Review of “How Customers Think” by Gerald Zaltman: This book talks a lot about insight but doesn’t deliver much.

Disappointing.  If you have read some bestsellers touching on with recent findings in neuroscience (e.g. Antonio Damasio) and memory (e.g. Daniel Schacter) then what’s left of this book for you is largely an advertisement for Zaltman’s commercial and patented (!!) market research technique called ‘Zaltman’s metaphor elicitation’.

Yes there are good reasons to doubt focus groups (more reasons than Zaltman discusses) as well as management intuition and market research that asks consumers why they bought what they bought.  But that doesn’t mean we need to resort to Zaltman’s consultancy which bears a strong resemblance to some of the excesses of 1960s motivational research.  Anyway Zaltman makes a very poor case for this logical leap, he simply presents it as a fait accompli (I believe so so should you).

For marketing managers the greatest weakness of this book is the lack of integration with known facts of buying behaviour.  The discoveries of even 20th Century marketing science are ignored.  So there no facts in this book about how consumers actually buy, or consume media.  So of course these facts aren’t used as a check against Gerry’s ideas.  Indeed there is no testing of any ideas.

The marketing examples are purely anecdotal, and often very vague – suggesting a lack of first-hand knowledge (they read as if they were mentioned by 3rd parties to the author at the end of a seminar or over a chat).  I can’t recall anything convincing about sales results, or anything that could be externally validated, the anecdotes have to be taken on trust.  Even so they tend to make very weak vague claims:

e.g. “managers at Coca-Cola’s German office found that new research on memory contradicted many of their prevailing assumptions about how memory worked and how to design effective advertising campaigns.  By applying several key findings about memory.. [they] launched a successful marketing program in that country.”  You don’t say, wow !  What assumptions, what research, what sort of advertising program ?  All we readers get is:

“Specifically, the company created more meaning (sic) and effective advertising by understanding the reconstructive nature of memory and the various factors affecting the encoding and retrieval of memory”.

It would perhaps be acceptable if that sort of anecdote came at the start of the book – you’d expect more exciting, harder, detailed evidence to come later once the reader was familiar with the book’s key concepts.  But this example comes from page 258 – this sort of lame anecdote is about as good as it gets as far as evidence that this book has any real-world application value.

As other reviewers have noted it’s also an overly long rather abstract book, with somewhat indulgent structure, for example the third part is about management thinking not “how customers think”.  This book talks a lot about insight but doesn’t deliver much.

Professor Byron Sharp

Does advertising only work via driving intentions and preference ? No!

Apart from a very small amount of direct response advertising, advertising works (to generate sales) through memories.  This is an uncontroversial statement, yet it’s common for marketers and academics to forget the essential role of memory and instead think advertising works largely through persuasive, rational or emotional, arguments that shift brand evaluations.

The dominant way that advertising works is by refreshing, and occasionally building, memory structures that improve the chance of the brand being recalled and/or noticed in buying situations and hence bought.  Memory structures such as what the brand does, what it looks like, where it’s available, when it’s consumed, where it is consumed, by who, with whom and so on.  Associations with cues that can bring the brand to mind.

Some advertising creates a purchase intention, gaining a reaction like “I should buy that” or “that’s interesting, I must check that out”.  It’s commonly assumed that such advertising must be more sales effective, but this does not follow.  Memory structures, even if they don’t result in intentions, still cause sales – decades of research shows that most sales typically come from people who had not formed an intention (Juster, 1960).  One reason is that intentions are memories too, and subject to faulty recall, so even firm intentions are weakly motivational.

A similar point can be made about brand preference or attitude.  Some advertising, much of it being quite similar or identical in style to intention forming advertising, generates a reaction like “that’s good” or “that’s the brand for me”.  Again, it is commonly assumed that such advertising must be more sales effective.  But again such attitudes are usually weakly motivational, because they are often not recalled in buying situations.

In fact there is typically only around a 50% chance that a person will state an attitude about a brand twice in two surveys (Dall’Olmo Riley, 1997; Sharp, 2002) – sometimes they recall their attitude, sometimes they don’t.  Either that or they are rather unsure of their attitude (it’s not like brand attitudes are very important).  Of course many of our intentions are rather vague and weak, e.g. “One day I must start eating more healthy foods and getting more exercise”.  We like a good many rival brands, including some we haven’t heard of yet, and we attitudinally reject very few of the many available options.

