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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Ron Ventura, Ph.D. (Marketing)

Notes:

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

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

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

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

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

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

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Retail banking is built on trust; it is at the core of the ‘public license’ to manage the accounts of customers. Think of phrases such as “People trust the bank with their money” or “We entrust our income in the hands of a banker”. Consumers often have a lot at stake held in the bank: their livelihoods and their hopes to use the funds accumulated to improve their quality of life in the future. They expect to have access to money in their accounts readily, before seeking more money via credit and loans from the bank. Banks are additionally expected to offer account holders means to make financial profit on their money. Since the financial crisis of 2008, depletion of consumer trust in the banking system has been troubling many countries. A question still hangs, as it was valid five years ago: How should banks regain consumer trust and improve their relationships with customers?

Digital banking and financial services are proliferating, and not from yesteryear. For example, consumers can view account information and perform by ‘self-service’ a selection of banking operations in their accounts on the Internet; practise of these activities is gradually spreading from desktop and laptop computers to mobile devices. Yet, digital financial services or features are also provided by a variety of non-banking companies, non-profit organizations and institutions, most notably in the area of digital ‘remote’ payment, whether via a debit/credit card or a third-party utility (e.g., PayPal).  The features are becoming increasingly available through mobile apps. Undoubtedly, applying digital banking services remotely and independently can smooth and facilitate for consumers everyday account follow-up and operations, save them time and increase efficiency in managing their accounts. But digital banking may prove as the opposite course of action than needed to help banks regain and rebuild their customers’ trust in them — it risks instead to increase the distance between banks and customers. For instance, is reliance on digital banking appropriate in managing an investment portfolio?

  • Complicating matters, many of the digital service tools are developed by financial technology (fintech) companies for execution online or in mobile apps. They are leading the field in developing those tools, and said to be leaving most banks lagging behind. The fintech companies allow retailers to offer shoppers different options for digital payment, and even running some form of current or expense accounts with them; investment houses and financial consultants can employ advanced tools to better update and communicate with their customers; other fintech’s work includes applications for assisting consumers to manage their personal finances and portals for mediating peer-to-peer loans.

At a conference of the central Bank of Israel, titled “The Technology Changes the Face of Banking” (3/3/16, Hebrew), the Banking Supervisor, Dr. Hedva Ber, embraced the expansion of digital banking, in vision and in action. She encouraged increased communication between banks and customers by digital means, guided by rules of conduct set by her department. Consumers less accustomed to using digital services will have to be accommodated to help them adjust through the process (e.g., by operating limited or temporary ‘pop-up’ branches where ‘fixed’ branches are to close down). But eventually a broad transition will take place and the intention is to include all parts of the population in the transformation of retail banking. The key instrument to achieve that goal will be digital education of banking customers, joined by enforcing a principle of customers’ ownership of their personal information and creating a ‘credit profile’ for each customer. There is also a plan to advance the establishment of a fully digital ‘branchless’ bank. Dr. Ber further talked in favour of computer-automated (AI) reply to customers on the phone.

This transition is likely to result in a significant reduction in the number of employees (mainly engaged in back office processes). The Supervisor projected that the digital transformation of banking will lead to better control of the customer over his or her financial situation, greater transparency, expansion of banks’ baskets of products and services, and foremost will contribute to increased efficiency. Several references to ‘efficiency’ were actually noticed in the presentation, but none regarding ‘trust’.

An initial requisite for trust is competence: the fundamental ability of the organisation to perform the tasks it took upon itself. The building blocks of the expected competence are  knowledge, skills and resources. Chaudhuri and Holbrook (2001) used the definition: “The willingness of the average consumer to rely on the ability of the brand to perform its stated function” (p. 82). The researchers studied the effect of brand trust and affect on brand performance, mediated through loyalty. In their view, brand trust is an involving process, deliberate and well thought out whereas brand affect is developed more spontaneously, immediate and less carefully reasoned. They find that trust and affect each contribute to purchase (behavioural) and attitudinal brand loyalty, whereupon purchase loyalty is positively related to market share and attitudinal loyalty contributes to higher price premiums. In particular, brand trust and commitment are both important for developing  a valued customer relationship (1).

