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Importance of Brands and Branding

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Abstract

Repetitive failures cost companies millions of dollars in redesign costs, liabilities, and transaction costs. However, by far the most serious cost of these failures is the lost business that results from customer defection. For service companies, the task of providing error-free services is even more challenging because their intangible nature renders subjective perceptions of quality. Equally troublesome is the uncontrollable element of customer participation in the service process because production and consumption occur as a simultaneous process. Despite these challenges however, service quality and customer satisfaction are closely related constructs. When service providers continuously strive to develop error-free processes, customer satisfaction is sure to follow.

Chapter 1: Introduction

Many marketers are rethinking their branding because competitive pressures, new channels, and changing customer needs have eroded their brands' positions of strength. However, increased marketing expenditures to reposition brands often fail to produce any improvements in either overall image or market share. Experience has shown that companies should focus on achievable rather than aspirational positioning, and that three steps can help ensure success:

1. Ensure relevance to a customer's frame of reference.

  • Be fully aware of the brand's “frame of reference” so that a repositioning strategy will resonate with customers.
  • Look at a combination of customers' attitudes and the situations in which the brand is used to obtain the most powerful customer insights.

2. Secure the customer's “permission” for the positioning.

  • Recognize that permission amounts to a reasonable and logical extension of the brand in the customer's eyes.
  • Leverage a brand's unique emotional benefits to carry customers from their current brand perception to the intended one.

3. Deliver on the brand's new promise.

  • Identify the pathway of performance “signals” that will convince customers of the new brand positioning.
  • Develop product/service programs to ensure consistent performance on these signals.
  • Track and assess performance against customer signals prior to launching the new positioning.
  • Adopt an “interim positioning” to establish brand credibility and performance.

An array of factors is requiring marketers today to rethink their brand positioning. Changing customer needs are often eroding the brand's established position. At the same time, increasing competitive pressures created by new entrants and product innovations, and the proliferation of new channels and promotional campaigns, are driving marketers back to the drawing board.

Many CEOs and CMOs, however, find themselves displeased with the results of their repositioning efforts. Increased marketing expenditures devoted to repositioning brands in the minds of consumers often fail to produce any improvements in either overall image or market share. Why do these well-intentioned efforts turn into marketing failures? While there are many causes, companies often fail to focus on achievable brand positioning rather than branding in service sector. Too often, their efforts target an ambitious goal that outstrips the actual ability of the brand to deliver on what it has promised to customers. Or the goal is too far from customers' current brand perception to be a realistic brand objective. For example:

  • In the late 1 980s Oldsmobile wanted to revitalize its brand and gear it to a younger audience. Thus marketers at General Motors launched a creative campaign around the tagline, “Not your father's Oldsmobile,” highlighting the car's improved styling and new features. But for many younger consumers, this was too much of a stretch for the brand. The product modifications did not go far enough to meet the needs and expectations of the new customer set they were targeting. As a result, Oldsmobile recognized the need to shift its campaign. Eventually, GM closed its Oldsmobile division.
  • More recently, United Airlines' Rising campaign attempted to position the brand as the most passenger-centric airline, with a clear understanding of customer problems and the solutions needed to fix them. The campaign had the effect of raising expectations, which were quickly deflated, however, by the brand's inability to deliver against the promises made as part of its bold new positioning platform. Consequently, United was forced to change its central brand message — no longer emphasizing Rising.
  • Many high-tech businesses have recently repositioned themselves as e-business brands. However little effort was made by these brands to clearly differentiate themselves from one another despite the millions of dollars spent on elaborate marketing programs. The net effect, according to their research, has been to sow confusion in the minds of customers, rather than to forge strong brand identities.

These examples — and most marketers can cite many others — underscore the imperative to pursue a brand positioning that is eminently achievable, not just attractive. Based on our experience, three steps can help ensure that they make this distinction: 1) ensuring relevance to a customer's frame of reference; 2) securing the customer's “permission” for the positioning; and 3) making sure that the brand delivers on its promise.

Be Relevant to the Customer's Frame of Reference:

When repositioning a brand, it's essential for marketers to capture not just the emotional and physical needs of the customer but the dynamics of the situation in which those needs occur. We refer to this as the customer's “frame of reference.” For example, while isotonic beverages like Gatorade and Powerade are thirst-quenching drinks, consumers tend to think of them in the broader context of sports, exercise, and physical activity. Importantly, the frame of reference sets the parameters for customers' consideration set — the brands they will choose from. Indeed, most customers have a very specific definition of what the brand is and what it can be relative to their frame of reference. Repositioning a brand too far from this frame of reference creates customer confusion that makes a positioning unsuccessful.

Attempting to brand Gatorade, for example, within a social, lighthearted context would probably be stretching the brand too far from the current sports/physical activity frame of reference. Similarly, a communications company known for data services for business customers would likely be positioning the brand too far outside of the customer's frame of reference if it suddenly tried to launch a “friends-and-family” calling plan. Being fully aware of the frame of reference for a brand can help ensure that its repositioning strategy will resonate with customers. But the frame of reference is usually a combination of both customers' attitudes and the situations in which the brand is used. As a result, we typically find the most powerful customer insights and segmentation come from looking at a combination of these factors

  • In some categories, customers' broader attitudes are the dominant factor. How customers think about pet-related brands, for example, can be seen in the context of how they treat their own pets — whether they view them as family members, best friends/companions, or in a less personal way. If customers view pets as family members, the optimal message for the brand will appeal to such human qualities as nurturing and pampering. This “family member” orientation or frame of reference may help support a brand extension to a full range of pet services, such as grooming and accessories.
  • Other customer needs are not as consistent, but better understood within the context of specific situations or sub-categories. In the field of airline travel, for example, the customer's frame of reference may be a function of the type of trip they are taking. The customer who is used to traveling within the U.S. in cramped coach-class conditions, for example, will have a much different set of needs and expectations than the traveler who is used to flying to international destinations with all the comforts of first-class service.
  • As a result, in most instances the frame of reference is built upon a combination of both of the above attitudinal and situational forces. For example, while consumers may generally have a health-conscious attitude about the foods they eat, on certain “special” occasions they may allow themselves to become more indulgent, creating what we call a “need state.”

