Posts Tagged ‘Experience’

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)


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

Two fundamental dimensions of this transformation may be detected:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Ron Ventura, Ph.D. (Marketing)


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Ron Ventura, Ph.D. (Marketing)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Ron Ventura, Ph.D. (Marketing)


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

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

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



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