The Missing Multiplier
Among the four largest U.S. airlines, Southwest has roughly the same number of flight cancellations per mile flown. Yet, this beloved airline sees one-tenth the number of customer complaints .
Clearly there is something going on beyond operational performance, something deeply rooted in emotions.
So, what do emotions have to do with it? Everything. When companies create emotional bonds with their customers, they act as multipliers on everything the company does, and they give greater lift from the same customer experience. The effect is measurable, allowing a company to trade off investments in the operating experience with investments to build the emotional connection.
For example, rather than heavily investing in on-time departures, empowering the cabin crew to have fun on the job and show genuine interest in their customers may have a more profound effect on the customer experience. Southwest understands the power of these emotional bonds, which make us more likely to forgive their flight delay over one of the other airlines.
We know emotional bonds matter. We intuitively recognize and respect the companies that create the strongest connections with their customers, across different sectors: companies like Disney, Nike, Southwest, Starbucks, USAA. And we know that they are not just loved by their customers; they outcompete others and deliver greater shareholder returns. For example, over the past five years, Southwest’s market capitalization gained 280 percent, nearly 100 percentage points more than United, while Disney grew 130 percent, over 50 percentage points more than 21st Century Fox. It’s not just about being in a high-engagement sector. There are financial services, healthcare and utility companies that achieve an emotional bond and the financial returns that result.
Despite this knowledge, companies often manage and measure themselves as if it were not so. Many Fortune 500 companies measure customer perceptions using the Net Promoter Score®, and they attempt to measure and manage the operational levers that drive improvements in that score . But this is to ignore the emotional context in which those levers operate. As we saw in the airline example above, the link between the operational lever and the customer perception depends on that context.
So if I want to increase the perception score, should I invest in the operational lever or the emotional context? The lever is easy to measure: I can vary it and see the result. For example, I can compare days or stores where customers faced different queue lengths — or even artificially manage their length experimentally by adding or removing service agents. The context is harder, because I can’t easily vary it, which is also why it is too easy to take it for granted and fail to invest in it. Even if I artificially increase the queue length, I am still benefiting from the customer goodwill that exists from past experience. As that is built up cumulatively, I am unable to vary it to see the effect.
Research has shown that emotional bonds matter a lot
Motista, a research company, has demonstrated that emotionally connected customers drive up to double the value that a merely satisfied customer delivers. Our own work shows that a marginal dollar of advertising has a greater impact on customer perceptions when those customers are already emotionally engaged. Emotional bonds create a confirmation bias that means customers are more open, believing and trusting of a message that comes from a brand they believe in versus one that they don’t.
How do we create and sustain these emotional bonds? Historically this has been the remit of marketing and brand departments. But for many leadership teams this has been a source of frustration. The cost of brand building is very real, but the benefits are hard to quantify. Brand metrics were developed in an era when branding was equated to advertising. They capture performance along the purchase funnel and a dozen brand attributes versus the competition. But what does it mean when unaided awareness improves by two points? Does it matter if we’re better known for “innovation” than our competition? How do these measures translate to financial value and how do they influence overall business priorities? Given this lack of connection between brand metrics and the business, it’s not surprising that in a recent poll that we conducted, fewer than 5 percent of marketers said that their companies could quantitatively gauge the impact of a 2 percent improvement in their brand metric to the value of the company.
The answer, then, is to recognize the reality of the emotional bond in the metrics with which you manage the business — to measure the missing multiplier, and therefore manage it and enjoy its power.
Finding the missing multiplier
The practical goal of measurement is not simply to measure, but to engage leadership and drive decisions. In our research with other carriers, it is leadership culture that’s statistically associated with strong brand performance; the presence or absence of metrics is not. Where the value of metrics comes into play is in helping drive that culture. Metrics offer CMOs credibility and authority to provide creative leadership and influence the customer experience beyond what they directly control.
On the left side of our measurement model, illustrated below, are operational metrics, including marketing measures such as awareness, but also metrics from every customer touchpoint, for example call-center queue time. On the right are financial outcomes from desired customer behaviors.
Many of today’s measurement models seek to quantify the relationship between the operational performance and the financial impact. However, this misses the powerful effect brand associations have on business performance (captured in the middle segment of our measurement model). Brand associations are the mental shorthand for how consumers feel about brands and the strength of their emotional bond. As we’ve demonstrated, these bonds have tremendous value. If you don’t measure them, you can’t manage them. Here is the missing multiplier that can amplify operational performance. This is how Southwest outperforms United and why investing in operational improvements is necessary but not sufficient.
