., marketing efforts do not help to enhance the brand).

The degree of correlation between CBBE and SBBE may be moderated by characteristics of product category. Following the salient difference cited above between dimensions of BAV in relation to SBBE, the researchers identify two separate factors of BAV: relevant stature (relevance + esteem + knowledge) and (energized) differentiation [7].

In more concentrated product categories (i.e., the four largest brands by market share hold a greater total share of the category), the positive effect of brand stature on SBBE is reduced. Relevance, esteem and knowledge may serve as particularly useful cues by consumers in fragmented markets, where it is more necessary for them to sort and screen among many smaller brands, thus to simplify the choice decision process. When concentration is greater, reliance on such cues is less required. On the other hand, when the category is more concentrated, controlled by a few big brands, it should be easier for consumers to compare between them and find aspects on which each brand is unique or superior. Indeed, Datta and colleagues find that in categories with increased concentration, differentiation has a stronger positive effect on SBBE.

For products characterised by greater social or symbolic value (e.g., more visible to others when used, shared with others), higher brand stature contributes to higher SBBE in the market. The researchers could not confirm, however, that differentiation manifests in higher SBBE for products of higher social value. The advantage of using brands better recognized and respected by others appears to be primarily associated with facets such as relevance and esteem of the brand.

Brand experience with hedonic products (e.g., leisure, entertainment, treats) builds on enjoyment, pleasure and additional positive emotions the brand succeeds in evoking in consumers. Sensory attributes of the product (look, sound, scent, taste, touch) and holistic image are vital in creating a desirable experience. Contrary to expectation of Datta and colleagues, however, it was not found that stature translates to higher SBBE for brands of hedonic products (even to the contrary). This is not so good news for experiential brands in these categories that rely on enhancing relevance and appeal to consumers, who also understand the brands and connect with them, to create sales-based brand equity in the marketplace. The authors suggest in their article that being personally enjoyable (inward-looking) may overshadow the importance of broad appeal and status (outward-looking) for SBBE. Nevertheless, fortunately enough, differentiation does matter for highlighting benefits of the experience of hedonic products, contributing to a raised sales-based brand equity (SBBE).

Datta, Ailawadi and van Heerde proceeded to examine how strongly CBBE corresponds with behavioural responses in the marketplace (elasticities) as manifestation of the anticipated impact of brand equity.

Results indicated that when relevant stature of a brand is higher consumers respond favourably even more strongly to price discounts or deals  (i.e.,  elasticity of response to promotional prices is further more negative or inverse). Yet, the expectation that consumers would be less sensitive (adverse) to increased regular prices by brands of greater stature was not substantiated (i.e., expected positive effect: less negative elasticity). (Differentiation was not found to have a positive effect on response to regular prices either, and could be counter-conducive for price promotions.)

An important implication of brand equity should be that consumers are more willing to pay higher regular prices for a brand of higher stature (i.e., a larger price premium) relative to competing brands, and more forgiving when such a brand sees it necessary to update and raise its regular price. The brand may benefit from being more personally relevant to the consumer, better understood and more highly appreciated. A brand more clearly differentiated from competitors with respect to its advantages could also benefit from a protected status. All these properties are presumed to enhance attachment to a brand, and subsequently lead to greater loyalty, making consumers more ready to stick with the brand even as it becomes more expensive. This research disproves such expectations. Better responsiveness to price promotions can help to increase sales and revenue, but it testifies to the heightened level of competition in many categories (e.g., FMCG or packaged goods) and propensity of consumers to be more opportunistic rather than to the strength of the brands. This result, actually a warning signal, cannot be brushed away easily.

  • Towards the end of the article, the researchers suggest as explanation that they ignored possible differences in response to increases and decreases in regular prices (i.e., asymmetric elasticity). Even so, increases in regular prices by stronger brands are more likely to happen than price decreases, and the latter already are more realistically accounted for in response to promotional prices.