So it is quite misplaced to conclude that advertising that affects intentions or attitude works better than advertising that simply refreshes and/or builds memories.  This fact undermines much academic advertising research that derived rules about effectiveness by examining the effect of advertising exposure on stated intentions.  Similarly, advertising pre-tests (copy tests) that use intentions or intention shift are biased towards particular types of advertising content, and very often reach incorrect conclusions about the sales effectiveness of particular commercials.

Many firms are still trapped in the intentions/preference paradigm.  They brief their agencies and evaluate their advertising in line with this mental model.  As a consequence they produce unoriginal advertising filled with persuasive arguments (often about trivial benefits) that are rejected or fail to engage consumers.  They often produce advertising that fails miserably to refresh or build appropriate mental structures – because management attention is on the selling message. They take their ‘eye off the ball’ failing to consistently communicate the distinctive aspects of the brand.  Consequently many firms produce campaign after campaign where each looks and feels different – as if each were for a different brand.

Somewhat ironically, firms operating to this model of how advertising works will sometimes produce what they call “image advertising” or “awareness advertising” yet they do not expect this to produce sales.  Why on earth anyone should spend money on advertising that isn’t expected to deliver a behavioural response is beyond me.

In summary, advertising largely drives sales by refreshing memory structures.  Occasionally it works to (slowly) build memory structures.  Occasionally it works by also creating a purchase intention or preference.
So marketers need to understand the memory structures that have already been built for their brand.  They need to use these, and ensure their advertising refreshes these structures.  Then they need to research what other memory structures might be useful to the brand, and then work to build these.

Over decades leading brands have done stellar jobs at building relevant memory structures.  Coke is a great example, this was once a brand that sold in drug stores it was something associated with drug store visits in Summer by teenagers.  Today Coke is associated with a host of memories…Coke and the beach…Coke and nightclubs…Coke and pizza…Coke at parties…Coke…Coke red…Coke swirl… and so on.  These memories make it more likely that Coke will come to mind, they make it easier to notice, and they make is easier to process Coke advertising.

In Summary, advertising largely generates sales by refreshing memory structures.  Occasionally it works by (usually slowly) building memory structures.  Occasionally it works by also creating a purchase intention or preference.  The way you commision, judge and research your advertising should reflect this.

References:

Juster, F. Thomas (1960), “Prediction and Consumer Buying Intentions,” American Economic Review, 50, 604 -22.

Ehrenberg-Bass Institute report 3 “Advertising and Brand Attitudes“.

Ehrenberg-Bass Institute report 13 “Brand Advertising as Creative Publicity“.

Sharp, Anne (2002), “Searching for boundary conditions for an empirical generalisation concerning the temporal stability of individual’s perceptual responses,” Doctor of Philosophy, University of South Australia.

A problem with ad awareness norms to assess advertising quality

It is now common for market research agencies to promise their clients norms against which they can compare their advertising campaign.  For example, they might report…

“The new campaign for Fabulo achieved 37% ad awareness, this compares well to the average of 31% for new campaigns after 3 weeks”.

This sounds like good practice, but the norm is meaningless.

Better yet the research agency might compare against campaigns in a particular product category, or adjust for a particular GRP/TARP weight.  But this still isn’t good enough, GRPs (Gross Rating Points) tell us nothing about the reach and frequency of the campaign.

Worse still the metric confounds both media strategy effects and advertisement quality effects.  What is really needed is measurement immediately after the ad goes into the market, just of those consumers who had a potential exposure (OTS).  This can measure the ability of the advertisement to cut through and impact on memory structures, i.e. assess the quality of the advertisement live in-market.  Only then, when you know if the ad itself is working well or not, can you later use ad awareness metrics to evaluate the media strategy.

The concept of brand awareness has been hijacked by poor measures

When marketers first came up with the very worthy concept of brand awareness they were thinking, obviously, about the number of consumers who know the brand. Intuitively you would measure this by showing it to consumers and asking them if they are familiar with it. But last century this was expensive, phone surveys were cost effective but the brand couldn’t be shown (and printing pictures in mail surveys was expensive).

So rapidly the measures of brand awareness became verbal/written product category prompts, e.g. “what brands of fabric conditioner are you aware of ?” The problem with this type of measure is that it doesn’t really fit the concept. This measure doesn’t so much measure awareness as association of the brand with the product category cue. It also assumes that consumers can remember and say or write the brand name.