Leadership teams across the board should be asking themselves the following three questions:
- How does investing in emotional bonds impact profitability?
- Which associations matter most in raising profitability?
- How can we improve these associations?
How does investing in emotional bonds impact profitability?
Quantify the missing multiplier
Across industries, we find that the brand typically accounts for 10 to over 50 percent of a purchase decision (and upwards of 90 percent in the case of bottled water). But even 10 percent matters and its quantification fundamentally changes the brand conversation.
Knowing where and how to invest in brand based on the data can yield substantial financial upsides. For a financial service company, every point of brand improvement was worth $30 in the lifetime value per customer. For another company, increasing the brand score by two points was worth $600 million in annual profit — enough to get the whole management team’s attention.
When the brand is expressed in financial terms, it creates buy-in. Brand measurement that captures economic impact helps create a common language and frame of reference, not just for marketing, but for everyone.
The best way to get data like this for your business, where resources allow, is to use primary research linked with your customer data to quantify the influence of brand versus other offer elements in driving customer choice and delivering customer value. But even simple correlations of brand perception versus market performance will give a good indication of the size of the prize in a transparent and understandable way.
Which associations matter most in raising profitability?
Measure the “hows,” not just the “whats”
It’s not enough to improve operational metrics. You need to do it in a consistently memorable way. There are two categories of association. The first category is industry, not company, specific and usually more tangible in nature. These are the dimensions that most consumers use to define their preferences and provide comparison across companies. If we identify and prioritize the associations that matter, we can increase the return on investment. In the airline business, for example, cabin crew service disproportionately influences brand preference.
The second category defines the small number of associations that make a brand distinctive. These are defined by the brand strategy and drive meaningful differentiation through the culture of the organization and innovation across the experience, not just within marketing. Yet today, consumers recognize only one in three companies as unique. It’s tough to create emotional bonds when your services are considered a commodity.
For Southwest Airlines, a “Fun-LUVing Attitude” is a defining characteristic of the brand. It provides the basis for why their cabin crew stands out versus others. Yes, they have worked hard to get the essentials of service right, but it is the sense of fun that creates the memorable experience.
For Southwest, a sense of fun pervades the culture and comes through in everything they do. Their three commitments — Fun-LUVing Attitude, Warrior Spirit and Servant’s Heart — keep things simple. By focusing on what makes them unique, Southwest is able to mobilize an entire organization to demonstrate these commitments across the customer experience and create preference among its customers.
Within an integrated measurement system, marketing can now quantify the contribution that differentiation is bringing to the business and where the differentiation will have the greatest financial impact.
Southwest‘s sense of fun comes through in everything they do, from the items passengers hold in their hands to flight attendants injecting personality into on-board announcements.
How can we improve these associations?
Measure the causes, not just the effects
It’s not enough to know which associations matter most. We need the underlying causality that turns customer success and brand differentiation into everyone’s priority.
The business needs to know which levers to pull. How much do you invest in marketing messages versus improving the overall customer experience? Within the experience, which levers really move the needle? What events in the wider world, outside your control, are impacting your associations?
When delving deep into the levers that underpin associations, surprising results arise. One brand learned that digital service channels have twice the impact on perceptions as physical ones. A consumer packaged goods company found that signage was at least three times more effective than either brand blocking or increasing shelf share in creating perceptions of the product as “readily available.” A major drugstore found that offering in-store wellness screenings was more than twice as effective as other, often lower-margin, products and services in cultivating health-and-wellness associations.
Invest in emotional bonds and measure the returns.
With the measurement model we have described, marketers can express the emotional bonds they seek to build as the missing multiplier in business performance, and so make the business case not only for their own activities but for the customer experience investments they need to influence in their colleagues’ operational domains.
It is disruptive in concept, but not in practice, because it easily integrates into existing methodologies such as Net Promoter Score® or its equivalent. As a consequence, this is a model that not only earns marketers their seat at the executive table, but it also gives them the tools to achieve the business impact that their brands can create.
Are you measuring your business when you measure your brand?
- Shiv Gupta
- John Marshall
- Amit Sabharwal