Relevant stature is positively related to responsiveness to feature or promotional display (i.e., consumers are more inclined to purchase from a higher stature brand when in an advantaged display). Consumers also are more strongly receptive to larger volume of advertising by brands of higher stature and better differentiation in their eyes (this analysis could not refer to actual advertising messages and hence perhaps the weaker positive effects). Another interesting finding indicates that sensitivity to degree of distribution (on-shelf availability) is inversely associated with stature — the higher the brand stature from consumer viewpoint, larger distribution is less attractive to the consumers. As the researchers suggest, consumers are more willing to look harder and farther (e.g., in other stores) for those brands regarded more important for them to have. So here is a positive evidence for the impact of stronger brands or higher brand equity.

The research gives rise to some methodological questions on measurement of brand equity that remain open for further deliberation:

  1. Should the measure of brand equity in choice models rely only on a brand-specific intercept (expressing intrinsic assets or value of the brand) or should it include also a reflection of the impact of brand equity as in response to marketing mix activities?
  2. Are attitudinal measures of brand equity (CBBE) too gross and not sensitive enough to capture the incremental value added by the brand or is the measure of brand equity based only on a brand-intercept term in a model of actual purchase data too specific and narrow?  (unless it accounts for some of the impact of brand equity)
  3. How should measures of brand equity based on stated-choice (conjoint) data and actual purchase data be classified with respect to a consumer perspective? (both pertain really to consumers: either their cognition or overt behaviour).

Datta, Ailawadi and van Heerde throw light in their extensive research on the relation of consumer-based equity (CBBE) to behavioural outcomes, manifested in brand equity based on actual purchases (SBBE) and in effects on response to marketing mix actions as an impact of brand equity. Attention should be awarded to positive implications of this research for practice but nonetheless also to the warning alerts it may signal.

Ron Ventura, Ph.D. (Marketing)

Notes:

[1] How Well Does Consumer-Based Brand Equity Align with Sales-Based Brand Equity and Marketing-Mix Response?; Hannes Datta, Kusum L. Ailawadi, & Harald J. van Heerde, 2017; Journal of Marketing, 81 (May), pp. 1-20. (DOI: 10.1509/jm.15.0340)

[2] Brands and Branding: Research Findings and Future Priorities; Kevin L. Keller and Donald R. Lehmann, 2006; Marketing Science, 25 (6), pp. 740-759. (DOI: 10.1287/mksc.1050.0153)

[3] Developing and Validating a Multidimensional Consumer-Based Brand Equity Scale; Boonghee Yoo and Naveen Donthu, 2001; Journal of Business Research, 52, pp. 1-14.

[4]  Developing and Validating Measures of Facets of Customer-Based Brand Equity; Richard G. Netemeyer, Balaji Krishnan, Chris Pullig, Guangping Wang,  Mahmet Yageci, Dwane Dean, Joe Ricks, & Ferdinand Wirth, 2004; Journal of Business Research, 57, pp. 209-224.

[5] The authors name this dimension ‘energised differentiation’ in reference to an article in which researchers Mizik and Jacobson identified a fifth pillar of energy, and suggest that differentiation and energy have since been merged. However, this change is not mentioned or revealed on the website of BAV Group.

[6] A Conjoint Approach for Consumer- and Firm-Level Brand Valuation; Madiha Ferjani, Kamel Jedidi, & Sharan Jagpal, 2009; Journal of Marketing Research, 46 (December), pp. 846-862.

[7] These two factors (principal components) extracted by Datta et al. are different from two higher dimensions defined by BAV Group (stature = esteem and knowledge, strength = relevance and differentiation). However, the distinction made by the researchers as corroborated by their data is more meaningful  and relevant in the context of this study.

 

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‘Where do I find umbrellas?’ ‘How do I get to the shoe department?’ Questions like this are likely familiar to many consumers when visiting large department stores. Walking long pathways on a floor and moving between floors in a quest to find a needed product can be time-consuming and annoying. Signposts often are too general and lack useful instructions for direction. Mobile mapping applications (‘apps’) of indoors environments, an evolving technological development of the last five years, can make the shopping experience in large stores more smooth, convenient and enjoyable for consumers. A mapping app can be useful not only in department stores but also within large supermarkets, fashion, toys or DIY stores, to give just a few examples. Moreover, navigating in complex structures like shopping malls, airports, hospitals etc. may be made much easier with a mapping app.

