RCG White Paper - Brands Are People Too

8/3/2019 RCG White Paper - Brands Are People Too

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Brands arePEOPLE too!

AN ADVISORY SERVICES WHITE PA

Harnessing the Power of Brand Warmth and Competence


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© 2011 The Relational Capital Group September 2011

Groundbreaking research in customerbehavior has revealed that the wayhumans respond to brands is simply anextension of the way they spontaneouslyperceive, judge and behave towards oneanother. That insight could revolutionize

your brand strategy.

Brands are PEOPLE too!Harnessing the Power of BrandWarmth and Competence

For our ancestors who lived thousands oyears ago, the ability to recognize people, tocorrectly judge their intentions, and to build

trusting relationships was crucial to their survival.Today, hard wired by evolution, we repeatedly

judge others when we interact with them, assessingthem along the same two key social dimensionsthat our ancestors did: warmth and competence.People also make the same judgments about brands– spontaneously assessing them or warmth andcompetence.

To explore the impact o brand warmth andcompetence assessments on customer behavior,The Relational Capital Group in collaboration withworld renowned social psychologists Dr. SusanT. Fiske and Dr. Nicolas O. Kervyn o PrincetonUniversity conducted a series o research studieswith over 5,000 U.S. adults and 41 leading brands.We ound that customers not only perceivecompanies and brands in the same way thatthey do people, assessing them or warmth andcompetence, but also that these assessmentsstrongly inuence purchase interest and loyaltybehavior.¹

The implications o these ndings are enormous:By understanding how customers judge brandsthrough the same social processes they use in theirhuman interactions we can unlock the social-psychological power o brands, making them armore compelling and attractive as relationshippartners or customers.

TYLENOL vs. ADVIL:IRRATIONAL BRAND LOYALTY?

Consider the recent experience o Tylenol. In 2010,the U.S. Food and Drug Administration (FDA) shutdown the three actories in North America thatproduced the pain reliever Tylenol, ollowing a slew

o product recalls due to unsanitary manuacturingconditions. Despite the shutdown, Congressionalhearings, bad press in major news outlets, and a lacko product availability on the shelves or months,customers continued to hold the Tylenol brand inhigh regard, rating it higher than competitor Advilon measures o purchase intent and brand loyalty.Exhibiting what many might call irrational loyalty to abrand that had apparently made so many missteps,customers appeared to be guided by a orce thatdeed logic.

Compare those results with those o several brandsthat handled product recalls poorly or received

negative publicity or their business practices.Most o these, including BP, Toyota, AIG, Citibankand Goldman Sachs, substantially trailed theircompetitors when we asked customers to assesstheir warmth and competence. However, Tylenol,despite its product quality issues, deed this trend.Through several nationally representative studieso customers, we repeatedly ound that Tylenol’swarmth and competence ratings ollowing itsproduct recalls consistently matched Advil’s.

Our analysis revealed that customers’ apparentlyirrational loyalty to Tylenol was the result o a deepreservoir o warmth and competence perceptions

that the brand had established over decades ointeracting with its customers, protecting thebrand’s relationships with its customers, despite thecompany’s temporary lapse in product quality thatled to the recalls. Customers largely interpretedTylenol’s quality issues as a short-term lapse incompetence, rather than a undamental shit inwarmth. Despite Tylenol’s clear lapses, customersperceived that Tylenol handled its recalls in an honestand responsible way, which allowed customers tocontinue to view the brand as warm and trustworthy.




WHY Warmth AndCompetence ARE DECISIVE

I we ail to recognize that people judge brands thesame way they do other people, we miss out onsome o the most critical and compelling driverso human behavior in the marketplace. When we

encounter other people, we, as humans, are hardwired to immediately assess whether they will behelpul or harmul to our survival. We instinctivelysearch or answers to two key questions to guide oursocial interactions.²

First, we assess the person’s warmth toward us. Areyou a riend or oe? Will you help or hurt me? Willyou give to me or take rom me? Warmth is judgedby assessing whether one is kind, riendly, and

good-natured; whether one appears sincere, honest,moral, and trustworthy, and whether one possessesan accommodating orientation and is perceived ashelpul, tolerant, air, generous, and understanding.

