What is it?

You might be aware of the Mr. Clean AutoDry Carwash System.  Well, Mr. Clean Car Wash I am talking about here is not a product.  It is an actual car wash service that P&G opened up in Ohio.  Two locations have been opened so far, one in Mason and the other in Cincinnati.  Besides this innovative brand extension, it has also been reported that P&G is opening up Tide-Y dry cleaners in the Kansas City area.

Why is it a good idea?

(1) Household products are a highly-saturated market.  Branching out from the product market to services opens up a whole new set of opportunities and revenue potentials. As an added bonus, the services area is also highly fragmented competition-wise, unlike the product market.

(2) A physical shop gives P&G an opportunity to put a face to its products. Managed well, this can lead to more intimate and meaningful customer relationships.

(3) The shops can serve the function of advertising and publicity for the physical product/brand.

(4) Having first-experience with people’s carwashing and dry-cleaning behavior can give P&G valuable market research information.

Small Print

Sometimes an idea is so pioneering and unusual that it naturally comes with some risks. For P&G, the biggest risk is in its ability to execute these service shops well.  Being a consumer packaged goods company, it is not exactly an expert on services marketing and service logistics.  If not done right, bad customer experience from the physical shops can have a damaging effect on the core brand.  I suspect this is partially the reason why P&G has been very cautious in this area, so far keeping a very low key, only experimenting with the idea in selected local areas and possibly rolling out nationally if the experiments prove successful.

This is a true business tale that I heard a while back.  A Japanese firm did not do very well one year and could not afford to give employees bonuses at the end of the year.  The management thought of a clever way to reduce dissatisfaction among employees.  First, news leaked out that there would be no end-of-the-year bonuses, and everyone started complaining.  Soon it became known that the situation was worse and that not only there would be no yearly bonuses but there would be no regular yearly salary raises for next year.  Later, another rumor broke out that the situation was even worse and that some people might have to be laid off to reduce cost.  Can you imagine the employees’ reactions when the management finally announced that there simply would be no bonuses but yearly salary increases would still happen next year?  Everyone was very relieved and happy!  Why?  Because after the three rounds of “rumors”, the employees were expecting much worse and were relieved to find that not only were they not going to lose their job but they would actually get a raise next year.

While I would not encourage manipulating employees’ mind like this, the story does demonstrate the power of expectations.  In other words, as human beings, we do not perceive things in absolute terms.  Rather, we interpret them in a relative light according to our expectations.  Thus, when our expectations vary, how we feel about a situation can be interpreted and accepted under completely different lights. If we expect a full glass, we see half a glass as half-empty. But if we expect an empty glass, we see half a glass as half-full.

This aspect of human psychology has important implications for customer relationship management.  When dealing with customers, firms need to be aware that not only is it necessary to provide superior service but it is also important to manage what customers expect to receive from the firm.  For example, while it may be temporarily beneficial for a firm to pamper its best customers, such a tactic may also increase the expectation of these customers such that they can become easily disappointed.

To use a more concrete case to illustrate this point, consider airlines’ frequent flyer programs.  Most of these programs are structured in tiers, such that consumers who fly over a certain number of miles per year are granted higher status and receive special treatments and privileges.  This special treatment aspect is considered an important feature of a loyalty program (see this Colloquy article on the soft side of loyalty). While I acknowledge the usefulness of this tiered structure, firms do need to carefully balance the potential gain in loyalty via such a structure and the potential loss that can happen in setting up consumers’ expectations too high and subsequently disappoint them and lose their hard-earned loyalty.

I would like to conclude this discussion with another true story that actually happened to me personally.  In my recent trip to Seattle, I flew for the first time as a Silver Medallion member of Delta Airline’s SkyMiles Program.  Below is a log of my experiences and how I reacted to them in my mind.  From these, you can see how an elevated expectation can set up a higher possibility of disappointment.