Over the years large physical floor maps have been installed in some department stores (e.g., hung on the wall near a lift) — the problem is that the shopper has to try to keep in memory the route to pass to a desired destination. Signage of product directories placed in front of escalators may help the shopper to find on what floor a particular type of product (or a brand) is placed, but one may be left again to stroll a widespread floor until locating the product requested. Signs hung above aisles (e.g., in supermarkets) may not be seen until one approaches the relevant aisle. Some retailers and operators of shopping centres provide printed maps on cards or leaflets to guide their customers on the premises; the map is usually accompanied with index lists and codes for reference, and regions on the map diagram may be printed in different colours to facilitate navigation. Holding a map in the shopper’s hands can be a great relief. Holding a dynamic and interactive map displayed on the shopper’s mobile phone seems as an even greater step forward.

Mapping applications of enclosed environments aim to provide people with spatial information and tools similar to those that facilitate their navigation on roads and in the streets of cities. One can search for an address, a business or an institute, and the mapping utility will show the user its location on the map. Additionally, when used on a mobile device, smartphone or tablet, the application can show the way and follow the user until he or she gets to the destination. In-store, the ‘address’ would typically be a product. An in-store mapping app may show the shopper the location of the product in the store, and perhaps give instructions step-by-step how to get there, yet it will not necessarily be able to follow the user to the destination — an additional layer of technology, a physical infrastructure, is required to locate the shopper on the map and automatically “advance” the map on display as he or she walks in the store.

  • A web-based mapping utility of Heathrow Airport (London), for example, allows a prospect traveller to look for a starting point and a destination in any of the five terminals and their facilities and the online service will provide instructions in text and over the map diagram how to get there.

The GPS technology that usually allows the positioning of users on a map of an outdoors space, and follows the user until he or she gets to a destination, stops working when one enters an enclosed environment of a building. It is additionally not accurate enough to pinpoint the location of a person in a relatively small area, and especially is impractical in distinguishing between floors in the building. Therefore, this technology cannot be applied in mapping applications either in shopping centres or in-store. Alternative technologies have been tested and utilised for indoors mapping: more notable is Bluetooth technology applied with beacons, but there are other options in the field, including Wi-Fi and LED light bulbs for signalling and transmitting location information. Effective positioning of shoppers is said to require a dense network of devices (transmitters) throughout the store, oftentimes an expensive enterprise. Therefore, retailers appear to be more interested in implementing select functions of in-store mapping applications (e.g., orientation, promotions) but are less in a hurry to adopt also the capability of positioning shoppers on a map of the store.

A retailer can deliver via a mobile app promotional offers (e.g., digital coupons) to shoppers as well as updates on new products, services and events. A retail app may  include a bundle of services such as tools for mapping and managing a shopping list for the benefit of the customers. Some retailers already use a location functionality in their stores, independent of mapping, to improve the timing when offers are sent to shoppers during their visit, specific to their location in the store. But this functionality usually utilises fewer devices (e.g., beacons) than would be necessary for a full positioning capability. The mapping tools can produce several advantages: (1) deliver a helpful service to shoppers (e.g., using a shopping list with a map); (2) enhance navigation by location of the shopper on a dynamic map; (3) give a better incentive to shoppers to authorise an app to track their location in the store; (4) mount ‘flags’ of promotional offers for various products on the map near the relevant aisles or display shelves, particularly as the shopper approaches nearby (as a benchmark for illustration, think of information [icons & text] mounted on maps of Google or in an app like Waze).

The map is meant to provide first of all spatial information. Should mapping applications also be visuospatial, that is, display a visual image of the store’s appearance? It would be like making a virtual simulated tour of the store. The experience could be more entertaining (e.g., like gaming) but would it be more informative and useful? If the shopper is already in the store, he or she should not really need the enhanced display — it could be more confusing (screen and reality may interfere with each other) and time-consuming to navigate with such a display. The enhanced imagery display may be useful for planning a visit before entering the store, or perhaps for online shopping in a virtual store. Yet, once a shopper is at the physical store, a visuospatial display should be made an option as a matter of discretion by the shopper while the main display better be a map diagram that matches the actual layout and organisation of the store.