With respect to retail banking, the key competence asked of banks is to protect the money of their customers; it is about safekeeping, or the customer’s feeling that his or her money is ‘kept in good hands’. That kind of attitude may be hard to foster if all contacts the customer has with the bank are indirect through computers. Trust is built between people, therefore customers should be able to meet at the very least a few representatives of the bank that will instill in them the notion that someone cares about them and is taking good care of their money. Such a representative could be an adviser or ‘advocate’ for the customer in the bank.

  • Taking good care of the customer’s money includes warning him when taking excessive investment risks, as the bank should act responsibly in its own risk management.

Another vital requisite for trust maintains that the organisation (bank) should be acting in the interest of its customers and not just in its self-interest. For example, it means that the bank creates and offers saving programmes that are fair and beneficial to the customer, protecting her money with a plus of a reasonable interest rate (as opposed to reducing cost by paying too low rates). The risk for self-interest of the bank may be more pronounced in offering so-called ‘structured products’ of investment that oftentimes use complex rules, obscuring from the investor in whose interest the product will work best. Peppers and Rogers offer the concept of a ‘trusted agent’: in a relationship wherein the customer trusts the enterprise to act in his own interest, “the customer perceives the enterprise to be his trusted agent, making recommendations and giving advice that furthers the customer’s interest, even when it occasionally conflicts with the enterprise’s self-interest, at least in the short-term” (p. 78). Although relationships can exist without trust, it should be obvious that they can become stronger, and grow in value, only when built on trust — trust-based relationships evoke greater dedication (2).

  • We can see how the position of a ‘customer advocate’ relates to fulfilling this requisite, ensuring that the bank is acting in the customer’s interest.

Credibility and reliability are additional important antecedents to trust. Credibility would manifest in the bank’s practice to provide correct information about products and services it offers or delivers, that it is able to provide them, and stands behind them. Furthermore, in the current state of customer relationship management, offering a financial product would be more credible if selected to be more suitable for a specific customer, based for example on his current bank assets and risk attitude. That is, the offer would be more credible if based on knowledge of the customer to fit him better. Reliability concerns more specifically aspects of the accuracy of information and execution of instructions in time as intended (i.e., predictability). Objectives of credibility and reliability can be achieved in offerings made through platforms of online or mobile digital banking, but trust is reliant on more than these two criteria alone.

Charles Green (President of Trusted Advisors Associated, 2004) formulated that credibility, reliability and intimacy enhance customer trust whereas self-orientation diminishes trust in the company (a discount factor). Green describes intimacy as follows: “Intimacy has to do with perceived safety: ‘I can trust talking with him about…'”. He associates intimacy with security and integrity (3). The aspect of intimacy is noteworthy because in banking it corresponds most closely to the kind of delicate affairs that may arise in bank-customer relationships about one’s finances. It is about the level of confidence a customer can put in the bank, based on integrity and consideration he or she can find during any dealings with it and its employees. It is hard to talk about intimacy in human-computer interactions. Integrity also is reflected in conduct of human bank representatives, much less through digital interactions.

Intimacy should not be confused with personalisation that can be achieved with analytics-based digital tools (e.g., a ‘Digital First’ strategy that puts most weight on digital channels, as suggested by Accenture). It is wrong to equate computer-based personalisation with intimacy while talking with another person. Talking with an expert adviser on more complex financial services is especially not equivalent to automated customization, though analytic tools may help the adviser in making her recommendations. Demitry Estrin (Vision Critical) addresses the eroding banks’ relationships with customers who are blaming banks for treating people as numbers. He explains: “Nothing would address the problem better than face-to-face encounter, but these are increasingly rare. In fact, the problem is self-perpetuating: the less people interact with financial services professionals, the less they value them, and the companies they work for.”

Customers are looking to combine interactions in different modes (e.g., mobile, online, phone, face-to-face), but those human and digital interactions have to be streamlined and information exchanged in them should be coordinated within the bank. In a white paper of IBM on “Rebuilding Customer Trust in Retail Banking” (Sept. 2012), the technology and consulting company claims yet that banks managed to create more competition than co-ordination between channels with their working methods (e.g., rewards, targets, metrics). Banks have taken different measures that seem to make customers feel they are treated more conveniently and friendly, efficiently, even fairly, but not necessarily feeling that the bank thinks of each like a person. In that respect, consumers see banks as falling behind other companies they interact with in digital platforms.