1. Prior to departure: I was successfully upgraded to first class for the longer leg of my flight.  It made me feel very happy to receive the upgrade, especially for a four-hour flight. Prognosis: no prior expectation, high satisfaction.

2. Checking in for my flight: I waited in the Medallion member special line. But the agents were all dealing with other customers who were not Medallion members.  Despite being the first person in line at the special check-in line, I did not receive immediate service.  Normally I would have just patiently waited in line, but this time it created some irritation.  Prognosis: some prior expectation, some dissatisfaction.

3. Flight from Norfolk –> Seattle: Being my first time flying first class, I was happy with the treatment that I received on board the airplane.  I had a very decent dinner with real china and silverware rather than no meal or paid meal with plastic plates one would expect in coach.  Prognosis: low/no expectation, high satisfaction.

4. Flight from Seattle –> Norfolk: Due to bad traffic to the airport, I arrived at the airport just past the 30-minute threshold and had to miss my flight.  I was told that I had to either pay a substantial amount of several hundred dollars to be rebooked to another flight, or wait till three hours before the next available flight for the same-day call rule that would cost me only $50 for the change.  Yes, I was the one responsible for the flight.  But airlines miss my flights all the time, and they never pay me a few hundred dollars for my lost time.  Well, normally I would have just blamed myself for missing the flight and creating the subsequent situation.  But now that I am a Medallion member who actually flew first class once, I was expecting a much better response, something along the line of “I am sorry you missed your flight.  We value your business as a Medallion member.  Since this is your first offense, we will ignore that it is your responsibility, and we will book you onto the next flight right away so that you can be on your way” (of course costing me little to no money for doing that). The ending of the story was that I was not able to get onto the immediate following flight and had to wait for the next one.  I ended up paying close to $250 extra (or about half of the price of the original ticket), and my return date was delayed till the next day.  Prognosis: high expectation, high dissatisfaction.

In sum, managing customer loyalty is a science, and this science can be crystallized by a better understanding of consumer psychology.  Understanding what consumers expect and properly managing that expectation should be part of every firm’s loyalty marketing strategy.  For readers who would like to learn more about the effects of having tiered structures in a loyalty program, you may want to check out this MSI Working Paper entitled “Feeling Superior: The Importance of Loyalty Program Structure on Customers’ Perception of Status” by Nunes and Dreze.

My previous blog documented my disappointment with Second Life’s public relations. Here is an update on the situation. The day after my blog appeared, I received both a voice mail and an email from the lady at Lewis PR (her name should have been Kristin, not Christen as I had thought at the last writing). According to her email, she had attempted to send the requested information to me via two emails. But I assume both emails were lost in transition, because they were not in my inbox or junk folder. When I called back to Lewis PR, someone did pick up the phone this time. When I said my name, he was apparently aware of who I am. He sounded courteous and helpful on the phone. Since the information that was sent to me was already something I knew and not quite what I had hoped for, he even told me that they would consider putting the information together internally, as it would be eventually useful for the company itself as well.

Overall, I am glad that the situation was resolved successfully. I had heard about the power of customer complaints on the Internet. In fact, a fellow blogger and PR specialist Michelle Rogerson had documented such a situation with PBWiki. But it is not until I have experienced it personally that I truly feel and believe in the power. So what are the lessons learned from this whole event?

1. As Rogerson’s blog pointed out, a company should actively monitor the blogsphere (and I would add the websphere in general) for customer opinions. They are very valuable market research information that has been enabled by today’s participatory Internet.
2. Ignoring negative feedback carries grave consequences. But dealt with properly, negative feedback can turn around and become a blessing to a business. This is analogous to service recovery in the services research literature. No one is expected to do everything right 100% of the time. If recovered properly, a service failure may actually lead to higher customer satisfaction.
3. Email as a communication channel can be unreliable sometimes. Therefore, for important customer/public requests, companies should follow up through other channels of communication (online or offline). This would help avoid ill-will and negative word-of-mouth from happening in the first place.