  • Mobile marketing company aisle411, which specialises also in indoors mapping for retail stores, created in co-operation with Google’s Project Tango a 3D imaged environment (“3D mapping”) of a supermarket store with features of augmented reality (e.g., product information. rewards and coupons). [BusinessWire.com, 25 June 2014, see video demonstration — note that the application is operating on a tablet mounted on the shopping cart]

A study published last year (Ertekin, Pryor & Pelton, Spring 2017) sought to identify perceptions, attitudes or personality traits that could motivate consumers to use mobile in-store mapping applications (*). The study focused on consumers from generations X (born in 1961-1979) and Y (born in 1980-1999 — adults likely to be familiar with and orientated to using computer technology and its applications). Actually 80% of the respondents in the sample were of generation Y. All respondents (n=258) had a device that can connect to the Internet (57% had a mapping application downloaded to their smartphone). The researchers considered factors regarding the use of technology of in-store mapping applications and how it would affect the shopping experience (30% of respondents reported trying an in-store mapping application before).

The degree of ease-of-use of an in-store mapping app was found to have a positive effect on intention (or ‘propensity’) to use it while shopping. Perceived ease-of-use was defined as the “degree to which a person believes that using a particular system would be free of effort” (e.g., easy to use, clear and understandable, flexible to interact with). Usefulness of the app pertains specifically to the act of shopping, helping to enhance the ‘job performance’ (effectiveness) of shopping with the map. As expected, perceived usefulness also had a positive effect on the intention to use such an app.

In addition to those functional or utilitarian benefits of the application, the researchers addressed the app’s ability to make the shopping experience emotionally more entertaining (particularly inducing excitement associated with novelty of the technology). Entertainment benefits (e.g., enjoyable learning about stores, fun, or merely a good pass time when bored) also strengthen the intention to use an in-store mapping app.

The willingness to use a mobile in-store mapping app is diminished by greater concern of consumers about sacrificing their security when using a network computing application (i.e., emphasis on protection from malicious software or stealing personal information). Conspicuously, however, reference to data security is only hinted and the sensitive matter of privacy is not properly covered, particularly the reluctance of consumers to let their moves being tracked. If the mapping app provides the user more perceived benefits of the types cited above, they may be less resistant to allow the retailer to track them.

A result that would probably be of interest to retailers shows that consumers who exhibit a stronger deal proneness are more intent on using an in-store mapping app. In other words, consumers who are more leaning towards buying on discounts and deals are more likely to be attracted to the mapping app in hope of finding there promotional offers, easy to locate in the store. Yet retailers should be careful about this finding because if they are too focused on delivering promotional offers through their apps, then they will get shoppers more interested in deals and reward points more frequently than other shoppers. In order to encourage shoppers to extend their in-store visits longer and make more unplanned purchases, promotional offers should be put forward on the app more closely in accordance with the store sections or aisles the shoppers access, when they pass through; where feasible, generate offers in association with products on a shopping list the shopper fills-in on the app (i.e., help a shopper find more easily the products on his or her list while adding products that are more likely to be perceived as complements to them).  Promotions are only one of the ways to encourage consumers to shop more, and that is true also for the ‘package’ offered in a retail mapping app.

The model analysed in this study did not provide support for a positive effect of being pressed in time on intention to use an in-store mapping app  (i.e., apps are not associated enough with saving time or those pressed in time are interested in the mapping app no more than others with more free time). It does not seem to give ground to a concern of retailers that such an app might allow shoppers to shorten their shopping trips, but as suggested above, if needed there are ways to circumvent such behaviour. The model also did not support the hypothesis that consumers who like to gather more market information (e.g., products, prices, innovations) and share their knowledge with others, to advise or actually influence them, are more inclined to use an in-store mapping app to accomplish their goals.

The study makes early steps in investigating consumer behaviour pertaining to using retail mapping apps. It confirms that functional as well as emotional benefits are drivers of consumer use of a mapping app in-store. But the investigation has to proceed to validate and refine those findings and conclusions. While the study targeted young consumers of relevant generations Y and X, the sample consisted of university students (hence probably also the vast majority of millennials). It may be sufficient for establishing relations of the tested factors to the use of mapping apps, but further research should go beyond a student population to cover consumers of these generations to validate the relations or effects. Additional analyses and models (beyond the regression model applied in this study) will have to examine effects more thoroughly or with greater scrutiny (e.g., causality, mediators). Furthermore, consumer disposition towards the mapping apps has to be examined through actual experience and behaviour, for example by letting shoppers perform their shopping ‘naturally’ with an app or by giving them specific tasks to perform with a mapping app in their shopping trip. The study of Ertekin, Pryor and Pelton would serve as an instructive and helpful starting point.

