For many years, marketing students have been thoroughly trained in the traditional tools of brand management: the famed "four P's." As a result, marketing practitioners, just like marketing professors, have focused on managing their businesses through the conscientious application of this well-established set of tools. Their goals: to provide a great product, smartly (and often heavily) promoted, intelligently placed and competitively priced.
What is the key to business growth, in the eyes of traditional marketers? Managing and --as necessary -- trading off between these same four P's, so that your brand outperforms its competitors.
The four P's have certainly served management well. Until the 1980's, that is.
As a myriad of marketing cases can attest, these four marketing tools have been powerful drivers of product sales. Bear in mind, however, that these sales results were achieved in an expanding consumer economy, where customer acquisition was the goal, and customer retention was largely assured through product quality control. The marketer was king, and there were four powerful knights to do the king's bidding.
Meanwhile, however, the world changed. Dramatically. We moved from a product economy to a service economy, where marketers who had sold instant coffee and facial tissues were now challenged to sell airline travel, investment accounts, long distance telephone services and fast food.
In addition, we moved from an expanding consumer economy to a mature one, where increased brand volume could only be met through increased brand share, and competition was greatly intensified. At the same time, marketers began to recognize a very powerful fact: Customer retention is typically far more profitable than customer acquisition.
For service marketers (or for those who have service as a major component of the service/product mix they offer), who now must focus on building an enduring brand relationship (i.e., "loyalty"), the question for this new marketing environment becomes, "How can we optimize the use of these four P's?"
The answer? They can't!
Why not? Because there are five P's, not four. And the power of the fifth P is so dominant that it often overshadows any of the other four when it comes to building a Brand relationship.
What is the fifth P? People. People represent the Brand and people, on behalf of the Brand, touch the customer in any number of ways. These individuals, often called "customer facing employees," may well be the most powerful marketing resource available to build brand differentiation and enhance customer commitment.
Employees may not be thought of -- or managed -- as though they represent a "marketing" resource. Nonetheless, they very clearly are. And a recent Gallup research and development effort dramatically underscores this simple, yet powerful, marketing truth.
Employees as brand builders
In a recently completed study of more than 6,000 consumers, Gallup undertook the task of determining the relative role of each of the five P's in building Brand loyalty.
We looked at a wide range of product/service marketing categories - automobiles and fast food, retail electronics and airlines, and banking and long distance telephone service. All represent highly competitive categories, with any number of powerful leading brands aggressively employing various combinations of the four traditional tools of brand marketing. A few -- a rather obvious few -- have also been paying attention to the fifth P.
We asked each brand's customers to tell us which brand's advertising stands out, and had them rate the product/service quality, the price/value, the locational convenience, and the persuasiveness of the advertising for a number of leading brands that compete in the same category. We had them indicate which brand they plan to buy next, and what other brands they might consider. And, to address the fifth P, we asked which brand's employees stand out, and then had customers rate the helpfulness and competence of the people who represent the brand and with whom they may have had contact.
What did we learn? Some things that will surprise many marketers -- and which should also make many of them rethink their current marketing emphasis.
In a crowded category, in which parity is the rule, is location key? Is price?
For marketers of fast food, it is not location, or price, or even product quality that makes customers want to return. What is it? Well, if you are marketing hamburgers, the most powerful driver of intended repeat visits is actually your employees.
Product quality, surprisingly, is not what brings fast food customers back. Instead, product quality functions mainly as a "dissatisfier." Poor product quality turns customers into non-customers, but great product quality is largely assumed.
Does price/value keep these burger-buyers loyal? Given the enormous price competition in the fast food category, you might think so. However, outstanding employees are at least three times as powerful as outstanding price/value when it comes to motivating return visits. Outstanding employees are also at least four times more powerful than a convenient location, and three times more powerful than food quality and taste appeal.
OK, so employees are a major key to customer commitment in the low involvement, impulse-driven world of fast food. What about categories where there is far greater involvement in the decision, and where there appear to be some far more important product considerations? Surely, that's where the role of the product must emerge?