Some have argued that it is vital that consumers know that the brand is a member of a particular category. If that’s the case it can be measured directly (e.g. “what do Ben & Jerry sell?”). It is no credible argument that category cue prompted recall is a decent measure of brand awareness.

Another measure is to present the brand name and ask consumers if they recognise it. Again this tests the link only to the brand name. It doesn’t tell us how well other cues, like colour, cause the brand be recognised. And it tells us nothing about noticing, which is different from brand name cued recognition.

So unfortunately a good concept has been hijacked by cheap and convenient but poor measures.

Some people will disagree with me saying it is a good concept, and that what matters to the marketer is whether or not the brand is noticed or recalled in potential buying situations. I agree, and this is what we call, for want of a better name, brand salience.

Snake (oil) and loyalty ladders

Many market research houses now market a “loyalty ladder” or “loyalty pyramid” product. These dissect a brand’s customer base into 4-6 groups, starting with something like “no awareness” at the bottom and ending with something like “passionate loyals” at the top. This classification is usually based on behaviour (or claimed behaviour) such as share of category purchases devoted to the brand in question. Some add attitudinal statements into the customer classification. Others, like The Conversion Model, claim to be entirely attitidudinal.

All these do is reflect the brand’s relative popularity (i.e. market share) and random sampling error (which looms large when you have 4-6 groups).

Marketing Science has known for decades that loyal behaviours and attitudes follow a set statistical distribution, and so any brand’s true loyalty ladder can be accurately predicted simply from knowing its size compared to rivals. And if it has 100% relative share, then all customers will be at the top of the ladder, but not until then.

I suppose these ladders are attractive because intuitively marketers feel it’s their job to move people along this path, sorry up this ladder. Yet I notice that my practitioner colleagues rarely draw any practical insights from these ladder metrics, they provide more entertainment value (”that looks interesting”) than knowledge. Which is fine, because that’s all they are, an entertaining expensive way of presenting, and obscuring, loyalty metrics.

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Tests that don’t count

Call me a skeptic (please I don’t mind) but I think that new marketing concepts or techniques that claim to show where a brand is going in the future are worth nothing UNTIL there is independent replicated empirical evidence supporting this bold claim.

And just in the same way you wouldn’t (indeed can’t) buy a new pharmaceutical drug until some testing has been done on it, no marketing manager should spend their shareholders’ money based on unproven claims. They would be better off spending it on doing some testing themselves – if it works they will have discovered something competitors don’t know, likewise if it doesn’t work.

Marketing consultancy abounds with concepts, frameworks, research and modelling techniques that claim to indicate brand health and predict the future. They target weak minded and hopeful marketing managers. Many (most ?) of these models are based on empirical support that is no more convincing than that for palm reading or astrology.

Trustworthy findings are trustworthy because of direct empirical tests of the predictive claims, done multiple times (in different contexts) by independent and preferably different teams of researchers. There is no short cut…

“But the technique is ultra new, modern, it’s the leading edge” – doesn’t count. These are just code words for “untested”, and “unsupported by theory or data”.

“It’s very complicated, very expensive and difficult” – doesn’t count.

“The sample size was huge” – doesn’t count.

“It is statistically significant” – doesn’t count.

“Clients like it” – doesn’t count.

“Qualitative supports it” – doesn’t count.

Market research: What do you really think?

25 November 2004
Marketing Week
39
by Alicia Clegg

What a customer thinks, and what a market researcher is told, may not be the same thing. Companies have to ask the right people the right questions at the right time to get the best from their research, says Alicia Clegg

Think back to your last visit to the supermarket. How long did you have to queue for? Was it less than a minute; one to two minutes; or more than five minutes? And what about stock availability? Could you find everything that you wanted and, if you couldn’t, were the alternatives acceptable? Now (and think hard), if you were given the option, would you prefer to find all your first choices and queue for five minutes, or not queue at all but have to settle for more substitutions?

Deciding how to allocate a limited budget to best effect is absolutely fundamental to retailers. So the idea of presenting customers who have just shopped in a store with a range of scenarios and asking them, in effect, to tell you which aspect of service to invest in and which to ease up on has obvious appeal. But do such techniques really tell companies anything about the way in which customers, rather than businesses, make choices in the real world?