A strong brand identity can also help marketers secure the desired permission from consumers. Because Victoria's Secret owns or is associated with the notion of intimate moments, for example, it would be easier for that brand to get permission to introduce a new line of lingerie or perfume with a sensual connotation than it would be to launch a line of jeans or handbags.

In repositioning, marketers must embrace the idea that they are brand “stewards,” while customers define their relationship with the brand and determine the basis for the relationship. A steward must spend more time deeply understanding what customers really think about the brand and where potential “bridges” to growth and new branding exist. For example, Smuckers could leverage the “wholesome goodness” their loyal customers attribute to them instead of solely focusing on themselves as fruit processors.

Marketers should not attempt to cover the waterfront here, but instead focus on the relevant interrelated “hot buttons” that will clearly convey the message. For example, in the case of a technology brand positioning itself as “humanizing technology for everyday people,” the strongest set of pathways to the positioning came from product signals such as customized hardware and specific application platforms (e.g., games, household management) rather than from equipment with the latest features and innovative design. The pathway modeling also indicated the strong signal value of the brand's customer service representatives having an understanding of an individual customer's needs. This important service signal led to the broader customer perception of the brand as caring — an important personality signal for the brand to deliver on its positioning. Additionally, the marketer learned that having technicians follow through with customers to issue resolution was a critical service signal that led to the broader personality signal of the brand being professional — another key for the brand to live up to its positioning. With these insights, the marketer could allocate resources accordingly, ensuring that the more important signals were being appropriately supported.

  • Develop necessary product/service programs to ensure consistent performance on these signals to the customer. For example, if the brand positioning is built around superior customer satisfaction, but frontline sales people are measured on revenue rather than satisfaction, it is unlikely that consistent performance will be achieved. So, if airline gate agents are the first and most important contact point for customers, they should be empowered to solve customers' issues instead of redirecting them to customer service personnel. In the technology brand example, given the importance of the customer service representatives and service technicians, there should be a greater emphasis on the quality of the service delivered rather than on the number of customers that can be serviced over a given time period.
  • Make sure approaches are in place to track and assess your performance against these customer signals prior to the formal launching of the new positioning. Applying rigorous quality assurance procedures to key elements of the new brand experience will often ensure that customers are not disappointed, or fail to have their expectations met. Current data-collection methods allow for rapid response and can be leveraged to determine whether the launch programs are having their desired effect on brand perceptions.
  • Due to the complexities of brand positioning, many marketers are correctly choosing to move to an “interim positioning.” This interim positioning is designed to establish brand credibility and performance on the road to fully achieving the longer-term aspirational positioning. Such a positioning focuses on those aspects of the brand on which the organization is currently able to deliver. Interim positioning is often essential when a brand stakes out new territory considered “up market,” addresses an important or longstanding deficiency, or is attempting to redefine its competitive set. As the brand evolves (based on customers' changing perceptions), additional components of the new platform can be put into place and confidently communicated to consumers. Target Stores successfully employed an interim positioning as it evolved the brand up market from a position as a discount retailer of national brands to a contemporary “urban chic” retail brand providing good value. The interim positioning emphasized value without sacrificing style and involved specific merchandising efforts such as stylized color blocking and associations with name designers (e.g., Frank Gehry). As the brand evolved to its current positioning, it further emphasized the “designer” theme in its advertising, often having models wearing various house wares as high fashion.

By focusing on achievable instead of aspirational brand positioning, companies can help ensure meaningful market share results while enhancing their brand image. This requires, however that the new brand position fits comfortably within the customer's frame of reference, and that it not attempt to overreach. Marketers must also secure the customer's permission to extend the brand by building a bridge of relevant benefits to carry customers from the current to the intended brand position. Implementing the performance delivery systems to ensure the brand is able to live up to its new promise is the final critical step in building and executing a successful brand positioning program.

Chapter 2: Literature Review
2.1 Branding: Definition and benefits

Literature gives several definitions of the term brand. The common themes are that a brand is more than just a combination of a name, a design, a symbol or other features that differentiate a good or a service from others. It is a unique set of tangible and intangible added values that are perceived and valued by the customer. In addition a brand is said to have personality, an emotional bond to the customer that grows out of the perceived characteristics.

These certain features of a brand grow out of a complex set of added values that can comprise of history and tradition, additional services, marketing messages, quality, popularity of the product amongst a certain group of users (status) and others. These basis's of a brand perception prove that a strong brand can not be established over night The development of a brand takes time, strong financial marketing muscle and good marketing skills such as

  • Insight into customer needs,
  • Ability to offer products or services that meet those needs,
  • Creativity to produce exiting and compelling advertising,
  • Ability to communicate differentiation in a way that customers understand and that motivates them.