Consider one such category: the case of the automobile marketer - where product contact occurs daily and employee (dealer rep) contacts, in contrast, are often few and far between.
Contrary to what would be expected or what syndicated product quality ratings might suggest, for many automobile brands, product quality perceptions don't really enter in as a significant factor driving repurchase intentions. In addition, locational convenience is almost never a key issue.
What is important? Perceived value is an important consideration for many auto brands. Customers who rate their vehicles as a great value for the money are two to three times more likely to choose that vehicle again. Advertising is often an important factor, as has sometimes been conjectured, as it serves to reinforce the wisdom of their current brand investment both to the owners and to their friends.
However, the number one motivator of continued commitment - for automobiles, just as for fast food - is not the product, nor the price, but the people. The dealer representatives with whom auto owners have sales and service contact are anywhere from two to five times as powerful as any other "P" in cementing an ongoing relationship with an automobile maker. Customers who feel the dealer representatives for their vehicle stand out from all others are from 10 to 15 times more likely to choose that same make of vehicle for their next purchase.
What does this research imply for a marketing organization? Does it say that product quality is irrelevant? Hardly. Does it say that perceived value has no place in creating loyalty? No. Does it suggest that locational convenience is not a factor in consumer retention - or that the only things that matter are the people who provide the service or make the sale? No.
What it does state, quite powerfully, is that there are an array of marketing tools that any company can use when attempting to build a brand relationship. And, for each of those tools, the key for any brand is to differentiate itself meaningfully from its competitors. Differentiation is, after all, the essence of branding.
Can a company differentiate itself based on product attributes and product quality? Perhaps, although usually not for long. Most product differentiation, to the extent that it exists, is limited to differentiation based on features or attributes. These can be copied, or they may have a tenuous or indirect relationship to the benefits that consumers deem important. Does flame broiling translate into a better-tasting burger? Does a side-impact bar or a Northstar system mean better performance or greater customer satisfaction? Perhaps.
It is, however, up to the customer to assign meaning or value to these items. And, often, the customer may perceive that there is some difference … but yet may not conclude that the brand offers a meaningful difference.
In so many categories, including the six that we studied in this recent R&D effort, the marketing tools used by brands in attempting to differentiate their offerings have simply not created consumer-perceived differentiation. Product quality is felt by consumers to be essentially the same - at least among an array of leading brand alternatives. Pricing is similar. Availability and accessibility are similar.
So, where do brands typically turn in order to create a perception of differentiation? To their advertising, of course. Advertising is a readily controlled tool for delivering a consistent brand message, and for registering a differentiated brand promise.
Terrific. Except for the fact that advertising, while readily controlled, is not the key to enduring brand loyalty. A far more important factor is that which is far less readily controlled, but far more meaningful to the average customer: people.
Why is so little attention paid to this key brand loyalty-enhancing factor?
First, most companies don't think of their employees as a marketing resource. They don't envision, recruit or manage them as though they were components of their brand marketing efforts. That's a mistake. Employees, whether recognized or not, are brand builders (or, at times, destroyers).
Second, and not incidentally, it is far more difficult to establish a consistent employee-driven experience than a consistent advertising-driven experience. Employees are simply far more difficult to control than pricing or promotions or even product quality - and that's critically important when setting out to assure a consistent customer experience. Customer-facing employees are by far the most difficult customer touch-point to manage to assure consistency of experience.
That does not mean that these employees cannot, or do not, determine the degree of customer commitment. In fact, it's because this difficult-to-manage resource isn't an easy solution that it has proven to be such a powerful one for companies ranging from McDonald's to Southwest Airlines.
What do people represent? They are a differentiating factor (in fact, a very powerful one) that cannot be readily duplicated by the competition. And that, after all, is the Holy Grail of relationship marketing - a meaningful brand differentiator that is sustainable in the face of competition.