Second, we assess the person’s overall level ocompetence to understand how successul they

would be in carrying out their intentions towardsus. Are you stronger or weaker than I am? Howmuch power do you possess? What specialresources do you have that make you capable ohelping or hurting me? Competence is judged byassessing whether you possess special resources,skills, creativity, or intelligence that grants you anadvantage. Do you appear ecient, capable, skillul,clever, and knowledgeable? Do you seem to possessthe condence and ability to carry out your plans?

The answers to these questions guide our mental, emotional, and behavioralresponses towards people, afecting what we think o them, how we eel toward them,and what we do to embrace or avoid them. We retreat rom or deend ourselvesagainst threatening people who are capable o hurting us, while we saely ignorethose who mean us harm but who are less capable. We orm alliances with those withgood intentions who bring competence and skill to our relationship.

Further, warmth judgments always occur rst and carry greater weight thancompetence judgments. We are particularly sensitive to changes in warmth and

actively search or behaviors that disconrm that someone has warm intentionstoward us. Competence judgments are more orgiving; someone who has been

perceived as competent is allowed a ew slips in competence beore weadjust our overall assessment.

These warmth and competence assessments are remarkably strongpredictors o how we eel and act towards others. Social psychologistsestimate that these two simple assessments predict more than 80 percento the variance in our overall assessments o people. Thus, our assessmento warmth and competence orm the predominant impression we have oa person, inuencing all other personality assessments that we make.

Warmth

Assessment

Competence

Assessment

Emotional

Response

Behavioral

Response

Warm Competent Admiration, PrideAttraction, Aliation,

Alliance

Cold Competent Envy, JealousyBegrudging Cooperation,

Obligatory Association

Warm Incompetent Sympathy, Pity Indiferent Neglect

Cold Incompetent Contempt, Disgust Rejection, Disassociation




FIVE CRITICAL Brand Loyalty CONCLUSIONS

In the ancient struggle or survival, people were the rst brands and aces were the rst logos that helpedhumans make vital choices. During the early periods o commerce, the reputation o the product and itsmaker were virtually inseparable. People judged the warmth and competence o the person standing behindthe product beore they purchased. However, as products and services have become more removed romtheir makers, the practice o branding them with a unique mark emerged to help customers recognize and

choose among market oferings.

Our work with leading Drs. Fiske and Kervyn at Princeton has shown that consumers today judge brandsin much the same way they judge other people and social groups in order to determine whether eachbrand exhibits the warmth and competence customers need. So all o the branded trade and commercewe engage in today is simply an instinctive adaptation o how we perceive and behave toward each other.Starting rom that central, groundbreaking insight, our team uncovered ve additional critical implicationsor brands and customer loyalty:

1. Warmth and Competence Drive Customer Behavior

Customers can and do judge brands on their warmth and competence, and theseassessments and the resulting emotions they elicit are highly predictive opurchase intent and loyalty behaviors. Our studies over 41 brands with 5,000

customers showed that over 50 percent o purchase and loyalty behavioracross a host o categories can be explained by customers’ warmth andcompetence assessments and the resulting emotions they elicit. This makesunderstanding and managing brand warmth and competence a strategicimperative or all brands.

2. Brand Features and Benets Don’t Tell the Whole Story

Traditional eatures and benets are an incomplete subset o the broader andmore oundational warmth and competence perceptions that customers useto assess brands. Our in-depth study o ve major brands ound that the keyeatures and benets used to market them ail to predict large portions o

customer purchase and loyalty behavior. However, when customers’perceptions o these brands’ warmth and competence are added,

an incremental 15-40 percent o the variance in customers’behavior is explained, highlighting their signicant impacton purchase and loyalty.

So while brand eatures and benets are certainly necessaryand important, alone they are insucient to address all theneeds and expectations that are driving customer behavior.

I we ail to see that they are simply part o customers’ largerand more powerul warmth and competence perceptions, wemiss up to 40% o the potential loyalty available to brands.

3. Honesty and Selfessness Are Hidden Drivers o Loyalty

Two specic dimensions o brand warmth stood out as more powerul

drivers o customer behavior than all others: honesty and selessness.It turns out that genuine, instinctive trust is such a strong drivero human behavior that customers are unable to become loyal tobrands and companies without it. In human relations, honesty andselessness are two traits that allow others to view us as sae and aslikely candidates or deeper relationships dened by commitment andloyalty. We call this the Principle o Worthy Intentions, or putting thebest interests o customers ahead o short-term prots.