Without this process they do not have a brand but only a name and a sign for a product. Brands have benefits for both, the brand owners as sellers and the customers:

Benefits of a brand for

Sellers

Customers

  • Identifies the companies products, makes repeat purchases easier
  • Facilitates promotion efforts
  • Fosters brand loyalty - stabilises market share
  • Allows to charge premium prices and thus to get better margins
  • Allows to extend the brand to new products, new markets and to new geographic areas
  • Can communicate directly with the customer, reach over the shoulder of the retailer
  • More leverage with middlemen
  • Is more resistant to price competition
  • Can have a long life
  • Is more forgiving of mistakes
  • Helps identify products
  • Helps evaluate the quality of a product
  • Helps to reduce perceived risk in buying, provides assurance of quality, reliability etc.
  • Is dependable (consistent in quality)
  • May offer psychological reward (status symbol)
  • “rout map” through a range of alternatives
  • Saves customer time
  • Is easier to process mentally

With this potential a brand can offer an important competitive advantage for a seller who has decided for a differentiation strategy. Even in markets with many similar products or services a brand can provide some sort of uniqueness to a certain product. Depending from the strength of a brand the branded product thus can be positioned towards a more monopolistic situation.

With all these characteristics a brand is important in an organisations marketing mix. Although it is basically a certain feature of the category “product”, it influences every component of the marketing mix:

  • The product gets a higher value in the perception of the customers.
  • This influences the pricing policy in the way that often a premium can be charged.
  • The promotional strategy and mix will be different because it is more focused on the brand than on the individual product. For instance the introduction of a new product under a well established umbrella brand requires a very different promotion campaign than the introduction of a new brand or an unbranded product.

The decision for the place and the marketing channel is influenced because a branded product with a higher perceived value might be placed in an environment that is well related to the brands personality, e.g. gourmet shop vs. food department in a supermarket.

2.2 Branding strategies:

Besides the more general decision for the use of brands the decision for the branding strategies is important. There are several aspects to be considered:

  • Ownership of brands
  • Structure of brand systems

Regarding the ownership, Dibb (1997) and Kotler (1999) differentiate between five categories:

These decisions need to be taken carefully. They offer not only large opportunities but also various risks:

A company which has strong manufacturer brands may decide to sell the same or similar products to retailers for use as their own label brands. If consumers become aware of this they might change their perception of the manufacturer brand:

  • “They get the same product for a lower price under my retailers brand.” or
  • “They sell the same thing under another name very cheap. This product is not exclusive anymore. I go for another brand then.”

Extensive permissions for the licensed use of a strong brand for other products can destroy the value of the brand. Pierre Cardin has lost lots of its luxury appeal since various goods with this name can be found in every department store. The structure of brand systems describes how an organisations products and brands are related. Dibb (1997) distinguishes between:

2.3 Branding for service industries:

2.3.1 Reason for branding services:

Although the principles for branding of goods and services are generally the same there occur some differences. These arise from the different natures of both categories. The main differences that influence branding policies are that services

  • Have a changing level of quality,
  • The consumer has to become involved in the consumption of a service actively,
  • They are intangible and not storable.

When a brand in general gives the consumer more confidence in his choice this is even more important for services. Their quality and other features are more difficult to asses. Because of their intangibility and complexity it is harder for the customer to distinguish between the offers from the wide range of service companies are working in the market place.

This especially applies to the market of accounting, auditing and consulting where consolidation and globalisation increase competition. In an FT-article about branding accounting services (Kelly 1998) a branding expert states that “more than 70 % of the Fortune 500 companies ...said branding is increasingly important in helping them to choose where to get a service. They want to be able to tell who is good at what.”

2.3.2 Drivers for the use of branding in the accounting/consulting industry with a focus on the Big Five (former Big Six) firms:

The Big Five accounting firms have a long history up to 75 to 100 years. These firms have developed from smaller entities through co-operations and mergers. Often new products and new markets have been developed by “buying in”, by buying the expertise and the access in the form of other firms. For many small and medium accounting and auditing firms it is attractive to join the association (in most cases) of one of the large players for the following reasons:

The form of an association with independent member firms allows to retain a level of individuality - although in some cases this is not long-lasting. The membership in an large powerful firm gives a competitive advantage (reputation, access to knowledge, access to new markets, higher market share, cost savings through sharing resources, e.g. for training and recruitment etc.).

Partners of these smaller firms are often offered to become partners in the large firm.

For a long time the industry did not put much effort in the development of brands.

The tradition and long lasting reputation of the Big Five itself gave their names a considerable brand value. For quite a long time this was fairly enough for their purposes. In Kelly's (1998) article a professional firms branding expert states that for many years the accountancy firms hid behind the “convenient parapet” of the Big Six brand label. In the audit market most shareholders were happy to have any audit firm as long as it was from the Big Six.Other factors were legal limitations for advertising. Accounting firms were first allowed to advertise in 1984. That means that marketing and communications focused mainly on activities like excellent work and the power of word of mouth, job advertisements (as the only allowed advertisements they were used as a means to present the company), speaking at conferences, publishing articles in professional journals, co-operating with universities and business schools and so on. Accounting firms saw themselves as a conservative industry with discretion as one of their services. In their minds this didn't go together with an aggressive marketing campaign.In the last years the industry has seen some developments that required new strategies:

  • Globalisation: A global client needs a global auditor because companies are legally required to prepare consolidated financial statements including all subsidies around the world. This is much easier if you have all subsidies audited by the same firm. In addition global clients have a high need for specialised consulting. They often prefer a consultant that is as global as they are to get more expertise and consistency.
  • Stagnation in the core business: The traditional auditing business does not show high growth rates. An individual firms growth can mainly be achieved at the expense of competitors.
  • Growth in consulting services: On the contrary to the auditing business there is an enormous growth for consulting services. The accounting firms have traditionally done some consulting and now they developed these activities aggressively. This had two results:
  • A growing variety of services offered - these new products had to be communicated to existing and potential clients Accounting firms came into direct competition with the traditional consulting firms which had their own brands and reputation
  • Need for qualified people: With the development of new products/services all firms needed much more highly qualified people. Recruitment became an important issue. (For example: The German member firm of PricewaterhouseCoopers took on about 1000 new employees in 1998, the first year after the merger.) This led to a competition to attract the best university students.