The paper of IBM optimistically argues: “Fortunately, trust and digital communication channels can be and are best built together.” It is true but just to a limited extent. It is possible to maintain a certain degree of trust to allow for digital communication to succeed, but trust can grow only so far. Digital banking can provide efficiency, convenience, reliability, even credibility, but that is not enough for building a high level of trust that breeds commitment and dedication. It is doubtful if digital banking can remedy the deeper problems of trust in banks. Perhaps the answer is better found in a combination of human and digital modes of delivering banking services for fostering trust.

  • Digital banking, particularly communication via Internet, raises additional issues of protecting data from cyber-attacks and securing customer data privacy. Acting on those matters to reduce threats is vital to building trust, yet it would not ease the original causes of declining trust that are not digital-related.

Even within a bank branch, the scene can change — a new model is emerging, presenting a novel form of combined digital self-service and human service. Most likely, future branches will no longer have human tellers; otherwise, however, digital and human services will be intertwined in new design concepts. In the upcoming future, a customer may find in a branch central arena with personal working posts equipped with self-service terminals where each can view account information and perform various operations; the customer will be able to proceed to talk with ‘advisers’ sitting in the periphery and settle more complex issues such as loans or investments (e.g., RBC-Royal Bank of Canada, HSBC-flagship branch in Singapore).  At RBC, customers may sit comfortably to read materials (print, online) or watch instructive videos on a large screen about financial products and related topics, thus he or she may prepare before talking with an adviser. BMO Harris Bank is experimenting with ‘video tellers’ for assisting customers; representatives in stand-by, holding tablets, are available to help with any difficulty. There is also a trend to change the visual design of branches to make them look and feel more like shops: less formal, more friendly and rejoicing in colour and form.

Customers are seeking a combination of user-friendly digital tools and human expert advisory on more complex issues. To that end, Mike Baxter and Darrell Rigby advocate a combined ‘digical’ approach: a mashup of digital technologies and physical facilities (“Rethinking the Bank Branch in a Digital World“, HBR, 15 Sept. ’14). The authors argue that combined technological and human services can be implemented on-site within a branch — as illustrated above. They note that financial products and services are often complicated, and security and trust are paramount. Baxter and Rigby conclude: “Physical banking is evolving rapidly, but not disappearing. Branches may be fewer in number, but they will be more useful and efficient, and banks without branches are likely to find themselves at a competitive disadvantage.”

Human banking and digital banking are like two arms of the retail bank. Banks have to provide digital ‘self-service’ tools to allow customers manage their accounts of different kinds more conveniently and efficiently, at an acceptable level of reliability; banks gain from this as well in efficiency and cost reduction. Digitization of banking services extends from the long-running ATMs to more advanced information ‘kiosk’ terminals and remote online and mobile banking utilities. However, digital banking is becoming a necessity, not a basis for competitive advantage for banks. If it were all about digital services, customers would find it even easier to look for more friendly and useful financial services from non-banking companies, and their commitment to retail banks could decline further.

Retail banks need the ‘human arm’ to differentiate themselves from external competition and to develop excellence in competition with other banks. It is also essential to regain and foster trust, tighten and strengthen banks’ relationships with their customers. In branches, it will be a question of creating a friendly atmosphere and balancing in a useful way between digital utilities and the assistance and expertise of human personnel.

Ron Ventura, Ph.D. (Marketing)

Notes:

1. The Chain of Effects from Brand Trust and Brand Affect to Brand Performance: The Role of Brand Loyalty; Arjun Chaudhuri and Morris B. Holbrook, 2001; Journal of Marketing, 65 (2), pp. 81-93.

2. Customer Relationships: Basic Building Blocks of IDIC and Trust (Ch. 3), Managing Customer Relationships: A Strategic Framework; Don Peppers and Martha Rogers, 2004; John Wiley & Sons, Inc.

3. The Trust Equation: Generating Customer Trust; Charles H. Green; in (2), pp. 72-77.

 

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The concept of brand attachment has become a frequent, almost integral component of attitudinal models of brand equity in commercial studies since the late 1990s. It has been introduced to represent an emotional bond that is expected to build between a brand and consumers to allow for their sustainable loyalty to the brand. Perceived quality and other assessments of a rational nature about branded products and services are generally not regarded as sufficient to connect a consumer with a brand. In addition, brand attachment is meant to represent a disposition towards a brand that is more solid and enduring regarding consumer-brand relations than brand attitude. However, what signifies and distinguishes that construct has not been properly and agreeably defined.  In a recent seminal article (2010), Park and MacInnis of the University of Southern California and their colleagues (*) offer an approach to fill this caveat coherently. The researchers define the construct of brand attachment, test and demonstrate how it differs from brand attitude strength.