Consumers may utilise a mental map of a store site that they hold in memory to guide them through locations in the  store as in an auto-pilot mode. Mental maps are possible to construct, however, for stores that shoppers visit frequently enough or regularly. Digital mapping apps may change how consumers construct and utilise their own mental maps, stored in their long-term memory. People tend to favour digital information sources and rely less on their own memory. A shopper may need no more than a graph as a spatial model to perform his or her shopping job, or perhaps a more detailed mental model of a drawing similar to a map. Yet the extent to which people also use picture-like mental imageries of the site depends on how useful is the visual information for performing their task, because visual imagery requires greater resources. So visual imagery may be re-constructed more selectively as needed — think of ‘photos’ of specific locations of importance or interest to the shopper (e.g., shelf displays of ‘target’ products) pinned to the mental drawing at the relevant places. A conception like this may be emulated in the digital in-store maps of mobile applications.

Mobile in-store mapping applications present a significant, promising development in re-shaping consumer shopping experiences. It could play an important role in the future of retailing, but there is still ambiguity about the extent to which large retailers would choose to implement mapping features and capabilities, particularly the real-time positioning of shoppers inside a physical store. Mapping applications for retail indoors sites may impact, for example, the balance in preference of consumers between shopping online and offline (i.e., in brick-and-mortar stores).

Ron Ventura, Ph.D. (Marketing)

(*) An Empirical Study of Consumer Motivations to Use In-Store Mapping Application; Selcuk Ertekin, Susie Pryor, & Lou E. Pelton, 2017; Marketing Management Journal, 27 (1), pp. 63-74.

 

 

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Transparency; reliability; trust: These key terms are rehearsed and highlighted many times in textbooks and business books, academic and trade articles about managing customer relationships. Holding up to them is based, for example, on being honest, truthful and fair when making product or service offers to customers and in any other dealings between a company and its customers. However, those concepts that are good in managerial and marketing theory are too often lost when it comes to practice.

In addition, experts, technology consultants and other advocates of digital marketing are praising the capacity gained by companies to know so much about the behaviour and personal characteristics of their customers. One of the great benefits of this customer knowledge is in enabling companies to construct offers that will closely fit the needs, preferences and consumption or usage habits of their customers. Again, a gap emerges between what companies are supposedly capable to do with digital technologies available to them, including information and tools, and what they actually do. More accurately,  oftentimes companies are not doing enough in utilising those technologies to the intended purpose of creating better fitting offerings and messages.

The present post is based on a true story of a troubling journey to acquire an iPhone from a mobile telecom service provider (it will be called here ‘WM’). But this post is not just about the case of a particular company. Similar forms of problematic conduct are likely to be encountered at competing mobile service providers as well as other telecom service companies such as TV (cable and satellite), telephony (voice and data) and Internet providers. Moreover, at least some of these types of flawed conduct will be familiar to the reader from interaction with service providers in other domains (e.g., banking and finance, credit cards, insurance, healthcare, travel and tourism). In essence, this conduct refers most typically to providers of contractual services, and particularly when services extend over months and years.

An upgrade of a customer’s mobile phone is often accompanied by a modification of his or her service package; it is justified especially when a large generation gap exists between the previous and the new model. Two-part and three-part tariff schemes have been common in mobile communication for many years, splitting the price of service between fixed and variable components. Usage possibilities and patterns have changed, however, with smartphones, pertaining in particular to the online flow of data and the use of mobile applications (‘apps’). Service packages more frequently combine bundles of included (‘pre-paid’) units — minutes (voice), messages (SMS), and data MBs/GBs (mobile websites and apps); the weight of variable cost (i.e., based on price per unit), drops vis-à-vis a fixed cost component.