All these factors together increased competition amongst the Big Five. For this industry excellent quality is not a means to get a competitive advantage, it is an important requirement for any success at all. A large variety of services is important; but the customer will perceive it only in the moment he needs a certain service.

In this situation the Big Five did not manage to differentiate themselves successfully from competition. A survey conducted by PricewaterhouseCoopers during the merger process revealed that “the business community and the general public did not - and do not - perceive any compelling differences between and among either the Big Six or the Big Five. Not only did all firms appear to have similar defining qualities, they were also not sending any consistent messages about their organisations to external audiences.”Here a strong brand with a personality and a clear message can be a valuable means for differentiation and thus for gaining a competitive advantage. By now we can say that the Big Five have become aware of this. Now they invest heavily to reposition themselves and to develop their good names to real power brands.

2.4 Benefits of branding:

Branding is the process of creating distinctive and durable perceptions in the minds of consumers. A brand is a persistent, unique business identity intertwined with associations of personality, quality, origin, liking and more. Here's why the effort to brand their company or their self pays off.

· Memorability: A brand serves as a convenient container for a reputation and good will. It's hard for customers to go back to "that whats its name store" or to refer business to "the plumber from the Yellow Pages." In addition to an effective company name, it helps when people have material reminders reinforcing the identity of companies they will want to do repeat business with: refrigerator magnets, tote bags, date books, coasters, key rings, first aid kits, etc. Memorability can come from using and sticking with an unusual color combination (FedEx's purple and orange), distinctive behavior (the gas station whose attendants literally run to clean your windshield), or with an individual, even a style of clothing (Author Tom Wolfe's white suits). Develop their own identifiers and nail them to their company name in the minds of their public.

· Loyalty: When people have a positive experience with a memorable brand, they're more likely to buy that product or service again than competing brands. People who closely bond with a brand identity are not only more likely to repurchase what they bought, but also to buy related items of the same brand, to recommend the brand to others and to resist the lure of a competitor's price cut. The brand identity helps to create and to anchor such loyalty. Consider the legions of car owners who travel up to 2,000 miles at their own expense to attend a Saturn celebration at the company's plant in Spring Hill, Tennessee. That's loyalty. And supposedly, more people have the motorcycle brand "Harley-Davidson" tattooed on their body than any other brand name. That's out-of-this-world loyalty.

· Familiarity. Branding has a big effect on non-customers too. Psychologists have shown that familiarity induces liking. Consequently, people who have never done business with you but have encountered their company identity sufficient times may become willing to recommend them even when they have no personal knowledge of their products or services. Seeing their ads on local buses, having their pen on their desk, reading about them in the Hometown News, they spread the word for them when a friend or colleague asks if they know a ____ and that's what they do.

· Premium image, premium price: Branding can lift what they sell out of the realm of a commodity, so that instead of dealing with price-shoppers they have buyers eager to pay more for their goods than for those of competitors. Think of some people's willingness to buy the currently "in" brand of bottled water, versus toting along an unlabeled bottle of the same stuff filled from the office water cooler.The distinctive value inherent in a brand can even lead people to dismiss evidence they would normally use to make buying decisions. I once saw one middle-aged Cambridge, Massachusetts, intellectual argue to several colleagues that Dunkin' Donuts' coffee tastes better than Starbucks'. So contradictory was this claim to the two companies' reputations for this demographic group that the colleagues refused to put the matter to a taste test.

· Extensions: With a well-established brand, they can spread the respect they will earn to a related new product, service or location and more easily win acceptance of the newcomer. For instance, when a winery with a good reputation starts up regional winery tours, and then adds foreign ones, each business introduction benefits from the positive perceptions already in place.

· Greater company equity: Making their company into a brand usually means that they can get more money for the company when they decide to sell it. A Coca-Cola executive once said that if all the company's facilities and inventory vanished all around the world, he could walk into any bank and take out a loan based only on the right to the Coca-Cola name and formula.

· Lower marketing expenses: Although they must invest money to create a brand, once it's created they can maintain it without having to tell the whole story about the brand every time they market it. For instance, a jingle people in their area have heard a zillion times continues to promote the company when it's played without any words.

· For consumers, less risk: When someone feels under pressure to make a wise decision, he or she tends to choose the brand-name supplier over the no-name one. As the saying goes, "They'll never be fired for buying IBM." By building a brand, they fatten their bottom line.

2.5 Brand structures for services industries:

As for services, literature suggests to use the companies name - a so called corporate brand - as the overall family brand for all the services offered. Murphy (1990) calls this the “monolithic approach”. He argues that especially for companies which offer an enormous array of services (e.g. consultants, banks) corporate names must be used to deliver more generalised benefits of quality, value and integrity. de Chernatony (1996) comes to the conclusion that corporate brands are a crucial means to help make the service offering more tangible in consumers minds and can enhance consumers perceptions and trust in the range of services provided by the company.

One disadvantage of corporate brands - little opportunity for developing second or sub-brands for differentiated product lines- applies more to branded products. However Murphy (1990) states that many companies have chosen an approach of “local autonomy but group-wide coherence” as a system whereby individual divisions and products are largely free-standing but mention is made in all literature and on all stationery and products that “company A is member of the XYZ group”. This approach is very common amongst the Big Five accounting and auditing firms. It allows their national member firms, to exploit the groups brand name and their own (brand) name at the same time. Many member firms that had joined the global firms have long traditions and a good reputation of their own. For them it is important to demonstrate their clients that these qualities are not lost, on the contrary - other qualities and services are added.