We may find a spectrum of relationships between consumers and brands at different levels of depth and strength. What creates, for example, the deep attraction, to an extent of passion, of consumers to brands like Nike or Apple? On the contrary, the brand Nokia of mobile phones has for the past few years lost its favour with consumers. Last month it was revealed that Microsoft, which had acquired the mobile division from the Finnish mother company, intends to abolish the Nokia brand name but retain the “Lumia” name for new models of smart-mobile devices (e.g., phones, tablets, and whatever comes next); if indeed brand attachment by consumers to Nokia has diminished, no one would shed a tear. Coca Cola almost ruined its brand equity in 1985 due to its New Coke ordeal — apparently consumers were insistent on their attachment to the brand and what it represented to them to force the company to step back and save the brand. Brand attachment captures the affective linkage that is created between a brand and its customers.

A brand equity model may start from awareness of and basic familiarity with the brand of interest at its ground. On top of which should come associations of product attributes and functional benefits (tangible product assets) next to “softer” associations of feelings or personality traits assigned to the brand (intangible assets). After accounting for these building blocs, a bridge of attachment can be erected between the consumers and the brand, leading to commitment (a manifest of attitudinal loyalty). Several facets can be proposed based on pervious academic and applied research in the field to represent brand attachment: (a) respect for the brand and its leadership; (b) personal identification with the brand; (c) favourability of brand legacy and values; and possibly also (d) appreciation of how the brand treats its customers.

Park and MacInnis et al. develop a scale of brand attachment that formally specifies aspects of brand-self connection — it emphasises identification of the consumer with the brand; yet to this factor they add a second factor of brand prominence in memory. Thus, they suggest a scale constructed from two factors; they show that treating the scale as a composition of the two components has better validity than a single-unified scale. Furthermore, the authors demonstrate the effect of brand attachment on behavioural intentions as well as actual behaviour (self-reported and as registered in customer database records).  They cover a range of activities or actions that differ in their level of difficulty.  It is shown that brand attachment is able to predict the intention to perform the more difficult types of behaviour that brand attitude strength cannot.

Brand attitude strength is measured by the valence of an attitude (positive-negative) weighted by the confidence with which the consumer holds that attitude. However, research repeatedly has shown that attitudes get to impact behaviour when the valence is more extreme in either direction and confidence is strong. Attitudes do have an affective basis but it is generally sublime and concerned primarily with valence. That is, brand attitude alone does not contain a scope of emotions people may exhibit; it is very limited in its emotional capacity. Brand attachment, on the other hand, is more emotionally charged and can tell a better story about the relation of the consumer to the brand. Park and MacInnis et al. conceptually define brand attachment as “the strength of the bond connecting the brand with the self” (p. 2). This bond materializes when it is supported by a rich and accessible network of positive thoughts and feelings about the brand in the consumer’s memory.  A brand-self connection ascribes to the extent to which a consumer identifies with a brand as if they could merge together. In other words, the self (concept) of the consumer is extended so as to absorb the brand and make it part of his or her own self (image or goals). While the representation is cognitive, the researchers note, the brand-self linkage is inherently emotional. Brand prominence indicates in addition the ease and frequency with which  thoughts and feelings (underlying the connection) are brought to the consumer’s mind. The brand-self connection can “come to life” more readily when brand prominence is greater, hence the consumer experiences a stronger brand attachment.

  • The researchers first constructed a scale with five items for each of the two components. However, they sought to make the scale more parsimonious and practical to implement, and proposed a reduced scale of two items for brand-self connection and two items for brand prominence. Looking at the factor loadings suggests that it would be justified to keep four items for the first component and three items for the second. But in the researchers’  judgement parsimony should win over. For example, the item “feel emotionally bonded” could be discarded in favour of “feel personally connected”.

