OCT 2000 PI file - CiteSeerX

COMMENTARY

Internal Branding: Using Performance Technology to Create an Organization Focused on Customer Value by Donald T. Tosti and Rodger Stotz

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any applications of performance technology in business settings are designed to improve organizational productivity by increasing the skills and competency of individuals. Cost reduction is often a primary driver behind such change efforts.

Another approach to organizational improvement uses revenue enhancement as a primary driver of change. This paper presents a performance technology approach to revenue enhancement, with the goal of improving customer retention through building customer value. A key component of such an effort is the company’s brand, which can both serve as a driver for change and provide the framework for performance change. The broad purpose of such efforts is to ensure that an organization “lives the promise” of value made by its brand, both externally and internally; that is, both in the value it provides to customers and in the way its people behave. Marketing historians (if such a profession exists) would probably identify the increasing importance of consumer product brands over the last century as one of the most significant trends in marketing and advertising. Companies with famous brand names, such as Coca-Cola® or Xerox®, often invest as heavily in promoting their brands as in their products. But retaining customers over time requires that they have a positive experience with the product or service. This is particularly true when advertising explicitly promises something, and does so powerfully. In fact, there is a saying in the advertising

industry that “nothing kills a poor product faster than good advertising.” Internal branding is a way to make sure that what the company and its people deliver matches what’s promised in the company’s advertising. In practice, internal branding is a blend of marketing, communications and performance technology, with an emphasis on the latter. Its purpose is to enable a company to deliver on its brand promise to its customers. Marketing professionals are very good at designing research to determine exactly what customers value. These findings are then translated into a value proposition that serves as the base for brand promotion and advertising messages. It tells customers what they want to hear. That same value proposition can be used as a springboard for an internal branding strategy as well. What’s more, it can act as a very powerful stimulus for change in the organization when it is positioned as the company’s solemn obligation to deliver to customers what it promised them.

Product Versus Service Brands Fundamentally, a product brand makes a promise to the consumer: “If you buy products with this brand, we promise that they will be….” The promise can take a variety of forms; it may offer reliability and consistency, quality, good taste, elegance, purity, or any factor that customers value in the product. The owners of such brands will often go to great lengths

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to preserve brand integrity and ensure that a product with their brand delivers on its promise. To date, branding has been much more effective with tangible products than in the service industry. Service brand promises are often less explicit, promoted less heavily, and delivered less reliably. As any frequent flier knows, the “friendly skies” of United Airlines® were, in the past, only sometimes friendly and occasionally downright surly. And United is far from alone in finding it difficult to translate a slogan into a genuinely reliable brand promise. With consumer products, delivery of the brand promise depends heavily on the nature of the physical product: its function, its appearance, its packaging, and its reliability. In the service industry, successful delivery of the promise depends at least as much on the people who deliver the service as on the quality of the service itself.

Using Brand to Drive Change A company’s brand consists of two major components. The first, and most visible, is the brand promise. This is the proposition of value that a company makes to its customers, and it is usually the base for the company’s advertising and promotion. It is the image that the company would like customers to have of its products and services. The second component is the brand character. This is the customer’s perception of people in the company and of the company itself. Both components of brand are important, but brand character is of particular importance to service organizations. For example, 20 years ago AT&T® did a first-rate job of delivering on its brand promise. The company provided good, reliable service at a reasonable price, making that service readily available even in remote areas. AT&T®’s brand character, however, was seen as monopolistic, arrogant, and indifferent to customers. Even television skits and motion pictures of the time conveyed this impression; for example, in The President’s Analyst, the chief enemy was “the phone company.” Since the U.S. government dictated AT&T®’s divestiture, it has encountered stiff competition for the first time and has invested considerable time and effort, not to mention money, to overcome its old image. People may be willing to buy tangible products from companies whose character they don’t know or like or trust, but not services. You don’t buy important services from strangers if you can help it. You want to know who they are and what they stand for. Can they be trusted? Will they be there when you need them? Do they seem to care about you

