Three - The Principle of Worthy Intentions
The chapter opens with various factoids about the rabid loyalty garnered by Lululemon, a retailer of women's workout clothing: the customer who spent $25,000 on their products over five years, the steep markups on their products compared to other retailers of the same items, etc.
There are various touches that are evident in its retail operations, in terms of the environment, interaction, and support services - but their most productive practice is that they integrate themselves into the social aspects of an active lifestyle. Women in exercise classes become social groups, and by supporting yoga instructors, the brand becomes part of the culture, an emblem of belonging to a group of women who participate in activities together and have similar lifestyles and interests to one another.
It is also noted that the brand associates itself to the desire of its customers, as its clothing is worn when women participate in self-improvement activities, and thereby becomes an outward sign by which they demonstrate their progress and project their idealized selves. The brand's mission "to elevate the world from mediocrity to greatness" and their slogan "create your ideal life" associates wearing their brand to achieving greatness and realizing dreams.
Loyal customers regard Lululemon as a competent and warm brand. They feel that the brand is focused on helping them to achieve their goals, and feel that the brand puts their interests ahead of the financial interests of the company or brand. Most of the marketing done is not through traditional one-way advertising but through word-of-mouth recommendations from peers and fitness instructors as well as interaction with the staff at its stores.
Trust as Default
Brands that attempt to gain customer loyalty by competence alone often find that they fail to do so. Not only is it difficult to provide a product that is appreciably superior to that offered by competitors, but competence alone does not impress customers. The customer expects, as a basic requirement, for a product to have quality and be suitable for its purpose, and while fulfilling that expectation is a necessity, it is not something that is impressive nor does it create an emotional connection.
Competence is something that exists between a company and its products, not a company and its customers. In that regard, a brand must demonstrate that it has a "worthy intent" in all its interactions with customers. That is to say that the brand should not be focused on a product's functional excellence, but it its practical excellence - it delivers something that benefits its customer. (EN: The phrase "it's an amazing product but I don't need it" comes to mind.)
Even in instances in which a customer recognizes the value of a product, they still have a negative perception of a firm that seems to be focused entirely upon a product. Given the example of Lululemon, there are any number of companies that make durable and attractive workout clothing, but few that seem to care about whether the person who buys their product achieves the goals of their fitness program.
Switch to the notion of customer relationship management systems. Lululemon doesn't use them at all. They do not require customers to register or track data about individual customers. Their store personnel recognize their best customers when they walk into the store - and rely largely on their memory rather than a data sheet of facts. The money that the firm saves on the software and the labor to do data entry and maintain the system is instead diverted to things that actually improve the customer experience: complementary classes, store events, and local charitable giving.
The author also notes that the new generation of relationship companies are often small start-up businesses that do not have massive advertising budgets, and who focus on service excellence because it really isn't that expensive. It costs virtually nothing to be considerate to a customer, and going the "extra mile" often requires very little effort or expense.
Matters of Trust
Neuroscience research demonstrates that it requires more mental resources to trust someone conditionally than unconditionally, which is why competitive negotiations with another party are so stressful: we assume that they will act in their self-interest, and must be on guard to ensure that the agreement in which we enter will make sure our interests are served as well. We crave relationships where we don't have to calculate the tit-for-tat exchange to make sure we get our fair share because they are easier to maintain.
Where trust is unconditional, and we believe that the other party will honor an agreement "in spirit" and not merely follow the letter of the contract, we no longer need to rely heavily on the mental resources to closely pay attention and make comparisons - but instead can rely on more primitive (and less resource-intensive) brain structures that are more closely related to social attachment. In effect, when a person states that they "love" a brand, this is not far from the truth, as the structures within the brain that respond in trusting relationships with brands are the same as those active in trusting relationships with people.
At the same time, unconditional trust places a greater burden on both parties. The nature of a conditional exchange is that "I will do X if I do Y" places a specific obligation on one party if the other undertakes a specific action. Until the action is taken, no obligation exists - and when action is taken, there are clear expectations for performance. Unconditional trust, "I will look out for your welfare and you will look out for mine" means there is no definite beginning or end to the action one is obligated to perform, nor any specific indication of what it is. Either party may expect anything of another.
One-Way Streets
Many universities seek to raise funds by asking alumni to donate, and generally get very generous donations from very few individuals. The problem is that this is often a one-way street: universities make no effort at all to maintain a sense of community or identity with alumni and their sole contact with their alma mater consists of being asked for money several times each year.
The author presents a rather convoluted case-study of a university's attempt to overcome this problem - decreasing the frequency with which it contacted alumni for donations, sought ways to "support" its alumni, and saw donations increase as a result.
(EN: The case study is rather vague and not particularly convincing, so I'm omitting the details. But germane to the point, many charitable organizations suffer the same fate as they hound people for donations but do nothing for them in return. Those organizations that tend to have the greatest success are those that build a sense of belonging or community, provide recognition, and confer other benefits in exchange for the donation.)
Shared Moral Values
There's a case study of Starbucks, which wishes to maintain a consistency of service across various outlets, some of which are owned by the company and others are franchised. There was particular difficulty with a catering company, which had its own corporate culture that focused on efficiency rather than quality (cafeterias in prisons, hospitals, offices, and other locations generally have the benefit of monopoly or convenience and provide very poor customer service).