Kelly (1998) sees three obstacles to develop a strong global corporate brand for the large accounting firms:

  • National partnerships value their individuality over “corporate” discipline
  • National regulations and cultures make it difficult to work smoothly under one global set of values
  • The diversity of services offered makes specific branding impossible.

The first two points closely relate to quality and consistency, two issues that customer value in a brand. They need to be monitored and controlled carefully. It is think that - under the pressure to globalise and with ongoing integration of national member firms at least the Big Five will be able to overcome these obstacles to a greater extend. The third point should be tackledwith a strong corporate brand that stands for all services. The “Big five” see one competitive advantage over smaller firms in their ability to offer every service their client might need in every place of the world.

2.6 Choosing a brand name:

The decision for a brand name has to be taken carefully because it can have a long term influence on the success of the branded product or - in the case of a corporate brand - of the whole company. Murphy (1990) and Dibb (1997) give a list of factors to take care for:

To pick out one issue of the process of developing a brand name, there is a big choice in the spectrum from descriptive to free-standing names which are often artificial words with no obvious relation to the good or service. Free standing or arbitrary names are more suitable if they are to stand for a variety of services since there is no initial association with this name. In addition they are the potentially strongest form of trademark in legal terms.

As for professional services firmsa common theme in the brand names is the use of the company's founder's names. For instance the name KPMG stands for Klynveld, Peat, Marwick and Mitchell, Goerdeler. In the process of the merger between Price Waterhouse and Coopers & Lybrand they had to develop a new name for the new company that would exploit the reputation and heritage from both old names. This was important for the relationship with the existing customers as well as for the relationship with all employees. The result was the name PricewaterhouseCoopers. This corporate name is formed out of three names of founders of companies where the new company originates from (Price, Waterhouse, Coopers). Both names are completely free-standing. That's why they properly address the issues of suitability for different media, different markets and cultures and different products as well as the issue of imitation and legal protection

2.7 Marketing a service brand:

In general marketing strategies for services add three more P's to the marketing mix, which stand for Process, Physical evidence and People. The same principles apply to the branding of services. The careful selection and training of staff firstly assures a higher level of quality of the service that is depicted by the brand. It is up to the people to give the processes more reliability and thus to assure a higher homogeneity between the quality of the service and the personality and message of the brand. Furthermore people have contact with the customer. They have to be aware of the brands objectives so that they can “live them” and communicate them to the customer. It is not enough to communicate the message of the brand externally to the customer; the first step has to be internal communication.

Here the principles of internal marketing play an important role. Staffs are seen as the first customer of the brand. Typology of marketing in service industries applies equally to the marketing of brands in service industries:

The theme here is that the customer not only receives the message from the companies external marketing activities, but also the message from the behaviour of the staff he has contact with. The impression the customer gets from the service, from the company and thus from the personality of the corporate brand is also influenced by the friendliness and responsiveness of staff, their perceived qualification and how the staff “lives” the philosophy of the corporate brand.The element of physical evidence is about the environment in which the service is offered and consumed, it is about the customers “feelings” (Dibb 1997). As for branding services, the physical evidence is closely related to the personality of the brand, which can be described as an emotional bond to the customer that grows out of the perceived characteristics of the brand. To give the service a differentiation advantage it is important to create a distinguishable atmosphere that the customer can relate to the service provider. This can be achieved by the use of corporate brand signs, corporate colours and several other themes that are common for all outlets, all employees everywhere the company presents itself to the public.

As for branding auditing and consulting firms, physical evidence is more than just to have a visible corporate identity. It is about bringing a message across. In this industry the message of the brand has to establish the emotional bond to the customer which is one of the few ways for differentiation. An good example when ”Some clients may ask how brand building sits alongside the traditional virtues of a professional partnership - skilled individuals with independent minds able to solve problems on a case by case basis. The real challenge is turning that into a brand.”Up to now many accounting and auditing firms use their job advertisements to send out their brand personality. Job ads for professional services are much more than a means of attracting qualified people. They allow the companies to present themselves with some unique personality. Today's job advertisements not only use corporate colours and logotypes, they tell little stories, transfer messages, describe corporate cultures, and the skills and experiences of the people in these firms. For the companies the job advertisements are a good way to present the variety of services offered when they search specialists for a certain position. In that way the firms can make their brand and its personality more known amongst possible employees and possible clients.

Processes are very important in services industries since in most cases the customer is directly involved in the processes. Aspects that especially apply to the auditing and consulting industry are extremely high quality, confidentiality, timing/availability, consistency and the avoidance of the abuse of insider knowledge. The internal processes that assure these characteristics are less important for the customer. For him it is important that these characteristics are met. Again a brand can provide more confidence in the choice of a service provider. It allows to identify a provider with a good reputation for high quality processes and results. As with most other services the quality of the auditing or consulting processes can not be tested in advance. Moreover, you can change your hairdresser if you are not satisfied but it is much harder to change your auditor since public normally perceives this as some sort of sign for alert.

On the other hand, even if necessary, there are dangers in relating a brand too closely to the quality of processes. Poor quality in only one single case can affect the whole brand. Many of the professional services firms have faced the problem that one of their major clients went into bankruptcy or was accused for some illegal activity. In such situations the media often ask about the quality of the auditing processes.