Explains

50% of

behavior alone

WARMTH & COMPETENCE

FEATURES &

BENEFITS

15-40%more




As a result, the degree to which brands are perceived to be “honest and trustworthy” and “acting withcustomers’ best interests in mind” has enormous impact on customer purchase intent and loyalty.This was especially the case or brands like BP, Toyota, Goldman Sachs and Citibank, each o whichhas sufered major business practice scandals recently. It seems that these dimensions o warmth arecritical “price o entry” expectations or customers. When companies and brands all short on them,they are penalized severely with very low trust, purchase intent and loyalty, without regard to theirperceived competence.

4. Major Brands Fall Short on Worthy Intentions

Most major companies and brands today are perceived to be selsh, greedyand concerned only with their own short-term best interests. In act, every

brand we studied ell short o customer expectations on honesty and selessintentions. Perhaps this helps explain why it has become harder and harderor major brands to build and maintain lasting brand loyalty.

However, it turns out that major crises and product recalls are a rareopportunity or companies and brands to genuinely and transparently

demonstrate worthy intentions toward their customers. Our research oundthat 93% o customers agree that product recalls are moments o truth where

customers learn what companies and brands care about most. In act, another87% o customers said they would become even more loyal to companies and

brands that handle product recalls honorably and responsibly.

5. Customers Are Actually Loyal to People, Not Brands or Companies

While customers clearly can and do develop relationships with brands³ and companies, even whenthey have no direct contact with any o its employees, our research suggests that something moreundamental is actually happening there. Customers know that the products and services they use everyday come rom the companies that produce them, and that those companies are all made up o people.They recognize this brand to company to people connection.

Their experiences with those products and services, along with their pricing, packaging andmerchandising, all communicate something to customers about the warmth and competence o thepeople that produced them. As with other orms o social perception, customers use clues, short-cutsand inerences to orm opinions o those people, even in the absence o direct contact with them. So,

subconsciously, they’re actually becoming loyal to what they know about the people behind each brand.That’s why scandals and product recalls can have such a tremendous impact on customer behavior.

They provide powerul, new inormation on the integrity,character and trustworthiness o the

people behind each brand.

93%agree product

recalls aremomentsof truth.

Brand, Company, People

Connection




FIVE WAYS TO BUILD LOYALTY THROUGH Warmth And Competence

Given the ndings o our research and their ar-reaching implications, companies have many options orbuilding warmth and competence into their brands. Five o the most prominent include:

1. Demonstrate Worthy Intentions

The rst and most critical step to building

stronger brand loyalty is having intentionstoward customers that are actually worthyo their loyalty. This means honestly andtransparently putting customers’ best interestsahead o your brand’s short-term gain. Byselessly demonstrating that you genuinely careabout what’s best or customers, your brandshows that it can be trusted to look out or themin the uture, rather than just make a quick buckand move on.

What do your brand’s policies, practices andpromotions convey about your intentions toward

customers? Do they ensure that customersconsistently get what you promise, or are theydesigned to protect your company rom costand liability risks? I the odds are stacked heavilyin your avor, your brand is telling customersthat it’s looking out only or itsel, and they hadbetter do the same. On the other hand, whatdo Southwest Airlines’ policies on baggage andchange ees convey about its intentions towardpassengers? Their consistent growth and highpassenger loyalty speak or themselves.

2. Put a Human Face on Your Brand

Customers have a deep and instinctive needto know about the true intentions and abilitieso the people behind the products and servicesthey buy. Since the industrial revolution andmass marketing removed most direct contactwith those people, customers have had to rely onsecondary sources to inorm their perceptions.But it doesn’t have to remain that way.

Bringing real employees, human aces andtrue stories to the oreront o your brand’sinteractions with customers will make it

easier or them to recognize, understand andbecome loyal to it. High prole business leaders

like Steve Jobs, Richard Branson and SamWalton personied their brands in ways that toldcustomers a great deal about what they couldexpect rom their products and services. Yourbrand can accomplish much o the same efectwith humanizing aces, stories and customertouch points.