Subscribed customers are encouraged to pre-commit to ever larger bundles or unit quotas, some of them could constantly be left unspent each month. At least in one category it is sensible for mobile service providers to ‘give away’ a large quantity of messages amid the expanded messaging by customers via free chatting apps (e.g., WhatsApp, Facebook’s Messenger). The marginal cost per unit of any kind could be much lower now for the mobile network companies to make it economic for them to offer larger bundles, and thus attract customers to their ‘great value’ plans (i.e., the customer gets lots of ‘free’ units). Albeit, if customers do not utilise large enough portions of their quotas, they could end up paying for units they never get to benefit from.

A service plan was offered with the new phone purchased, including 10GBs of data, 5000 minutes and 5000 messages per month. This volume signalled a dramatic increase from my previous consumption levels. No doubt the new smartphone could support a huge data volume not possible with the previous semi-smartphone model, but also a volume hard to imagine how it may be used. Nor was it perceivable how to use anything near 5000 SMS. That is the magic of large numbers — they can be fascinating and captivating, yet meaningless at least in a short to medium term. The sales representative at the store and service centre of WM promised that it will save up to 45% of my bill so far. With the service package I get also ‘marvellous high-fidelity’ wireless-Bluetooth earphones, supposedly as a bonus or gift. No other plan was suggested. The relation of the earphones to the discount was not explained. Protesting that I do not really need those earphones did not help. It was awkward, but then it seemed that the enlarged traffic volume, that one might learn how to take advantage of, with a reduction in monthly cost could be worth it. The value of the earphones was negligible to me (but apparently not to WM). That is probably where System 1 got the hold of me. When not feeling on solid ground, swapped with documentation, and distracted, one may fail to pose difficult, intelligent questions;  System 2 remains dormant or blocked. It was a combination of desire to believe the offer is good for me, and to trust the company that it will treat me fairly.

The secret behind the earphones was revealed in the next monthly bill. If paid in cash, their price was about $150 vis-à-vis $900 for the iPhone. I agreed to pay for the iPhone in 12 credit installments (adding  5% in cost). However, the additional and unexpected payment for the earphones was set to be spread over 36 months (+65%! added to price in cash). The discount on service was for 12 months. The payments for the earphones would “eat” much of the discount during the first year. Furthermore, they will drag for another 24 months while the cost of service package returns to its previous level, though of course with a much greater usage allowance. Lesson: Beware of ‘free gifts’ and make sure to get all the details (see more in the section below on contracts).

This has brought me promptly back to the service centre — the staff refused to take their earphones back and gave me another nice demonstration of their performance. However, with the help of a kind supervisor we agreed that payments for both iPhone and earphones will be changed to 6 instalments with no interest (see more in the section on execution).

The Bluetooth earphones may well be a good product and the representatives were right to offer it, but it is wrong to impose the earphones as a ‘bonus’ or incentive if the customer is not interested and declines the offer. Furthermore, at least one other package option should have been recommended that would be more aligned with previous usage in recent months. A smart system should know how to use past behaviour of the customer as a benchmark and propose a reasonable expansion of usage levels of minutes, messages and data. First, it would make the customer feel that the company knows him or her (e.g., needs and usage patterns) and is trying in accordance to provide the most suitable personalised solutions. Second, when the quota of units posits a sensible ‘ceiling’ to the customer it may serve as a goal or an aspiration level to gradually increase his or her usage towards it, and then upgrade the service plan. Otherwise, the customer may be just lost, having no appreciative reference for scaling one’s personal usage levels (perhaps that is the objective, to let customers with less self-control carry away, but that is beyond the scope of this story).

Signing contracts to purchase products or receive services is frequently a sensitive matter and a host of potential pain points. This happens because customers usually cannot fully or even adequately read the contract and comprehend it at the time of transaction, and they are not sufficiently encouraged to spend the time reading and asking questions. The contract for my smartphone included, for example, the terms of payment, basic support, terms of usage,  liability and warranty, etc.. On each desk at the store and service centre of WM stands a tablet in portrait position. Regularly, it displays ads for services and products. However, WM saves on paperwork and employs the screen also to display contracts that can be signed digitally (later sent by e-mail). Reading the contract from the screen is not very convenient and the customer also cannot control the display to the pace of his or her reading. One is quickly brought to the place for signing. The contract for the earphones was separate in origin from the iPhone’s (later corrected); when the representative came to it, he jumped to the signature position which incidentally fell at the top of the screen. When asked to see what comes before, he said this is simply to confirm that I accept the earphones. At that point I wanted to trust him and WM. This turned out to be a mistake. Lesson: Never agree to sign a contract on a screen without seeing the previous screen pages (as you should not do when signing a paper contract). The tablet screen may appear informal and friendly but the contract is binding.