The question of how best to research customer service has been debated for years. It is a subject that exercises Professor Byron Sharp, director of the University of South Australia’s Marketing Science Centre and global director of the Research & Development Initiative (RDI), an industry-funded venture run in concert with South Bank University. In a short paper circulated earlier this year, Sharp argues that companies make investment decisions based on research that is often meaningless. The first problem, he suggests, is that consumers rarely evaluate service experiences in the logical way market researchers would have us believe.

It’s the thought that counts

To begin with, there is the assumption, often implicit in research, that people carry attitudes around in their head that determine their buying behaviour. “Most of the time, we don’t give much thought to the burger that we’ve eaten or even the flight that we’ve made,” says Sharp. But, he adds: “Our natural inclination is to be polite and co- operative. If a researcher asks us to give an opinion we will do our best to formulate one on the spot.”

Made to measure

It is not just consumers’ desire to oblige researchers that makes measuring service experience so hazardous. Other factors are at work. A classic example concerns tracking studies. If customer satisfaction is rising, most managers assume that this is down to their own efforts.

Yet according to Sharp, satisfaction measures “show little or no relationship to service delivery”. Instead, they reflect factors that more often than not fall wholly outside the control of the business. To take a couple of examples: when interest rates fall, borrowers feel generally more positive about their bank’s service, even though, as customers, they are being treated in exactly the same way as before. Similarly, when the press carries stories about executive fat cats, satisfaction ratings for indicators such as value for money take a turn for the worse.

The pitfalls highlighted by the RDI are issues that research agencies grapple with on a daily basis. Many have evolved techniques that compensate, at least in part, for the worst sources of bias. A case in point is the growing importance attached to looking at research in context.

To take a simple example: discovering that 80 per cent of customers are satisfied with staff friendliness, while only 70 per cent are satisfied with value for money, might lead a company to conclude that it is doing well on friendliness and not so well on perceived value.

No comparison, no results

However, the exact opposite might be the case, according to Research International group business practice director Roger Sant. He says: “To make sense of research findings, you need comparative data, not absolute scores.” In this instance, that would mean comparing the company’s performance to that of its competitors and knowing that the scores awarded for staff friendliness tend to be higher than those relating to value for money.

On a similar tack, Tim Wragg, global director of NOP World’s customer management centre of excellence, argues that any competent researcher should be able to identify and correct distorting factors, such as seasonality or interest rate movements. So if the remedies exist, why do the problems continue?

One explanation may simply be ignorance. “There is a still a good deal of managerial naivety about research,” acknowledges Wragg. Another factor, undoubtedly, is cost and pressure of time. Tracking customer satisfaction on an absolute scale is quick and easy to do - even if the results provide a less than reliable guide for service improvement. Indexing performance against competitors is more complicated and pre- supposes that companies can find people with relevant experience of competitor brands and are prepared to buy into a database containing normative data for the whole of the industry.

Even then, as Maritz Research head of analysis Jeremy Griffith points out, the solution is not perfect. “When you make comparisons between surveys there’s a danger of comparing apples with oranges - there is no guarantee that the questions asked of competitors’ customers exactly match your own.”

You do the maths

Some of the toughest research conundrums are being investigated mathematically with the aid of statistical tools such as econometrics.

Such techniques come into their own when a researcher wants to test a hypothesis. For instance, a company might have a hunch that a dip in satisfaction is seasonal, or that consumers are playing down the importance of a perk or freebie, such as free champagne in the flight lounge or the chance to enter a prize draw. “Spotting patterns in data can open your eyes to the influences on satisfaction consumers won’t freely admit to,” says Ian Brace, director of research at TNS and a spokesman for the Market Research Society.

Another way to probe the subtleties of consumer satisfaction is to undertake qualitative studies. The risk here, however, is of spending more time listening to people talk about brands and services that, in the normal run of things, they would consume without thinking. So what is the way forward?

Liaising with the enemy

One approach is to stop treating all respondents as equal and to focus on those who have most to say about your service. At one end of the spectrum, this means courting people companies have failed to impress - complaint-makers or those who have recently switched to a competitor. Another potentially fruitful line of attack, says Simon Roberts, founder of research-based strategic consultancy Ideas Bazaar, is to spend time with front-line staff. “There’s huge value in finding out about the processes that impede employees in their everyday work, because those are often the things that frustrate customers the most,” he says

At the other end of the spectrum, researchers are devoting extra attention to clients’ most committed customers - so-called evangelists - who buy the brand repeatedly and recommend it to their friends. The hope here is that by talking to advocates, companies will gain a better understanding of the emotional triggers that create brand preference. “Historically, researchers have focused on the rational bread-and- butter aspects of service, such as whether a repair was done properly,” says Larry Crosby, chairman of customer loyalty research and consulting company Symmetrics. He adds: “What we under-estimated was the extent to which brand preference and loyalty are influenced by emotional responses.”