In their analyses, Park and MacInnis and their colleagues confirm that brand attachment and brand attitude strength are related yet empirically distinct constructs — while correlation between them is moderate-high they cannot be confounded. This supports the convergent and discriminant validity of brand attachment. The authors provide further support for the validity of attachment by showing an interesting relation to separation distress, a negative emotional state that may occur when losing a relationship with an entity people felt close to (e.g., feelings of depression, anxiety and loss of self). Brand-self connection and prominence each independently “contribute to the prediction of separation distress as indicators of brand attachment” (p. 8). The research additionally substantiates that brand attachment is distinct from attitude strength, the former being more strongly associated with separation distress.

Eventually, marketers would want to know how brand attachment is linked to behaviour. Three categories of difficulty are distinguished: (1) Among the most difficult forms of behaviour are buying always the new model of brand X, waiting to buy brand X versus an alternative brand, and spending money, time and energy to promote brand X (e.g., in pages and forums of social media and in blogs). (2) Moderately difficult forms of behaviour include paying a price premium for brand X and defending it when others speak bad of it. (3) The least difficult modes of behaviour include, for example, recommending brand X to others and buying the brand for others. Notably, recommending a brand to relatives or friends involves a certain personal risk for the endorser because one puts his or her own reputation or credibility on-line by suggesting to others to buy and use the particular brand. Yet, this alone is not considered hereby as a major cause of difficulty vis-á-vis the investment of time, money or energy to promote the brand (e.g., tell a story in a blog post, add photos).

With respect to intention to behave in ways that favour a brand (reflecting brand commitment) it is found that brand attachment predicts the intention to engage in behaviours regarded as the most difficult remarkably better than brand attitude strength. Brand attachment also better predicts intention to behave in moderately difficult ways but the difference from attitude strength, although also statistically significant, is rather small. There is no significant difference between attachment and attitude strength in predicting intention of performing the least difficult behaviours — they do equally well.  These findings bolster the importance of addressing brand attachment as a driver of brand commitment, particularly via more demanding modes of behaviour.

  • An additional test suggests that brand prominence is less essential than the brand-self connection component in predicting intentions. (Intentions were tested with respect to Nike.)
  • In a different set of analyses of actual behaviour (banking-investments), the researchers found furthermore that brand attachment is a better predictor of past purchases than brand attitude strength. In this case, however, brand attachment represented by both brand-self connection and brand prominence is predicting behaviour better than the former alone. That is, with regard to actual behaviour, brand prominence is an essential component.

Many brand owners would find utility in applying this scale of brand attachment (in a full or reduced form): from food (e.g., Nestlé) or toys (e.g., Lego) to banking (e.g., Royal Bank of Scotland) or carmakers (e.g., Peugeot). Take for instance Microsoft that now holds four brand names they may apply for marketing mobile devices: their own corporate name, Surface, Nokia or Lumia. Microsoft could use the aid of such a scale to decide which brand proves as better ground to build upon and which name is better eliminated. It may be a major factor in the contest of brand equity for mobile-smart devices of Microsoft versus Apple, Samsung Electronics, and Lenovo (Motorola).

Although the brand strength construct may capture a brand’s mind share of a consumer, attachment is uniquely positioned to capture both heart and mind share (p. 14).

The scale of brand attachment constructed by Park and MacInnis and their colleagues emphasises consumer identification with a brand, representing an emotional connection, and actualised through its prominence in memory. It does not cover other possible sources of attachment, but the approach taken is focused, concrete and well-substantiated. The researchers provide a valid scale for practitioners in brand management and research for measuring brand attachment, stand-alone or as part of a brand equity model.

Ron Ventura, Ph.D. (Marketing)

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

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Mapping the customer journey is often suggested as a vital step for better understanding customer experiences, before appropriate measures can be planned for improving on them. At the core of a “customer journey” is the purchase decision process, yet the evolved concept of “journey” encompasses broader aspects of customer behaviour and experience. Particularly with respect to consumers, the term “process” may have seemed to many (e.g., practitioners, managers) as too technical and logical while a “journey” is perceived as more imaginative and more likely to be imbued with emotion. There is still a significant parallel between the two concepts, yet the concept of journey has been extended in some important ways and emphasises the following aspects:

  • More frequently, the relation of a consumer with a company or a brand does not end with the act of purchase (transaction) of its product, good or service — following the purchase decision process there are likely to be additional immediate activities like further enquiries about product usage, feedback to the company or exchange of impressions with friends and family; in many cases, especially for on-going services and durables, there are continued interactions of customer service and technical support.
  • In any task concerned with purchase or usage customers more often engage multiple channels and touchpoints to complete their tasks and accomplish their goals (e.g., visiting a company’s Web site, a product & price comparison online portal, and a brick-and-mortar store before buying, interacting with a company by Facebook and e-mail to receive technical assistance).
  • Processes entailed in a “customer journey” tend to be cyclic rather than uni-directional processes with clear start and end points — there is continuity or flow from one purchase episode to the next such that if a subsequent purchase of a similar or related product is made from the same company customer loyalty can develop, but there are also possible cycles and repetition of activities performed by a consumer during a single purchase decision process.