2.8 What does the term “Customer Satisfaction” refer to?

Customer satisfaction is a measurement of customer attitudes about products, services and brands. While it's always been smart to keep customers happy, the term “customer satisfaction” became popularized in the 1980's with the total quality movement. Customer Driven Excellence and Customer Focused Results remain important aspects of the Baldrige National Quality Program.

2.9 Failure Mode and Effects Analysis:

Failure Mode and Effects Analysis (FMEA) is a logical, proactive technique that is used to identify and eliminate potential causes of failures. The technique was first used in the aerospace industry to find problems with an aircraft before it ever left the ground. Today, FMEA is in widespread use by a multitude of industries, many of which have begun imposing FMEA standards. In the services industry, FMEA is critical because once a service encounter has occurred (and resulting customer dissatisfaction has ensued), any corrective actions taken by the service provider will likely be futile. With FMEA, potential failure modes in the process are identified in anticipation of the service encounter. In this way, the potential for errors is reduced or eliminated, allowing for only the smallest probability of customer dissatisfaction. Once a service provider decides FMEA is the right choice, the following ten steps can be used to guide the implementation process:

  • Select a service process to be analyzed
  • Define responsibility (team, engineers, designers, developers etc)
  • Flow-chart the process
  • List and describe all failure modes at each step in the process
  • Perform a criticality assessment by determining the risk level for each fault by failure probability or severity of failure
  • Rank the faults in terms of priority
  • Design changes to reduce the risk of the highest priority failure modes
  • Specify outcome measures and criteria to determine the success of the changes
  • Specify a time frame
  • Implement the changes and evaluate

Design changes should continue until all possible causes of failure have been reduced or eliminated. As mentioned earlier, while FMEA can technically be performed at any stage, ideally it is performed at the process design stage. This way, potential problems can be identified and prevented before the process is put in place.

2.10 Consumer Satisfaction Process:

The paramount goal of marketing is to understand the consumer and to influence buying behaviour. One of the main perspectives of the consume r behaviour research analyses buying behaviour from the so-called “information processing perspective". According to the model, customer decision-making process comprises a need satisfying behaviour and a wide range of motivating and influencing factors. The process can be depicted in the following steps:

  • Need recognition - realization of the difference between desired situation and the current situation that serves as a trigger for the entire consumption process.
  • Search for information - search for data relevant for the purchasing decision, both from internal sources (one's memory) and/or external sources.
  • Pre-purchase alternative evaluation - assessment of available choices that can full fill the realised need by evaluating benefits they may deliver and reduction of the number of options to the one (or several) preferred.
  • Purchase - acquirement of the chosen option of product or service.
  • Consumption - utilization of the procured option.
  • Post-purchase alternative re-evaluation - assessment of whether or not and to what degree the consumption of the alternative produced satisfaction.
  • Divestment - disposal of the unconsumed product or its remnants.

Besides the information processing perspective, marketing analyses consumer behaviour by employing a psychologically grounded concept of attitudes. It is consumer attitudes that are usually named as the major factor in shaping consumer behaviour and a wealth of studies is available on the topic of how attitudes can predict behaviour.

2.11 Business and marketing domain:

Special focus is given to the formation of consumer needs and attitudes, information processing and the decision- making process within the purchasing decision. The ultimate goal of this decision making process is satisfaction of consumer needs. This section helps the reader understand different stages in the consumer decision process and distinguish between the notions of customer acceptance and customer satisfaction. It provides background to the following sections, which analyse consumption and consumer behaviour from the point of view of different disciplines. Business management and marketing are concerned with ways of satisfying and retaining customers for the purpose of generating profits, improving companies' competitiveness and securing market share. Some of the major themes in the business management domain include studies of customer relationship marketing, which analyses how customer satisfaction relates to competitiveness and profits, methods for measuring customer satisfaction, and approaches that can help transfer customer satisfaction data into strategies for improvement of customer relations and their retention. The paramount goal of the marketing domain is to understand the consumer and to influence buying behaviour. One of the main perspectives of the consumer behaviour research analyses buying behaviour from the so-called “information processing perspective”. The basic concept is derived from the model of the consumer's decision-making process that includes the following major steps: problem recognition, search, alternative evaluation, choice and outcomes. Later this model was expanded to include other steps and add more details.

According to the model, the customer decision-making process comprises a need-satisfying behaviour and a wide range of motivating and influencing factors. Consumer decision-making process has the following steps:

1. Need recognition - realization of the difference between desired situation and the current situation that serves as a trigger for the entire consumption process. This process depends on the difference between the desired and the current state of affairs. Several factors can influence this process: changed circumstances, time, new product purchase, and consumption that trigger the need for other products. Once a certain threshold of this discrepancy is exceeded, the need is recognized. However, to trigger the action, the need should be considered as important and the need satisfaction should be within a person's resources (e.g. time, money, etc.).

2. Search for information - search for data relevant for the decision, both from internal sources (one's memory) and/or external sources. The search for information usually begins with the internal search for any sort of information, memory, or experience with a product or service. The outcomes of this stage depend on the actual existence of internal knowledge about the subject and on the ability of the individual to retrieve this information. If the internal search does not produce expected results, the individual turns toward external information sources. The external searches differ in scale (how comprehensive the search for information is), in the direction (advertising, brands, in store information, information received from sales people, or social contacts) and in the sequence of the research (brand or attribute processing). The major determinants that influence a search are product determinants, situational determinants, retail, and consumer determinants. The consumer determinants comprise knowledge, involvement, attitudes, beliefs, and demographic features. The extent of the information search depends on the degree of importance of the purchasing decision to the customer. For example, people seek information more actively than in cases of more expensive products. The relevance of product information presented to consumers also affects the purchasing decision. It has been shown that irrelevant information weakens consumers' beliefs in the product's ability to deliver the outcome and satisfy the need.

