Welcome to our newsletter for November-December 2003 – our last for the year.

This issue focuses on customer satisfaction, the role of PR in brand building for professional services and leading marketing academic, Philip Kotlers' predictions for marketing.

Please forward this newsletter on to colleagues and friends who may also find it of interest.

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Best Regards

Dianne Davis
Principal and Managing Director

In recent years, a school of thought (supported by a growing body of research) has developed around the central argument that customer satisfaction is an overly simplistic (and indeterminate) measure of customer behaviour, masking an array of more complex emotions.

And it is the underlying emotions customers experience everyday that are more meaningful indicators of customer loyalty, purchase / re-purchase, apathy and defection.

The Consumer Emotions Study - research conducted by Evalue & Psychologica in late 2002-early 2003 amongst 4,000 customers from nine major Australian organisations (covering automotive, aviation, financial services, home services, telecommunications and utilities) demonstrates the seminal role of emotions in influencing customer behaviour – while also highlighting the lack of distinctiveness around "customer satisfaction".

Key findings from the Study, include:

• Self-referrant emotions are at the core of people’s sense of identity and self-worth.
• The top emotions felt by very satisfied customers were: impressed, secure, pleased, contented, appreciative, happy, reassured, delighted and valued. Customers who felt positive self-referrant emotions had strong emotional ties and loyalty to the brand.
• Strong loyalty is found only at the very highest levels of satisfaction – as is the intention to continue to purchase.
• By contrast, highly dissatisfied customers experience negative emotions like disappointment, anger and frustration, and feel "neglected" and "disgusted".
• In the middle of satisfaction ratings are emotions of indifference, emotionless and disappointment. These are emotions, the Study’s authors regard as being in "the dead zone of tolerance", where the future of the relationship could go either way, but will in all probability stagnate.
• Signficiantly, satisfaction is nominated by those who are both satisfied and dissatisfied. In essence, satisfaction provides little real definition or deep insight.
• There are some key emotions – experienced only occasionally – that have a strong positive impact on loyalty: namely – thrilled, empowered, relieved, important, fulfilled, special and excited.
• Emotions that influence advocacy / referral include: delighted, impressed, thrilled, special and empowered.
• 21% of customers have a negative customer experience (i.e. expectations were not met); of these, 61% contacted the organisation, but only 14% were satisfied with the organisation’s response, with their satisfaction and loyalty being regained.
  
  Clearly, the majority of people who contact an organisation are not satisfied, experiencing strong negative self-referrant emotions such as anger, annoyance, and frustration, and feeling cheated, disgusted and exasperated.
  
  As the Study notes "..organisations need to be more emotionally intelligent when it comes to contact handling".
• New customers do not extend a "honeymoon" period with an organisation – they expect the organisation to get it right the first time.

The key implications for organisations arising out of this Study (and indeed other similar research) are:

• In your customer satisfaction tracking, start to uncover and probe the various layers that make up satisfaction.
• Identify both the positive and negative emotions experienced by very satisfied and very dissatisfied customers, and the indifferent emotions felt by tolerant customers.
• As part of this process, expand your customer satisfaction research to include specific questions on emotional experiences - and the situations / circumstances that lead to particular emotional experiences.

Having identified the core emotions which drive loyalty, continued purchase / re-purchase and advocacy, as well as those that can destroy satisfaction and loyalty, organisations then need to provide a consistent experience across every one of your customer touch points – ensuring your customer’s expectations and reality are one and the same.

Building and sustaining a differentiated brand in the marketplace is a major challenge facing all professional services marketers.

In this context, we consider PR is one of the most effective brand-building tools a marketer has at their disposal.

PR provides a number of key benefits for professional services firms – over and above other forms of brand communication; specifically:

• Communicating and reinforcing a range of messages: especially where it involves more complex messaging around legislative /regulatory issues, and in relation to educating clients / prospects.
• Credibility: editorial coverage is not seen as being "paid for" and lends authority to those quoted in a story / article.
• Superior reach and longevity: for example, newspapers - and especially magazines - have longer impact / shelf lives than many other media (e.g. advertising, direct mail, outdoor).
• Superior targeting of messages at key segments in the business-to-business market: the highly concentrated nature of business/industry media in Australia means only a small number of media need to be targeted.
  