Therefore, the customer journey may be not only longer than what a purchase decision process implies but also more multi-faceted and complex. To be honest, some of the extending aspects have been already suggested within the framework of the purchase decision process. For instance, post-purchase stages such as feedback and product divestment have been suggested in decision models in the 1990s (e.g., Engel, Blackwell and Miniard). Reliance on multiple information sources (marketer- and non-marketer controlled) has also been long considered  in the course of a purchase decision process. And if we concentrate on the path of a single decision process, decision models described and depicted by prominent scholar Jim Bettman in the late 1970s are all but simple, uni-directional and straightforward. Consumers frequently move back-and-forth, collect and use different pieces of information according to various decision rules, evaluate their options, and if necessary return to revise their consideration set, collect more information or re-examine their prior analysis. Those concepts and models have been tested and developed by Bettman together with his colleagues John Payne and Eric Johnson under the theoretical framework of adaptive decision-making (1993). Hence, the customer journey clearly builds on the foundations of earlier theories and models of consumer decision-making.

However, the concept of customer journey contributes several new perspectives. First, journey models give more weight to post-purchase activities compared with purchase decision models that traditionally address these activities only briefly, leaving them to be treated in other model types. Sharing opinion in social media networks, crowd sourcing for assistance, or asking for customer support from a company-provider, all these are important for business practice; accounting for these activities recognises that positive experiences in these activities build the link from one purchase to the next with the same company  (i.e., replacement, cross-sell, and up-sell). Journey maps vary nonetheless in their scope: taking a broad-view of a relationship journey with a company or focus on specific tasks and activities (e.g., enquiry about billing); considering all aspects of a purchase decision process, including any engagement with offers by competitors, or concentrating on interactions between the company concerned and its customers, as “customer journey” literally suggests.

Second, journey models appear to give more room to expression of emotions and affective reactions by customers, for example, in giving feedback or during service-related interactions with the company. Mapping studies that rely on interviews with customers even encourage such expressions. However, it should be noted that literature on decision-making, particularly in the past 10-15 years, already recognises the incorporation of both cognitive and affective components as co-influencers of decision processes.

Third, making probably the most important contribution, customer journey models address the employment of multiple channels by customers through various associated touchpoints with companies to perform purchase, usage or service tasks. This aspect appears to be driven primarily by business enterprises in response to the contemporary reality of their relations with customers. These channels furthermore are expected to be co-ordinated. In some cases, however, ambiguity arises whether each touchpoint defines an independent channel or multiple touchpoints are nested within a single channel:

  • In a brick-and-mortar store, shoppers may encounter touchpoints with the retailer in front of a shelf display (this is also a potential touchpoint with a manufacturer’s brand) and at the cashier;
  • On the internet, a customer may experience a touchpoint with a company on its main commercial website when learning about its products, but she may also transfer to the company’s blog linked to the website or launch a chat conversation from the website to ask for assistance from a service representative.
  • “Mobile” is commonly considered a channel by itself but nested within are a variety of resources and tools that can be used on the mobile devices, some of them have parallels in other modes of communication (websites, e-mail, social media), some are specially designed for mobile (e.g., apps).

Constructing a mapping diagram of customer journeys is a specialisation with its own techniques; it falls in the domain of information visualisation or graphic design and is beyond the scope of this post-article. Such maps can quickly become complicated, rich in detail, because there are many pathways that customers may follow in their journey. A common way to deal with the complexity, and in order to make journeys more accessible and vivid to managers is to identify “typical” customers with characteristic personal attributes and pathways they go through, and build accordingly exemplary profiles, also known as ‘personas’ (e.g., common in the area of user experience [UX]).