3. Pre-purchase alternative evaluation - assessment of available choices that can fulfil the realised need by evaluating benefits they may deliver and reduction of the number of options to the one (or several) preferred. In this step, a number of alternatives are evaluated and the final option, which is believed to be able to satisfy consumer need, better than the other options, is chosen. A number of evaluative criteria, which represent product or service attributes or particular dimensions of their delivery, are used for the evaluation. The criteria can be functional or expressive in nature, for example, price, brand name, colour, smell, environmental attributes, etc., which have different importance to various individuals. Consumers may often choose products for the status and image attributes and less for their functional features. Differences in product attributes are also reflected in the way the consumer knowledge about a product can be measured. Functional attributes are more likely to be measured objectively, while expressive /status/ and image attributes can primarily be measured through subjective experiences of consumers with products. It has been demonstrated that these image or intangible attributes are important in customer evaluations, especially when their tangible features are difficult to evaluate. In addition to the choice of criteria, consumers also choose which alternatives they will evaluate. The set of alternatives for the evaluations process is called the consideration or evoked set. Research on the evoked set (number of alternatives that are considered in the evaluation process) has focused on both explaining the process in which close substitutes - alternatives sharing the same attributes (usually within the same product category, but of different brands) - are being evaluated and on the choice of alternatives from different product categories - non comparables, so called across-category choice alternatives. The difference in the choice process between close substitutes and alternatives from different product categories has been shown. The choice process between close substitutes is a top-down process, in which consumers start from comparing general information about product categories, narrowing it down to concrete choices among brands of products. The choice process between alternatives from different product categories is the opposite. It starts from concrete features of alternatives and widens the comparison to more abstract characteristics, based on which the alternatives are being compared. Knowledge from these studies is useful for analyzing consumer acceptance of PSS, because in the PSS context, the consumers have to compare service alternatives to products, which resembles comparing non-comparables from different product and service categories. Following Johnson's logic, the evaluation in this case will also be a bottom- up process. The information processing capabilities about product characteristics are shown to depend on how well individuals are informed about a product, brand and entire product category. It is demonstrated that well-informed customers focus more on objective information and particular product attributes, while less informed customers rely on general information about the entire product category and use more subjective information and recommendations of social contacts. Furthermore, studies report that well- informed customers are willing to pay more for the quality brand than were lower-knowledge customers. An important part of the pre-purchase alternative evaluation is acceptance - whether the consumer accepts and believes the information provided and trusts the sources of that information.

4. Purchase - acquirement of the chosen option of product or service. The purchase step is associated with a number of decisions that individuals have to make. Even if the alternative is already chosen, the purchasing may still not be made, because motivations and circumstances can change, new information can become available, or there could be no such alternatives available at that particular place. The decision also depends on when and where to buy, and/or how to pay for the purchase. Thus, at the purchasing stage, the final decision can be fully planned, partially planned, or totally unplanned.

5. Consumption - utilization of the procured option. After the product or service is bought, consumers can use it directly, in a period of time or could even abort the consumption process all together. Research distinguishes between sacred and profane consumption, as well as impulsive consumption.

6. Post-purchase alternative evaluation - assessment of whether or not and to what degree the consumption of the alternative produced satisfaction.

The result of this step can be either satisfaction or dissatisfaction. Satisfaction is the result of a post-consumption evaluation if a chosen alternative met or exceeded expectations of the customer. According to Oliver's expectation-disconfirmation model, consumers have three levels of expectations about the product or service performance: equitable performance (what the customer has to receive in return for money and effort spent), expected performance, and ideal performance. The model states that individual's expectations are either confirmed if a product performs as expected, negatively disconfirmed when the product performs more poorly than expected, or positively disconfirmed if a product performs better than expected. A negative disconfirmation results in dis satisfaction, and consumption of the product is likely to be discontinued. Confirmation or positive disconfirmation results in satisfaction and the continued use of the product or service.

7. Divestment - disposal of the unconsumed product or its remnants. Divestment became a focus of customer research relatively recently because of growing environmental concerns. Most of the research has been focusing on final disposal and recycling, but recently the secondary use of a product, such as reuse and remarketing, is gaining more and more attention. Besides “information processing perspective” presented above, marketing analyses buyer behaviour by employing a psychologically grounded concept of attitudes. Attitudes are usually named as the major factor in shaping consumer behaviour and a wealth of studies is available on the topic of how attitudes can be used to predict consumer behaviour. Katz' functional theory of attitudes explains the role of attitudes in shaping social behaviour. People form attitudes toward products, brands, advertisements, stores, themselves, and other people based on four underlying reasons: utilitarian function (based on rewards and punishments), value expressive function (consumer's central values or self-concept), ego-defensive function (serves to protect the person from internal feelings of threat), and knowledge function (need for order, meaning, and structure). Underlying dimensions of attitude include: affect (feelings), behaviour (do), and cognitions (learning and beliefs). These dimensions can be combined into three hierarchies of effects models, which try to explain a different kind of consumer decision-making process.

  • The Standard Hierarchy or High Involvement Hierarchy perceives the consumer as a rational problem solver and suggests the following order of consumer responses: cognition, affect, and behaviour (learn- feel-do).
  • The Low-Involvement Hierarchy applies to low-involvement purchase situations where both motivation and risk are low e.g. trial purchases and suggests the following order of consumer responses: cognition, behaviour, and affect (learn-do-feel).
  • The Experiential Hierarchy highlights the importance of consumers' emotions (impulse purchases) and situations in which consumer are highly involved with outcome and suggests the following order of consumer responses: affect, behaviour, and cognition (feel-do-learn).