  For example, for professional services firms, principal print media is AFR /BOSS, BRW and The Australian, followed by profession-specific publications, such as CFO, CIO and Lawyers Weekly.
  
  If firms have a specific industry focus, then the top two-three trade publications within each sector are key targets.
  
  In relation to electronic media, it’s essentially Business Sunday, Sky Business Report and ABC radio.
  
• Cost-effectiveness: allowing a consistent national PR campaign to be run over a 12 month timeframe and beyond, for significantly less cost than other media.
• Leverage: for professional services marketers getting some tangible "runs on the board" is essential – PR has the capability to gain quick profile for a firm / key partners.
• Measurement: the ability to develop a clear set of KPIs linked to wider strategic brand and marketing objectives, (e.g. contribution to brand awareness / brand understanding /brand credibility; volume and value of leads / inquiries, generated by PR; quality of relationships developed-reinforced via PR activity etc).

Research from META Group shows that spam will remain a top email issue, but the biggest concern over the next five years will be reliability.

Between 2003 and 2007, email will become even more deeply entrenched and more valuable to organisations.

META research shows that up to 80% of businesspeople now believe email is more valuable than the telephone for daily business activities.

By 2007, email priorities will shift from existing concerns about spam blockage and policy enforcement, to a focus on stability and security.

Following stability, filtering techniques and software will help keep spam and other security issues under control. In addition, email centralisation, mobile email access and mailbox overload are issues that will need to be addressed to ensure email continues to be a successful business tool.

Recognising the power of a united effort, CMOF and AFA have agreed to work together to build – for the first time – an industry-wide coalition of relevant marketing and related industry bodies to:

• Generate increased awareness amongst analysts / brokers, Boards and corporate executives of marketing’s contribution to company profitability and shareholder value (especially a company’s intangible asset base)
• Establish a common set of relevant higher-level marketing metrics for the profession focused on enhanced accountability / ROI, combined with some industry-specific measures.

Representing the country’s senior marketing practitioners (including many of Australia’s largest advertisers), CMOF has been a strong advocate of marketing measurement since its inception in early 2002; while AFA (representing Australia’s advertising industry) sees the clear benefit of being an active driver in the development of marketing metrics (especially in the area of marketing communications).

Davis & Associates is a founding member of the CMOF

Marketing academic, Philip Kotler – in a speech to The Marketing Forum in October 2003 - made a number of "pull no punches" observations on the state of marketing. Here are some edited highlights:

• Marketers need to grow their influence through innovation and a knowledge of finance.
• Marketer’s influence needs to grow at the senior level in companies – marketing must be a driver of business strategy. One of the reasons for the lack of influence - marketers don’t talk finance; it’s vital for marketers to be familiar with margins and turnover.
• "Brand death" is a problem – commoditisation and rapid imitation is leading to shorter product lifecycles. Marketers need to create new ideas because segmenting and re-segmenting gets you nowhere. Marketers need to create new categories not simply new improved products.
• Another problem is competition from cheaper brands (e.g. "China is not only making everything but they’re going into branding").
• TV advertising and direct marketing simply don’t work – too much of it is a waste of money; we need other ways to reach customers.
• Most companies have to have at least 3 ways in which they’re servicing and selling their product.
• Sales promotions – which work in the short-term – ultimately fail because they ultimately devalue brands.
• Marketers should be spending more money on: sales forces, trade deals, customer service, public relations and R & D.
• More marketing accountability is required – the reason marketing budgets are consistently cut more deeply than other functions - senior management is "tired of not knowing what happened to their company’s money".
• New marketing skills are needed beyond the traditional ones; marketing performance will increasingly depend upon developing integrated systems, relationships and information.
  

In September and October, Davis and Associates were appointed to undertake new brand and strategic marketing projects for:

• ParaQuad (NSW)
• ABN AMRO
• Sparke Helmore
• Bentleys MRI.

Dianne Davis will Chair the Marketing Roundtable at the Australian Financial Review’s 2nd Annual Advertising Summit in Sydney on 2 December, 2003.

Please note our office will be closed from 24 December, 2003 through to 29 January, 2004.