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as a client? Can you get special attention if you need it from time to time? Brand character is often a key factor in making a decision to go with a company, and even more important is the decision as to whether to stay with that company. This link to customer decisions makes brand character a powerful force for driving organizational change and serving as a base for a corporate value system. Its power lies in its relation to customers’ perception of value received and its effect on long-term retention. Maximum competitive edge for an organization comes from both delivering on the brand promise and demonstrating the brand character. Corporate value systems are sometimes created by a group of top managers working in isolation and thus appear arbitrary. Corporate values should reflect not only what senior managers think they should be, but also, and perhaps more important, what employees and customers think they should be. A value system that begins with a base in brand character will represent one that both customers and company personnel can buy into. The Janus Effect Clearly, a company’s brand promise and its brand character must be linked and compatible. There is a phenomenon in organizations that can be termed the “Janus effect.” Janus was the Roman god of initiation and closure. Sometimes he is seen as a god of the doorway and is shown with two faces, one facing out and one facing in. The Janus effect in organizations represents a simple but profound proposition: The face a company presents to its customers and the general public is in large part a reflection of the face it presents to its employees. Thus, the way customers view the company is significantly enhanced, or diminished, by the way employees view the company. Given this, it seems ironic that a company will spend millions of dollars to create a brand image for the public, yet invest little or nothing in aligning its internal face with that external image. If people in an organization are to deliver on a company’s promise to customers, they should live the promise in their work environment as well. For example, if an organization wants to build a reputation for responsiveness to customers, its people must be responsive to each other. Put simply, it’s hard to smile at customers in an organization where your managers or coworkers regularly greet you with frowns. The consequences of incompatibility between a company’s external and internal behavior are illustrated by the problems encountered by an insurance company that sought to

distinguish itself from the competition by creating a brand promise of partnering with customers. Tests of this approach with customers, agents, and others were all positive. Yet when the company launched the partnering brand campaign, it quickly began to flounder. The face the company wanted its agents to present to customers was at odds with the face the company presented to the agents. Establishing a partnering relationship with customers requires flexibility and openness. But the company was rewarding agents for meeting rigid product/service quotas, with no consideration of the nature of the agents’ customer base, and agents did not feel well informed about company issues and policies that affected them.

tend to be transparent; customers can see right through the organizational doorway all the way into managers’ offices. If an organization wants to maximize the return on its investment in a brand promise, some of that investment must go into creating an internal manifestation of the brand promise. It will be difficult for people to reliably deliver a brand promise that emphasizes respect for customers if the employees do not feel they are treated with respect by their managers and coworkers.

Internal Branding The Process

The Janus effect creates a bleed-through phenomenon. That is, customers can see the internal image that the company presents to employees. For example, one study conducted for a large bank asked customers to fill out an employee survey as they thought employees would do. Employees completed the same survey. There was a remarkably high correlation between employee and customer responses. The treatment employees received from their managers was accurately reflected to customers by the behavior they observed in front-line employees. Service organizations

Below is a typical process for creating a brand character that is aligned with an organization’s brand promise to customers. It is often accompanied by an effort to ensure that the company’s processes are also aligned with both brand promise and brand character. 1. Senior management orientation. Usually a one- or twoday program in which senior managers review the company’s brand and identify ways to demonstrate their commitment to the brand promise through actions.

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Brand launch. A series of communications that includes a program for all employees on the new brand, its values, and what it takes to “live” the brand and “deliver the promise.” Midmanagement involvement. Working sessions with midmanagers on their responsibilities and what they need to do to support delivery of the brand promise. This is often done in conjunction with service leadership training and may include follow-on programs that further strengthen appropriate management behaviors. Tactical planning. Planning activities for managers and their supervisory teams. Participants review feedback on their behavior and review company marketing strategy to align themselves with the brand value. Teams plan what they will do to change the cultural practices in their work group. Support, assessment, and review. Periodic evaluation of existing programs and actions that resulted from the planning activities by the above groups. Brand camps. Supervisors work with their teams to develop ways to support the brand proposition at local and regional levels and to link these efforts to meeting business needs.

When It Is Easy or Hard

QUALITY

RECOVERY

COST

VALUE (Satisfaction)

CHOICE

LOYALTY

Retention Figure 1. The Promise of Value. Defining the Culture From a cultural standpoint, a value describes a preferred way of behaving. That means that any value must ultimately be defined in terms of behaviors that people can exhibit. The behavioral practices that people subscribe to and demonstrate are more important than the label we assign to values. Ultimately, it’s what we do that counts, not what we say we believe in.