The hierarchy of effect model

2.12 Economic domain:

Consumption plays a central role in economic theory. The most popular theories and models in economic consumer research portray consumers as somewhat passive rational decision makers and assume that well-defined and insatiable desires for goods and services drive consumer behaviour in the market. Traditional neoclassical economists posit that these desires are not affected by culture, institutional frameworks, social interactions, or the consumption choices and lifestyles of their social contacts. Furthermore, these desires or preferences for certain goods are stable by nature and consumers maximize their own utility in the world of perfect information and market competition. They identify three major influencing factors that affect consumption - prices, incomes, and personal tastes. As personal tastes fall outside the realm of economics, most often, traditional economists restrict themselves to the role of income and prices in determining consumption choices. Other presuppositions of economic theory of consumer demand are that desires are not diminishing as mo re of them are satisfied and that the origin of desires is in the consumers themselves. In response to these traditional views, Galbraith argued that we need to realize that there are limits to desires and that expressions of these desires in specific want s are created by industrial systems, implying that consumer sovereignty is an empty concept. Here he implies that only physiological needs have limits. He critiques the present consumer societies, which exploit the fact that psychological needs are insatiable, and which employ great amount of resources to discover and create urge for more and more desires, all in order to sustain the growth drive of industry. After Galbraith, the narrow scenario of reality drawn by neoclassical economists has been heavily criticized on several grounds and a shift towards new foundations in microeconomics has taken place. A modern consumer theory regards consumers as full members of the market who create their utility in the context of the household. The fundamental prerequisite of this approach is that goods and services are simply inputs to the consumption process, and their utility is being extracted by consumers, who spend time and other resources, in the household. The notion that needs and outcomes is really what consumers want is at the centre of this new approach. Needs ma y be fulfilled by putting market-provided goods through consumption process, in which time and skills of the consumers are employed. The end result could be a great variety of ways consumers can produce utility. This vast amount of alternatives makes the consumer decision process a complex task, which consumers face every day. Taking into account the concept of bounded rationality with lack of information and cognitive limitations, it is clear that consumers cannot be efficient in their choices and that neoclassical economics failed to provide sufficient explanation of consumption processes. A different approach to the consumer decision process comes from the studies by prominent economists who explored the effects of tastes and preferences on consumption choices. It is been argued that life would be impossibly complex if we were to go through the entire decision-making process every time they are faced with a choice. It is suggested instead that our lives are deeply routinized and the decisions about familiar daily situations are made automatically, as a matter of habit. Habits are formed based on changes in tastes, and our preferences depend on experiences in past consumption. This discussion stems from the psychological learning theory, according to which habits are formed in the process of continuous reinforcement of influencing factors. Once people are satisfied with their choice and situation, their behaviour becomes routinised and they do not tend to search for new solutions, until new signals and influences come that can trigger the search for better alternative.

These ideas built the foundation for an extensive debate on economic implications of habits. Economists suggested looking at individual costs as an explanation of the habitual behaviour. Stability of habits with a certain capital, consisting of skills, information and experiences, that was acquired during consumption of a particular object or service. Triggers for change reduce this accumulated capital. This discussion is interesting from environmental point of view as well, as routines and habits often offset sustainable patterns of consumption. Another interesting reason for habit stability comes, who suggested taking into consideration the desire of people to consume certain goods in order to be accepted by a social group. As a result, people can be trapped by the desire to adapt to the most accepted or prestigious way of living. This mechanism implies that if the prestigious way of living is unsustainable, it might be difficult to change it, as nonmembers will always struggle for being accepted into the prestigious circle. The contrary is also true: if it is possible to make prestigious life style more sustainable, then it will be easier to solicit more followers into it. The work of Sen brings us closer to the area of product-service systems in that Sen argued that in order to evaluate a person's well-being it is not sufficient to look at one's possessions and at the characteristics of these possessions, but at what functioning these possessions provide. Sen defines functioning as “an achievement of a person: what he or she manages to do or to be. It reflects, as it were, a part of the ‘state' of that person. It has to be distinguished from the commodities, which are used to achieve those functionings. This conceptualization reminds very much the direction of the current discussion in the environmental filed about product ownership versus buying functions of products. Examples of economic research provided here demonstrate clear links between psychological, social and marketing research. There is a lot to learn from economic research in terms of knowledge and methods, for example, for evaluating consumer willingness-to-pay and willingness-to-accept. Incorporation of economic methods into customer acceptance and satisfaction techniques could greatly contribute to this line of research.

2.13 Social studies domain:

Social institutions, collective behaviour, and constraints of consumption environments enable and affect consumer behaviour. Social studies focus on identifying and studying parameters of external environments that influence consumption patterns. The major themes that are studied by sociologists with regard to consumption behaviour are culture, social class, personal influence, ethnic influence, family and household, and situational influences. The scope of individual and environmental influences and this distinction is used in this study for the narrowing down and distinguishing between the two research areas: sociology and psychology. There is a substantial body of literature on consumer culture that analyses cultural differences and looks into reasons for consumption in a cultural context. Culture affects the entire structure of consumption. Sociology studies why people buy products and find various answers to that simple question: products provide function; products should comply with people preferences about the form in which product function could be delivered; products become symbols of meaning in society. The importance of values is described by a theory of consumption values. The authors propose that consumer choice is influenced by functional value, conditional value, social value, emotional value, and epistemic value. Changes of values are usually explained from a life-cycle perspective (people grow older and their values change) or


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