But it could matter on what type of input the profiles of these personas are based. Are methods of quantitative research for collecting relevant data from customers sufficient? Bruce Temkin, expert on customer experience and head of the consulting group by his name, recommends in his blog, Customer Experience Matters, that companies combine between input from discussions (‘think tank’) of their managers responsible for customer relationships, and data from customer research (e.g., in-depth interviews, ethnographic techniques). These steps would preferably be conducted in this order. It should be helpful, however, to use quantitative data to construct plausible journeys and identify most relevant and interesting customer personas. Surveys may not be economic and efficient as a method to collect detailed-enough data. Yet, surveys can be useful for at least characterising main stages in a journey as well as the channels and touchpoints engaged, that could still enable better generalisation or validity of the information. Even quantification of input collected during in-depth interviews can help to pinpoint more frequent activities or stages, and paths or links between them so as (1) to depict significant or salient journey scenarios; (2) to identify key segments; and (3) to construct more meaningful and realistic personas that managers can effectively rely upon in their planning. Relevant approaches and techniques may be learned from the areas of means-end chain models and path analysis, for instance of shoppers’ journeys in physical stores (i.e., a true physical journey that is nonetheless relevant in this context).

Better established maps of customer journey layout a chain of main stages as the foundation or “spine” of the journey, and then add more detail on specific activities, customer impressions and reactions, costs and benefits, etc. A map would be devised for each key segment or prototypical persona. Maps can get more complex as one tries to account for cycles in the flow of events and activities during the journey (e.g., initial exploration on a website, visit to a store, return to the website for more information, and so on). A model proposed by Forrester Research, for example, defines four primary stages in a customer journey: discovery, explore, buy, and engage. The general model distinguishes between reach channels used for discovery, depth channels appropriate for exploration, and relationship channels through which customers engage with the respective company over time (i.e., strengthening relationships). McKinsey & Co. define more explicitly their orientation: they offer a model named the “consumer decision journey”. It is a cyclic journey model which includes four main phases: (a) initial consideration set for research and learning; (b) active evaluation of alternatives; (c) the moment of purchase; and (d) post-purchase experience, which can cycle back through a “loop” of loyalty to purchase. Noteworthy about this model, it recognizes that consumers may check again new alternatives and update their consideration set during active evaluation.

The Big Data sphere is also recruited to the mission of mapping customer journeys. However, the approach taken in such applications tends to be more strictly focused on performance of particular tasks by customers with the client company (e.g., product enquiry and service). Furthermore, th0se maps seem to over-emphasise the role of touchpoints as used by customers, particularly digital ones, as the nature of data sources used dictates. Temkin (see above) criticises the interpretation of a customer journey map as a touchpoint map, as typically adopted in systems based on big data. He argues that concentrating on individual interactions is prone to lose sight of the “broader context of how that touchpoint fits within the overall goal and objectives of the customer.” Systems in the field do show links or transitions between touchpoints, but the maps provide a rather narrow viewpoint of the journey and its context.

A map may zoom for instance on a particular touchpoint such as a call centre (by phone) and show how many customers visited previously a webpage of the company and how many ended the journey at the call centre or proceeded to another touchpoint for completing their task. Conspicuous figures or pathways may start a discussion of what that means and what should be done to improve the experience. However, such applications “see” only computer-based channels or touchpoints associated with the company, that is, mapping strictly customer journeys of technological interactions with the company. What if the customer consulted a friend on the phone, responded to a TV ad, or visited a store? The effectivity of the maps relies also on strong connectivity between the different channels of communication and interaction operated by the company (e.g., PC website, mobile, phone call centre). Silos in the organisation can hamper the construction of journey maps. Finally, it is important to study not only what customers do but also how they perceive their own actions and their attitude towards them. It would help companies to tap into subjective sensitivities of customers about their behaviour and avoid infringing into areas of customer desired privacy.

Mapping the customer journey can be used to improve many aspects of decision processes and post-purchase experiences (e.g., foster linkage between physical stores and information through mobile devices). Focusing on the journey of customers for narrowly defined tasks that involve interaction with a company can help indeed in resolving concrete problems or issues in customer experience. Nevertheless, companies should also take a broader perspective to map the journeys of more elaborate processes and experiences that extend in time through a relationship with the company. Models should also avoid being too restricted to customer interactions with the company and explore interactions with other potential influencers.

Ron Ventura, Ph.D. (Marketing)

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