When a company is already customer-focused and sees itself as a service company, internal branding may be relatively easy to do. This was the situation with British Airways® when it launched its Club World service. British Airways® had already spent some years redefining itself, both internally and with customers, and had moved from an organization that saw itself as flying and servicing airplanes to one that saw itself as providing transportation services to passengers. Because the company had already moved from an operational orientation to a service orientation, it was well prepared to provide internal support for its new brand.

One approach to developing a value system is first to define the critical practices that lead to business success. A corporate value system must contribute to the long-term health of the corporation. Given a set of critical practices, these can be organized into related clusters and given appropriate value labels. While this may be the most straightforward way to proceed, it is seldom the way it happens. Most people feel that values should come first and practices should follow. So in practice, the clarification of a corporate value system should combine the two approaches, working both from preliminary descriptions of desired values to representative practices and from clusters of key practices to value statements that describe them.

While more companies are beginning to move in this direction, it is still comparatively rare. Many corporate cultures are still driven much more strongly by operations than by service. Research has shown that while most CEOs in service companies will rate customer satisfaction and service as a top priority, the next level of management will often rate it much lower. At these levels, conforming to a plan is usually seen as a top priority. Thus, financial companies are often driven by financial experts who focus on budget; hightech companies may be driven by a focus on engineering and design. While such companies have been extremely successful, at least for a while, they often stumble when competition increases and customers become more sophisticated and demanding.

The next step is to translate the brand characteristics into practices that everyone can demonstrate. For example, focusing on customers might be demonstrated through the following behavioral practices: 1. We keep abreast of customer and partner needs and priorities. 2. We are willing to make significant change in the way we do things now to better provide value to the customer and to the company. 3. Meeting the needs of the business and customer is seen as far more important than conforming to bureaucratic or administrative requirements. 4. We demonstrate a sense of personal urgency, energy, and commitment to achieve quality results.

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5. 6.

We seek constant advice and feedback from customers on group and company performance. We take into account the impact of business developments, as they may affect the organization and our work group.

Using performance technology to keep us focused on behavior and results, we can translate grand ideas like customer focus into actions people can observe and perform.

Customer Value We have said that a company’s brand states its promise of value to customers. But people within the organization often have different views of how to deliver that promise and sometimes even different views of what the promise is. Such differences often underlie disagreements or conflicts between internal groups such as sales and operations. Operations personnel may complain that sales overpromises, while sales personnel complain that operations underdelivers. This can happen when sales people view the promise to customers primarily in terms of the relationship and operations people view it primarily in terms of the quality of the product or service. Figures 1 and 2 provide a framework for examining the factors that contribute to a customer’s perception of value (Tosti & Jackson, 1997). Figure 2 in particular has proven useful in building a common understanding of brand and customer value across an organization.

The model illustrates key relationships among the factors that lead to customer satisfaction and reflects the assumption that a key reason to satisfy customers is to retain them over the long term.

Customer Satisfaction Customer satisfaction is determined by the value customers perceive (see Figure 2), based on— • quality in relation to cost to the customer, in good times—that is, in the absence of a problem, customers will typically be satisfied if they feel the quality they received was well worth what it cost. • the way the organization deals with recovery in hard times—that is, when a problem occurs, overall customer satisfaction will be strongly influenced by the way the organization recovers (or fails to recover) from that problem. Each of the following factors relates to customer value: Quality Quality can be measured from both a performance perspective and an experience perspective, with regard to both the product/service itself, and the people with whom customers interact. • Performance quality reflects whether customers see people and the product/service as doing the basic job expected of them—performing their functions effecTYPE OF VALUE

SOURCE OF VALUE

FUNCTIONAL

BEHAVIORAL

QUALITY: Product or Service

How it works: the functional value of the product or service features to the customer

How the customer feels about the experience with the product or service

QUALITY: Provider

How people perform: the functional effectiveness of people as they provide the product or service

How the customer feels about the experience of interacting with people who provide the product or service

RECOVERY

How problems or complaints are dealt with: the adequacy of the recovery action

How the customer feels, or is made to feel, during the recovery process

COST: Purchase

The purchase price of the product or service

The effort required to locate/access or purchase the product or service (ease of doing business)

COST: Maintenance and Implementation

The price of installing, maintaining, and using the product or service

The effort required to install, maintain, and use the product or service

Figure 2. Customer Value: 10 Key Factors.