3. Develop Your Brand Biography

Telling the story that chronicles your brand’sorigins, growth, and evolution over time helpstransorm the largely static nature o productsand services into a dynamic, unolding, and

meaningul narrative authored by the peopleproducing them. While brand personalities areoten constructed through associations withctitious concepts and characters, compellingbrand biographies are best based on the storieso real people, typically the brand’s ounders oremployees, giving the brand a human tangibilityand credibility that makes it easier or customersto identiy with. 4

4. Leverage Social Networks to Engage WithCustomers Directly

During the past ew decades, most o the

touch points that customers had with thepeople who provide products and services theybuy have now been digitized, outsourced orautomated in the ongoing quest or scalablecost reductions and productivity gains. As aresult, customers have ewer human to humaninteractions than ever on which to base theirbrand warmth and competence perceptions.

However, social network technology now ofersbrands an ecient, scalable and trackable wayto re-engage and build relationships directlywith customers in a way that hasn’t beenpossible since beore the industrial

This crazy fee I just gotchargedcan’tbe correct.You’re absolutely right.

It was our mistake.




revolution. In act, many leading companiesare creating personalized Facebook and Twitteraccounts or their customer service and customerrelations employees to provide person-to-personservice and problem resolution.

These social network accounts use realemployee names and aces, putting an authentic

human ace on the brand, while also providinglots o opportunities or human interaction andthe building o warmth and competence. What’smore, these interactions essentially happen inpublic. With the click o a button customers canshare their brand experiences with all o theirriends and ollowers – giving new meaningto building brand loyalty through word omouth marketing.

5. Empower Employees to Foster BrandRelationships With Customers

While customer-riendly business practices and

social network eforts will go a long way towardimproving the perceived warmth o your brand,there will always be unoreseeable situations thatyour employees will be unsure how to resolve.For instance, when customers don’t get whatthey expected through no ault o their own orthe brand, who gets the short end o the stick?

Forward thinking companies and brandsrecognize situations like these to be powerulopportunities to oster a lasting brandrelationship with customers. Accordingly, theyempower their employees to simply “do theright thing” or customers whenever companypolicies seem clearly unair or likely to destroy

a customer relationship. These random acts oheroism are oten widely retold by customersand provide valuable anecdotes or yourcontinuing brand biography.

In sum, everything customers encounter relatedto your brand helps communicates what itsintentions and capabilities are. Every customertouch point matters. Everything your companydoes and does not do, everything your companysays and does not say – it all communicatessomething to your customers about yourwarmth and competence. To build lastingbrand loyalty and relationships, companiesneed to reexamine their products, services,policies, and practices through the lens owarmth and competence to ensure that they arecommunicating and demonstrating the traitsnecessary or lasting customer loyalty.

GETTING STARTED

To help companies and brands harness theull potential o warmth and competence, TheRelational Capital Group has developed proprietaryresearch and analysis tools that illuminate the pathto greater customer loyalty. They are designed toprovide sales and marketing executives with a clearpicture o their competitive position on warmthand competence, as well as how these impact keyperormance measures. In addition, a clear andactionable diagnosis o brand strengths and gapsprovides the basis or stronger loyalty buildingplans and initiatives. These customized analysescan include:

•

Brand Warmth and Competence Assessments• Warmth and Competence Gap Analysis

• Customer Emotional Proling

• Brand Loyalty Driver Analysis

• Competitive Position Mapping

• Strategic and Tactical Prescriptions

In a world where people were the rst brands and

aces were the rst logos, these analyses

can help brand managers tap intoan ancient truth about humanbeings and an up-to-the-minutediscovery about the application othat truth. Both timeless and timely,warmth and competence can impartunparalleled power to any brand.From broad issues like managingcorporate reputation tothe smallest details odelivering customerservice, companies havealmost limitless potential

to earn customerloyalty. But they mustrst understand whatreally drives thatloyalty and put thatunderstandingto work or theirbrands.




REFERENCES

1. Brands as Intentional Agents Framework: How Perceived Intentions and Ability Can Map Brand Perception, Nicolas Kervyn, SusanT. Fiske, and Chris Malone, Journal o Consumer Psychology, orthcoming.

2. Universal Dimensions o Social Cognition: Warmth and Competence, Susan T. Fiske, Amy J.C. Cuddy, and Peter Glick, Trends inCognitive Sciences, Vol. 11, No. 2, pp. 77-83, 2006.