Starbucks publishes an employee guide, the "Green Apron Book" meant to be carried in the pocket of the standard uniform apron, which describes the values the brand wishes all employees to adopt and sustain: to be welcoming, genuine, considerate, knowledgeable, and involved. Called the "five ways of being" these are meant as principles to guide conduct in customer interfaces. This was not meant to be mere corporate posturing, but practiced guidance as managers were coached to the same principles in supporting their store employees in everyday operations.
Insert a random anecdote about the daughter of an old man who visited Starbucks daily, who stopped in to thank the staff for having treated him so kindly. The author speculates that the old man valued the brand for more than a cup of coffee, which could be had elsewhere for cheaper, but preferred the brand because they gave him a "vital sense of belonging" in his daily visits. This is a story told within the firm to illustrate the values in its Green Apron book.
Skip to a broader perspective: people are drawn to others who share their moral values, and the sense of comfort in the company of like-minded individuals is the basis for social groups that serve no functional purpose. We interact with most brands out of need for a product, but the sense of shared values leads us to seek out a given brand even in the presence of other (and arguably better) alternatives.
(EN: This is likely true in the HR sector as well. People work a job that provides them with an income because it is necessary - but when given a choice, people seek to work for firms and in the company of other people who share their moral values. Some will even accept a decrease in compensation for the sake of work that feels like supporting a righteous cause.)
Doing Well by Doing Good
Various points are made in a case-study of a bicycle shop owner, who like many small businesses had been steadily losing business to discount chains and mass retailers who were able to use their bulk purchasing power to offer very cheap bicycles to customers.
- He calculated that a customer's lifetime value was $12,500 in revenue, and $5,600 of this was gross profit - which led quickly to the conclusion that undertaking some additional expense to increase customer loyalty would be worth some investment.
- He offered an absolute guarantee of satisfaction - to take back any bicycle for any reason.
- He also instituted a "free service and maintenance for life" policy, which was noted in the press and denounced as "crazy" - by competitors who were unwilling to do the same.
- He offered a trade-in program, realizing that children outgrew their bicycles quickly and having the ability to trade-in made his prices more competitive. While there was some concern that the shop would be swamped with used bicycles, only about 20% of customers traded in their bicycles.
- He called customers to find out why they weren't trading in, and what he found is that they came to recognize his bikes were higher quality and more durable. So they were passed along or kept as hand-me-downs for other children. Importantly, customers got the perception that his shop offered higher quality than mass merchandisers.
- He simply stopped charging for any part that cost him less than a dollar. Things linke nuts, bolts, ball bearings, and chain links. He recognized that in many situations, a parent who is dealing with a crying child is already emotional and takes offense at being nickel-and-dimed on simple repairs. He tracked his cost, which was $86 for 450 repairs - which meant he took advantage of 450 chances to make a positive impression and earn loyalty.
Not only did the shop owner enjoy great financial success, but he became something of a personality, often sought for speaking engagements at conventions of small retailers who wished to learn his secrets of successfully competing with the mass-marketers who drive many small businesses out of their local market. The "secret" however is quite straightforward: to be willing to provide the quality of service that discount merchandisers are unwilling to provide.
The author pauses to add the notion that to be successful in this strategy, a shop owner must also exude a high level of competence. A business owner who gives away free stuff and offers satisfaction guarantees runs the risk as being seen as incompetent (he doesn't know how to run a business soon), which draws feelings of pity rather than loyalty from people who would not trust the shop to still be in business when they needed service.
Deserving and Undeserving Success
It's also observed that people react to the success or failure of others based on whether they perceive that outcome to have been earned.
- We deeply admire those who are successful because they have earned it and bear them no ill will. We even hope to emulate them.
- We loathe and distrust those who seem successful without having done anything to deserve the rewards they are receiving.
- We deeply pity those whose failure seems undeserved. While we do not admire them we have great sympathy for the innocent victims of circumstance or fate
- We have contempt for those whose failure seems deserved. We regard it as poetic justice for their arrogance or laziness.
(EN: Something similar was mentioned about the course of success. There is great admiration for the self-made man who builds a business, but when the business is sold or inherited we perceive that the new management and owners are profiting in a parasitic way from the founder's efforts.)
There is also some mention of values in determining whether we admire others. If a person's system of values is alien to, then we feel their success to be undeserved. If, however, we agree with their moral values and feel that the actions they have taken have been honorable by our own code of ethics, we admire their success as it represents proof of the things we already believe.
(EN: It occurs to me that people may have different perceptions of the same values. Some see a person who opens a convenience store in a poor neighborhood as taking advantage of the people who live there by charging high prices. Others may see that very same action as granting a boon to the local residents by making merchandise available in their neighborhood that they would otherwise have to travel to obtain. There's likely no action that some will not revile while others admire.)
The author suggests that this is the reason that certain brands can win customer loyalty while charging prices higher than their competitions, and do not need to rely on discounts, promotions, or even advertising in the way their competitors do. Customers who admire a firm do not begrudge its owners the profit they take from providing valued services - it is an earned reward.
The author also speaks of word-of-mouth. Particularly in the age of social media, word travels fast, and customers are actually more likely to share stories about the retailers from whom they have received exceptional service than those from whom they have received poor service. Genuine customer testimonials carry more weight and are spread to a more receptive audience than commercial messages.
(EN: It's worth mentioning that "genuine" word of mouth is earned. Companies that feel the need to encourage people to mention them in social media, or offer some sort of promotion for those who "like" them publicly, often suffer damage instead of gaining esteem when the arrangement is discovered. And given that the people who act as salesmen for brands out of self-interest also lose the trust and respect of their friends, efforts to earn false praise are often ineffective and counterproductive.)