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tively. For example, did they meet customer needs in a timely, reliable fashion? Experience quality reflects how customers feel about their experience with people or with the product/service. For example, did customers feel valued, respected, safe, comfortable?

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Cost The customer’s perceived cost can be measured in terms of both price (monetary cost) and effort required—in relation to the initial purchase of the product as well as its installation and ongoing maintenance and use.

and experience or behavioral terms (how people felt they were treated if they complained or raised a problem).

Customer Retention Customer retention is strongly influenced by perceived choice: the perceived value to the customer in relation to the alternatives. Satisfied customers may nevertheless buy from a competitor who seems to offer something better in one or more areas. Customer retention may also be influenced, at least for a time, by loyalty to the company, as a result of many years of satisfied experience.

Branding Meets the Needs of the Business Recovery Recovery can be measured in both performance, or functional, terms (how the problem or complaint was resolved)

Virtually every business wants solid bottom-line results, increased employee job satisfaction, and high customer retention. Achieving this over the long term requires align-

Examples of Consumer Value Factors Product Function Automobile • Safe • Reliable • Good handling • Adequate space

Bank Account • Reliable statements • Money available when needed

Provider Function Automobile • Dealer knowledgeable • Car prepped and ready on time • Warranty repairs done correctly, promptly

Bank Account • Tellers efficient • Able to answer questions • Handle transactions promptly

Purchase Price Automobile • Cost of car and extras

Bank Account • No cost (usually)

Installation/Use Price Automobile • Insurance • Registration • Fuel costs • Repair costs

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Bank Account • Service charges • ATM charges • Fees for information requests

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Product Experience Automobile • Comfortable • Attractive • Fits buyers’ image

Bank Account • Feel secure with the bank • Bank is part of community

Provider Experience Automobile • Feel fairly dealt with during sale • Help matching car with needs • Feel unpressured

Bank Account • Customers feel their business is important • Feel treated politely, respectfully

Purchase Effort Automobile • Finding a dealer • Negotiating a price • Getting the options you want

Bank Account • Finding a bank • Completing paperwork • Closing former accounts

Installation/Use Effort Automobile • Ease of driving • Finding a good repair shop

Bank Account • Locating a branch or ATM • Reconciling statement • Checking balance, outstanding checks

ment of organizational practices and processes to focus on providing high value to customers, and thus to the company and its people. The company’s brand promise of value and character is a powerful driving force for such an alignment. Internal branding, aligning an organization around its brand promise, offers a solution to several significant problems facing many organizations today and for the foreseeable future: • Rapid technological development is occurring in all areas of business and is seldom well integrated into the business. • Competition continues to increase in virtually every industry, and it is becoming more and more difficult to stay competitive on the basis of product features alone. Standing out from the competition now requires a stronger focus on the psychological value a company can offer to its customers. • Interdepartmental conflict is rife in many organizations and is a major stumbling block in working toward a common organizational strategy. • Technological changes are proving a mixed blessing, attracting some elements of the customer base while alienating others. Branding may be the most practical and powerful answer to the competitive pressures facing business today and in the near future. Companies are increasingly coming to recognize its value, as both an external promise to customers and an internal force for alignment of the organization.

Donald T. Tosti has been a member of the International Society for Performance Improvement since its inception. His contributions include both the development and refinement of conceptual models of performance technology and pioneering applications of the technology to complex areas. He currently specializes in the application of human performance technology to large-scale organizational change and alignment. Don may be reached at [email protected].

Rodger Stotz is the ISPI Advocate representative for Maritz Inc. and has represented ISPI at speaking engagements. He is a Certified Compensation Professional and a member of the ISPI HPT Institute faculty. Rodger is both an internal and external performance consultant specializing in reward systems and integrated change solutions. His background includes both a Bachelor’s and Master’s Degree in Industrial Engineering, graduate studies in business and organizational behavior, and extensive practical experience applying human performance technology. Rodger brings more than 20 years of business and organizational experience to his clients, which includes AT&T, NationsBank, GTE, Reynolds Metals Company, and IBM. He may be reached at [email protected].

Reference Tosti, D., & Jackson, S. (1997). Customer value. San Rafael, CA: Vanguard Consulting, Inc.

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