3. Customers and Their Brands: Developing Relationship Theory in Consumer Research, Susan Fournier, Journal o ConsumerResearch, Vol. 24, Issue 4, pp. 343-373, 1998.

4. The Strategic Use o Brand Biographies, Jill Avery, Neeru Paharia, Anat Keinan, and Juliet B. Schor, in Research in ConsumerBehavior, Vol. 10, ed. Russell W. Belk, Emerald Group Publishing Limited, pp. 213-229, 2010.

ABOUT THE AUTHORS

Chris Malone

Chris Malone is Chie Advisory Ocer o The Relational Capital Group. He leads the Advisory Services practice that helps clientsmeasure, manage and strengthen the relationships that drive their business perormance. Chris previously served as Chie MarketingOcer or Choice Hotels International and Senior Vice President, Marketing or ARAMARK Corporation. Earlier in his career, hewas also co-ounder and principal consultant at Zyman Marketing Group, a marketing strategy consultancy ofering brand building,business strategy and growth acceleration service to companies across a number o industries. Chris holds a bachelor o science degreerom the University o Maryland at College Park and an MBA rom The Wharton School o the University o Pennsylvania.

Dr. Susan T. Fiske, Ph. D.

Susan T. Fiske is Eugene Higgins Proessor o Psychology, Princeton University (Ph.D., Harvard University; honorary doctorates,Université catholique de Louvain-la-Neuve, Belgium; Universiteit Leiden, Netherlands).

She has written eight books and more than 250 articles and chapters, as well as editing several academic journals. On a regular basis,she edits the Annual Review o Psychology and the Handbook o Social Psychology. Her most recent book, Envy Up, Scorn Down: HowStatus Divides Us, is about how we compare ourselves all the time, and the problems this makes or us as individuals, partners, students,employees, and citizens.

Currently, as a social psychologist, she investigates emotional prejudices (pity, contempt, envy, and pride) at cultural, interpersonal, andneural levels, research unded by the Russell Sage Foundation (2008-2010) and previously unded by the National Science Foundation(1984-1986, 1995-1997) and the National Institutes o Health (1986-1995). Her expert testimony in discrimination cases was cited by theU.S. Supreme Court in a 1989 landmark decision on gender bias.

Most recently, she won several scientic honors: the APA Distinguished Scientic Contributions Award and the Society or Personality andSocial Psychology Donald T. Campbell Award, a Guggenheim Fellowship, and the William James Fellow Award rom the Association orPsychological Science. Previously, she won the American Psychological Association’s Early Career Award or Distinguished Contributionsto Psychology in the Public Interest or anti-discrimination testimony and the Society or the Psychological Study o Social Issues’ AllportIntergroup Relations Award or ambivalent sexism theory (with Glick), as well as Harvard’s Graduate Centennial Medal.

Dr. Jill Avery, DBA, MBA

Dr. Jill Avery is an assistant proessor o marketing. Jill teaches marketing management, brand management, integrated marketingcommunications, and consumer behavior in the MBA and undergraduate programs at the Simmons School o Management andteaches executive education in the “Taking Marketing Digital” program at the Harvard Business School. She holds a DBA (marketing)rom the Harvard Business School, an MBA (marketing and nance) rom the Wharton School, and a BA (English and art history) romthe University o Pennsylvania.

Jill’s research ocuses on brand management and customer relationship management issues. Her doctoral dissertation on online brandcommunities won the 2006 Harvard Business School Wyss award or excellence in doctoral research. Her work has been publishedin the Journal o Consumer Research, Harvard Business Review, MIT Sloan Management Review, Business Horizons, and EuropeanBusiness Review. Her branding insights have been cited in Advertising Age, The Economist, The New York Times, The Financial Times,Business Week, and Strategy and Business.

ABOUT THE RELATIONAL CAPITAL GROUP

The Relational Capital Group is a research-based, sales and marketing consulting rm that helps organizations assess,manage and strengthen the business relationships that drive their perormance. We specialize in customer loyalty,retention, growth and CRM strategies or leading companies and brands around the world.

For more inormation about this research or other Advisory Services o The Relational Capital Group, please contact,Chris Malone, Chie Advisory Ofcer at [email protected] or visit our website at http://www.relcapgroup.com.

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RCG White Paper - Brands Are People Too

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