To illustrate his point, Crosby describes how his own attitude towards US phone giant AT&T was transformed by a directory assistance operator, who provided him with the number he wanted for a restaurant in an unfamiliar neighbourhood and then talked him through how to get there.

The silent majority

But what about the people who consume brands casually, who are neither committed nor disaffected, but who, when all is said and done, account for the vast majority of the consuming public? Even if, as the RDI’s work implies, mainstream consumers pay less attention to service experiences than was once assumed, it would seem risky to discount their views. Whenever we purchase something from a store, book a holiday or buy a coffee, we come away with a general impression of whether the service was better or worse than we expected. And - if we are caught quickly enough - we can probably say why.

One way to capture fleeting thoughts before they fade from our memories is to conduct interviews close to the point of purchase. Another line of attack is to encourage consumers to give feedback on service in whatever way suits them. Grass Roots, a company that specialises in “performance improvement” rather than classic market research, favours this approach. Executive board director Nigel Cover says: “It’s about opening a channel of communication. If you call a customer while they are watching EastEnders, offer to contact them later. Alternatively, give them the option of calling you and leaving their comments on an automated system.”

A question of trust

Marketers are increasingly aware of the limitations of market research, particularly the dangers of a relying upon a single source. But whatever the perils of trusting naively in consumer opinion, there exists one greater danger - and that is not trusting consumers’ opinions at all.

by Alicia Clegg

Why marketing research matters

It is quite normal to consider some types of human activity more noble than others. A career in medicine ranking ahead of one in advertising, for instance. Likewise research into heart disease, or even traffic congestion is considered more important than research into marketing.

Here is a story which illustrates some of the problems with this sort of thinking.

Once upon a time….there was a large company on the Western side of the USA, called Combucon, that provided ambulance services to the public and institutions such as nursing and retirement homes. Combucon largely operated on a subscription basis, where customers would pay an annual fee which enabled them to call an ambulance in an emergency. Similar organisations operate around the world.

Over a two year period Combucon experienced a drop in subscription income. The economy had slowed somewhat, and the company had diverted much of its advertising budget for that period into a single sponsorship event, but overall, as is often the case, the causes of the drop in new subscribers were not clear. A hastily organised sales promotion, offering substantial discounts, had boosted subscriptions somewhat and reduced the proportion of lapsing members but these sales were not profitable given the company’s existing cost structure.

Faced with this drop in revenue and profits the company was in a difficult position, it had recently made a heavy investment in acquiring another ambulance service company in the mid-West. The costs of integrating the two companies systems was higher than expected. Also the Chief Financial Officer of Combucon had made a commitment to shareholders to reduce the company’s debt levels considerably over the next five years.

Combucon’s major cost was its large team of paramedics who drove the ambulances. It was clear to management that cuts in the size of this workforce would have to be made. This brought management into dispute with the union representing these workers. The union threatened strikes, and potential legal action against Combucon if it went ahead with the cuts in paramedics for not delivering the levels of customer service it promised subscribers.

Negotiations dragged on for some months, meanwhile staff morale plummeted, this was evidenced by the 400% increase in the number of ’sick days’ taken by paramedics. Even without staff cuts Combucon was having difficultly maintaining its previous levels of service. Ambulances were taking longer to get to the scene of an emergency and there was an obvious impact on patient welfare. The company also began to lose some of its contracts with nursing and retirement homes.

Management reacted by scaling back their cost cutting plans and quickly reached agreement with the union. The company largely wore the reduction in profits, much to the detriment of its shareholders, until sales gradually returned to their normal level a few years later. Any longer term impact on Combucon (and perhaps others in the industry) was that investors were less willing to provide it with funds for expansion and improvement of services.

Maureen Forsyth, founder of Combucon, now retired, had intended to make substantial donations to medical research through establishing her own charitable foundation. But the above incident, which occurred around the time she was in the process of setting up the foundation, changed her thinking somewhat. She wanted to lessen the chance of such an event happening again. It had not occurred to her previously that fundamental research into marketing (or industrial relations, or management in general) might also have a positive influence on patient welfare. And might benefit other companies, and their customers, in related industries or even unrelated industries.