  • In fact, by returning to the issue of service plans, the tablet already on the desk can be used cleverly for displaying service options to a customer while taking into account his or her personal usage patterns. That is, the company can show the customer what would be the cost implication of a proposed service plan given current usage levels, and how it may change if usage levels increase by X%.

On top of all, bad execution of proceedings can temper even actions taken in good faith. It may happen as a result of neglect, lacking proficiency by the staff (e.g., how to use the computer system), or flaws in computer software (e.g., poor execution of instructions). Here are two examples — no attempt is made to guess what has caused them:

As told above, the payment arrangement was changed with special managerial consent to six instalments with no interest, as an option in the contract allows, for both the iPhone and earphones. Unfortunately, a notice from the bank as well as the credit card monthly bill soon revealed that the whole amount was charged in a single payment. The trap is apparently in the phrasing of the contract (translated): “The sum of $$$ that will be charged in one payment (or up to six payments to the choice of the customer at the time of acquisition)”. The phrase ambiguously does not specify in how many (equal) payments, up to six, that (cash) price will be charged. This ambiguity has led to practically ignoring the content in parentheses and what was agreed accordingly. It is noted that a statement on an option of payment in instalments with interest explicitly indicates the number of payments and amount of each one. The phrasing of the first statement must similarly be fixed for that option to have any validity.

In the second case, the company left in place a monthly charge (~$6) for a quota of 70 SMS from my previous service package. Obviously, this number is negligible relative to the new allowance of 5000 SMS a month in the new service plan with the iPhone. They should have automatically removed this obsolete component together with other components from the older plan. The customer service representative at the call centre argued that I should have asked it to be cancelled. That is, instead of apologising for an honest mistake, and possibly reimbursing me for the past month, she made it look as if I may have wanted a non-significant addition of 70 SMS to 5000 SMS (>70:1 ratio). That was already infuriating because it made no sense at all. Lesson: Always check your bills carefully.

The customer journey to purchase an iPhone evolved into a kind of chain of pitfalls, acts of malpractice, and errors of unknown source or cause. It must be emphasised that the troubles are concerned with the envelope of services that enable using the iPhone and not the device itself. It is a story of failure of sales and service representatives to listen, a tendency to repeat answers regardless of the customer’s response (i.e., lack of sensitivity or rigidity forced from above), and possibly a skill problem in retrieving information and instructing their computer systems correctly. Where supervisors or managers do try to fix things, organisational and technological pitfalls may stand in their way. Nonetheless, the more disturbing moments of the experience surface when a customer feels an attempt to manipulate has been made (e.g., by diverting attention or hiding information). Being manipulated generally feels uneasy, because among other things it infringes on a consumer’s autonomy to make a decision in one’s own good, but it is all the more damaging when done just to serve the manipulator’s interest (e.g., make a sale)[*].

Companies and customers alike can help in minimising negative encounters that can spoil customer journeys. Consumers can be more vigilant, pay more attention to details, and ask questions when offers do not sound or look right. Yet in the real world consumers cannot avoid being off guard, erring in judgement, or being complacent — much of the time humans are driven by the intuitive and instinctive System 1 mode of thinking. Companies can make greater effort to ensure customers have the relevant information and comprehend it; be attentive to what customers ask or argue; and overall show respect to customers and refrain from egregiously exploiting their cognitive vulnerabilities — perhaps naïve, but not illegitimate to expect.

Ron Ventura, Ph.D. (Marketing)

 

[*] Further reading: “Fifty Shades of Manipulation”; Cass R. Sunstein , 2016; Journal of Marketing Behavior, 1 (3-4), pp. 213-244.

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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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